Protectionist Policies

These different expedients for the protection of commerce, are now generally decried.

Though almost all governments agree in repelling from their states the produce of foreign manufactories, or at least in loading it with heavy duties, to give the national produce an advantage.

The prohibitive system of custom-house duties plainly gives to a growing manufactory an advantage equivalent to the largest bounty. Perhaps this manufactory scarcely produces the hundredth part of what the nation consumes of such commodities.

But the hundred purchasers must compete with each other to obtain the one seller’s preference, and the ninety-nine rejected by him will be compelled to obtain goods by smuggling.

In this case, the nation’s loss will be as a hundred.

Its gain as one. Whatever advantage may arise from giving a new manufacture to a nation, certainly there are few which deserve such a sacrifice and even these might always be set a-going by less expensive means.

Besides, we must also take into account the weighty inconveniences of establishing the vexatious system of duties, of covering the frontiers with an army of customhouse officers, and with another not less dangerous army of smugglers, and thus of training the subjects to disobedience.

We must remember that:

• It is not the interest of a nation to produce every thing indifferently. It should confine its efforts to such goods or commodities as it can manufacture at the cheapest rate or to such as, whatever price they cost, are essential to its safety.
• Each merchant knows his own business better than government can do.
• The whole nation’s productive power is limited.
• In a given time, it has but a given number of hands, and a given quantity of capital.
• By forcing it to enter upon a kind of work which it did not previously execute, we almost always at the same time force it to abandon a kind of work which it did execute.

The most probable result of such a change is the abandonment of a more lucrative manufacture for another which is less so, and which personal interest had designedly overlooked.

If the prohibitive system gives a very powerful, though very expensive encouragement to rising manufactures, it can offer, in regard to such, no advantage to those which are already prosperous; the sacrifice at least which it imposes on consumers, is entirely useless. If the manufacture was destined for exportation, government, by granting a monopoly of the interior market, causes it to abandon its ancient habits to assume others which probably are less advantageous.

Every manufacture destined for exportation gives proof of not fearing the competition of foreigners. From the moment that it can support competition abroad, notwithstanding the expense of transport, it has still less reason to dread this competition in the very place of production. Thus nothing is more common than to see goods prohibited which never could have been imported with advantage, and which gained credit solely by being so prohibited.

By the prohibitive system, governments had proposed to increase the number and productive powers of their manufactures.

It is doubtful if they rightly knew the price they paid for this advantage, and the prodigious sacrifices they imposed on consumers, their subjects, to bring into existence an unborn class of producers; but they succeeded much more rapidly even than speculators on political economy expected.

For a time they excited the bitterest complaints on the part of consumers; but even these complaints ceased afterwards, because sacrifices in fact had also ceased, and manufactures so powerfully encouraged, had soon provided with profusion for the national wants. But this emulation of all governments to establish manufactures every where, has produced two strange and unexpected effects on the commercial system of Europe; one is the disproportionate increase of production without any relation to consumption; the other is the effort of each nation to live isolated, to suffice for itself, and refuse every kind of foreign trade.

Before governments had been seized with this manufacturing ardour, the establishment of a new manufacture had always to struggle with a crowd of national habits and prejudices, which form as it were the vis inertiae of the human mind. To overcome this force, it was necessary to offer speculators a very manifest advantage; hence a new species of industry could scarcely arise without a distinct previous demand, and the market was always found before the manufacture destined to occupy it.

Governments, in their zeal, have not proceeded upon this principle; they have ordered stockings and hats beforehand, reckoning that legs and heads would be found afterwards.

They have seen their people well and economically clothed by strangers, and yet have caused them to produce clothes in the country itself. During war, this new production was not capable of being too exactly appreciated; but when peace came, it was found that all things had been made in double quantity; and the readier the mutual communication of states had become, the more embarrassed were they to dispose of all their works executed without orders.

Consumers who at the beginning had been satisfied, afterwards found themselves called to unexpected gains, because merchants, eager to recover their funds, were forced to sell a very great quantity of goods with loss.

Manufacturers gave the signal for these sacrifices; resigning themselves to a cruel loss of their capital, they induced extensive merchants to furnish themselves with goods beyond their custom or ability, in order to profit by what appeared a good opportunity. Several of the latter have been forced to experience a similar loss, before their excessive supply could be introduced to the shops of retail dealers; and these again before they could make them be accepted by consumers. A universal embarrassment was felt by manufacturers, merchants, and retailers, and this was followed by the annihilation of the capital destined to support industry.

The fruit of long saving and long labour was lost in a year. Consumers have gained certainly, but their gain is scarcely perceptible even to themselves. By laying up a stock of goods for several years to profit by their cheapness, they have also included themselves in the general embarrassment, and still farther retarded the period when the balance can be re-established between consumption and production.

According to the former organization of Europe, all states did not make pretences to all kinds of industry. Some had attached themselves to agriculture, others to navigation, others to manufactures; and the condition of these latter, even in prosperous times, could not have appeared so worthy of envy as to demand prodigious efforts to attain it.

