Chapter XXVI. Foreign commerce under profits; protection and free trade, or between the devil and the deep sea

by Edward Bellamy

　　We arrived at the Arlington School some time before the beginning of the recitation which we were to attend, and the doctor took the opportunity to introduce me to the teacher. He was extremely interested to learn that I had attended the morning session, and very desirous to know something of my impressions. As to the forthcoming recitation, he suggested that if the members of the class were aware that they had so distinguished an auditor, it would be likely to embarrass them, and he should therefore say nothing about my presence until the close of the session, when he should crave the privilege of presenting his pupils to me personally. He hoped I would permit this, as it would be for them the event of a lifetime which their grandchildren would never tire of hearing them describe. The entrance of the class interrupted our conversation, and the doctor and myself, having taken our seats in a gallery, where we could hear and see without being seen, the session at once began.

　　"This morning," said the teacher, "we confined ourselves for the sake of clearness to the effects of the profit system upon a nation or community considered as if it were alone in the world and without relations to other communities. There is no way in which such outside relations operated to negative any of the laws of profit which were brought out this morning, but they did operate to extend the effect of those laws in many interesting ways, and without some reference to foreign commerce our review of the profit system would be incomplete.

　　"In the so-called political economies of our forefathers we read a vast deal about the advantages to a country of having an international trade. It was supposed to be one of the great secrets of national prosperity, and a chief study of the nineteenth-century statesmen seems to have been to establish and extend foreign commerce.--Now, Paul, will you tell us the economic theory as to the advantages of foreign commerce?"

　　"It is based on the fact," said the lad Paul, "that countries differ in climate, natural resources, and other conditions, so that in some it is wholly impossible or very difficult to produce certain needful things, while it is very easy to produce certain other things in greater abundance than is needed. In former times also there were marked differences in the grade of civilization and the condition of the arts in different countries, which still further modified their respective powers in the production of wealth. This being so, it might obviously be for the mutual advantage of countries to exchange with one another what they could produce against what they could not produce at all or only with difficulty, and not merely thus secure many things which otherwise they must go without, but also greatly increase the total effectiveness of their industry by applying it to the sorts of production best fitted to their conditions. In order, however, that the people of the respective countries should actually derive this advantage or any advantage from foreign exchange, it would be necessary that the exchanges should be carried on in the general interest for the purpose of giving the people at large the benefit of them, as is done at the present day, when foreign commerce, like other economic undertakings, is carried on by the governments of the several countries. But there was, of course, no national agency to carry on foreign commerce in that day. The foreign trade, just like the internal processes of production and distribution, was conducted by the capitalists on the profit system. The result was that all the benefits of this fair sounding theory of foreign commerce were either totally nullified or turned into curses, and the international trade relations of the countries constituted merely a larger field for illustrating the baneful effects of the profit system and its power to turn good to evil and 'shut the gates of mercy on mankind.'"

　　HOW PROFITS NULLIFIED THE BENEFIT OF COMMERCE.

　　"Illustrate, please, the operation of the profit system in international trade."

　　"Let us suppose," said the boy Paul, "that America could produce grain and other food stuffs with great cheapness and in greater quantities than the people needed. Suppose, on the contrary, that England could produce food stuffs only with difficulty and in small quantities. Suppose, however, that England, on account of various conditions, could produce clothing and hardware much more cheaply and abundantly than America. In such a case it would seem that both countries would be gainers if Americans exchanged the food stuffs which it was so easy for them to produce for the clothing and hardware which it was so easy for the English to produce. The result would appear to promise a clear and equal gain for both people. But this, of course, is on the supposition that the exchange should be negotiated by a public agency for the benefit of the respective populations at large. But when, as in those days, the exchange was negotiated wholly by private capitalists competing for private profits at the expense of the communities, the result was totally different.

