XXXIV. COMMERCIAL POLICY…

XXXIV. COMMERCIAL POLICY

=404. War and peace in the nineteenth century.=—Although, for the convenience of a round number, the date 1800 has been chosen in this book to fix the beginning of the recent period, the great changes which marked the passing of previous conditions began with the French Revolution of 1789. The effects of the revolution were soon felt outside the country in which it started. In a few years the powers of Europe were engaged in a war which, with slight intermission, endured for almost the period of a generation, and ceased finally only with the defeat of Napoleon at Waterloo. Since 1815 commerce has enjoyed singular freedom from the vexation of war, and our attention will be occupied in this chapter mainly with the commercial policy of states at peace. The convulsive struggle, however, in which the century began, has such importance, commercial as well as political, that it demands more than passing comment.

=405. French privateers and English commerce.=—The commercial interest of the revolutionary and Napoleonic wars centers in the contest between France and England. These two powers were the greatest commercial states of Europe, and France still retained important colonial possessions. England, however, had specialized in the development of sea power, while France now followed the course to which she had long been tending and sought to win the victory by the development of her power on land. After 1795 France abandoned the policy of maintaining great fleets to oppose the British, sacrificed the merchant vessels flying the French flag, and sought to destroy the commerce on which the life of England depended by sending out innumerable privateers to prey upon it. France enjoyed, apparently, an extraordinarily favorable position for making this policy effective. The port of London carried on more than half of British foreign trade; of the ships which contributed to its annual record of thirteen or fourteen thousand entries and departures, two thirds had to pass through the English Channel; and French privateers, sailing at sundown from a home port, could reach their cruising ground before it was light again. Some of the French privateers inflicted very serious loss on the British. A large one, captured in 1799, is said to have taken 160 prizes in four years, and to have cleared for her owners in Bordeaux five million dollars. English ships were forced to gather in convoys, sailing under the protection of ships of war. Fleets of 200 or 300 vessels were not unusual, and sometimes 500 or 1,000 were seen together, in dangerous places like the Chops of the Channel or the entrance to the Baltic. This system consumed the time and money of English merchants, and did not entirely prevent losses, which amounted perhaps to 2 per cent or more of the total volume of British trade. Still, the effort of France to crush her enemy by this means was clearly futile. France, on the other hand, saw her commerce decline until, as a literal fact, not a single merchant vessel flying the French flag was on the seas. In 1800 France received directly from Asia, Africa, and America less than $300,000 worth of goods altogether, and exported to those continents only $56,000.

=406. Napoleon and the Continental System.=—A new period in the war against commerce can be dated from the reopening of hostilities, after a brief interval of peace, in 1803. Napoleon, now the ruling spirit in France, found that a direct contest with the English on their own element, the sea, was hopeless. His schemes for the conquest of his great enemies may be summarized as follows: first, direct invasion, from which he was always deterred by the English sea power; second, a blow at England through her eastern empire, to which the Egyptian expedition was preparatory; and finally, the “commercial strangulation” of England by the exclusion of her goods from Europe. This last scheme, to which his efforts finally narrowed themselves, simply continued a policy which had already been applied in France, of excluding the wares and ships of British commerce. Napoleon was able, however, by his extraordinary successes on land, to extend the system of prohibition far beyond the bounds of France, and make it truly deserving of its name of Continental System. By 1809 he had closed to English trade all Europe except Turkey, Sicily, and Portugal. Decrees named from the place at which they were issued (Berlin, Milan), sought with savage thoroughness to stop all openings through which the English might carry on their trade and recruit their resources for the war against him. Commerce with Europe, according to Napoleon’s plan, was to be carried on exclusively by his allies or by neutrals like the Americans; and the English, by being totally excluded, were to be starved into submission.

=407. English reprisals; the position of neutrals.=—To these measures England replied with various Orders in Council which matched in spirit Napoleon’s decrees. As Napoleon sought to exclude England from European commerce, so England sought to drive the commerce of Napoleon’s allies from the sea, and, furthermore, to make neutral commerce aid her in her measures against him. An order of 1807 required any neutral trading with the Continent to stop at a British station both going and coming, to land and reship the cargo, and to pay certain duties. Its purpose was to make England the center and warehouse of the world’s commerce. Neutrals were placed between the upper and the nether millstone. In obeying the orders of either belligerent they exposed themselves to the punishment of the other. The merchants of the United States, who had profited by the early stages of the war to extend their commerce greatly, were forced into the seclusion of the embargo (to be described later), and were led in 1812 to the declaration of open war with England.

=408. Failure of the Continental System.=—England scarcely needed political allies in a contest in which the material interests of most of the people of Europe were allied with her own. The obstacles to commerce with the Continent caused the prices of articles like the colonial wares to rise to double, triple, even tenfold, what they were in England. The reader will remember that the practical beginnings of beet sugar manufacture can be dated from this period of dearth. Commercial forces were too strong for any political restrictions, and smugglers brought goods to the people who wanted and would pay for them, despite all penalties. At a time (1809-10) when all the great ports from Riga to Triest were closed, goods reached the interior still, through the Greek islands, Malta, parts of Spain, the Channel Islands, and Heligoland. Napoleon himself had to recognize the impossibility of making the Continental System effective. He clad his own armies in English cloth, sold constantly licenses to evade his own decrees, and sought to win the profits away from smugglers by allowing the introduction of colonial products on payment of duties equivalent to the smugglers’ gain. Certain branches of production and manufacture were furthered on the Continent by the restrictions on trade, but the Continental System, on the whole, resulted only in loss to the people and in the defeat of Napoleon’s own plans. It furnishes a signal example of the futility of attempting to crush a sea power like England, without meeting it on its own element.

