Mr. Chamberlain was not insensible to the tactical dangers and political difficulties of the task thus forced upon him. He had always wished to avoid them, feeling confident that by judicious concessions to Colonial sentiment, which need not have materially impaired the fiscal system of the Mother Country, a community of material interests might have been created which would have eventually led to a favourable decision of the larger economic issue. But if no concession was to be made, then the outlook was black indeed. Holding this conviction, what course could he pursue? The opponents of Preferences took their stand on the Free Trade principle. Obviously then it could only be fought out on on that that ground. Protection might involve some sacrifice, some disagreeable party readjustments, some temporary diminution of trade-though on that point he felt doubtful-but all these evils would be preferable to the alienation of the Colonies and the certain break-up of the Empire. How far he was right in this view is difficult to say, and for the moment I am not concerned in discussing it. But it is important in considering the great issue now before the country that the true motives of the statesman who has raised it should be made clearly known, not merely in justice to himself—for that is a small matter-but so that the question may be studied in its proper environment, and the battle fought in a full knowledge of the forces called into play.

I now turn to the new fiscal scheme itself. It is not my purpose to examine it from the point of view of any economic Shibboleth, either ancient or modern, or to read into it any intention which does not appear clearly on the surface. I propose merely to take the chief propositions as they have already been presented to us, and to enquire on grounds of practical politics whether or not they are justified.

As outlined by Mr. Balfour and Mr. Chamberlain, the scheme resolves itself into a system of facultative Protection with an assured nucleus in the shape of a duty on foreign corn, and probably other foreign foodstuffs, from which the Colonies would be exempt in consideration of a rebate on their duties on British goods. The psychological process by which this ambitious project has been developed from the simple proposal to exempt Colonial grain from the Corn Duty, has been naïvely explained by the Prime Minister. Once the question of a tax on food is submitted to the people it will not suffice to recommend its consideration on grounds of Imperial solidarity, and of a probable increase in the Colonial demand for British manufactures. The compensations for such a tax must be more obvious and they can only be found in a big policy," which will enable the State to extort substantial concessions from the great Protectionist Powers, whose

Tariffs are already a grievance to the British producer.' I will not pause to enquire whether this "big policy" would not be just as effective for Tariff war purposes without the cost of a corn duty, but will pass at once to the merits claimed for the scheme. The new Protection, we are assured, will possess these advantages:

1. It will unify the Empire.

2. It will increase the home trade and raise wages.2
3. It will help agriculture.3

4. It will supply the pecuniary means for social reforms.*
5. It will provide an instrument of retaliation by which
the barriers of foreign Tariffs may be beaten down, and the
area of Free Trade extended.5

The most important of these claims is, of course, the first. It is alleged to be the one great and certain prize held out by the scheme, the transcendent political end which, in the high economic opinion of Sir Robert Giffen, justifies any dubious economic means. If I thought this claim well founded, no considerations of economic orthodoxy would prevent me from sacrificing to it within judicious limits on the principle laid down by Sir Robert Giffen; but I do not think it is. I base my conclusion on two grounds. In the first place, the claim is contrary to all our experience in the domain of Imperial politics, and in the second place, the scheme is so inequitable, that instead of consolidating the Empire it would inevitably lead to new and perilous dissensions.

No theory of English history rests on a more solid foundation than that the extension, prosperity and loyalty of the Empire have increased in proportion as trade restrictions and preferences between its component parts have been abolished. Differences with the Colonies on grounds other than economic have been few and unimportant. Long before the American Revolution, the Colonies enjoyed a degree of political liberty fully equal to that of the Mother Country, and in many respects superior to it." The only restrictions upon them related to their foreign trade, and it was chiefly these restrictions which led to the loss of the American Colonies. It is a popular error to imagine that the Colonial trade system of those days was monopolistic. It was essentially Preferential, and as reciprocal as that now proposed by Mr. Chamber(1) Cf., Speech in the House of Commons, Times, May 29th, 1903. (2) Times, May 22nd and June 6th, 1903 (letters), and May 29th (speech). (3) Speech, Ibid.

(5) Ibid., June 11th (speech of the Prime Minister), May 16th and 29th (speeches of Mr. Chamberlain), June 8th, 1903 (letter).

(6) Times, May 28th, 1903.

(7) Adam Smith: Wealth of Nations (edit. Bohn), Vol. II., pp. 94-95.

lain,' with the single difference that, so far as the Colonies were concerned, it was not optional. This no doubt was a galling limitation, but according to the theories now in vogue it ought to have been fully neutralised by the accruing material profit and by a sense of common interests. As a matter of fact, it was not so neutralised, and the reason was revealed in a striking way after the secession of the American Colonies. Within fifteen years of the signing of the Treaty of Paris the volume of trade between Great Britain and the United States, being relieved of all preferences, doubled itself.2