A miserable and degraded population almost always produced these rich stuffs; these elegant ornaments, this furniture which it was never destined to enjoy and if the men who directed these unhappy workmen sometimes raised immense fortunes, those fortunes were as frequently destroyed.

The development of nations proceeds naturally in all directions; it is scarcely ever prudent to obstruct it, but it is no less dangerous to hasten it; and the governments of Europe, by having of all hands attempted to force nations, are at the present day loaded with a population, which they have created by requiring superfluous labour, and which they know not how to save from the horrors of famine.

The existence of this manufacturing population, and the duty of providing for its wants, have constrained governments to alter the aim of their legislation. Formerly, in the real spirit of the mercantile system, they encouraged manufactures, in order to sell much to foreigners, and grow rich at their expense; now, perceiving that a prohibitive system is every where adopted, or like to be adopted, they cannot any longer count on the custom of strangers, and therefore study to find, in their own kingdom, consumers for their own workmen; in other words, to become isolated and sufficient for themselves.

The system of policy at present is more or less strictly followed by all European nations. It destroys all the advantages of commerce. It it hinders each nation from profiting by the superiorities due to its climate, to its soil, to its situation, to the peculiar character of its people.

It arms man against man, and breaks the tie which was destined to sooth national prejudices, and accelerate the civilization of the world.

According to the natural progress of increasing wealth, when capitals are yet inconsiderable, it is desirable to direct them rather to some neighbouring branch of trade, than to one which is very remote.

Foreign trade gives foreigners one half of its profit, and the natives another. A country which has little capital may desire to employ it entirely in the trade of its interior, or for its own use.

The more so, because if the market is near the producer, the same capital will be several times renewed in a given period, whilst another capital, destined for a foreign market, will scarcely accomplish a single renewal. But the capitalist’s interest will always direct him with certainty, in such cases to do what suits the country best; because his profit is proportioned to the need there is of it, and consequently to the direction in which the public demand carries him.

Besides, nations, on reckoning up their produce and their wants, almost constantly forget that neighboring foreigners are much more convenient and more advantageous producers and consumers than distant countrymen. The relation of markets on the two banks of the Rhine is much more important, both for the German and the French merchant, than the relation of markets between the Palatinate and Brandenburgh is for the former, or between Alsace and Provence for the latter.

The ardour, with which all governments have excited every species of production, by means of their restrictive system, has brought about such a disproportion between labour and demand, that perhaps it has become necessary for every state to think first, not of the comfort, but of the existence of its subjects, and to maintain those barriers which have been so imprudently erected.

An important part of the population might, perhaps, be cut off by penury, in the course of a few years; and it is reasonable that each state should seek to preserve itself and those depending on it from such a calamity. Yet, we cannot without pain, behold the rivetting of this anti-social system, and the abandonment of that ancient spirit of commerce, which triumphed over barbarism, and taught hostile hordes to know and esteem each other.

Governments, after having attempted to give the national producers a monopoly in their own country, have sometimes endeavoured to procure them a similar advantage in foreign countries, by treaties of commerce. Such actions, always subordinate to policy, granted to a favoured nation an exemption from some part of the duties required from others, on consideration of some reciprocal advantage.

It cannot be doubted that such an exemption was advantageous to the nation in whose favour it was granted; but, on the other hand, it was just as disadvantageous to the nation granting it; and when a treaty of commerce bore a concession of mutual exemption, each state should have discovered, that a monopoly granted to its producers was too dearly purchased by a monopoly granted to foreigners, against its consumers: and the more so, as there existed no kind of relation between the two favoured branches of trade.

Some show of reason may be discovered, why the consumers of cloth should be taxed for the advantage of cloth manufacturers; but there is no shallow of reason why the consumers of wine in England should experience a loss, in compensation for an advantage to the sellers of goods in Portugal.

No treaty of commerce can fully satisfy the greediness of merchants desiring a monopoly; and therefore governments invented the fanatic expedient of creating in a colony a nation expressly to be purchasers from their merchants. The colonists were prohibited from establishing any manufacture at home, that so they might be more dependent on the mother country.

They were carefully prevented from following any species of foreign trade; they were subjected to regulations the most vexatious, and contrary to their own interests; not for the mother country’s good, but for the good of a small number of merchants. The infinite advantages attached to a new country, where every kind of labour is profitable, because every thing is yet to do, enabled colonies to prosper, although they were continually sacrificed.

As their raw produce was fit for a distant trade, they had it in their power to support a most unequal exchange, in which nothing was taken from them that the buyer could procure at home; but their rapid increase itself bears witness against the system which has founded them; they have prospered by a system diametrically opposite to that followed by the mother country.

The exportation of all raw produce, the importation of all wrought produce, has been encouraged in colonies, and have presented to such as believe in the existence, and calculate the state, of a commercial balance, a result as disadvantageous for themselves, as it was advantageous for the mother country.