=409. Effect of the war on England and France.=—The effect of the war and the prohibitive system was necessarily injurious to British commerce, and showed itself in a decline of British exports. The injury, however, far from being mortal, was extremely slight. Smuggling was incessant, and if one opening to British trade was closed another was quickly found. When Holland became allied to France and hence closed to England, British exports to Germany increased rapidly; the German people were not consuming more British goods, but acted merely as distributing agents, through whom the goods reached their old markets. Napoleon could not forever coerce a whole continent, and his blockade was generally evaded in northern Europe, with the connivance of the governments, before 1810. On the last day of that year the Czar of Russia bade open defiance to the Continental System; and it crumbled beyond hope of repair after the failure of the Moscow campaign. Even the losses which England suffered were made up, in considerable part, by the profits which she secured from the expansion of neutral trade. England gained valuable additions to her maritime empire (Malta, Heligoland, Cape Colony, Ceylon, etc.), and entered the nineteenth century with her commercial primacy established beyond dispute. France, on the other hand, emerged from the struggle weakened at home and shorn still further of possessions abroad. Hayti (or San Domingo) had been lost by a native revolt; the Louisiana territory had been ceded to the United States; and some of her small islands had passed into the hands of England.

=410. Other wars of the nineteenth century.=—After the conclusion of this great war the world enjoyed a long interval of peace. The nineteenth century has been marked by internal political development, rather than by international strife. The growth of the spirit of nationality, the idea that people conscious of likeness in language, religion, etc., should be grouped under the same government, has led to several sharp struggles between states; but these have, in general, been short and of no great commercial significance. More important, from the commercial standpoint, has been the revolution in South America, which has enabled the people, formerly bound by the restrictions of the colonial system, to establish independent trade relations. Commerce was seriously affected, moreover, by the Civil War in the United States, which closed to the world for a few years its great source of supply of cotton. Other countries proved incapable of supplying the lack; a considerable portion of the English people (one fifth, it was said then), supported by the cotton manufacture, suffered from the stoppage of work; and consumers were forced to adopt other clothing materials, and did not, for many years, use cotton as freely as before. Of the other wars preceding 1914 the only one that had great economic significance was the war between Japan and Russia in 1905, which brought into the rank of the great powers an Asiatic country with far-reaching commercial ambitions.

=411. Removal of old obstacles to commerce.=—The greatest benefit which Europe enjoyed from the French Revolution and the ensuing wars was the removal of many remnants of feudal institutions which had persisted, petrified as it were, to this late period of history. Of these remnants none was more harmful to commerce than the feudal institution of the staple. This flourished especially in the German states, and resulted in depriving of a large part of their commercial value the German rivers, which were by nature the cheapest and best means of transportation. It was impossible to travel far on any German river without reaching a staple, where the boatman was subject to delay, inconvenience, and considerable expense. On the Rhine, for instance, there were thirty-two stations of this character where dues were still levied in 1800. As far as regarded the effect on commerce the flow of the rivers might as well have been interrupted by cataracts. It was a great step in progress, therefore, when these interruptions were removed, as little by little they were in the first half of the nineteenth century. The principle of free navigation was extended gradually to include important international rivers like the Scheldt and the Danube. The reader will remember that in the Middle Ages various countries tried to monopolize parts of the sea itself. Denmark had kept its hold on the straits leading into the Baltic Sea, and required ships to stop at Elsinore and pay toll, until 1857, when it sold out its right to levy toll on the payment of a lump sum by the countries interested in free navigation.

=412. Customs tariffs; the prohibitive system.=—The most important topic which remains to be considered in this chapter is that of commercial policy as shown in the customs tariffs. The details of tariff policy must be left to later chapters, in which the different states will be considered separately; place can be found here only for a brief review of the general course of development, and for a consideration of some of the factors which explain the great changes.

Only a few years before the outbreak of the French Revolution France and England had agreed to a commercial treaty, which marked a great departure from the restrictive principles of the old mercantilist policy, and seemed to promise a new era of freedom in trade. The outbreak of war destroyed the new system almost as soon as it had been carried into effect, and changed the relations between the two states into that attitude of fierce antagonism which has been described above. The return of peace found the tariff systems of both France and England set in the old lines. The tariffs included a vast number of duties, both on imports and on exports; the rates were high and often prohibitive; the protection of national shipping by navigation acts was maintained. Similar characteristics marked the tariffs of other European states, and this period may fitly be termed the era of prohibition in recent commercial policy.

=413. The period of free trade, 1860-1880.=—The prohibitive system held its ground, however, only by force of custom and by the active support of small groups whom it favored. The writings of French and English economists, of whom Adam Smith was the great representative, had convinced thinking men that the people and countries of Europe would benefit by greater freedom of trade, and governments waited only for favorable conditions, political and economic, to lower their customs duties. The movement toward reform was at first local, finding place especially in England and Germany. Soon after the middle of the century, however, it became general in Europe, and led to such sweeping changes that the period extending, roughly, from 1860 to 1880 has often been called the free-trade period in commercial history. This was the time when the technical inventions, especially the application of steam on a large scale to manufactures and transportation, were first showing their full power in increasing productiveness. At this time a state which secluded itself commercially seemed to be renouncing the chance to share in the great movement of progress. Industrial states sought markets for their manufactures and sources of supply for their food and raw materials. Agricultural states found the offers for their surplus products too tempting to be refused. So many profitable openings appeared everywhere that there was little dread of competition and little call for protection.

