Chapter 8
The Russians
Russia owes her first progress in civilization and industry to
her intercourse with Greece [ID], to the trade of the Hanseatic Towns
with Novgorod [ID] and (after the destruction of that town by [tsar] Ivan Vasil'evich
[ID]) to the trade which arose with the English [ID] and
Dutch, in consequence of the discovery of the water communication with the coasts of the White Sea.
But the great increase of her industry, and especially of her
civilization, dates from the reign of Peter the Great [ID]. The history
of Russia during the last hundred and forty years offers a most
striking proof of the great influence of national unity and
political circumstances on the economic welfare of a nation.
To the imperial power which established and maintained this
union of innumerable Barbaric hordes, Russia owes the foundations
of her manufactures, her vast progress in agriculture and
population, the facilities offered to her interior traffic by the
construction of canals and roads, a very large foreign trade, and
her standing as a commercial power.
Russia's independent system of trade dates, however, only from
the year 1821 [ID].
Under Catherine II [ID]. trade and manufactures had certainly made
some progress, on account of the privileges she offered to foreign
artisans and manufacturers; but the culture of the nation was still
too imperfect to allow of its getting beyond the first stages in
the manufacture of iron, glass, linen, &c., and especially in those
branches of industry in which the country was specially favored by
its agricultural and mineral wealth.
Besides this, further progress in manufactures would not, at
that time, have been conducive to the economic interests of the
nation. If foreign countries had taken in payment the provisions,
raw material, and rude manufactures which Russia was able to
furnish if, further, no wars and exterior events had intervened,
Russia by means of intercourse with nations more advanced than
herself would have been much more prosperous, and her culture in
general would in consequence of this intercourse have made greater
progress than under the manufacturing system. But [Napoleonic] wars and the
Continental blockade [ID],
and the commercial regulations of foreign
nations, compelled her to seek prosperity in other ways than by the
export of raw materials and the import of manufactures. In
consequence of these, the previous commercial relations of Russia
by sea were disturbed. Her overland trade with the western
continent could not make up for these losses; and she found it
necessary, therefore, to work up her raw materials herself. After
the establishment of the general peace, a desire arose to return
to the old system. The Government, and even the Emperor, were
inclined to favor free trade. In Russia, the writings of Herr
Storch enjoyed as high a reputation as those of Mons Say in
Germany. People were not alarmed by the first shocks which the home
manufactories, which had arisen during the Continental Blockade,
suffered owing to English competition. The theorists maintained
that if these shocks could only be endured once for all, the
blessings of free trade would follow. And indeed the circumstances
of the commercial world at the time were uncommonly favorable to
this transition. The failure of crops in Western Europe caused a
great export of agricultural produce [ID],
by which Russia for a long time gained ample means to balance her large importation of
manufactured goods.
But when this extraordinary demand for Russian agricultural
produce had ceased, when, on the other hand, England had imposed
restrictions on the import of corn for the benefit of her
aristocracy, and on that of foreign timber for the benefit of
Canada, the ruin of Russia's home manufactories and the excessive
import of foreign manufactures made itself doubly felt. Although
people had formerly, with Herr Storch, considered the balance of
trade as a chimera, to believe in the existence of which was, for
a reasonable and enlightened man, no less outrageous and ridiculous
than the belief in witchcraft in the seventeenth century had been,
it was now seen with alarm that there must be something of the
nature of a balance of trade as between independent nations.
The most enlightened and discerning statesman of Russia,
Count Nesselrode, did not hesitate to confess to this belief. He declared
in an official circular of 1821 [ID]:
"Russia finds herself compelled by
circumstances to take up an independent system of trade; the
products of the empire have found no foreign market, the home
manufactures are ruined or on the point of being so, all the ready
money of the country flows towards foreign lands, and the most
substantial trading firms are nearly ruined." The beneficial
effects of the Russian protective system contributed no less than
the injurious consequences of the re-establishment of free trade
had done to bring into discredit the principles and assertions of
the theorists. Foreign capital, talent, and labor flowed into the
country from all civilized lands, especially from England and
Germany, in order to share in the advantages offered by the home
manufactories.
The nobility imitated the policy of the Empire at large. As
they could obtain no foreign market for their produce, they
attempted to solve the problem inversely by bringing the market
into proximity with the produce -- they established manufactories
on their estates. In consequence of the demand for fine wool
produced by the newly created woolen manufactories, the breed of
sheep was rapidly improved. Foreign trade increased, instead of
declining, particularly that with China, Persia, and other
neighboring countries of Asia. The commercial crises entirely
ceased, and one need only read the latest reports of the Russian
Minister of Commerce to be convinced that Russia owes a large
measure of prosperity to this system, and that she is increasing
her national wealth and power by enormous strides.
It is foolish for Germans to try to make little of this
progress and to complain of the injury which it has caused to the
north-eastern provinces of Germany. Each nation, like each
individual, has its own interests nearest at heart. Russia is not
called upon to care for the welfare of Germany; Germany must care
for Germany, and Russia for Russia. It would be much better,
instead of complaining, instead of hoping and waiting and expecting
the Messiah of a future free trade, to throw the cosmopolitan
system into the fire and take a lesson from the example of Russia.
