LECTURE III.

MERCANTILE THEORY OF WEALTH CONCLUDED.

I REMARKED, in my last lecture, that there are three grounds on which an interference with the natural channels of commerce may, in some cases, be defended without having recourse to the mercantile theory. Two of these, security in case of war, and the immediate injury to the domestic producer with whom the imported commodity would interfere, I have considered. I now proceed to the last, which is taxation:

The principle of free trade is non-interference: it is to suffer every man to employ his industry in the manner which he thinks most advantageous, without a pretence on the part of the legislator to controul or direct his operations. But when a tax is laid on any domestic product for which a substitute can be obtained from abroad, if the tax exceed the

difference between the price at home and abroad, and the expense of importation, it may, besides the general evils necessarily incident to a tax, also operate as an interference with the natural employment of industry. It may occasion the home producer to abandon his business and devote himself to the production of some other commodity, by the exportation of which he may be enabled to import, tax free, the foreign commodity. A heavy tax is imposed on the domestic manufacture of glass-if no restrictions were imposed on the importation of foreign glass we should cease to manufacture glass at home, and devote an additional portion of our industry to the manufacture of commodities to be exported in exchange direct or indirect, for the glass of France and Germany.

The obvious mode of preventing this is to levy an equivalent, or, as it is called, a countervailing duty on the foreign commodity: and we may easily believe that no government is likely to be wanting in this precaution. The

fault is uniformly on the other side. Partly with a view to reconcile to the tax the domestic producer; partly in the hope of additional revenue; and partly with the patriotic intention of protecting domestic industry, a specific tax on any home product is always accompanied, not by an equivalent, but by a much heavier tax on the foreign commodity which might be a substitute for it. And the necessary evils of the tax are augmented by making it a pretext for new restrictions on commerce. But if the duty be no more than a countervailing or equivalent one, it is, subject to the exceptions which I shall mention in a subsequent part of my lectures, not a departure from the principles of free trade but an application of them.

This argument, however, is often made use of to sanction the grossest violation of those principles. We have seen that free trade is founded on non-interference; on the unquestionable axiom, that the wealth of the whole nation is best promoted by allowing each indi

vidual to employ himself in the way which he thinks most advantageous to himself, without the influence of motives artificially supplied by partial taxation. But taxation can supply such motives only while it is partial. When a tax is laid generally on all employments, it obviously can occasion no transfer of industry from one employment to another. An exclusion of foreign commodities founded on such a tax, must, of course, either be general, or a particular one. We have seen that such a general exclusion, if it were possible, instead of diminishing the necessary evil of the tax would be itself a fresh, and a far severer calamity. On the other hand, a particular exclusion would be an attempt to favour some particular class or classes of producers at the expense of the community. The first would be simply mischievous; the second mischievous and unjust.

The same answer is to be made to the demand by a particular class to be allowed a

monopoly in consideration of the injury which they suffer from the monopolies granted to others. It is true they are sufferers, and so is the whole community, but where would be the justice of an attempt to exempt them from their share of the general suffering by inflicting a new evil on the community at large?

As a fallacy cannot be clearly exposed without illustrations, I will venture to select a few examples from the debate in the House of Commons, in February, 1826, on the proposed admission of foreign silks. The Member who opened it, said It was utterly impossible to

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compete with French silks. With a load of "debt, hanging like a mill-stone, around the "neck of the nation, were they rational men "who could propose a competition with a

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people whose debt was almost no burthen at "all?"

The Member for Coventry asked, "Could

they go back to the rate of wages which pre"vailed in 1792? Could they introduce the