and the Empire alike fiscal laissez faire is now a principle of minimum development, and that we must seek in another policy the principle of maximum development.

An altogether new vocabulary would be needed in this country to secure the clearest discussion of the issue involved. To a greater extent than has been generally recognised even yet, we are dealing in names which have no relation to things. Let us begin therefore by reminding ourselves of the actual meaning of some familiar terms:

(1) Free Trade is something which does not exist, which has never existed, which cannot be made to exist, and which, however irreproachable as an ideal, is a conception remaining as purely abstract and remote as that of "the parliament of man, the federation of the world." The theoretical merits of the doctrine are not in any way involved in the present controversy, and there is no occasion to dispute or even to discuss them.

(2) Free Imports imply by their mere name the absence of free sale. They cannot be confounded with Free Trade, which implied complete reciprocity in the conditions of exchange. That was the quintessence of its meaning. Further, "free imports" cannot even be called "free imports" without qualification, for the purposes of careful controversy. Our system, if we are to accurately distinguish it from other systems, must always be thought of as "indiscriminate free imports."

(3) Protection nowhere means what in this country it is almost universally supposed to mean. It means in modern economics "largely free imports." That is the quintessence of the idea involved in it. It distinguishes fundamentally between imports of raw material and those of manufacture. The latter are taxed, the former are free. The aim is to restrain the taxed import of foreign goods in order to encourage more powerfully the free import of raw material. (4) "Free Imports" v. "Protection." There is thus between these terms no such radical antithesis as is commonly supposed. The true distinction is the much narrower and more definite one between "indiscriminate free imports and "largely free imports." In this sense either of these systems has just as much or as little to do with Free Trade as the other. This country, for instance, possesses practically nothing in the shape of free exchange except in regard to coal. Now foreign countries called Protectionist actually do possess free exchange—that is, real Free Trade—to a more considerable extent. Germany and France, for instance,

have free imports for their raw material and free exports to this market for a very high proportion of their finished manufactures.

(5) Federal Trade is the system proposed to be established in order to promote the largest exchange of commodities between the Mother Country on the one hand, and her Colonies and Dependencies on the other, with a view to the greater security of sea power, as well as to the economic development and political union of the Empire.

Throughout the present paper, therefore, the issue will be regarded as one between indiscriminate free imports, and a discriminating system. This implies the abandonment of laissez faire and the definite intervention of the State for the purpose of encouraging the more desirable at the expense of the less desirable imports. There is no proposal to reverse Free Trade, for it has never existed. There is no attempt to disparage its principles, for they are remote from the practical issues of the existing generation. If the State is to interfere at all in economic policy, that interference can only take the form of some discrimination between imports and imports. Laissez faire was an artichoke of which every leaf but free imports has disappeared. Are we to consider that truth, which did not reside in the root, is likely to reside in the remnant? Or shall the remnant also disappear with the adoption by the State of a definite policy with regard to sea trade and Imperial production? The whole question of Constructive Economics lies there.

Philosophically the term "constructive economics " is one with which it might be possible to pick a slight verbal quarrel. The conflict is more strictly one, to deviate for a moment into jargon, between the passive and the active conceptions of the State, between the static and the dynamic ideas of public policy, between a theory of structure and a theory of energy; or, in one word, between laissez faire and savoir faire. The issue, as I understand it, is above all one between the doctrine of drift and the doctrine of development. But this being admitted there are great practical uses in the term "constructive economics." All political economy must involve a theory of the State in relation to trade. For more than sixty years the most dogmatic and least exact of the sciences has been dominated in this country by a futile conception of the State. Laissez faire assumes that the State has no function or only a negative one in relation to trade -that commerce only asks of Governments what Diogenes asked of Alexander.

That is the principle of destructive economics which we are organised to combat. The leading principle of constructive

economics is that the State, above all others the British State, has a positive and vital function in connection with the commerce upon which dominion depends. We are told by the survivors of the Manchester school that Governments can only hamper the operations of industry-that tariffs, in other words, can only limit production and restrict exchange. It is our business to show, upon the contrary, that the State can still give a powerful and decisive impetus to national industry. A national economic policy can unquestionably promote production. In this country a well-adjusted tariff would stimulate, for instance, manufacturing production.

But you cannot promote manufacturing production in this country, which would then rely to a greater extent than ever upon imported raw material, without at the same time promoting exchange in the largest volume and in the best form. If a national tariff increased our manufacturing power it could not do so without making us larger consumers of raw material from the other parts of the Empire. From our point of view, we can only regard a National Tariff on the one hand, and Federal Trade upon the other, as the inseparable factors of a dual apparatus, or rather as the reciprocating parts of a single mechanism. There we touch the aspect of the case which, as I conceive, especially interests this Club.