That England should look with jealousy on this commercial
policy of Russia is very natural. By its means Russia has
emancipated herself from England, and has qualified herself to
enter into competition with her in Asia [ID].
Even if England manufactures more cheaply, this advantage will in the trade with
Central Asia be outweighed by the proximity of the Russian Empire
and by its political influence. Although Russia may still be, in
comparison with Europe, but a slightly civilized country, yet, as
compared with Asia, she is a civilized one.
Meantime, it cannot be denied that the want of civilization and
political institutions will greatly hinder Russia in her further
industrial and commercial progress, especially if the Imperial
Government does not succeed in harmonizing her political conditions
with the requirements of industry, by the introduction of efficient
municipal and provincial constitutions, by the gradual limitation
and final abolition of serfdom, by the formation of an educated
middle class and a free peasant class, and by the completion of
means of internal transport and of communication with Central Asia.
These are the conquests to which Russia is called in the present
century, and on them depends her further progress in agriculture
and industry, in trade, navigation and naval power. But in order to
render reforms of this kind possible and practicable, the Russian
aristocracy must first learn to feel that their own material
interests will be most promoted by them.
Chapter 9
The North Americans
After our historical examination of the commercial policy of
the European nations, with the exception of those from which there
is nothing of importance to be learnt, we will cast a glance beyond
the Atlantic Ocean at a people of colonists which has been raising
itself almost before our eyes from the condition of entire
dependence on the mother country, and of separation into a number
of colonial provinces having no kind of political union between
themselves, to that of a united, well-organized, free, powerful,
industrious, rich, and independent nation, which will perhaps in
the time of our grandchildren exalt itself to the rank of the first
naval and commercial power in the world. The history of the trade
and industry of North America is more instructive for our subject
than any other can be, Because here the course of development
proceeds rapidly, the periods of free trade and protection follow
closely on each other, their consequences stand out clearly and
sharply defined, and the whole machinery of national industry and
State administration moves exposed before the eyes of the
spectator.
The North American colonies were kept, in respect of trade and
industry, in such complete thralldom by the mother country, that no
sort of manufacture was permitted to them beyond domestic
manufacture and the ordinary handicrafts. So late as the year 1750
a hat manufactory in the State of Massachusetts created so great
sensation and jealousy in Parliament, that it declared all kinds of
manufactories to be 'common nuisances,' not excepting iron works,
notwithstanding that the country possessed in the greatest
abundance all the requisite materials for the manufacture of iron.
Even more recently, namely, in 1770, the great Chatham, made uneasy
by the first manufacturing attempts of the New Englanders, declared
that the colonies should not be permitted to manufacture so much as
a horseshoe nail.
To Adam Smith [ID] belongs
the merit of having first pointed out the injustice of this policy.
The monopoly of all manufacturing industry by the mother
country was one of the chief causes of the American Revolution
[ID]; the
tea duty merely afforded an opportunity for its outbreak.
Freed from restrictions, in possession of all material and
intellectual resources for manufacturing work, and separated from
that nation from which they had previously been supplied with
manufactured goods, and to which they had been selling their
produce, and thus thrown with all their wants upon their own
resources: manufactures of every kind in the North American free
states received a mighty stimulus during the war of revolution,
which in its turn had the effect of benefiting agriculture to such
an extent that, notwithstanding the burdens and the devastation
consequent upon the then recent war, the value of land and the rate
of wages in these states everywhere rose immensely but as, after
the peace of Paris, the faulty constitution of the free states made
the introduction of a united commercial system impossible, and
consequently English manufactured goods again obtained free
admission, competition with which the newly established American
manufactories had not strength enough to bear, the prosperity which
had arisen during the war vanished much more quickly than it had
grown up. An orator in Congress said afterwards of this crisis: 'We
did buy, according to the advice of modem theorists, where we could
buy cheapest, and our markets were flooded with foreign goods;
English goods sold cheaper in our seaport towns than in Liverpool
or London. Our manufacturers were being ruined; our merchants, even
those who thought to enrich themselves by importation, became
bankrupt; and all these causes together were so detrimental to
agriculture, that landed property became very generally worthless,
and consequently bankruptcy became general even among our
landowners.'
This condition of things was by no means temporary; it lasted
from the peace of Paris until the establishment of the federal
constitution, and contributed more than any other circumstance to
bring about a more intimate union between the free states and to
impel them to give to Congress full powers for the maintenance of
a united commercial policy. Congress was inundated with petitions
from all the states -- New York and South Carolina not excepted --
in favor of protective measures for internal industry; and
Washington, on the day of his inauguration, wore a suit of
home-manufactured cloth, 'in order,' said a contemporary New York
journal, 'in the simple and impressive manner so peculiar to this
great man, to give to all his successors in office and to all
future legislators a memorable lesson upon the way in which the
welfare of this country is to be promoted.' Although the first
American tariff (1789) [ID]
levied only light duties on the importation
of the most important manufactured articles, it yet worked so
beneficially from the very first years of its introduction that
Washington in his 'Message' in 1791 was able to congratulate the
nation on the flourishing condition of its manufactures,
agriculture, and trade.
