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most energetic system ever adopted by a nation to secure the development of its shipping at the expense of its rivals. I need say nothing in defence of the Navigation Laws, since we have the combined testimony of Adam Smith and John Stuart Mill that they were the wisest of all the commercial regulations of England. If they were politically right they could not be economically wrong. When Adam Smith said that “defence was more than opulence,” he hardly put the case with sufficient force. Defence creates opulence just as defeat works ruin. The power of nations, to state the maxim by which the commercial policy and the economic theory of Germany, for instance, are governed today—the power of nations in the modern world is the main factor in increasing the wealth of nations. Sedan made Germany richer to an immense extent than she had been. A sea-Sedan such as inspires the dreams of the German Navy League would make her richer than we are.

Take a step forward in the study of the national system and again we see that the great Chartered Companies were created by the State as part of the whole machinery for developing markets abroad with the reflex effect of developing industry at home. Take manufacture. Walpole in the King's Speech for 1721 showed a complete grasp of the main fact upon which the modern theory of a scientific tariff depends—that the fullest development of manufacture in a country like ours is promoted by the largest import of raw material as a means to the largest and cheapest production of finished articles. The attitude of Chatham and the statesmen before him towards the Colonies was governed, and far too rigidly governed, by the same idea— that we should receive from the Colonies raw material, exotic produce and non-competitive articles generally, and that we should send our manufactures to them. “The Minister who neglects any just opportunity of promoting the power or increasing the wealth of his country is to be considered as an enemy to his fellow-subjects,” declared the Cornet of Horse at the outset of his parliamentary career. Cobdenism would have approved the observation about wealth, and would have left out the reference to power, losing precisely by the omission what we may call that organic conception of national development as a whole which made mercantile statesmanship great in practice despite all defects in theory. Chatham, however, never thought of asking whether his theories were right or wrong. The selfconscious attitude towards political economy came later. Chatham was solely concerned with doing the effectual thing in a given situation.

The disciples of laissee faire ridiculed the attempt of the national system to monopolise markets. But the simple question of practical policy during all these generations was this. When all nations monopolised the markets they controlled, the question which country should control the largest market was a decisive issue.

Upon the Cobdenite theory of the stupidity of our ancestors, we have all been brought up to believe that statesmen under the mercantile system were chiefly and absurdly preoccupied with attempts to secure the largest inflow and the least outflow of gold. Nothing perhaps has done more mischief than this caricature of the old national idea. Statesmen during the seventeenth and eighteenth centuries may have been preoccupied with the movement of bullion for the wrong reason, but it led them for many generations to do right things. Gold under the circumstances of that time was the real barometer of trade. When we were building up our industry we had to pay for our imports either with gold or goods. It was obviously far better that we should pay for them with goods. In a word, the object of the national system was that the foreigner should pay gold for our goods, rather than that we should pay gold for his goods. This involved a check upon foreign competitive power in order to provide a stimulus for our own competitive power. Or to put it another way. Before the rise of machine industry—temporarily upsetting the whole economic balance of the world in favour of this country —national aptitudes for manufacture were tolerably equal. When the gold-index showed that the foreigner was selling more goods to us than we were selling to him, it often showed the existence of a trade abroad, part of which we might collar for ourselves. It disclosed a direction in which development was still needed. The mercantile people thought it better to produce goods than to export gold, and that conception was one of fundamental good sense under the particular circumstances of their time. In one word, with respect to trade, sea-power and dominion alike, to shipping, manufacture and markets, the national policy was the principle of maximum development, as laissez faire is now rapidly proving itself to be the principle of least development. When they tell us that a particular state of the gold-index under the mercantile system was the whole object of that system, they might as well try to convince us that the weathercock is the cause of the east wind.