=414. Reduction of customs duties.=—In this period, therefore, there was a general overhauling of the old tariffs. Export duties disappeared. Prohibitions were dropped, and import duties were reduced. Narrow restrictions, designed to favor merchant shipping, were reformed. Liberal commercial treaties became the fashion, and Europe was soon covered with a network of them after England and France had set the example in 1860. These treaties became of especial importance because they now included generally the clause of “the most favored nation,” by which a participant in the treaty was assured that it should share, without delay and without need of recompense, in any favors that might be granted to other states. The slightest concession, therefore, effected a general reduction of duties in Europe. An English author, writing in 1882, found that in the period from 1860 to 1880 tariffs had been raised in only two of the sixteen European states. Apart from these two exceptions, which were not important, tariffs had undergone substantial reductions; of 2,140 items existing in 1860 only 136 had been raised, while 900 had remained the same and no less than 1,104 had either been lowered or removed altogether from the list. These reforms were undoubtedly responsible in part for the remarkable growth of the world’s commerce in the period which they covered.

=415. The return to protection.=—The free-trade movement has been followed, in the last quarter of the century, by a decided reaction to protection. Since about 1880 increase in the customs duties has been the rule in Europe, and reductions have been exceptional. No single cause can be held responsible for this change. The growth of national feeling and of international tension in Europe since 1870 has undoubtedly disposed governments to listen more readily to the complaints of citizens who suffer from competition, and ask for protection against foreigners. Competition, moreover, has widened its range of action and become more keen. The countries which gained new markets for their agricultural products, and flourished during the period of development of steam transportation in Europe, have lost their foreign markets and find their home markets menaced, as the transportation system has grown to embrace other continents and now brings cheap products from across the seas to the door of the European consumer. Countries which willingly accepted the manufactures of advanced industrial states when their own industries were in a primitive stage of development have since aspired to establish modern factories of their own at home.

In spite of the return to higher duties the present protectionist policy has retained many of the changes of the period of free trade. The statesmen who guide the commercial policy of European countries have discarded prohibitions, and use duties discriminating against particular countries only exceptionally. Down to the close of the century they have continued to grant to nations in general the treatment accorded to the most favored nation, and in some ways have extended the scope of this practice. The general level of duties, moreover, though it may seem high in comparison even with the general average of the period of prohibitions, offers a much less effective bar to trade, because of the reduction of the expense of transportation. It is impossible to state accurately the relative height of various tariffs. The following table gives an estimate of the tariffs on some important manufactures towards the close of the century: Russia 130 per cent, United States 72 per cent, France 30 per cent, Germany 25 per cent, Belgium 13 per cent, New Zealand 9 per cent, etc.

=416. Colonial policy.=—Colonial policy, a topic which has had for some years a leading place in public discussion, can receive only brief consideration in this history. The colonial ventures of the recent period may in time bring forth the commercial results which their projectors promise; up to the present the results have been small. Until far into the century European governments showed little interest in the expansion of their people or the extension of their power in distant parts of the world. Their attention was absorbed by the problems of domestic and foreign policy in Europe. The colonial question, however, like every other political and economic question, assumed a new aspect under the changes wrought by steam and the telegraph. Distant continents were, by those changes, brought nearer to European capitals than parts of the home territory had been before. The immense increase of transmarine commerce which marked the latter part of the century was carried on largely by English-speaking people, and seemed to promise to states of the Continent similar results if they could spread broadcast their people and power as England had done. The best parts of the world had already been occupied, it is true, but great stretches of territory were still free from claimants of European descent. France began to raise her flag over new territory in Africa, Asia, and Oceanica; the Belgian king established his authority in the region of the Congo; the movement quickened to a scramble in the ‘80’s; and soon all parts of the habitable world except certain countries in Asia and Africa had been brought under the sovereignty of European powers. The colonial question—what to do with these possessions now that they have been secured, how to govern them—has not yet become a part of history; it is still a question of the day.

QUESTIONS AND TOPICS

1. Prepare a chronological table of the wars of the nineteenth century, from a manual of recent history.

2. The English navy during the Napoleonic wars. [Social England, vol. 5, pp. 391-401, 541-544; the sea stories of Captain Marryat.]

3. The Continental System and its effects. [Levi, Hist. Brit. commerce, part 2, chap. 4, reprinted in Rand, Ec. hist., chap. 5; Rose in Kirkpatrick, Lectures on hist. of nineteenth century, Cambridge, 1902, 59-78.]

4. Effect of Napoleon’s commercial measures on British finances. [Audrey Cunningham, British credit in the last Napoleonic war, Cambridge, 1910.]

5. The question of neutral rights. [Schuyler, Amer. diplomacy, chap. 7; Reeves, Two conceptions of the freedom of the seas, in Amer. Hist. Rev., April, 1917, 22: 535-543.]

6. The movement for independence in South America, and its commercial results. [Helmolt, Hist. of the world, vol. 1; History of South America, transl. by Adnah D. Jones, London (N. Y., Macmillan), 1899.]

7. Free navigation of European rivers. [Schuyler, Amer. diplomacy, chap. 6, p. 345 ff.]

8. The Sound Dues. [Same, p. 306 ff.].

9. Divide your graphic chart of commercial statistics into blocks, to correspond with periods of commercial policy; dates may be chosen as follows, 1800, 1860, 1880, 1900. Be cautious, however, about any conclusions that may suggest themselves.

10. Relative share of different factors in recent commercial progress. [Cf. W. E. Gladstone, Free trade, railways, and the growth of commerce, Nineteenth Century (Magazine), Feb., 1880, 7: 367-378; but do not regard this article as settling a problem still unsolved.]