The inadequacy of this protection was, however, soon apparent;
for the effect of the slight import duties was easily overcome by
English manufacturers, who had the advantage of improved methods of
production. Congress did certainly raise the duty on the most
important manufactured articles to fifteen per cent, but this was
not till the year 1804, when it was compelled, owing to deficient
customs receipts, to raise more revenue, and long after the inland
manufacturers had exhausted every argument in favor of having more
protection, while the interests opposed to them were equally
strenuous upon the advantages of free trade and the injurious
effects of high import duties.
In striking contrast with the slight progress which had, on the
whole, been made by the manufacturers of the country, stood the
improved condition of its navigation, which since the year 1789,
upon the motion of James Madison, had received effectual
protection. From a tonnage of 200,000 in 1789 their mercantile
marine had increased in 1801 to more than 1,000,000 tons.
[Re. USA mercantile
marine and Russia] Under the protection
of the tariff of 1804, the manufacturing interest of the
United States could just barely maintain itself against the English
manufactories, which were continually being improved, and had
attained a colossal magnitude, and it would doubtless have had to
succumb entirely to English competition, had it not been for the
help of the embargo and declaration of war of 1812 [ID]. In consequence
of these events, just as at the time of the War of Independence,
the American manufactories received such an extraordinary impetus
that they not only sufficed for the home demand, but soon began to
export as well. According to a report of the Committee on Trade and
Manufactures to Congress in 1815, 100,000 hands were employed in
the woolen and cotton manufactures alone, whose yearly production
amounted to the value of more than sixty million dollars. As in the
days of the War of Independence, and as a necessary consequence of
the increase in manufacturing power, there occurred a rapid rise in
all prices, not only of produce and in wages, but also of landed
property, and hence universal prosperity amongst landowners,
laborers, and all engaged in internal trade.
After the peace of Ghent, Congress, warned by the experience
of
1786, decreed that for the first year the previous duties should be
doubled, and during this period the country continued to prosper.
Coerced, however, by powerful private interests which were opposed
to those of the manufacturers, and persuaded by the arguments of
theorists, it resolved in the year 1816 to make a considerable
reduction in the import duties, whereupon the same effects of
external competition reappeared which had been experienced from
1786 to 1789, viz. ruin of manufactories, unsaleability of produce,
fall in the value of property and general calamity among
landowners. After the country had for a second time enjoyed in war
time the blessings of peace, it suffered, for a second time,
greater evils through peace than the most devastating war could
have brought upon it. It was only in the year 1824, after the
effects of the English corn laws [ID]
had been made manifest to the full
extent of their unwise tendency thus compelling the agricultural
interest of the central, northern, and western states to make
common cause with the manufacturing interest, that a somewhat
higher tariff was passed in Congress, which, however, as Mr
Huskisson immediately brought forward counteracting measures with
the view of paralyzing the effects of this tariff on English
competition, soon proved insufficient, and had to be supplemented
by the tariff of 1828, carried through Congress after a violent
struggle.
Recently published official statistics (1) of Massachusetts
give a tolerable idea of the start taken by the manufactures of the
United States, especially in the central and northern states of the
Union, in consequence of the protective system, and in spite of the
subsequent modification of the tariff of 1828. In the year 1837,
there were in this State (Massachusetts) 282 cotton mills and
565,031 spindles in operation, employing 4,997 male and 14,757
female hands; 37,275,917 pounds of cotton were worked up, and
126,000,000 yards of textile fabrics manufactured, of the value of
13,056,659 dollars, produced by a capital of 14,369,719 dollars.
In the woolen manufacture there were 192 mills, 501 machines,
and 3,612 male and 3,485 female operatives employed, who worked up
10,858,988 pounds of wool, and produced 11,313,426 yards of cloth,
of the value of 10,399,807 dollars on a working capital of
5,770,750 dollars.
16,689,877 pairs of shoes and boots were manufactured (large
quantities of shoes being exported to the western states), to the
value of 14,642,520 dollars.
The other branches of manufacture stood in relative proportion
to the above.
The combined value of the manufactures of the State (deducting
shipbuilding) amounted to over 86 million dollars, with a working
capital of about 60 million dollars.
The number of operatives (men) was 117,352; and the total
number of inhabitants of the State (in 1837) was 701,331.
Misery, brutality, and crime are unknown among the
manufacturing population here. On the contrary, among the numerous
male and female factory workers the strictest morality,
cleanliness, and neatness in dress, exist; libraries are
established to furnish them with useful and instructive books; the
work is not exhausting, the food nourishing and good. Most of the
women save a dowry for themselves.(2)
This last is evidently the effect of the cheap prices of the
common necessaries of life, light taxation, and an equitable
customs tariff. Let England repeal the restrictions on the import
of agricultural produce, decrease the existing taxes on consumption
by one-half or two-thirds, cover the loss by an income tax, and her
factory workers will be put into the same position.
