shoes, whether by increasing the population or by increasing the proportion of the population which can find a sale for its labor, and the demand for shoes will increase, their exchangeable value will rise, the profits of the manufacture will augment, and it will be enlarged to meet the changed conditions. It will find its new limits in the production which again reduces the exchangeable value of shoes to that point where the profits fall to the rate usual in the community. The moment profits are such as to enable the manufacturers to save, and add to their capital an annual percentage, greater than that by which the population increases, they will increase their production faster than the population increases; when profits are less, they will allow the population to gain upon the production. There is, evidently, a limit to the field of employment open to this industry. It will be wider under certain circumstances, narrower under others. But it is this limit,-the limit of the field of employment, which regulates both the quantity of labor and the quantity of capital which will be employed in it. But what is true of shoes is true of every other commodity, and of every service known to the community. It would seem, then, that the normal condition of an improving community was this. Skill, dexterity, judgment, machinery are constantly diminishing the sacrifice at which men can procure the commodities produced by its industries; but they are also constantly increasing the mass of unemployed capital, and forcing it to search for new commodities and new services, which may tempt the capitalists, great and small, to increase their consumption, so as to keep pace with the increasing capacity for production. Each new commodity, convenience, and amusement furnishes a new market for the existing industries, and enlarges the effective demand. The field of employment is increased, the people are more fully occupied, the gross annual product is augmented, and the purposes to which an additional fixed and floating capital can be applied are multiplied. This is a society in which the introduction of a new industry finds ample unemployed capital for its development, and in which its products immediately enlarge the market

for the products of the old industries, and enable them to increase their production and the capital employed by them.

The normal condition of the society imagined by Adam Smith, and by John Stuart Mill in his first volume, and by Bastiat, is one where the field of employment is checked by the want of capital. Deductive reasoning leads us to the conviction that they put the cart before the horse; to the conviction that, on the contrary, it is capital which is limited by the limitation of the field of employment. Introduce the new industry, and the capital necessary for its development will be found waiting for the work, and will be rapidly reproduced and more than reproduced by the augmented activity of the previously acquired industries. There will be a demand for more labor, and the increased annual product will reward the labor with higher wages.

Pure reasoning would have led to the conclusion that in community possessed of a considerable variety of industries there must be an enormous aggregate of commodities unsold or unconverted, or, in other words, of unemployed capital; and an inquiry in Wall Street or State Street would have revealed that such was the fact. The free traders missed the fact, because they did not stop to reason, but preferred to jump at conclusions.

M. Bastiat's assertion, then, that a protective law, which says such or such an article shall be limited to home production, cannot increase disposable capital a single penny is simply a blunder. It can increase it in the United States many hundred millions of dollars a year. The surplus stocks of the existing industries will immediately supply the capital required, and will be replaced in an exceedingly short time by the stimulated activity of those industries; and, meanwhile, the people will have had paid to them for labor about twice the amount of capital invested in the new industry. Take the following as an illustration. Let us suppose that a country exists (call it, if you please, the United States) where the annual product is six thousand millions of dollars, and the normal surplus stock of commodities is equal to a consumption of sixty days, a value of about one thousand millions.

We will suppose that it uses largely of woollen goods procured from abroad. The people, looking round, perceive that the climate is in no way unfavorable to the woollen industry; that they themselves are by no means wanting in general aptitude to mechanical and manufacturing industries; that there is every reason to suppose the requisite skill can be attained; and that well-directed efforts to import the industry will end in our producing, here, close at hand, as good or better cloths at a somewhat lower cost of labor and abstinence than they cost when imported from abroad. Accordingly the people say, let a law be passed giving a protection of say fifty per cent to woollens. The law is passed, and here and there all over the country woollen mills are commenced by the combined capital of a multitude of individuals. Gradually, as the mills are built, they pay in their subscriptions. Some draw out of the savings banks, which hold over a thousand millions; some have money with other banks or bankers, the deposits with whom exceed another thousand millions; some sell stocks or property. Twenty millions a month over the whole country will not make a ripple in the money market. Suppose, then, the operations are to the extent of twenty millions a month. As soon as gathered in they are paid out for labor and spent by labor in buying commodities. The producers of commodities now find their stocks diminishing,