11. Significance of the “most favored nation” clause in tariff history. [Reciprocity and commercial treaties, 389-416.]

12. Various systems of tariff policy. [Reciprocity and commercial treaties, 461-467.]

BIBLIOGRAPHY

The best single reference on the commercial conditions and policy of the Napoleonic period is Lingelbach, *Historical investigation and the commercial history of the Napoleonic era, in Amer. Hist. Rev., Jan., 1914, 19: 257-281; this provides a scholarly survey of the whole literature of the subject and can be used as a guide to further study. Of later works should be noted Frank E. Melvin, Napoleon’s navigation system, Univ. of Penn. thesis, 1919, N. Y., Appleton.

On commercial policy in general the best reference is Bastable’s ** Commerce of nations, which treats international trade, the theory and the history of commercial policy briefly but with admirable clearness. The history of the commercial policy of particular countries will be covered in following chapters. A survey of modern tariff systems is provided in * Reciprocity and commercial treaties, published by the U. S. Tariff Commission, Washington, 1919; J. W. Root, Tariff and trade, Liverpool, 1898, combines a general discussion of the tariff question with a review of the tariff policy of important commercial countries.

Colonial policy can receive but scant treatment in this book. The student is referred to the bibliography by A. P. C. Griffin, List of books relating to colonization, Washington, second ed., 1900, and to the references there given.

Spotted a typo or a problem in this chapter? Tell us

XXXV. ENGLAND: COMMERCIAL DEVELOPMENT, 1800-1850

=417. Importance of the commerce of England.=—In returning to the study of the development of commerce in different countries we shall take up first the country which at the beginning of the nineteenth century, and at its end as well, held the leading position, England. An English author has made the statement that “in the eighteenth century foreign trade was of so little importance to the majority of the inhabitants of England, that with one important exception (wheat) the whole of it might have been destroyed without making any appreciable change in the habits or wealth of the people.” This statement is an exaggeration which can hardly be supported, but yet it suggests a truth of great importance; English commerce in 1800 was merely an aid to the development and welfare of the country, while it had become in 1900 absolutely necessary to the mere existence of the people.

=418. Statistics of the growth of commerce, 1800-1850.=—The period of most rapid growth was the second half of the nineteenth century, and this period will be reserved for special consideration a little later. The development in the first half of the century is set forth in the accompanying table, which gives the figures for imports retained in the country, and for the exports of home produce, according to the system of valuation in use in this period, with the sum of these items.

As the population doubled in this period it is apparent that foreign commerce, which more than doubled in value, was taking a more important place in the national economy than before. In the first quarter of the century, when England was passing through the struggle of the Napoleonic wars and was recovering from their effects, trade was nearly stagnant, but it made up in the twenty-five years that followed for the time that had been lost before. If we measure commerce not by the value of the wares, but by their physical quantity, the increase was far more striking; prices of many articles, especially of the manufactures exported, fell during this period, and consequently the same bulk of trade would be represented by much smaller figures in pounds sterling. If we returned to the old method of measuring trade, which retained “official” values that did not change with the movement of market prices, and which therefore affords a means of measuring an increase in the bulk of trade, we should find, comparing the two years, 1800 and 1849, that exports grew from 24 million to 190 million pounds sterling, giving the enormous increase of 682 per cent.

ANNUAL AVERAGE TRADE OF THE UNITED KINGDOM. (Millions of Pounds and Dollars)

========+==========+==========+========= | Imports | Exports | Total --------+----------+----------+--------- 1801-05 | £28 $140 | £33 $165 | £61 $305 1806-10 | 30 150 | 37 185 | 67 335 1811-15 | 29 145 | 45 225 | 74 370 1816-20 | 20 100 | 40 200 | 60 300 1821-25 | 26 130 | 37 185 | 63 315 1826-30 | 33 165 | 35 175 | 69 345 1831-35 | 36 180 | 40 200 | 76 380 1836-40 | 47 235 | 50 250 | 97 485 1841-45 | 57 285 | 54 270 | 111 555 1846-50 | 72 360 | 60 300 | 133 665 ========+==========+==========+=========

=419. Change in the relative importance of different exports.=—We can expect, by studying the details of exports in this period, to find the branches of production in which the English were strong enough to enable them to supply other people and to extend their commerce. Taking the figures for 1850, we find the evidence of some important changes. The old staple of the English export trade, woolen manufactures and yarn, had increased since 1800 in value, and still more in quantity. It had ceased, however, to be the standby of the English exporter; this item formed now less than one seventh of the exports instead of over one fourth. It had been thrust into the second place by the rival textile cotton, which had become, as it was destined to remain throughout the century, the leading item among English exports. Cotton yarn and manufactures made up 28 out of a total of 71 million pounds sterling. Among other changes in the list we note the growth of the iron and steel, the hardware and the coal exports. Some items are interesting because they are still so small; among those which remained below the million-pound mark were steam-engines and machinery, pottery, and tin plate.

=420. Development of English manufactures.=—It is apparent that this period was marked by a rapid development of English manufactures. Taking two manufactures, typical of an advanced industrial state, iron and cotton, we find that the increase in production is estimated at over tenfold or more than 1000 per cent; as the quantity of population had merely doubled it is apparent that its quality, or the character of its occupations, underwent a revolutionary change. It is, in fact, in this first half of the nineteenth century that the enormous possibilities latent in the inventions of the eighteenth century became apparent and were realized. The great inventions were not enough, in themselves, to transform industry. They needed to be developed by practical business men, who could secure the necessary capital to utilize them to the best advantage, who had the talent for organization enabling them to build up an efficient force of laborers, who could stimulate further technical improvements necessary to supplement the great inventions, and who could develop a mercantile system enabling them to buy and sell large quantities to good advantage. Some English manufactures remained “domestic” industries carried on in the home of the workman, but the most important advanced to the factory system, and were thus enabled to get the full advantage from technical improvements.