No nation has been so misconstrued and so misjudged as respects
its future destiny and its national economy as the United States of
North America, by theorists as well as by practical men. Adam Smith
and J. B. Say had laid it down that the United States were, 'like
Poland,' destined for agriculture. This comparison was not very
flattering for the union of some dozen of new, aspiring, youthful
republics, and the prospect thus held out to them for the future
not very encouraging. The above-mentioned theorists had
demonstrated that Nature herself had singled out the people of the
United States exclusively for agriculture, so long as the richest
arable land was to be had in their country for a mere trifle. Great
was the commendation which had been bestowed upon them for so
willingly acquiescing in Nature's ordinances, and thus supplying
theorists with a beautiful example of the splendid working of the
principle of free trade. The school, however, soon had to
experience the mortification of losing this cogent proof of the
correctness and applicability of their theories in practice, and
had to endure the spectacle of the United States seeking their
nation's welfare in a direction exactly opposed to that of absolute
freedom of trade.
As this youthful nation had previously been the very apple of
the eye of the schoolmen, so she now became the object of the
heaviest condemnation on the part of the theorists of every nation
in Europe. It was said to be a proof of the slight progress of the
New World in political knowledge, that while the European nations
were striving with the most honest zeal to render universal free
trade possible, while England and France especially were actually
engaged in endeavoring to make important advances towards this
great philanthropic object, the United States of North America were
seeking to promote their national prosperity by a return to that
long-exploded mercantile system which had been clearly refuted by
theory [ID].
A country like the United States, in which such measureless
tracts of fruitful land still remained uncultivated and where wages
ruled so high, could not utilize its material wealth and increase
of population to better purpose than in agriculture; and when this
should have reached complete development, then manufactures would
arise in the natural course of events without artificial forcing.
But by an artificial development of manufactures the United States
would injure not only the countries which had long before enjoyed
civilization, but themselves most of all.
With the Americans, however, sound common sense, and the
instinct of what was necessary for the nation, were more potent
than a belief in theoretical propositions. The arguments of the
theorists were thoroughly investigated, and strong doubts
entertained of the infallibility of a doctrine which its own
disciples were not willing to put in practice.
To the argument concerning the still uncultivated tracts of
fruitful land, it was answered that tracts of such land in the
populous, well-cultivated states of the Union which were ripe for
manufacturing industry, were as rare as in Great Britain; that the
surplus population of those states would have to migrate at great
expense to the west, in order to bring tracts of land of that
description into cultivation, thus not only annually causing the
eastern states large losses in material and intellectual resources,
but also, inasmuch as such emigration would transform customers
into competitors, the value of landed property and agricultural
produce would thereby be lessened. It could not be to the advantage
of the Union that all waste land belonging to it should be
cultivated up to the Pacific Ocean before either the population,
the civilization, or the military power of the old states had been
fully developed. On the contrary, the cultivation of distant virgin
lands could confer no benefit on the eastern states unless they
themselves devoted their attention to manufacturing, and could
exchange their manufactures against the produce of the west. People
went still further: Was not England, it was asked, in much the same
position? Had not England also under her dominion vast tracts of
fertile land still uncultivated in Canada, in Australia, and in
other quarters of the world? Was it not almost as easy for England
to transplant her surplus population [ID]
to those countries as for the North Americans to transplant theirs from the shores of the
Atlantic to the banks of the Missouri? If so, what occasion had
England not only continuously to protect her home manufactures, but
to strive to extend them more and more?
The argument of the school, that with a high rate of wages in
agriculture, manufactures could not succeed by the natural course
of things, but only by being forced like hothouse plants, was found
to be partially well-founded; that is to say, it was applicable
only to those manufactured goods which, being small in bulk and
weight as compared to their value, are produced principally by hand
labor, but was not applicable to goods the price of which is less
influenced by the rate of wages, and as to which the disadvantage
of higher wages can be neutralized by the use of machinery, by
water power as yet unused, by cheap raw materials and food, by
abundance of cheap fuel and building materials, by light taxation
and increased efficiency of labor.
Besides, the Americans had long ago learnt from experience
that
agriculture cannot rise to a high state of prosperity unless the
exchange of agricultural produce for manufactures is guaranteed for
all future time; but that, when the agriculturist lives in America
and the manufacturer in England, that exchange is not infrequently
interrupted by wars, commercial crises, or foreign tariffs, and
that consequently, if the national well-being is to rest on a
secure foundation, 'the manufacturer,' to use Jefferson's words,
'must come and settle down in close proximity to the
agriculturist.'
At length the Americans came to realize the truth that it
behooves a great nation not exclusively to set its heart upon the
enjoyment of proximate material advantages; that civilization and
power -- more important and desirable possessions than mere
material wealth, as Adam Smith himself allows -- can only be
secured and retained by the creation of a manufacturing power of
its own [ID];
that a country which feels qualified to take and to
maintain its place amongst the powerful and civilized nations of
the earth must not shrink from any sacrifice in order to secure
such possessions for itself; and that at that time the Atlantic
states were clearly the region marked out for such possessions.
It was on the shores of the Atlantic that European settlers and
European civilization first set a firm foot. Here, at the first,
were populous, wealthy, and civilized states created; here was the
cradle and seat of their sea fisheries, coasting trade, and naval
power; here their independence was won and their union founded.
