with the same amount of labor and capital, in both countries. Our supposition is, that, so long as each country produces both commodities for itself, the American price of a barrel of flour will be six yards of cloth; while the English price of a barrel of flour will be ten yards of cloth. Now, if a system of free trade between the two countries be established, the two commodities will be exchanged for each other at the same rate both in England and America. The price will be equalized between the two countries; but at what point will it be equalized? Shall the English price be established in America, or shall the American price be established in England? Or shall a price intermediate between the two be established? Either of these three suppositions is possible. The Englishman can afford to give ten yards, for it will cost him that amount of labor and capital to produce the flour in his own country, or for himself. On the other hand, the American can afford to sell the flour for six yards, because this quantity of cloth, if produced in his own country, would cost him as much labor and capital as a barrel of flour. Suppose that, by the higgling of the market, the price in both countries. is fixed at seven yards. The advantage of the trade is then shared between the two countries, but it is shared unequally. America gains one yard on each barrel, as she now receives seven yards of cloth for the labor which formerly produced but six; England gains three yards on each barrel, for the flour now costs her but seven yards a barrel, while it formerly cost her ten. We will suppose that, at these rates, America sells 100,000 barrels of flour to England, and receives in exchange, of course, 700,000 yards of cloth. The demand on each side must be just sufficient to carry off the supply received on the other. So long as England wants only this amount of flour, and the United States only this quantity of cloth, the interchange will continue at this rate, giving three fourths of the profit to Great Britain, and only one fourth to this country. But suppose the demand to vary in one of the two countries; suppose that England, on account of the increase of her popu lation, now needs 150,000 barrels of flour, which America is perfectly able and willing to furnish. But England can pay for this larger purchase only by sending over more cloth; the United States, however, by the supposition, are fully supplied with the 700,000 yards which they received before; they cannot buy any more at the old rate of seven yards for one barrel. How, then, is England to obtain the additional quantity of flour that she needs? She has but one course to pursue; she must offer her cloth at a reduced price, knowing that this reduced price will bring it within the reach of a larger class of consumers, who will take off the increased quantity that she needs must sell. Instead of seven, she will now offer nine yards of cloth for a barrel of flour. At this price, the Americans may be willing and able to buy 1,350,000 yards of cloth, which will furnish the 150,000 barrels of flour required by England; or, if we do not need this large quantity of cloth, England has only to sell this quantity at the reduced price to other countries, and obtain in exchange for it tea, coffee, sugar, and other products, which (at this reduced price again) we do need. If we do not receive the benefit of the change of price in cloth, we shall receive it in other commodities. There is, indeed, one other mode by which England might obtain the additional quantity of flour required without lowering the price of her cloth. Suppose that the demand of the United States for cloth had been kept down to 700,000 yards by a protective tariff, the revenue from which paid the expenses of our government, though it somewhat enhanced the price of cloth to our people. Suppose, further, that our government, learning that England was inclined to purchase more flour of us, in order to favor that inclination, should determine to abolish the tariff, and admit cloth duty free, or at a nominal. duty. Then, indeed, the demand for cloth might be so far increased, that England might obtain her 150,000 barrels of flour by paying for it at the rate of seven yards to a barrel. We should, indeed, sell the increased quantity of breadstuffs, but receive in payment only 1,050,000, instead of 1,350,000, yards of cloth. By this wise act of legislation, also, we should be obliged to pay the expenses of our government by direct taxation, should have our domestic manufactures ruined, and the profits of our agriculturists much diminished by the influx into their business, and the consequent competition, of the disbanded workmen from our manufactories. - Those who have followed the reasoning thus far will have perceived, that our suppositions all along have been only disguised statements of recent facts. The great increase of the English population in consequence of the misery of that population, the policy of the English landlords in depopulating their vast estates by driving the peasantry into the towns, thus substituting manufactures for agriculture as their employment, and the deficient harvests of 1846 and 1847, - all these causes combined, created an evident necessity for a much enlarged importation of breadstuffs into Great Britain. These facts were recognized almost simultaneously by the leading English statesmen of both parties, by Lord John Russell and Sir Robert Peel; and they led, first to a partial, and in a very short time to a total, abolition of the corn laws, those laws which had existed for over thirty years, avowedly to check our sale of provisions to England, and thereby to enhance the price of English manufactures in America. But under the American tariff of 1842, a much enlarged supply of grain from this country could not be obtained without a corresponding material reduction in the price, not only of English manufactures, but of all