=421. Introduction of machinery.=—It is in this period that the knowledge and experience necessary to the proper handling of machinery spread from narrow circles to broad groups of men. The market for machinery was thus established, and the manufacture of tools and machines underwent a corresponding development; in 1836 it was “difficult to point out any leading mechanical process, the details of which have not been, by this means, simplified, and the article produced brought nearer to perfection.” Inventors from other countries sought British shops to perfect their devices, and British factories in which to introduce them. Some of the best textile machinery of this period was invented in the United States and other countries, but was first put to practical use in England.

=422. Steam power and railroad transportation.=—It is in this period, also, that the steam-engine became a practical force in English manufactures. The steam-engine had been introduced in Birmingham in 1780, but the number of engines in that rising center of manufactures was in 1815 only 42 and in 1830 still only 120, while in the nine years following the number rose to 240, or doubled. In 1835 the textile factories of England employed only a little over 50,000 mechanical horse-power, and of this total nearly a quarter was still obtained from water-wheels. The beginnings of transportation by steam railroads can be dated, as said before, from about 1830.

=423. Gradual development of the cotton manufacture.=—The statement in a previous paragraph, that time was needed to develop the inventions before they could be made to serve the interests of manufacturers and merchants, is borne out by the history of the most important manufacture, that of cotton. Most of the basic inventions in cotton machinery were made in the last quarter of the eighteenth century. As early as 1812 a man, using the improved appliances, could produce 200 times as much as could be got from the old spinning-wheel. Yet it was not until 1820 or 1830 that cotton-spinning machinery had been practically developed and introduced on such a scale that the yarn exports began to show the full strength of this new force; while power weaving came even later, and the exports of cloth increased most rapidly in the second quarter of the century. Other processes connected with the textile manufacture present the same history. Cotton printing, for instance, had been practised in the eighteenth century, but in 1800 only 32 million yards a year were printed, while in 1830 the figure had risen to 347. The growth of the cotton manufacture was reflected in the development of towns like Manchester, Bolton, and Liverpool, which increased immensely in population.

=424. Character of the import trade.=—It will be instructive to glance now at the other side of England’s commercial balance sheet, and observe the wares imported about the middle of the century. In 1854 the values were as follows, in round millions of pounds sterling: total 152.3, of which the chief items were grain 21.7, raw cotton 20.1, timber 10, sugar 9.6, raw wool 6.4, tea 5.5, raw silk 5.3. While it is not safe to make a direct comparison between these values and those given previously to show conditions about 1800, a striking change is apparent in the relative rank of the items. A great growth in the importance of the imports of breadstuffs is noticeable. We shall see a little later that the English in this period gave up the attempt to produce their food at home, and resigned themselves to depending on foreign countries for supplies which they could purchase with their manufactures. Wares like sugar, tea, coffee, and tobacco had declined in relative importance. The actual amount of these commodities imported for consumption at home had increased much more than would appear from a comparison of the figures, and their use was constantly extending among the common people; but they were now overshadowed in trade by other items. The chief group of imports was formed of raw materials for the English textile manufacture. The cotton imports, had, of course, grown immensely; the home supply of wool, which had been almost sufficient for manufactures in 1800, needed now to be supplemented by large imports from abroad; silk had taken the third place on the list of textiles away from flax and hemp.

=425. Increase in importance of trade with distant continents.=—If we attempt to trace the changes in the direction of English trade in the first half of the nineteenth century, we find, in the maze of figures presented for study, some facts standing out as evident and important. The trade with other countries in Europe grew steadily, but grew slowly as a rule, and did not keep pace with the progress which English trade was making in other parts of the world. Most of the continental states looked with jealousy on England’s industrial development, and checked the free exchange of commodities by severe restrictions. We must look outside of Europe for the field of expansion of English trade. Africa still remained unimportant from the commercial standpoint, but America, Asia, and Australia dealt in increasing measure with the British merchant.

=426. Great importance of the trade with the United States.=—The United States was, far and away, England’s best customer, taking, near the beginning of the century, when the ports of the continent were closed by Napoleon, as much as one third of the total English exports, and at the middle (1849) nearly one fifth. “It affords strong evidence of the unsatisfactory footing upon which our trading relations with Europe are established,” wrote an English author in 1838, “that our exports to the United States of America, which with their population of only twelve millions are removed to a distance from us of 3,000 miles across the Atlantic, have amounted to more than one half of the value of our shipments to the whole of Europe, with a population fifteen times as great as that of the United States of America, and with an abundance of productions suited to our wants, which they are naturally desirous of exchanging for the products of our mines and looms.” The United States paid for the wares by an export mainly of raw materials, and especially of cotton.

=427. Trade with other distant countries.=—Other American countries were good customers of the British manufacturer; Brazil, for instance, bought more from England in 1849 than did England’s nearest neighbor, France. Among other independent states China deserves mention. Trade with that country had been included in the monopoly of the East India Company until 1834, when it was thrown open to British merchants in general; the trade grew rapidly thereafter, but suffered from the restrictions imposed by the Chinese until, as a result of the so-called Opium War of 1842, the English secured the cession of Hong-Kong and the opening of a number of ports.

=428. Trade with British dependencies: India.=—In 1850 between one fourth and one third of the exports of the mother country were sent to British dependencies. Among these British India, almost a continent itself if we consider its area, its population almost equal to that of Europe, and the complexity of its peoples, took the leading place. British India alone took about one tenth of the English exports. So long as the trade with this country was controlled by the East India Company it remained small; and the company declared that because of the backwardness and peculiar customs of the natives it could not be increased. The privilege of trading with India was granted to individual merchants in 1793, but under such burdensome restrictions that it led to slight results; and the nineteenth century opened with the Indian trade still but a small item in England’s total. In 1813, however, the trade was at last thrown open, and the effect was immediately manifest; in the first year of the new policy private merchants exported more than did the company, and soon they had developed the trade to an extent undreamed of by the monopolists. India proved to be just the country which English merchants were seeking as a market for the expanding cotton manufacture. In the eighteenth century protection was demanded in England against the competition of Indian textiles, but soon the tables were turned, and manufacturers in India complained that they were being ruined by the importation of English cotton goods; about 1850 British India took more cotton manufactures than any other country, and nearly one sixth of the total exports of this most important commodity of England.