Their oppression gave the latter all the profits of a monopoly; yet, in a very circumscribed market; whilst the free trade of all Europe, with all its colonies, would have been more advantageous for both, by infinitely extending the market of the one, and accelerating the progress of the other. What justice and policy should have taught, force will obtain, and the colonial system cannot long continue.

Governments, in the last place, to favour commerce, have granted it bounties and drawbacks. A bounty is a reward which the state decrees to the manufacturer, on account of his goods, which comes to him in the shape of profit. A drawback is a restitution of all the taxes, which a piece of goods had paid, granted to it at the moment of its exportation. A drawback is perfectly just and reasonable.

It leaves the national producer, in the foreign market, on a footing of equality with all his rivals, whilst, if beforehand be had paid a tax in his own country, he could not have sustained the competition. Bounties are the strangest encouragements which a government can give. They may be justified when granted for the fabrication of an article, the production of which it is necessary to procure at any price: but when granted on exported goods, as often happens, government pays merchants, at the expense of its own subjects, that foreigners may buy cheaper than them.

Thus, nearly all the favours which governments confer on trade and manufactures, are contrary even to sound policy or justice; and, judging of them by the law of profit and loss, we should infer, that all this attention, bestowed by government on trade, had done more ill than good. But political economy is, in great part, a moral science. After having calculated the interests of men, it ought also to foresee what will act upon their passions.

Ruled, as they are, by self-interest, pointing out their advantage will not be sufficient to determine their pursuit of it. Nations have sometimes need of being shaken, as it were, to be roused from their torpor. The small weight which would suffice to incline the balance, with a calculating people, is not sufficient when that balance is rusted by prejudice and long continued habits.

In such a case, a skilful administration must occasionally submit to allow a real and calculable loss, in order to destroy an old custom, or change a destructive prepossession. When rooted prejudices have abandoned to disrespect every useful and industrious profession, when a nation thinks there can be no dignity except in noble indolence; when even men of science themselves, carried away by public opinion, blush at the useful applications made of their discoveries, and in such applications see nothing but what they call the cookery of their sciences.

It might be necessary to grant extraordinary favours to the industry which it is necessary to create, to fix incessantly the thoughts of a too lively people on the career of fortune which lies before them, intimately to connect the discoveries of science with those of art, and to excite the ambition of those who have always lived in idleness, by fortunes so brilliant as, at length, to make them think of what may be accomplished by their wealth and their activity.

The mercantile capital of a nation is limited in a given time, and those who dispose of it, always desiring to put it out to the greatest advantage, have no need of any new stimulant to augment it, or turn it into the channels where it best produces profit. But all the capital of a nation is not mercantile. Inclination to idleness, which public institutions have fostered among certain nations, not only binds men, but also fetters fortunes.

The same indolence, which makes those people lose their time, makes them also lose their money. The annual revenue of territorial fortunes forms of itself an immense capital, which may be added to or deducted from the sum devoted to support industry.

In southern counties, the whole revenue of the nobility was annually dissipated in useless pomp; but to recall the heads of noble families into activity has likewise been found sufficient to give them habits of economy. The great French or Italian proprietor, becoming manufacturer has, at once, given a useful direction to the revenue of his land, by adding his own activity to that of a nation becoming more industrious, and added likewise all the power of his wealth, which formerly lay unemployed.

The torpor of a nation may sometimes be so great, that the clearest demonstration of advantages, which it might derive from a new species of industry, shall never induce it to make the attempt.

Example, alone, can then awake self-interest.

French industry has found, in the single little state of Lucca, more than ten new branches, to employ itself upon, with great advantage both for the country and those who engaged in them.

The most absolute liberty was not enough to direct attention to these objects. The zeal and activity of the princess Eliza, who called into her little sovereignty several head-manufacturers, who furnished them with money and houses, who brought the produce of their shops into fashion, has founded a more durable prosperity in a decaying city, and restored to a beneficent activity much capital and intellect, which, but for her, would forever have remained unemployed.

When government means to protect commerce, it often acts with precipitation, in complete ignorance of its true interests; almost always with despotic violence, which tramples under foot the greater part of private arrangements; and almost always with an absolute forgetfulness of the advantage of consumers, who, as they form by far the most numerous class, have more right than any other to confound their well-being with that of the nation. Yet it must not be inferred, that government never does good to trade.

Government can give habits of dissipation or economy. The government is the richest of all consumers. It encourages manufactures by the mere circumstance of giving them its custom.

If to this indirect influence it join the care of rendering all communications easy; of preparing roads, canals, bridges; of protecting property, of securing a fair administration of justice; if it do not overload its subjects with taxation in levying the taxes, it adopt no disastrous system, - it will effectually have served commerce, and its beneficial influence will counterbalance many false measures, many prohibitory laws, in spite of which, and not by reason of which, commerce will continue to increase under it.