that long before our foreign trade was crushed by this protectionist ring, the trade between the protectionist countries themselves must have disappeared. A free-import country, with or without the assistance of foreign bounties, will continue to do trade with the several foreign protectionist nations long after they have ceased to do trade with one another; for in dealing with one another they confront, not only the same tariff wall which confronts us, but are hampered by the higher expenses of production which their own tariff imposes on them.

Protectionist countries (dumping or not dumping) possess no power to injure our export trade which is not exercised earlier and more injuriously upon their own trade and the trade of one another.

So long as large free or low-protected markets exist in the commercial world, this protective policy of a number of great nations, while largely restricting the volume of their export trade, could not largely reduce the volume of ours, but would chiefly operate by changing its character and direction. A rigorous protective policy pursued by all other great nations which did greatly diminish the volume of our foreign trade, could only succeed in doing so by a complete stoppage of their own foreign trade.

§ 3. In neither case is any economic force set in motion which can suck the capital out of this country into the protective countries. The attribution of such a power to protection is due to a narrow

separatist view of industry. If in America or Germany a single trade, steel or cotton, gets a good deal more protection than other American or German industries, it may for a time earn an abnormally high rate of profits. In such a case it may pay English manufacturers to put up mills in the protected area, so as to share this bounty, as in a few instances has been done. It is conceivable that a large section of American or German industry, comprising (say) the great manufactures, might for a time enjoy this power to tax the other industries of America or Germany by a tariff which enabled them to raise their home prices and to earn high profits. If the mobility of capital and labour in America or Germany was so defective as to enable them to maintain these high profits, it is possible that a considerable quantity of capital and labour might flow from England into these countries. But while this is possible, it is not likely, because trades in Germany and America which were strong enough to secure this special advantage over the other industries would probably be strongly organised enough to prevent foreign capital from entering their preBut let us suppose certain trades or groups of trades in protective countries to possess this power to suck into their protected area some British capital. They can only accomplish this object on condition of lowering the rate of profits in other trades and exposing these trades to British competition. Protec

serves.

tion, as we have seen, by substituting a less effective for a more effective division of labour in a country, reduces the average productivity of capital and labour. If, then, that protection be so manipulated as to secure abnormally high profits for certain favoured trades, the effect must be to diminish further the productivity of other industries. These less protected industries, saddled with high expenses of production through the general operation of the tariff, will then be earning low profits and paying low wages. Two results will follow. Those trades among them which are exposed to British competition will find British goods displacing them in neutral markets and in their own markets; these industries will decay and British industries will thrive at their expense. Thus Germany or America, by the very process of drawing British capital into a few specially favoured foreign industries, will have improved certain other British industries employing as much or more new capital. Though this process might induce British capitalists to invest some capital inside the protected areas, selecting the bounty-fed trades, it would not cause any net reduction of employment of capital in Great Britain. This fresh British capital required for the expansion of trades which were displacing German or American trades would be furnished either by more British saving, or, failing that, by a flow of foreign capital into Great Britain corresponding with the flow of British capital

into the protected countries. This balance, though perhaps less regular in working than the balance of import and export trade, is equally necessary. Certain German or American trades have ex hypothesi drawn some British capital into these countries to share the artificial prosperity of favoured trades. But these trades are favoured primarily at the expense of other trades in their own country. These other trades, therefore, will be as much depressed as the others are prosperous. As then the prosperity of the one drew capital from Great Britain into the protected area, the depression of the other will draw capital from the protected area into Great Britain. If, as we have shown, the main burden of protection is borne by the industries of the protected country, there is no escape from this conclusion. Favoured trades can only thrive at the expense of other trades in their own country, so that any flow of capital from a free-trade country into the former must be counteracted by a corresponding flow into the free-trade country. In point of fact, the net movement of capital must be from protective into free-trade areas, because the latter, enjoying a more productive division of labour, will have a somewhat higher profit on its capital.

The notion that a protective country, or a group of protective countries, can suck the trade out of a free-trade country depends on a fallacious generalisation from the case of single trades.

D

UMPING," in the sense of selling goods for something less than "cost price," or for "whatever they will fetch," is a widely pervasive practice. Fishmongers, fruiterers, and butchers, finding themselves with a surplus of perishable goods upon their hands, offer them late on Saturday night for prices which have no definite relation to "cost." This "dumping" undoubtedly injures the ordinary local trade, for some of those who buy upon these terms would have bought a smaller quantity at ordinary prices earlier in the day were it not for the knowledge of these Saturday-night sales. Indeed, so far as the wholesale trades in perishable foods are concerned, this "dumping" policy is qualified by wholesale destruction of such portions of supply as seem likely, if an attempt is made to sell them, to spoil the market. The organised trade, having regard to the trade interest as a whole, favours destruction rather than dumping; the unorganised trade, in particular the weaker retailers, are driven