=429. Colonies in North America and Australasia.=—Next in importance to British India came the two groups of the North American and the Australian colonies. The colonies on the continent of North America were, in spite of their political allegiance, a far less important market than the republic on their southern border which had declared its independence in 1776. They supplied, however, a fairly steady and a growing demand for English products which put them in sharp contrast with the West Indian colonies. These island colonies had been, in the early part of the century, the field of rich returns in trade, but their productiveness depended on a system of slave plantations, and when slavery was abolished in them in 1833 their commerce declined rapidly.

Thanks to the wide extent of her colonial dominions, England could hope to gain in one part of the world if she lost in another, and the development of the Australian colonies in this period promised to atone for any decline in the West. The British flag was first raised in Australia in 1788. The young colonies were out of the track of the trade of the time, and seemed of such small importance that one was made a penal settlement, but the natural resources, especially the fitness for sheep-raising, induced a steady growth of population, and a considerable trade, even before the gold discoveries in the middle of the century.

QUESTIONS AND TOPICS

1. What do we mean when we speak of the “importance” of a country’s commerce? The reader who reflects upon this question will find that at least three different standards are taken to measure importance. (1) Mere bulk or value. The commerce of the British Empire would be called the most important in the world, because it is larger than that of any other state. (2) The needs of the people of the country. A considerable number of Englishmen would starve without commerce. In this sense commerce is even more important to the miners of Alaska, for they would practically all starve without it. (3) The needs of other countries for the exports of a given country. In this sense the United States has perhaps the most important commerce in the world, because it supplies so much of the world’s need for cotton, copper, foodstuffs, etc.

Endeavor to find examples, in this book or in others, of the different uses of the word; apply it in different uses to different countries.

2. Treat the statistics in sect. 418 as suggested previously, by graphic representation. How did British commerce compare in growth with world commerce? Did England keep her share in the world’s trade? Try to find in English history reasons for the ups and downs of trade, and for its gains and losses in comparison with the world’s trade. Beware, however, of hasty conclusions; many pitfalls are concealed in commercial statistics. In the table in the text, for example, the early figures are those of total exports and imports of merchandise, including wares simply passing through English hands to foreign customers; the figures for 1816 and the following years show only exports of British produce and manufacture, and imports retained in the country. This change in the method of measurement, rather than the crisis following the Napoleonic wars, explains the drop in the figures. This last method of measurement will be followed in later tables.

3. The following list gives the value, in millions of pounds, of all items over 1.0, in total exports of 71.3. Coal, etc., 1.2, cotton yarn, 6.3, cotton manufactures 21.8, haberdashery and millinery 1.4, hardware and cutlery 2.6, linen manufactures 3.9, iron and steel 5.3, woolen yarn 1.4, woolen manufactures 8.5. (If various other items were grouped we could add: copper about 2., silk about 1.)

Arrange these items and represent them by spaces on a line, for help in realizing their relative importance, and for comparison with earlier and later conditions. [See Statesman’s Year-Book for present trade. Note that these items include only home produce and manufactures, so foreign produce, such as colonial wares, should be excluded in making the comparison with another period. Statistics of this period give only quantities, not values, of foreign and colonial merchandise exported. Values of foreign and colonial merchandise exported are available for 1854 and the following years. In 1854 the items over one million pounds were: cotton 2.3, indigo 1.2, wool 1.4. Among the items under one million were: coffee .7, wine .7, raw silk .7, tea .5, rice .5, guano .5, raw sugar .3, unstemmed tobacco .3. What changes are suggested by these figures, in comparison with those of about 1800?]

4. Review the substance of sections 245 ff., or read the account of the great inventions and their effects in Rand, Ec. hist., chap. 2.

5. Mining and metal production up to 1846. [Traill, Soc. England, 6: 194-199.]

6. Coal mining. [Same, 6: 367-379.]

7. Development of the English transportation system. [Same, 6: 199-211; McCarthy, Hist. vol. 1, chap. 4; Ward, Reign, 2: 83-111.]

8. Development of the textile manufactures. [Soc. England, 6: 69-75.]

9. Study the items in sect. 424 in the way suggested for sect. 419.

10. Review sect. 412, on the tariff policy of the period in Europe; note that the United States had a low tariff, and that trade in the other continents was practically free.

11. The Opium War. [McCarthy, Hist., vol. 1 chap. 8; Robert K. Douglas, China, N. Y., Putnam, $1.50, 1899, chap. 8.]

12. East India Company in the nineteenth century. [Willson, Ledger and Sword, vol. 2, chaps. 12, 13.]

13. Commerce of British India. [William W. Hunter, The Indian Empire, third ed., London, 1893, chap. 19; same author, The Marquess of Dalhousie, Oxford, 1890, chap. 10.]

14. The Hudson’s Bay Company in the nineteenth century. [George Bryce, Remarkable history of the Hudson’s Bay Company, N. Y., Scribner’s, 1900; Willson, The great company, London (N. Y., Dodd), 1900, vol. 2, chap. 36; G. R. Parkin, The great Dominion, London, Macmillan, 1895, chap. 8.]