Such was the spirit of the national policy. What were the results 2 It gave us, even before 1846, a supremacy in trade, Empire, and shipping such as the world had never seen before, and far more complete and secure than the supremacy we possess now. Friedrich List, writing a year or two before the repeal of the Corn Laws, before the failure of the Irish potato, and the inconsequent triumph of the laissez faire doctrine, said: “In no previous age has the world known in manufacture and commerce such a supremacy as that of England, disposing of such immeasurable forces and pursuing such a consistent and mighty policy in order to grasp the monopoly of manufacture, traffic, shipping, the possession of every important Colony in the world and the sovereignty of every sea. At all times there have been cities and nations distinguished above others in industry, commerce, and shipping, but such a supremacy as England's the world has never yet seen.” These were the Imperial results of the national or positive system. Yes; but I shall be very properly asked, what were the social results f Remember that the Corn Laws " were no part of the mercantile system, though they are nearly always confounded with it. They arose separately, and at an altogether later date, out of the practical situation created in this country by the Great Wars. Some form of Corn Law was essential to steady the transition of agriculture from war prices to peace prices—agriculture being at that time well nigh as important as all other industries put together—and to prevent a violent dislocation in the economic life of the country. Some form of Corn Law was essential, but a bad form of Corn Law was adopted; and it entailed some grave evils of its own. But in spite of that fact, the condition of the English working classes before 1846 was immeasurably better than that of the similar classes abroad. This is brought out by a paragraph one chanced across the other day in Porter's Progress of the Nation—a stiff Free Trade witness—which proves that the wages of our workers in 1837 were four times or more what they were at the same period say in Saxony: The manufactures [says Porter] are encouraged by the miserably low wages paid in Saxony. It is stated on the best authority that in October 1837, a man employed at his loom, working very diligently from Monday morning until Saturday night and even at times with a lamp, his wife assisting him in finishing and taking him the work, could not possibly earn more than 2s. 6d. Sterling per week; and that another man who had three children aged twelve years and upwards, all working at the looms as well as himself, with his wife employed doing up the work, could not earn on the whole more than 5s. 4d. weekly. Thus, even under the Corn Laws wages were at least four times, probably five or six times as high in this country as they were in Germany. There is no such disparity now. In 1846,

* This sentence applies to the Corn Laws of 1804–1846, not to the Corn Bounty of earlier periods when we were still a wheat-exporting country.

upon the theory of the stupidity of our ancestors and especially of Lord Hugh Cecil's ancestor, laissez faire kicked away the ladder by which we had risen. Foreign nations have since had similar ladders constructed. Germany, as the late Mr. Whistler said of nature, is “creeping up.” Before 1846 we enjoyed a very close approximation to universal ascendency. Our system was more efficient than the French because we alone realised what Colbert aimed at—mercantilism plus sea-power. This meant the fullest control of raw material, markets, and shipping. For three centuries, in short, England had pursued a policy of maximum development with all her strength. What have been the real results of sixty years of laissee faire 2

III. THE RENEWED NEED FOR DEVELOPMENT

For a generation we throve mightily, but it was only while the foreign competition already beaten down under our former system continued to lie flat. We provided the world with railways and loans. We created their competitive apparatus, and then they one and all adopted or strengthened Protectionist methods of working their competitive apparatus. The main fact about our situation before 1846 was that our Imperial security and commercial supremacy were absolute in every possible respect. Wages were at least four times as high in this country as they were in Germany. The blots which disgraced our civilisation were chiefly owing to the fact that laissee faire meant the neglect of the people before it meant the neglect of the State. Let us endeavour to tabulate, simply, the indisputable facts about our commercial situation in 1904. They may be stated as follows: (1) Our manufactured exports to foreign countries have been stagnant for more than thirty years. (2) Our manufactured exports to the great protected countries have been slowly but clearly declining for thirty years. (3) Their manufactured exports to us have increased during the same period in geometrical progression—they have increased, are increasing, and ought to be diminished. (4) For some time the growth of our colonial trade compensated for the loss in foreign markets. But for two decades that trade also has been showing all the symptoms of arrested development. The recent spurt has been entirely due to the

Canadian Preference clause and the South African War— the credit for which cannot be attributed by any stretch of imagination to the principle of indiscriminate free imports. (5) Excluding South Africa the truth about our exports of manufactured articles to foreign and colonial markets alike is that as a whole they have been totally stagnant during the greater part of the present generation. (6) In spite of the help which we derive from coal the United States is now first in the total value of its exports. (7) If Germany continues to gain upon us as she did last year and as she has not ceased to do since Bismarck abandoned laissee faire, Germany in less than ten years from now will either take second place or dispute with America the first ; and we shall be reduced to the third place as an exporting power. These are the facts about exports. You will agree with me that they could hardly be worse; that the necessity for waking up in earnest could hardly be more urgent. But now take the Cobden Club's test. Take imports. Even upon the Cobden Club's own principle of balance the countries which develope the largest exports must in the end have the largest imports. Things are indeed most clearly tending in that direction. The facts about imports are : (1) In the last twenty years the United Kingdom has increased its total imports for domestic consumption by 30 per cent. Germany, in spite of her Corn Law and protective system, has increased her total imports by close upon 90 per cent. And America, in spite of her McKinleyism and her vast internal command of food and raw material, has increased her imports by 40 per cent.” (2) At that rate in a couple of decades more we shall be surpassed, by Germany at least, in imports as well as in exports, and therefore in total value of trade. That is a far more important point than any that has been made with respect to exports. For if Germany is to excel us in the total volume of her trade she must ultimately displace us in shipping. (3) An unmistakable index of the whole situation is that the

* IMPORTS FOR DOMESTIC CONSUMPTION.

Moz. Mûz. United Kingdom . . 361 473 Germany - - . 161 299 United States - . 148 2O7

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