that is, a part of their unemployed capital is set free. They will know this if the free-trade philosophers do not, and they will employ more labor to meet the increased demand for commodities. They will be able to pay out twenty millions a month more for labor, and this will bring about an additional production of more than forty millions, more than sufficient to pay for the additional labor and the construction of the woollen mills besides. This is warranted by the facts given in the United States Census for 1870, which showed that the mechanical and manufacturing industries in the United States added $1,744,000,000 to the value of the material used, and that of this $776,000,000 went to labor. It would seem, then, that $240,000,000 a year would be invested in woollen mills in the year without diminishing the floating

capital of the country a cent. At the end of the year the country will have woollen mills which cost $240,000,000 as an addition to its fixed capital, and the laboring classes will have had $480,000,000 additional to spend. The investors in mills will have withdrawn $240,000,000 from the monied reserves, but the master mechanics and manufacturers will have added an equal or somewhat larger amount. The nation altogether will be richer by $240,000,000 in the shape of woollen mills, although it has had and spent $480,000,000 more within the year; and this is the result of giving fuller occupation to the people. More commodities are made and there are more consumed.

This is the effect of the law which Bastiat says cannot add a single cent to the wages of labor. Let business men, who understand accounts, examine the above theory of the protectionists, and compare it with the theory of the freetraders, and then decide which represents and explains the actual course of financial affairs as they go on continually before our eyes, and which ought to be taught to young men who are preparing for practical life.

Bastiat says that "when a nation isolates itself by the prohibitive system, its number of industrial pursuits is certainly multiplied, but their importance is diminished. In proportion to their number they become less productive, for the same capital and same skill are obliged to meet a greater number of difficulties. The fixed capital absorbs a greater part of the circulating capital; that is to say, a greater part of the funds destined to the payment of wages.

Was this a man capable of teaching the people of the United States? "Isolate" is a good piece of rhetoric. The abominable, absurd, suicidal, ridiculous, impoverishing tariff of the United States has so "isolated" the nation that it sends abroad for sale an annual value of about nine hundred millions, and keeps five or six times as much at home. It is so poor that its average annual individual income exceeds that of any other country in the world, not even excepting Great Britain. It has on its hands no starving Ireland, no starving Orissa, no starving Behar; nor would it have were those

countries transferred to its dominion. For "starving" would then have to be substituted in every case the words "flourishing," "contented," "prosperous;" for they would be protected from hostile industries as much as from hostile

armies..

M. Bastiat imagined that a new industry would be established by capital drawn from the old industries, which would be thus cramped and diminished, whereas the new industry would be established and equipped by capital already existing, and replaced during the period of its introduction by labor which would otherwise have been unemployed; and its products, when established, constitute an additional market for the products of the old industries, enabling them all to increase their production.

Chapter XIII. is called "Theory — Practice."

In this chapter M. Bastiat claims for each individual the "free disposition of his own property."

This is a proposition in law or in social science. It has nothing to do with political economy, which is an inquiry into the means of increasing national opulence. If it were shown that protection was one means, it would be no answer to say that protection invaded natural rights. Either legal or social science would laugh at any such pretension.1 A certain society has come to the belief that the opulence of all and each of its members will be promoted by a regulation that while A is employed by B, C, D, etc., he shall in turn use the products of B, C, D, etc. A does not like the regulation. His particular industry is such that B, C, D, etc., must employ him, while he has discovered that D's product can be got a little cheaper outside the society. A would like to work for the society and enjoy all the advantages of their custom; but he would prefer not to give any custom in return. He maintains that by an opposite arrangement the society altogether will grow rich. B, C, D, etc., reply that if the industry of D be abolished, D will have to be supported by the rest; and that in the particular circumstances of their society it is vastly cheaper to get the products through D than

1 See note 1, page 79.