15. Slave plantations in the British West Indies. [A. K. Fiske, The West Indies, N. Y., 1899, chap. 10; James Rodway, The West Indies, London (N. Y., Putnam), chaps. 7, 10; F. W. Pitman, Development of the British West Indies, New Haven, 1917, chap. 1.]

16. Emancipation of the slaves and its results. [Rodway, chaps. 14, 15.]

17. Development of Australia. [Encyclopedia; Helmolt, Hist. of World, vol. 2, p. 252 ff.]

BIBLIOGRAPHY

Useful references can be obtained on England, as on other countries to be considered later, by consulting the Subject Index of the British Museum Library for books published since 1881, and the A. L. A. Catalogue for books in print, of a popular character.

Of the general histories of England in the nineteenth century, that by *Spencer Walpole, 5 vols., London, Longmans, 1878-86, devotes considerable attention to economic developments, and is worth the teacher’s attention. Justin McCarthy, *History of our own times, is better suited to attract the student; it is divided into short topical chapters, and written in an interesting style. A shorter history has been published by McCarthy in the Story of the Nations Series, 2 vols., N. Y., 1899. The last volume of Traill’s Social England pays but scant attention to commerce.

Of smaller books that which deserves most cordial commendation to students who desire a description of economic progress in its relation to political changes is Gilbert Slater, **Making of modern England, London, 1913, revised edition Houghton, Mifflin Co., undated.

The best history of English commerce is that of **Leone Levi, extending from 1763 to 1878; it is unfortunately, out of print. Cunningham notices some of the important commercial changes in the first half of the century, but devotes most of his last volume to other topics; and the smaller manuals of English economic history pay comparatively little attention to commercial development. *Bowley’s small volume is a useful contribution, noteworthy for a number of graphic charts; it is, however, too statistical in treatment to serve the needs of the ordinary reader. Chapman’s book, like Bowley’s an outgrowth of a successful essay written for a Cobden prize, is confined to a special aspect of the trade with a particular country.

William Smart, *Economic annals of the nineteenth century, London, 1910-17, covering the years 1801-1830, treats commercial policy at length and the history of commerce proper briefly. The same tendency marks Commerce and industry, A historical review, 1815-1914, ed., W. Page, London, 1919, 2 volumes, of which the second, **Tables of statistics, is a very useful compilation. Other statistical sources, of importance to a student making a careful study of the subject, are Porter, **Progress of the nation and M’Culloch, **Commercial dictionary, of which various editions have been published. A revision of Porter by F. W. Hirst, London, 1912, aims to bring his statistics down to date.

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XXXVI. ENGLAND: REFORM OF COMMERCIAL POLICY

=430. Burden of tariff on trade and manufactures.=—After this survey of the development of English trade in the first half of the century we must attend to a most important change in English commercial policy, which lies mainly in this period. We shall consider three groups of topics: the reform of the general tariff; the repeal of the corn laws, protecting agricultural products, especially wheat; and the repeal of the navigation laws, protecting shipping.

England entered the nineteenth century with a cumbrous mass of tariff regulations inherited from the past, from which only the worst excesses had been pruned by statesmen like Walpole and Pitt. Customs laws had accumulated for 500 years to the amount of 1,500 statutes, “often confused, often contradictory, sometimes unintelligible.” Hardly any ware which was obtainable abroad, whether it was a raw material or a manufactured product, escaped the duties levied under one or another of these laws. The duties were heavy and were enforced with unreasoning severity; a man who imported a mummy from Egypt was told that it was a non-enumerated manufacture, dutiable at nearly $1,000. Internal taxes reached articles which escaped the customs tariff. The taxes on the publication of books were so heavy that they amounted on an ordinary edition to one seventh of the whole cost, and exceeded the remuneration of the author. The cotton manufacturer had to pay not only an import duty on his raw cotton (higher when it was brought in a foreign ship); he had to pay an excise or internal tax on calico which he printed; and he had to pay taxes, in one form or another, on all the important materials he used in manufacture,—flour, starch, leather, soap, dyestuffs, paper, timber, brick, tiles. A man could not build a factory, or run it, or feed and clothe his workmen, without paying taxes at every step.

=431. Prevalence of smuggling.=—A partial relief from the burden of the customs was obtained by smuggling. Tariffs could hinder but could not absolutely stop the natural movement of commodities. Smuggling was a regular profession, with a tariff modeled on the regular tariff, but enough lower to invite business; the smuggler’s charge varied ordinarily from 15 to 40 per cent ad valorem. Large numbers of the common people were leagued with the smugglers to defy the law, and the upper classes, even the legislators themselves, accepted smuggling as a matter of course. A member of the House of Commons once flourished his silk bandanna handkerchief before the House, saying: “Here is a foreign ware that is totally prohibited. Nearly every one of you has a similar illicit article in his pocket. So much for your prohibition.” The government framed its duties with an eye to the ease of evading them; it laid a higher duty on fancy silks than on plain, because the smugglers were at a disadvantage in handling the former, which had to be brought in at once, before the fashions changed, while plain goods could wait the smuggler’s convenience.

=432. Beginning of the reform movement, 1820.=—More and more as time went on, and England’s commercial capacity increased, were the evils and abuses of the system appreciated. By 1820 the times were ripe for a change, and the movement to reform was initiated in that year by a petition from a group of London merchants. The petition urged the principle of free trade which the economist Adam Smith had supported in his “Wealth of Nations” (published in 1776), and prayed that all restrictive regulations, not imposed on account of the revenue, including all duties of a protective character, might be repealed at once.