　　"The American grain merchant who exported grain to the English would be impelled, by the competition of other American grain merchants, to put his price to the English as low as possible, and to do that he would beat down to the lowest possible figure the American farmer who produced the grain. And not only must the American merchant sell as low as his American rivals, but he must also undersell the grain merchants of other grain-producing countries, such as Russia, Egypt, and India. And now let us see how much benefit the English people received from the cheap American grain. We will say that, owing to the foreign food supply, the cost of living declined one half or a third in England. Here would seem a great gain surely; but look at the other side of it. The English must pay for their grain by supplying the Americans with cloth and hardware. The English manufacturers of these things were rivals just as the American grain merchants were--each one desirous of capturing as large a part of the American market as he could. He must therefore, if possible, undersell his home rivals. Moreover, like the American grain merchant, the English manufacturer must contend with foreign rivals. Belgium and Germany made hardware and cloth very cheaply, and the Americans would exchange their grain for these commodities with the Belgians and the Germans unless the English sold cheaper. Now, the main element in the cost of making cloth and hardware was the wages paid for labor. A pressure was accordingly sure to be brought to bear by every English manufacturer upon his workmen to compel them to accept lower wages so that he might undersell his English rivals, and also cut under the German and Belgian manufacturers, who were trying to get the American trade. Now can the English workman live on less wages than before? Plainly he can, for his food supply has been greatly cheapened. Presently, therefore, he finds his wages forced down by as much as the cheaper food supply has cheapened his living, and so finds himself just where he was to start with before the American trade began. And now look again at the American farmer. He is now getting his imported clothing and tools much cheaper than before, and consequently the lowest living price at which he can afford to sell grain is considerably lower than before the English trade began--lower by so much, in fact, as he has saved on his tools and clothing. Of this, the grain merchant, of course, took prompt advantage, for unless he put his grain into the English market lower than other grain merchants, he would lose his trade, and Russia, Egypt, and India stood ready to flood England with grain if the Americans could not bid below them, and then farewell to cheap cloth and tools! So down presently went the price the American farmer received for his grain, until the reduction absorbed all that he had gained by the cheaper imported fabrics and hardware, and he, like his fellow-victim across the sea--the English iron worker or factory operative--was no better off than he was before English trade had been suggested.

　　"But was he as well off? Was either the American or the English worker as well off as before this interchange of products began, which, if rightly conducted, would have been so greatly beneficial to both? On the contrary, both alike were in important ways distinctly worse off. Each had indeed done badly enough before, but the industrial system on which they depended, being limited by the national borders, was comparatively simple and uncomplex, self-sustaining, and liable only to local and transient disturbances, the effect of which could be to some extent estimated, possibly remedied. Now, however, the English operatives and the American farmer had alike become dependent upon the delicate balance of a complex set of international adjustments liable at any moment to derangements that might take away their livelihood, without leaving them even the small satisfaction of understanding what hurt them. The prices of their labor or their produce were no longer dependent as before upon established local customs and national standards of living, but had become subject to determination by the pitiless necessities of a world-wide competition in which the American farmer and the English artisan were forced into rivalship with the Indian ryot, the Egyptian fellah, the half-starved Belgian miner, or the German weaver. In former ages, before international trade had become general, when one nation was down another was up, and there was always hope in looking over seas; but the prospect which the unlimited development of international commerce upon the profit system was opening to mankind the latter part of the nineteenth century was that of a world-wide standard of living fixed by the rate at which life could be supported by the worst-used races. International trade was already showing itself to be the instrumentality by which the world-wide plutocracy would soon have established its sway if the great Revolution had tarried."

　　"In the case of the supposed reciprocal trade between England and America, which you have used as an illustration," said the teacher, "you have assumed that the trade relation was an exchange of commodities on equal terms. In such a case it appears that the effect of the profit system was to leave the masses of both countries somewhat worse off than they would have been without foreign trade, the gain on both the American and English side inuring wholly to the manufacturing and trading capitalists. But in fact both countries in a trade relation were not usually on equal terms. The capitalists of one were often far more powerful than those of another, and had a stronger or older economic organization at their service. In that case what was the result?"

　　"The overwhelming competition of the capitalists of the stronger country crushed out the enterprises of the capitalists of the weaker country, the people of which consequently became wholly dependent upon the foreign capitalists for many productions which otherwise would have been produced at home to the profit of home capitalists, and in proportion as the capitalists of the dependent country were thus rendered economically incapable of resistance the capitalists of the stronger country regulated at their pleasure the terms of trade. The American colonies, in 1776, were driven to revolt against England by the oppression resulting from such a relation. The object of founding colonies, which was one of the main ends of seventeenth, eighteenth, and nineteenth century statesmanship, was to bring new communities into this relation of economic vassalage to the home capitalists, who, having beggared the home market by their profit, saw no prospect of making more except by fastening their suckers upon outside communities. Great Britain, whose capitalists were strongest of all, was naturally the leader in this policy, and the main end of her wars and her diplomacy for many centuries before the great Revolution was to obtain such colonies, and to secure from weaker nations trade concessions and openings--peaceably if possible, at the mouth of the cannon if necessary."

　　"How about the condition of the masses in a country thus reduced to commercial vassalage to the capitalists of another country? Was it necessarily worse than the condition of the masses of the superior country?"

　　"That did not follow at all. We must constantly keep in mind that the interests of the capitalists and of the people were not identical. The prosperity of the capitalists of a country by no means implied prosperity on the part of the population, nor the reverse. If the masses of the dependent country had not been exploited by foreign capitalists, they would have been by domestic capitalists. Both they and the working masses of the superior country were equally the tools and slaves of the capitalists, who did not treat workingmen any better on account of being their fellow countrymen than if they had been foreigners. It was the capitalists of the dependent country rather than the masses who suffered by the suppression of independent business enterprises."

　　BETWEEN THE DEVIL AND THE DEEP SEA.