Through these states on the coast the foreign trade of the Union is
carried on; through them it is connected with the civilized world;
through them it acquires the surplus population, material, capital,
and mental powers of Europe; upon the civilization, power, and
wealth of these sea-board states depend the future civilization,
power, wealth, and independence of the whole nation and its future
influence over less civilized communities. Suppose that the
population of these Atlantic states decreased instead of growing
larger, that their fisheries, coasting trade, shipping engaged in
foreign trade and foreign trade itself, and, above all, their
general prosperity, were to fall off or remain stationary instead
of progressing, then we should see the resources of civilization of
the whole nation, the guarantees for its independence and external
power, diminish too in the same degree. It is even conceivable
that, were the whole territory of the United States laid under
cultivation from sea to sea, covered with agricultural states, and
densely populated in the interior, the nation itself might
nevertheless be left in a low grade as respects civilization,
independence, foreign power, and foreign trade. There are certainly
many nationalities who are in such a position and whose shipping
and naval power are nil, though possessing a numerous inland
population!
If a power existed that cherished the project of keeping down
the rise of the American people and bringing them under subjection
to itself industrially, commercially, or politically, it could only
succeed in its aim by trying to depopulate the Atlantic states of
the Union and driving all increase of population, capital, and
intellectual power into the interior. By that means it would not
only check the further growth of the nation's naval power, but
might also indulge the hope of getting possession in time of the
principal defensive strategic positions on the Atlantic coast and
at the mouths of the rivers. The means to this end would not be
difficult to imagine; it would only be necessary to hinder the
development of manufacturing power in the Atlantic states and to
insure the acceptance of the principle of absolute freedom of
foreign trade in America. If the Atlantic states do not become
manufacturers, they will not only be unable to keep up their
present degree of civilization, but they must sink, and sink in
every respect. Without manufactures how are the towns along the
Atlantic coast to prosper? Not by the forwarding of inland produce
to Europe and of English manufactured goods to the interior, for a
very few thousand people would be sufficient to transact this
business. How are the fisheries to prosper? The majority of the
population who have moved inland prefer fresh meat and fresh-water
fish to salted; they require no train oil, or at least but a small
quantity. How is the coasting trade along the Atlantic sea-board to
thrive? As the largest portion of the coast states are peopled by
cultivators of land who produce for themselves all the provisions,
building materials, fuel, &c. which they require, there is nothing
along the coast to sustain a transport trade. How are foreign trade
and shipping to distant places to increase? The country has nothing
to offer but what less cultivated nations possess in
superabundance, and those manufacturing nations to which it sends
its produce encourage their own shipping. How can a naval power
arise when fisheries, the coasting trade, ocean navigation, and
foreign trade decay? How are the Atlantic states to protect them
selves against foreign attacks without a naval power? How is
agriculture even to thrive in these states, when by means of
canals, railways, &c. the produce of the much more fertile and
cheaper tracts of land in the west which require no manure, can be
carried to the east much more cheaply than it could be there
produced upon soil exhausted long ago? How under such circumstances
can civilization thrive and population increase in the eastern
states, when it is clear that under free trade with England all
increase of population and of agricultural capital must flow to the
west? The present state of Virginia gives but a faint idea of the
condition into which the Atlantic states would be thrown by the
absence of manufactures in the east; for Virginia, like all the
southern states on the Atlantic coast, at present takes a
profitable share in providing the Atlantic states with agricultural
produce.
All these things bear quite a different complexion, owing to
the existence of a flourishing manufacturing power in the Atlantic
states. Now population, capital, technical skill and intellectual
power, flow into them from all European countries; now the demand
for the manufactured products of the Atlantic states increases
simultaneously with their consumption of the raw materials supplied
by the west. Now the population of these states, their wealth, and
the number and extent of their towns increase in equal proportion
with the cultivation of the western virgin lands; now, on account
of the larger population, and the consequently increased demand for
meat, butter, cheese, milk, garden produce, oleaginous seeds,
fruit, &c., their own agriculture is increasing; now the sea
fisheries are flourishing in consequence of the larger demand for
salted fish and train oil; now quantities of provisions, building
materials, coal, &c. are being conveyed along the coast to furnish
the wants of the manufacturing population; now the manufacturing
population produce a large quantity of commodities for export to
all the nations of the earth, from whence result profitable return
freights; now the nation's naval power increases by means of the
coasting trade, the fisheries, and navigation to distant lands, and
with it the guarantee of national independence and influence over
other nations, particularly over those of South America; now
science and art, civilization and literature, are improving in the
eastern states, whence they are being diffused amongst the western
states.
These were the circumstances which induced the United States
to
lay restrictions upon the importation of foreign manufactured
goods, and to protect their native manufactures. With what amount
of success this has been done, we have shown in the preceding
pages. That without such a policy a manufacturing power could never
have been maintained successfully in the Atlantic states, we may
learn from their own experience and from the industrial history of
other nations.
The frequently recurring commercial crises in America have
been
very often attributed to these restrictions on importation of
foreign goods, but without reasonable grounds. The earlier as well
as the later experience of North America shows, on the contrary,
that such crises have never been more frequent and destructive than
when commercial intercourse with England was least subject to
restrictions. Commercial crises amongst agricultural nations, who
procure their supplies of manufactured goods from foreign markets,
arise from the disproportion between imports and exports.
