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mal importance of the more primitive industrial arts in the life of a few Western nations cannot last. If then it is true that under the recent abnormal circumstances the proportion of the real wealth of such countries as Great Britain, Germany, and the United States, which is suitable for external trade, is diminishing, this diminution will be still greater when the backward countries have learned, as they are learning, to manufacture for themselves. This tendency, as will appear when we consider the nature of international exchange, by no means makes for the disappearance of external trade and the establishment of self-sufficing nations. As industrial civilisation advances, the number, the volume, the value of trades with foreign nations must increase for every civilised nation, but not so fast as the number, the volume, and the values of the internal industry concerned with satisfying wants which are constantly þecoming more refined and more largely non-material in their forms.

At the present time it is estimated that between one-fifth and one-sixth of the wage-earners in Great Britain are putting their labour-power into goods for external markets. Since the aggregate income of the working classes (as of the entire nation) is growing far faster than the value of our export trade, it is certain that the proportion of workers who made goods for export was far larger a generation ago, and

1 Cd., 1761, p. 361.

it is likely it will be far less a generation hence. This simply means that our standard of consumption is being constantly reformed in a direction which makes us less and less dependent upon external goods. Though we shall continue to need increased quantities and new varieties of food, raw materials, and manufactured goods from abroad, they will form a diminishing proportion of the real income of our nation, of the total value of goods and services which we consume.

Setting the same argument in another form, we may say that the poorest classes in Great Britain are in proportion to their incomes the largest consumers of imported goods, chiefly because the largest proportion of their money goes for food; the richest classes are in proportion to their expenditure the smallest consumers of exported goods. Every elevation, then, of the general standard of comfort of the people diminishes the relative importance of external trade and enhances the importance of internal trade.

If, therefore, we found the external trade of Great Britain advancing at a faster rate than the internal trade and furnishing a larger proportion of the aggregate wealth of the nation, we should have grave reason for alarm regarding the industrial progress of the nation.

$ 5. When a civilised nation has, by a sufficient process of investigation of her own resources, as compared with those of other countries, discovered what

kinds and amounts of raw materials and commodities she can procure better and cheaper from abroad, and what goods of her own production she can best use to pay for them, and when she has established regular channels of import and export trade in accordance with this knowledge, her further development of external trade will naturally slacken, growing in amount and changing in character with the changes of industrial methods and of habits of consumption, failures of limited natural resources, and the growth or decline of population at home or in the several foreign countries. The swift application of new scientific methods in manufacture, the rapid opening of new large foreign markets, the sudden discovery of hitherto neglected home resources may give a spurt or a temporary boom to external trade. The application of steam and electricity to transport and to manufacture has afforded examples of these abnormal periods of development, and smaller inventions and discoveries will continue to break the regular operation of the economic law, according to which internal industry grows faster than the external trade of nations.

Apart from these changes in the natural resources and industrial arts of nations, there is no reason to suppose that, after a substantially sound division of labour among nations in the growth of food, development of mines, in the cruder forms of manufacture, and a few special lines of commodity where

skill and artistic taste play an important part, specialisation of national industry and the trade intercourse it involves should proceed further at any rapid rate. When a nation has once established firm reliable business connections with other nations along these lines of obviously profitable intercourse, a slow growth of external trade is always to be expected. Germany and the United States have in recent years been engaged in establishing lines of enduring intercourse with other nations similar to those which we established in earlier decades of the nineteenth century. Though, in doing so, they may cut across certain of our lines and oblige us to make alterations and readjustments in the character of our external trade, there is no reason to suppose that their external trade will not conform to the same economic law as ours, slackening its rate of growth until it has become as slow as ours. When the main lines of external trade are once laid down, the chief factors making for its increase will be a growth of population and a rise of the cruder standard of comfort of the poorer classes. When population exhibits a declining rate of growth, and when the mass of the population of a country has attained a tolerably large command of material necessaries and conveniences, it is unreasonable to look for a further rapid increase either of the volume or the values of external trade; industrial progress for the future is contained more and more in the elaboration of internal

trade and industry and in the diversion of an ever larger share of energy to the creation and distribution of intangible commodities.

$ 6. The rise and fall of external trade cannot therefore in itself be rightly taken as an index of the industrial prosperity of a nation. Still less can short periods of fluctuation over a few years furnish any evidence of the general condition of trade. A reductio ad absurdum of this short-range test has been lately furnished by the statistics of foreign trade of the United States, where an extraordinarily rapid growth of manufacturing export trade suffered a signal collapse during a period of phenomenal prosperity. The explanation was, of course, quite simple. Up to 1900 the development of the new American manufactures, chiefly in the metal trades, was so rapid that, after supplying fully the home market, a large and increasing surplus remained which sought foreign markets. After 1900 the internal enterprise of American industry became for a time so great as to absorb for domestic use the greater part of the former surplus, so that the export trade suffered a great depression.

There are several fairly satisfactory tests of fluctuations in the general industrial condition of a nation. In Great Britain the gross income-tax returns, conjoined with evidence of wage rates in representative trades, furnish such a test, to be fortified by evidence of the consumption of certain kinds of food, and by

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