This lesson was not lost on English statesmen, but it was only very gradually that the Preferential system was relaxed. Its principle, indeed, remained so unquestioned that Sir Robert Peel retained it in all his Tariff reforms, and as late as 1843 it was defended by Mr. Gladstone. The credit of sweeping it away belongs to the Russell Administration of 1846-1852, and especially to Earl Grey, one of the few constructive statesmen who have presided over the Colonial Office. The grounds on which Earl Grey acted were primarily economic, but they had nothing in common with the doctrines of what is now called Little Englandism. Earl Grey was a convinced Imperialist, and he believed that by the establishment of Free Trade in the Colonies a new era of prosperity and loyalty would be inaugurated throughout the Empire. But in carrying out his reforms-the abolition of differential duties in the Colonies and the Repeal of the Navigation Acts-he accomplished something far more important than the establishment of Imperial Free Trade. He practically completed the system of Colonial selfgovernment by adding fiscal autonomy to the free Parliamentary institutions on which that system was already securely based. In this respect the Acts of 1846 and 1849 were far more essentially the starting-point of the Golden Age of British Imperialism than the famous report of Lord Durham, with which it is usually identified, for it was precisely in proportion to the use made by the Colonies of the privileges thus secured to them that their loyalty to the Crown increased. The very fact that the Colonies disappointed Lord Grey's economic hopes by adopting Protection only emphasised the completeness of their liberties, and thus gave a powerful stimulus to the healthy growth of the Imperial spirit which has so splendidly manifested itself during the last fifteen years. We may easily figure to ourselves how differently the history of those years would have been written had the Crown

(1) Adam Smith: Wealth of Nations (edit. Bohn), Vol. II., pp. 85-92. (2) Davidson: Commercial Federation, p. 2.

(3) Grey Colonial Policy of the Russell Administration, Vol. I. pp. 7-8. (4) Ibid. See the whole chapter.

vetoed the Protective legislation which Canada inaugurated in 1858.

This then is the light we get from history. Under a Preference system we lost an Empire; under a system of fiscal autonomy we gained one greater and more united than the world has ever

seen.

Now, what hope is offered to us by Mr. Chamberlain's scheme of our being able to try the Preferential experiment again with better chances of success? I am bound to I see none. say It is of course true that the new scheme is free from the unilateral and compulsory defects which proved fatal to its predecessors, but it is not on that account less unfair. A bad bargain is just as much calculated to give rise to quarrels as an act of oppression, and this is certainly a very bad bargain. What is proposed to us is an exchange of sacrifices, but in the case of the Colonies the sacrifice consists only in a modification of their fiscal system, while in our case it takes the form of a fiscal revolution. The Colonies are to become a trifle less Protectionist; we are to pass from real Free Trade to absolute Protection. Regarded, too, as a mere exchange of Preferences the bargain is not less unequal. By handicapping the commercial rivals of the Colonies in our Free Trade market, we shall give the Colonies a real and valuable advantage, but by giving us a reduction of duties in their Protected markets, the Colonies will give us a preference of very small value, because our real competitors are not the foreign importers, but the Colonial manufacturers, who will still remain protected. Or suppose that the protection given to the Colonial manufacturer is substantially reduced. In that case we shall no doubt increase our trade, but only at the cost of dearer food at home. At the very best the bargain would have these results: we should have dear bread, and be handicapped in our trade with the world, while the Colonies would obtain cheaper manufactures and a higher price for their foodstuffs. Surely, it is not in such a compact as this that we should seek for the elements of a closer Imperial unity. It leads us straight back to the old Plantation policy, which lost us the United States, with the single difference that, instead of the Colonies, the Mother Country will become the exploited Plantation.

The second claim made on behalf of the new scheme is that it will increase British trade, and that if it adds to the cost of living, it will proportionately augment wages.

Now where is the increased trade to come from? We do not export raw materials to our self-governing Colonies, and consequently expansion can only be looked for in the direction of manufactures. The margin for expansion under this head is, however, very limited. In most of the high-class goods which are the special

products of our industries, and in the capacity of our manufacturers to place them on the Colonial markets that require them, we are already supreme.' A preference will consequently only enable us to enter into competition with the foreign manufacturers of cheap and finished imitations of our own goods—a course we are not likely to adopt-and even then the field is not a large one. Moreover, it must be remembered that our capacity for producing cheaper goods will be diminished by the increased cost of production arising from the enhanced price of food, which is the chief raw material in all our industries. But even if we obtain an increase of Colonial trade, it will be more than counterbalanced by our losses in our foreign trade. Here it will not be alone the increased cost of production which will handicap us, but the keener competition of foreign industries which will receive a powerful stimulus from our exclusion of foreign agricultural produce. This actually happened seventy years ago, when German capitalists were compelled by our Corn Laws to take their capital out of the land and invest it in industries which have ever since run us very closely in foreign markets.2

The claim with regard to higher wages is not less delusive. In one of his recent letters Mr. Chamberlain qualifies this claim by suggesting that the proposed duties on food-stuffs might be paid by the exporters, and that, consequently, the cost of living would not be increased. This, however, is very unlikely, for the simple reason that it would defeat the whole Preferential design of the duties. If the duties are substantially preferential, they must raise the cost of living; if they are not they will be superfluous. The contention that higher prices are attended by a proportionate increase of wages, finds no confirmation either in history or in contemporary experience. Professor Thorold Rogers declares as a result of his elaborate review of Six Centuries of Work and Wages, that "when the prices of the necessaries of life rise, the wages of labour do not rise with them." We know, too, that at the end of the eighteenth century food was so dear and wages so low that it was proposed to Parliament to fix a minimum wage, and it actually became necessary between 1795 and 1834 to pay the difference between the market price of labour and the minimum cost of living out of the poor rates.5 Owing mainly to the organisation of labour during the last half century, this state of things has been much improved, but still wages never rise in proportion to the increased cost of living. (1) Trade of the British Empire and Foreign Competition, C. 8,449, p. 12. (2) See article by Dr. H. Lévy in the Frankfurter Zeitung, October 31st, 1902. (3) Times, June 8th, 1903.

(4) Pp. 428-429.

(5) Cunningham: English Industrial History, pp. 86, 91. Lévy: Die Not der englischen Landwirte, zur zeit der hohen Getreidezölle, pp. 27-28, 98-99, 123.