Manufacturing nations richer in capital than agricultural states,
and ever anxious to increase the quantity of their exports, deliver
their goods on credit and encourage consumption. In fact, they make
advances upon the coming harvest. But if the harvest turn out so
poor that its value falls greatly below that of the goods
previously consumed; or if the harvest prove so rich that the
supply of produce meets with no adequate demand and falls in price;
while at the same time the markets still continue to be overstocked
with foreign goods -- then a commercial crisis will occur by reason
of the disproportion existing between the means of payment and the
quantity of goods previously consumed, as also by reason of the
disproportion between supply and demand in the markets for produce
and manufactured goods. The operations of foreign and native banks
may increase and promote such a crisis, but they cannot create it.
In a future chapter we shall endeavor more closely to elucidate
this subject.
NOTES:
1. Statistical Table of Massachusetts for the Year ending April 1,
1837, by J. P. Bigelow, Secretary of the Commonwealth (Boston,
1838). No American state but Massachusetts possesses similar
statistical abstracts. We owe those here referred to, to Governor
Everett, distinguished alike as a scholar, an author, and a
statesman.
2. The American papers of July 1839 report that in the
manufacturing town of Lowell alone there are over a hundred
workwomen who have each over a thousand dollars deposited to their
credit in the savings bank.
Chapter 10
The Teachings of History
Everywhere and at all times has the well-being of the nation
been in equal proportion to the intelligence, morality, and
industry of its citizens; according to these, wealth has accrued or
been diminished; but industry and thrift, invention and enterprise,
on the part of individuals, have never as yet accomplished aught of
importance where they were not sustained by municipal liberty, by
suitable public institutions and laws, by the State administration
and foreign policy, but above all by the unity and power, of the
nation.
History everywhere shows us a powerful process of reciprocal
action between the social and the individual powers and
conditions [ID].
In the Italian and the Hanseatic cities, in Holland and England, in
France and America, we find the powers of production, and
consequently the wealth of individuals, growing in proportion to
the liberties enjoyed, to the degree of perfection of political and
social institutions, while these, on the other hand, derive
material and stimulus for their further improvement from the
increase of the material wealth and of the productive power of
individuals.
The real rise of the industry and power of England dates only
from the days of the actual foundation of England's national
freedom, while the industry and power of Venice, of the Hanse
Towns, of the Spanish and Portuguese, decayed concurrently with
their loss of freedom [ID].
However industrious, thrifty, inventive, and
intelligent, individual citizens might be, they could not make up
for the lack of free institutions. History also teaches that
individuals derive the greater part of their productive powers from
the social institutions and conditions under which they are placed.
The influence of liberty, intelligence, and enlightenment over
the power, and therefore over the productive capacity and wealth of
a nation, is exemplified in no respect so clearly as in navigation.
Of all industrial pursuits, navigation most demands energy,
personal courage, enterprise, and endurance; qualifications that
can only flourish in an atmosphere of freedom. In no other calling
do ignorance, superstition, and prejudice, indolence, cowardice,
effeminacy, and weakness produce such disastrous consequences;
nowhere else is a sense of self-reliance so indispensable. Hence
history cannot point to a single example of an enslaved people
taking a prominent part in navigation. The Hindoos, the Chinese,
and the Japanese have ever strictly confined their efforts to canal
and river navigation and the coasting trade. In ancient Egypt
maritime navigation was held in abhorrence, probably because
priests and rulers dreaded lest by means of it the spirit of
freedom and independence should be encouraged. The freest and most
enlightened states of ancient Greece were also the most powerful at
sea; their naval power ceased with their freedom, and however much
history may narrate of the victories of the kings of Macedonia on
land, she is silent as to their victories at sea.
When were the Romans powerful at sea, and when is nothing more
heard of their fleets? When did Italy lay down the law in the
Mediterranean, and since when has her very coasting trade fallen
into the hands of foreigners? Upon the Spanish navy the Inquisition
had passed sentence of death long ere the English and the Dutch
fleets had executed the decree. With the coming into power of the
mercantile oligarchies in the Hanse Towns, power and the spirit of
enterprise took leave of the Hanseatic League.
Of the Spanish Netherlands only the maritime provinces achieved
their freedom, whereas those held in subjection by the Inquisition
had even to submit to the closing of their rivers. The English
fleet, victorious over the Dutch in the Channel, now took
possession of the dominion of the seas, which the spirit of freedom
had assigned to England long before; and yet Holland, down to our
own days, has retained a large proportion of her mercantile marine,
whereas that of the Spaniards and the Portuguese is almost
annihilated. In vain were the efforts of a great individual
minister now and then under the despotic kings of France to create
a fleet, for it invariably went again to ruin.
But how is it that at the present day we witness the growing
strength of French navigation and naval power? Hardly had the
independence of the United States of North America come to life,
when we find the Americans contending with renown against the giant
fleets of the mother country. But what is the position of the
Central and South American nations? So long as their flags wave not
over every sea, but little dependence can be placed upon the
effectiveness of their republican forms of government. Contrast
these with Texas [ID],
a territory that has scarcely attained to political life, and
yet already claims its share in the realm of Neptune.