For again our theory of the State differs from laisser faire in that it avoids like the plague all pretence of laying down universal and eternal principles. We have to discuss the conception of a positive economic policy as applied to the concrete and unique circumstances of the British Empire. But we are all the more bound to place the clearest emphasis upon our leading idea— that of the fundamental unity of the whole question.. The historic policy of this country never attempted to distinguish between the respective interests of trade and Empire. The statesmen of the seventeenth and eighteenth centuries may have taken sometimes an erroneous view of the connection between them. But they had the great merit, Chatham in this respect being always supreme among them, of understanding that the interdependence of trade and Empire was at any rate vital.

Far less can we afford to separate, or can we succeed in separating, those interests now, when the industrial island as a matter of absolute life and death is more than ever dependent upon having access at all times and upon the cheapest terms-of the word c'.eapest in that connection we are not at all afraid-to the oversea supplies without which our machines would starve as well as our people. For us trade and Empire must sink or stand together. For us the problems of both are urgent. In our belief a home tariff without fiscal federation with the Colonies would

be a lever without a fulcrum. We conceive the two things as warp and weft, not to be divided without pulling the texture to pieces. As Mr. Balfour said in that remarkable little speech to the overflow meeting at Sheffield, when he repudiated the idea that he was opposed to Preference on principle, it is not within the narrow limits of the four seas that you can develop the wealth, the population, and, in the combination of those two, the power required to keep you in your station among the Empires of the world. Still, as in the old days when the real foundation upon which our greatness yet stands was laid down by the national or positive system, so long and so inadequately known as the mercantile system, ships, colonies, and commerce are the inseparable links of a single chain, and they must slip or hold together. If your ships go, so do your colonies and your commerce; if your commerce goes, so do your ships and your colonies; but also if your colonies should go, so, as we shall see, in a moment, must your commerce and your ships.

With respect to each one of these things the condition of your Imperial existence is not success. It is supremacy. For this country there can be no such matter as a second-class position in sea trade with second-class shipping, a second-class navy, and a second-class dominion. We believe it to be in the strictest sense impossible that our supremacy in sea trade, sea power, national wealth, and Imperial dominion, can endure permanently or can endure for long without a decisive reversal of the essentially and avowedly anti-Imperial system adopted in 1846, and without a speedy return, with all such wide modifications as the very different needs and circumstances of the time may demand, to the historic and national spirit of commercial policy to which we owe to this day all that is solid still in the foundations and the fabric of the State.

For national policy created sea-power, and sea-power has been not only the instrument of our defence; it has been the great engine of our progress.

II. HISTORICAL DEVELOPMENT

Let us examine, by the light of Dr. Cunningham's researches, the fundamental character of the commercial policy which prevailed in this nation for nearly three hundred years, from before the defeat of the Spanish Armada to close upon the eve of the Crimean War. Compared with the length of that period, indiscriminate free imports and laissez faire have repre

sented a very temporary deviation indeed. The main points in the history of three centuries one can only endeavour to bring out here in a few sentences. The laissez faire doctrine in trade involved a theory of the stupidity of our ancestors. Now nothing is more certain than that statesmen in Elizabethan, Stuart, and Georgian times were at least as well able to deal shrewdly with the facts before them as are the statesmen of to-day. The actual quality of brain in Shakespeare's time was as good as it has ever been since. I am certain that Bacon in the discussion of political economy could have given John Stuart Mill a very bad quarter of an hour. The theory of the stupidity of our ancestors before the Cobdenite age will not hold water for a single moment.

What does Lord Hugh Cecil think of that theory as applied to his ancestor, the great Lord Burleigh, who was the real founder in this country of the national system of commerce and maritime policy? The more strenuous and taking of the twins struggles to array his mind in the second-hand clothes of the Manchester school, just as the general world is casting them off, and he tries to look as though these early Victorian garments had always been the only wear of his house. The mercantile system as applied by the first and greatest of all the great Cecils was sound political economy in ruff and doublet. It was simply a policy of leaving nothing undone that could conduce to the defence and progress of the realm. It was precisely what we hope to make the policy we advocate to-day-a practical policy entirely free from pedantic abstractions, and endeavouring to deal to the best advantage with the patent facts of a very stirring world.

Burleigh found our trade carried on by foreign shipping, he found the country supplied with foreign manufactured goods, largely dependent upon continental manufacture even for its apparatus of war. Until those conditions were changed we could not begin to dream of Empire. Burleigh encouraged Englishmen and aliens to improve home industry; he broke the German shipping by which we had been almost exclusively supplied; and he brought over German gun-makers, on the contrary, to teach us how to make our own guns. The result was that in a few years we had the best ordnance in Europe. We crushed the Spanish Armada by superior gun-power even more than by superior seamanship, as Professor Laughton has shown. After that, but only after, we could dream of trade and Empire to any extent. National development, happily for every Englishman since, had made it possible for the island to become the nucleus of ocean commerce and oversea dominion.

In the following century we had in the Navigation Laws the