the other foreign products needed in this country which had been purchased for us with English manufactures. The English, therefore, were eager to procure the repeal or modification of this tariff, and succeeded in persuading American statesmen that such a step would be only a fair return for the abolition of the corn laws, and that, in fact, it was necessary, in order to induce and enable the English to buy more grain and flour from us. This argument would have had more force, if it had been shown how they could avoid making this enlarged purchase at any rate. But these representations were successful; Congress did substitute the tariff of 1846 for that of 1842; and this lowered the price of English manufactures in this country so far, that our increased consumption of them paid for the whole enlarged supply of breadstuffs needed by Great Britain. The result was, that a conjuncture of events, which ought to have operated greatly to the advantage of the United States, and to the disadvantage of England, really paralyzed our domestic manufactures, almost destroying those of iron, and greatly injuring those of cotton and wool, while the English manufactures have never been more prosperous than since the abrogation of the corn laws. Why should they not be? The demand for their products in the United States has greatly increased, while the reduction of price, through which alone this increase of demand could have been effected, has really taken place, not through the English manufacturers receiving less for their goods, but through our own modification of our tariff. We have thereby just thrown away the benefit that would naturally have accrued to us from the increased English demand for our provisions, and we have nearly crushed our own manufactures into the bargain. I have now stated the doctrine of international values in the most precise manner, carefully analyzing each step of the process, in order to show that there was no gap in the reasoning. But as the theory of the matter is necessarily complicated and abstruse, I will now state it over again in a more general way, in order to be more fully understood. America produces chiefly raw material, because she has the advantages of a more extensive territory, and a more fertile soil; England produces chiefly manufactured goods, because she has the advantages of more capital, longer experience, and cheaper labor. (I must now use numbers and measures almost at random, for convenience of brief calculation; but any numbers and denominations will answer equally well to illustrate the principle with.) In consequence of their respective advantages, we will suppose that England must give the labor vested in ten pounds of manufactured goods for one hundred-weight of raw material; while the labor vested in six pounds of such goods would raise or buy one hundred-weight of raw material in America. Now the doctrine of free trade, (which is in itself a perfectly sound and just doctrine, if applied to two countries which are similarly situated in every respect,) if applied in this case, would teach the Americans to give themselves exclusively to the production of raw material, and the English exclusively to manufactures, on the ground that each could purchase of the other what it would then need, more profitably than it could produce that article for itself. Let us suppose that the Americans adopt this advice, and raise nothing but raw material. What will be the consequence? As every civilized nation must consume more value vested in manufactured goods than in raw material, (without reckon ing tea, coffee, and tropical products, which must be brought from abroad,) it is evident that we must be constantly pressed to purchase from foreign countries more than we can easily pay for by selling to them raw material. In order, then, to enlarge the foreign market for our cotton, tobacco, and flour, -in order to bring them within the reach of a larger class of consumers, we must offer them on the most favorable terms. We must offer them at the American price, (of one hundredweight for six pounds of manufactures,) rather than at the foreign price, which they would otherwise naturally assume, of one hundred-weight for ten pounds. At this last price, it may be assumed that we could dispose of only one thousand tons of the raw material; and for this amount we should procure only 200,000 pounds of manufactured goods; - not enough to supply our wants. But in order to obtain more, we must be able to sell more; and in order to sell more, we must offer the raw material at a lower price, so as to enable a greater number of foreigners to purchase it. If we offer it at the rate of six pounds to the hundred-weight, we might be able to sell, not merely one thousand tons, but ten thousand; and this, at the price mentioned, would give us 1,200,000 pounds of manufactured goods, which might perhaps be sufficient. The principle is, then, that whichever nation is under the strongest temptation or necessity to buy from others,-whichever needs to buy more value than it can readily sell of its own products to pay for, that nation labors under a disadvantage in the traffic, and must offer its own commodities at the lowest possible price. "At the lowest price which is possible," we say; for the theory shows clearly, that there are limits beyond which the price can neither be elevated nor depressed. We cannot sell for less than six pounds, because the labor and capital expended in producing a hundred-weight of raw material would, with all our disadvantages in manufacturing, enable us to manufacture six pounds of such goods for ourselves. Neither can we obtain more than ten pounds, because the English labor and capital bestowed on ten pounds of these goods would enable the English, in spite of their disadvantages in regard to raw produce, to raise one hundred-weight of raw material for themselves. Within these limits, then, is the sphere of opera |