But navigation is merely one part of the industrial power of a
nation -- a part which can flourish and attain to importance only
in conjunction with all the other complementary parts. Everywhere
and at all times we see navigation, inland and foreign trade, and
even agriculture itself, flourish only where manufactures have
reached a high state of prosperity. But if freedom be an
indispensable condition for the prosperity of navigation, how much
wore must it be so for the prosperity of the manufacturing power,
for the growth of the entire producing power of a nation? History
contains no record of a rich, commercial, and industrial community
that was not at the same time in the enjoyment of freedom.
Manufactures everywhere first brought into operation improved
means of transport, improved river navigation, improved highways,
steam navigation and railways, which constitute the fundamental
elements of improved systems of agriculture and of civilization.
History teaches that arts and trades migrated from city to
city, from one country to another. Persecuted and oppressed at
home, they took refuge in cities and in countries where freedom,
protection, and support were assured to them. In this way they
migrated from Greece and Asia to Italy; from Italy to Germany,
Flanders, and Brabant; and from thence to Holland and England.
Everywhere it was want of sense and despotism that drove them away,
and the spirit of freedom that attracted them. But for the folly of
the Continental governments, England would have had difficulty in
attaining supremacy in industry. But does it appear more consistent
with wisdom for us in Germany to wait patiently until other nations
are impolitic enough to drive out their industries and thus compel
them to seek a refuge with us, or that we should, without waiting
for such contingencies, invite them by proffered advantages to
settle down amongst us?
It is true that experience teaches that the wind bears the seed
from one region to another, and that thus waste moorlands have been
transformed into dense forests; but would it on that account be
wise policy for the forester to wait until the wind in the course
of ages effects this transformation?
Is it unwise on his part if by sowing and planting he seeks to
attain the same object within a few decades? History tells us that
whole nations have successfully accomplished that which we see the
forester do? Single free cities, or small republics and
confederations of such cities and states, limited in territorial
possessions, of small population and insignificant military power,
but fortified by the energy of youthful freedom and favored by
geographical position as well as by fortunate circumstances and
opportunities, flourished by means of manufactures and commerce
long before the great monarchies; and by free commercial
intercourse with the latter, by which they exported to them
manufactured goods and imported raw produce in exchange, raised
themselves to a high degree of wealth and power. Thus did Venice,
the Hanse Towns the Belgians and the Dutch.
Nor was this system of free trade less profitable at first to
the great monarchies themselves, with whom these smaller
communities had commercial intercourse. For, having regard to the
wealth of their natural resources and to their undeveloped social
condition the free importation of foreign manufactured goods and
the exportation of native produce presented the surest and most
effectual means of developing their own powers of production, of
instilling habits of industry into their subjects who were addicted
to idleness and turbulence, of inducing their landowners and nobles
to feel an interest in industry, of arousing the dormant spirit of
enterprise amongst their merchants, and especially of raising their
own civilization, industry, and power.
These effects were learned generally by Great Britain from the
trade and manufacturing industry of the Italians, the Hansards, the
Belgians, and the Dutch. But having attained to a certain grade of
development by means of free trade, the great monarchies perceived
that the highest degree of civilization, power, and wealth can only
be attained by a combination of manufactures and commerce with
agriculture. They perceived that their newly established native
manufactures could never hope to succeed in free competition with
the old and long established manufactures of foreigners; that their
native fisheries and native mercantile marine, the foundations of
their naval power, could never make successful progress without
special privileges; and that the spirit of enterprise of their
native merchants would always be kept down by the overwhelming
reserves of capital, the greater experience and sagacity of the
foreigners. Hence they sought, by a system of restrictions,
privileges, and encouragements, to transplant on to their native
soil the wealth, the talents, and the spirit of enterprise of the
foreigners. This policy was pursued with greater or lesser, with
speedier or more tardy success, just in proportion as the measures
adopted were more or less judiciously adapted to the object in
view, and applied and pursued with more or less energy and
perseverance.
England, above all other nations, has adopted this policy.
Often interrupted in its execution from the want of intelligence
and self-restraint on the part of her rulers, or owing to internal
commotions and foreign wars, it first assumed the character of a
settled and practically efficient policy under Edward VI,
Elizabeth, and the revolutionary period. For how could the measures
of Edward III work satisfactorily when it was not till under Henry
VI that the law permitted the carriage of corn from one English
county to another, or the shipment of it to foreign parts; when
still under Henry VII and Henry VIII all interest on money, even
discount on bills, was held to be usury, and when it was still
thought at the time that trade might be encouraged by fixing by law
at a low figure the price of woolen goods and the rate of wages,
and that the production of corn could be increased by prohibiting
sheep farming on a large scale?
And how much sooner would England's woolen manufactures and
maritime trade have reached a high standard of prosperity had not
Henry VIII regarded a rise in the prices of corn as an evil; had
he, instead of driving foreign workmen by wholesale from the
kingdom, sought like his predecessors to augment their number by
encouraging their immigration; and had not Henry VII refused his
sanction to the Act of Navigation as proposed by Parliament?
In France we see native manufactures, free internal
intercourse, foreign trade, fisheries, navigation, and naval power
-- in a word, all the attributes of a great, mighty, and rich
nation (which it had cost England the persevering efforts of
centuries to acquire) -- called into existence by a great genius
within the space of a few years, as it were by a magician's wand;
and afterwards all of them yet more speedily annihilated by the
iron hand of fanaticism and despotism.
