Here we have two countries, A and B. A has all sorts of advantages over B. You conclude from this that labor would be concentrated in A and that B is powerless to do anything. A, you say, sells a great deal more than it purchases, while B purchases much more than it sells. I might dispute this, but I align myself with your viewpoint.
In this hypothetical circumstance, the demand for labor is high in A and it soon becomes more expensive.
Iron, coal, land, food, and capital are in high demand in A and they soon become more expensive.
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At the same time, labor, iron, coal, land, food, capital, and everything else are in very low demand in B and soon become much cheaper.
That is not all. As A still continues to sell and B continues to purchase, money passes from B to A. It is plentiful in A and scarce in B.
But where there is an abundance of money, this means that you need a great deal to buy anything else. Therefore, in A, to the high real prices which result from very active demand must be added the high nominal money prices due to the excess supply of precious metals.6
Scarcity of money means that little is needed for each purchase. Therefore in B, low nominal money prices combine with low real prices.
In these circumstances, production will have all sorts of reasons, reasons that are, if I may put it this way, raised to the fourth power, to leave A and establish itself in B.
Or, to stick to literal truth, let us say that production would not have waited up to now, that sudden moves are contrary to its nature and that, from the outset under a free regime, it would have gradually divided and distributed itself between A and B in accordance with the laws of supply and demand, that is to say, in accordance with the laws of justice and usefulness.
And when I say that, if it were possible for production to concentrate at a single point, an irresistible force for decentralization would arise within it for this very reason, I am not speaking hypothetically.
Listen to what a manufacturer had to say in the chamber of commerce in Manchester (I am omitting the figures he used to support his demonstration):
In former times we exported fabrics, then this activity gave way to the export of yarn, which is the raw material of fabric, and then to the export of machines, which are the tools of production for yarn, and later to the export of capital, with which we built our machines, and finally to the export of our workers and our industrial genius, which are the source of our capital. All these changes in production succeeded one another in moving to where they might be exercised to greatest advantage, where the cost of living was lowest and life easier, so that now we can see in Prussia, Austria, Saxony, Switzerland, and Italy huge factories established with English capital, operated using English workers and directed by English engineers.
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You can see clearly that nature, or rather providence, which is more ingenious, wise, and farsighted than your narrow and rigid theory supposes, did not want this concentration of work, this monopoly of all the forms of superiority that you argue to be an absolute and irremediable fact, to continue. It made it possible, using means that are as simple as they are infallible, for there to be dispersion, dissemination, solidarity, and simultaneous progress, all things that your restrictive laws paralyze as far as they can, since, by isolating peoples, they tend to make their differences in living conditions much more entrenched, to prevent leveling out, obstruct intermingling, neutralize counterbalancing tendencies, and entrap nations in their respective superiority or inferiority.
III. In the third place, to say that through a protectionist duty the conditions of production are equalized is to use an inaccurate turn of phrase to put across an error. It is not true that an import duty brings the conditions of production into balance. After the imposition of an import duty, these conditions remain what they were before. All that this duty balances at most are the conditions of sale. It will perhaps be said that I am playing with words, but I will throw this accusation back at my opponents. It is for them to prove that production and sale are synonymous, and unless they do so, I am entitled to blame them, if not for playing with words, at least for mixing them up.
Let me give an example to illustrate my idea.
Let me suppose that a few Parisian speculators have the bright idea of devoting their time to the production of oranges. They know that Portuguese oranges can be sold in Paris for 10 centimes, whereas they, in view of the conservatories and greenhouses they need because of the cold that often undermines their cultivation, cannot demand less than 1 franc in order to cover their costs. They demand that oranges from Portugal should be subject to a duty of 90 centimes. Through this duty, the conditions of production, as they say, will be balanced and the Chamber when giving way as usual to this line of reasoning, adds an import duty of 90 centimes for each foreign orange to the customs tariffs.
Well then, I say that the conditions of production have not changed in the slightest. The law has removed nothing from the heat of the sun in Lisbon nor the frequency or intensity of the frosts in Paris. Oranges will continue to mature naturally on the banks of the Tagus and artificially on the banks of the Seine, that is to say, that it will require much more human work in one country than in the other. What will be balanced are the conditions of sale: the Portuguese will have to sell us their oranges at 1 franc, including 90
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centimes to pay the tax. Obviously, the tax will be paid by French consumers. And look at the oddity of the result. On each Portuguese orange consumed, our country will lose nothing, for the 90 centimes more that are paid by the consumer will go to the treasury. There will be displacement but no loss. However, on each French orange consumed, there will be 90 centimes or thereabouts of loss, since the purchaser will certainly lose this and the seller, also certainly, will not earn this since, according to the hypothesis itself, he will have earned only the cost price. I leave the protectionists to draw the right conclusion.
IV. If I have stressed this distinction between the conditions of production and the conditions of sale, one which the protectionists will doubtless find paradoxical, it is because it will lead me to afflict them once more with another paradox that is even stranger, which is this: Do you really want to balance the conditions of production? Then let trade be free.
Oh! people will say, that is too much at this time, and an abuse of intellectual games. Well then, if only through curiosity, I ask the protectionists to follow my line of argument to the bitter end. It will not take long. Let me go back to my example.
If you agree to suppose for a minute that the average, daily earnings of each Frenchman come to 1 franc, it will ineluctably follow that to produce one orange directly in France will require one day’s work or its equivalent whereas to produce the exchange value of one Portuguese orange only one-tenth of a day’s work is needed, which means nothing other than that the sun does in Lisbon what work does in Paris. Well, is it not obvious that, if I can produce an orange or what amounts to the same thing, the means to buy one, with one-tenth of a day’s work, my position with regard to this production is subject to the same conditions as the Portuguese producer himself, except for the transport costs, which I must incur? It is therefore apparent that freedom balances the direct or indirect conditions of production, as far as they can be balanced, since it leaves only one remaining inevitable difference, that of transport.
I will add that freedom also balances the conditions of enjoyment, satisfaction, and consumption, which are never taken into account and which are nevertheless essential, since in the end consumption is the final aim of all our productive efforts.