　　"That will do, Paul.--We will now ask some information from you, Helen, as to a point which Paul's last words have suggested. During the eighteenth and nineteenth centuries a bitter controversy raged among our ancestors between two parties in opinion and politics, calling themselves, respectively, the Protectionists and the Free Traders, the former of whom held that it was well to shut out the competition of foreign capitalists in the market of a country by a tariff upon imports, while the latter held that no impediment should be allowed to the entirely free course of trade. What have you to say as to the merits of this controversy?"

　　"Merely," replied the girl called Helen, "that the difference between the two policies, so far as it affected the people at large, reduced itself to the question whether they preferred being fleeced by home or foreign capitalists. Free trade was the cry of the capitalists who felt themselves able to crush those of rival nations if allowed the opportunity to compete with them. Protection was the cry of the capitalists who felt themselves weaker than those of other nations, and feared that their enterprises would be crushed and their profits taken away if free competition were allowed. The Free Traders were like a man who, seeing his antagonist is no match for him, boldly calls for a free fight and no favor, while the Protectionist was the man who, seeing himself overmatched, called for the police. The Free Trader held that the natural, God-given right of the capitalist to shear the people anywhere he found them was superior to considerations of race, nationality, or boundary lines. The Protectionist, on the contrary, maintained the patriotic right of the capitalist to the exclusive shearing of his own fellow-countrymen without interference of foreign capitalists. As to the mass of the people, the nation at large, it was, as Paul has just said, a matter of indifference whether they were fleeced by the capitalists of their own country under protection or the capitalists of foreign countries under free trade. The literature of the controversy between Protectionists and Free Traders makes this very clear. Whatever else the Protectionists failed to prove, they were able to demonstrate that the condition of the people in free-trade countries was quite as bad as anywhere else, and, on the other hand, the Free Traders were equally conclusive in the proofs they presented that the people in protected countries, other things being equal, were no better off than those in free-trade lands. The question of Protection or Free Trade interested the capitalists only. For the people, it was the choice between the devil and the deep sea."

　　"Let us have a concrete illustration." said the teacher. "Take the case of England. She was beyond comparison the country of all others in the nineteenth century which had most foreign trade and commanded most foreign markets. If a large volume of foreign trade under conditions practically dictated by its capitalists was under the profit system a source of national prosperity to a country, we should expect to see the mass of the British people at the end of the nineteenth century enjoying an altogether extraordinary felicity and general welfare as compared with that of other peoples or any former people, for never before did a nation develop so vast a foreign commerce. What were the facts?"

　　"It was common," replied the girl, "for our ancestors in the vague and foggy way in which they used the terms 'nation' and 'national' to speak of Great Britain as rich. But it was only her capitalists, some scores of thousands of individuals among some forty million people, who were rich. These indeed had incredible accumulations, but the remainder of the forty millions--the whole people, in fact, save an infinitesimal fraction--were sunk in poverty. It is said that England had a larger and more hopeless pauper problem than any other civilized nation. The condition of her working masses was not only more wretched than that of many contemporary people, but was worse, as proved by the most careful economic comparisons, than it had been in the fifteenth century, before foreign trade was thought of. People do not emigrate from a land where they are well off, but the British people, driven out by want, had found the frozen Canadas and the torrid zone more hospitable than their native land. As an illustration of the fact that the welfare of the working masses was in no way improved when the capitalists of a country commanded foreign markets, it is interesting to note the fact that the British emigrant was able to make a better living in English colonies whose markets were wholly dominated by English capitalists than he had been at home as the employee of those capitalists. We shall remember also that Malthus, with his doctrine that it was the best thing that could happen to a workingman not to be born, was an Englishman, and based his conclusions very logically upon his observation of the conditions of life for the masses in that country which had been more successful than any other in any age in monopolizing the foreign markets of the world by its commerce.

　　"Or," the lad went on, "take Belgium, that old Flemish land of merchants, where foreign trade had been longer and more steadily used than in any other European country. In the latter part of the nineteenth century the mass of the Belgian people, the hardest-worked population in the world, was said to have been, as a rule, without adequate food--to be undergoing, in short, a process of slow starvation. They, like the people of England and the people of Germany, are proved, by statistical calculations upon the subject that have come down to us, to have been economically very much better off during the fifteenth and early part of the sixteenth century, when foreign trade was hardly known, than they were in the nineteenth. There was a possibility before foreign trade for profit began that a population might obtain some share of the richness of a bountiful land just from the lack of any outlet for it. But with the beginning of foreign commerce, under the profit system, that possibility vanished. Thenceforth everything good or desirable, above what might serve for the barest subsistence of labor, was systematically and exhaustively gathered up by the capitalists, to be exchanged in foreign lands for gold and gems, silks, velvets, and ostrich plumes for the rich. As Goldsmith had it:

　　"Around the world each needful product flies

　　For all the luxuries the world supplies."