We see the principle of free trade contending in vain under
unfavorable conditions against restriction powerfully enforced;
the Hanseatic League is ruined, while Holland sinks under the blows
of England and France.
That a restrictive commercial policy can be operative for
good
only so far as it is supported by the progressive civilization and
free institutions of a nation, we learn from the decay of Venice,
Spain, and Portugal, from the relapse of France in consequence of
the revocation of the Edict of Nantes, and from the history of
England, in which country liberty kept pace at all times with the
advance of industry, trade, and national wealth.
That, on the contrary, a highly advanced state of civilization,
with or without free institutions, unless supported by a suitable
system of commercial policy, will prove but a poor guarantee for a
nation's economic progress, may be learnt on the one hand from the
history of the North American free states, and on the other from
the experience of Germany.
Modern Germany, lacking a system of vigorous and united
commercial policy, exposed in her home markets to competition with
a foreign manufacturing power in every way superior to her own,
while excluded at the same time from foreign markets by arbitrary
and often capricious restrictions, and very far indeed from making
that progress in industry to which her degree of culture entitles
her, cannot even maintain her previously acquired position, and is
made a convenience of (like a colony) by that very nation which
centuries ago was worked upon in like manner by the merchants of
Germany, until at last the German states have resolved to secure
their home markets for their own industry, by the adoption of a
united vigorous system of commercial policy.
The North American free states, who, more than any other nation
before them, are in a position to benefit by freedom of trade, and
influenced even from the very cradle of their independence by the
doctrines of the cosmopolitan school, are striving more than any
other nation to act on that principle. But owing to wars with Great
Britain, we find that nation twice compelled to manufacture at home
the goods which it previously purchased under free trade from other
countries, and twice, after the conclusion of peace, brought to the
brink of ruin by free competition with foreigners, and thereby
admonished of the fact that under the present conditions of the
world every great nation must seek the guarantees of its continued
prosperity and independence, before all other things, in the
independent and uniform development of its own powers and
resources.
Thus history shows that restrictions are not so much the
inventions of mere speculative minds, as the natural consequences
of the diversity of interests, and of the strivings of nations
after independence or overpowering ascendancy, and thus of national
emulation and wars, and therefore that they cannot be dispensed
with until this conflict of national interests shall cease, in
other words until all nations can be united under one and the same
system of law. Thus the question as to whether, and how, the
various nations can be brought into one united federation, and how
the decisions of law can be invoked in the place of military force
to determine the differences which arise between independent
nations, has to be solved concurrently with the question how
universal free trade can be established in the place of separate
national commercial systems.
The attempts which have been made by single nations to
introduce freedom of trade in face of a nation which is predominant
in industry, wealth, and power, no less than distinguished for an
exclusive tariff system -- as Portugal did in 1703, France in 1786,
North America in 1786 [ID]
and 1816, Russia from 1815 till 1821 [ID],
and as Germany has done for centuries -- go to show us that in this way
the prosperity of individual nations is sacrificed, without benefit
to mankind in general, solely for the enrichment of the predominant
manufacturing and commercial nation. [jump to final
summation of thesis.] Switzerland (as we hope to show in the sequel)
constitutes an exception, which proves just as much as it proves little
for or against one or the other system.
Colbert [ID] appears
to us not to have been the inventor of that system which the Italians have
named after him; for, as we have seen, it was fully elaborated by the English
long before his time [ID].
Colbert only put in practice what France, if she wished to fulfill
her destinies, was bound to carry out sooner or later. If Colbert
is to be blamed at all, it can only be charged against him that he
attempted to put into force under a despotic government a system
which could subsist only after a fundamental reform of the
political conditions. But against this reproach to Colbert's memory
it may very well be argued that, had his system been continued by
wise princes and sagacious ministers, it would in all probability
have removed by means of reforms all those hindrances which stood
in the way of progress in manufactures, agriculture, and trade, as
well as of national freedom; and France would then have undergone
no revolution, but rather, impelled along the path of development
by the reciprocating influences of industry and freedom, she might
for the last century and a half have been successfully competing
with England in manufactures, in the promotion of her internal
trade, in foreign commerce, and in colonization, as well as in her
fisheries, her navigation, and her naval power.
[Consider these four
paragraphs on a parallel situation in Post-Soviet Russia.]
Finally, history teaches us how nations which have been endowed
by Nature with all resources which are requisite for the attainment
of the highest grade of wealth and power, may and must -- without
on that account forfeiting the end in view -- modify their systems
according to the measure of their own progress: in the first stage,
adopting free trade with more advanced nations as a means of
raising themselves from a state of barbarism, and of making
advances in agriculture; in the second stage, promoting the growth
of manufactures, fisheries, navigation, and foreign trade by means
of commercial restrictions; and in the last stage, after reaching
the highest degree of wealth and power, by gradually reverting to
the principle of free trade and of unrestricted competition in the
home as well as in foreign markets, that so their agriculturists,
manufacturers, and merchants may be preserved from indolence, and
stimulated to retain the supremacy which they have acquired. In the
first stage, we see Spain, Portugal, and the Kingdom of Naples; in
the second, Germany and the United States of North America; France
apparently stands close upon the boundary line of the last stage;
but Great Britain alone at the present time has actually reached
it.
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