=433. Reform of the tariff under Huskisson.=—The early stages of tariff reform, effected under the leadership of Huskisson about 1825, included the following: (1) The simplification and condensation into manageable form of the customs laws. (2) Reduction or removal of the duties on raw materials. (3) Reduction of the duties on manufactures, generally to 30 per cent or less, on the principle that such a duty was ample for protection, if a ware could be made at home to advantage. (4) The removal of most of the restrictions on export. These restrictions had affected raw materials, partly manufactured goods, and even artisans themselves. The government had tried to keep skilled workmen at home, but found that it merely made them discontented, forced them to evasions, and kept them from coming back when they had once left the country: it left them henceforth free to emigrate. It was still unwilling to allow machinery to be exported freely, for fear that other countries would build up a competition in manufactures, but it recognized the difficulty of making its restrictions effective, and relaxed them greatly.

=434. Results and later completion of the reform.=—The results of the reform exceeded anticipations. Not only did those industries benefit which (like cotton, for instance) had previously been taxed for the support of others, but the protected industries themselves gained by the revision of the laws. The export of woolen stuffs increased rapidly after the removal of the prohibition on the export of raw wool. The silk manufacture, which had made slow progress and secured only a small market under the system of high duties and prohibitions, advanced more rapidly now in a decade than it had done before in a century.

The work of reform was, however, still far from complete; the tariff retained many incongruities and was felt still to be oppressive by the business interests of the country. The second stage in the advance to free trade was effected under Sir Robert Peel, who in 1842 secured the reduction of duties on 750 articles, and in 1845 abolished 430 out of a total of 813 import duties. Peel’s reforms left still a considerable element of protection in the tariff, and the final acceptance of free trade waited till Gladstone’s laws of 1853 and 1860, which lowered and then swept away import duties by the hundred, and left the English tariff substantially in its present shape. The system of “free trade” which England has since maintained does not imply a complete lack of import duties; more than one fifth of the total revenue from taxes is now yielded by the customs. Import duties, however, have been restricted to a very few commodities, and are “revenue,” not “protective” duties, in the sense that they do not encourage the production in England of anything which can be produced more cheaply abroad.

=435. The corn laws and their effects.=—Previous to the great changes which turned England into a manufacturing country, the agricultural interests which controlled Parliament had assured themselves a good measure of protection in framing the tariff laws. The importation of grain was prevented by high duties; and the export was favored by bounties when the supply was relatively plentiful and the price fell below about $1.50 a bushel. Export became more and more rare as the home demand for foodstuffs grew with the increase in the industrial population; and toward the close of the eighteenth century it became ever a more serious question whether England could produce at home sufficient food for her growing people. An attempt was made to arrange the laws so as to keep the price of wheat steady at about 48s. a quarter ($1.50 a bushel), but the laws did not succeed in preventing violent fluctuations in the price. At the close of the great wars, in 1815, English agriculturists demanded a continuance of the protection which the stoppage of commerce had afforded them and the import of foreign wheat was prohibited so long as the price at home did not rise above 80s. (about $2.50 a bushel, or about $.30 for the quartern loaf of bread). Landlords got high rents as a result, but farmers who leased their land suffered when prices fell to a reasonable level, and consumers were forced to pay extortionate prices for a prime necessity. Hundreds of thousands of the working classes were brought to the verge of starvation in 1817 by the price of wheat rising to 112s. (about $3.50 a bushel).

=436. Movement of English manufacturers for a repeal of the corn laws.=—The House of Commons, even after the electoral reform of 1832, afforded but little representation to the manufacturing and mercantile classes; four fifths of its members belonged to the landed interests, and though they made some slight concessions they refused to grant adequate relief. It was necessary for the opposition, which organized under the name of the Anti-Corn-Law League, to carry on its campaign outside of Parliament; it could report, at the annual meeting of 1843, that nine million tracts had been distributed, and meetings had been held in 140 towns. Inside of Parliament the movement engaged the energies of orators like Cobden and Bright, who saw in it a question of life and death for English manufactures. How was the manufacturer to pay the wages which such a costly food supply required? To whom was he to sell his goods when so large a proportion of English incomes had to be expended for bare necessaries, and when England refused to take from foreign countries the commodities which they offered in exchange? Even among the agricultural classes the landlords were the sole gainers. The agricultural laborers were wretchedly poor; Cobden asserted that none of them spent more than about $7.50 a year in manufactured articles, if shoes were excepted, and that they bought a smaller amount of English manufactures than the people of Brazil.

=437. Repeal of the corn laws and its significance.=—With the passage of time and with the growth of the industrial population conditions changed from bad to worse. The combination of a bad harvest and bad times in business in 1841 forced thousands of the manufacturing population to seek poor relief, while other thousands were estimated to be earning on the average less than a shilling a week. It needed only a shock like that given by the crop failure in the first year of the Irish famine, 1845, to force the change which had come gradually to be recognized as inevitable. Peel’s act of 1846 left a slight protection for a few years; but after 1849 only a nominal duty was to remain, and even this was abolished later.

The repeal of the corn laws was a momentous act in English history. It marks the formal and final recognition that England had grown from an agricultural to an industrial and commercial state. It threw England, as an English economist said, from corn to coal as the staple product of the country. Manufactures and trade thenceforth developed freely. Even the agricultural interest gained in ways which it had not foreseen: the consuming population increased rapidly both in numbers and in purchasing power, and demanded increasing quantities of meat, dairy produce, vegetables, and fruit. The full effect of the change on commerce will be apparent when we review the history of the last half of the century.

=438. Reform of the navigation acts.=—This survey of the course of English policy in the first half of the nineteenth century will be closed by the consideration of a third topic, the laws protecting shipping. Reference to a previous chapter will show how severe were the restrictions meant to prevent the competition of foreign shipping, in the seventeenth and eighteenth centuries. The period now under consideration was marked by the removal of all these restrictions, and by a great growth, notwithstanding, in the English merchant marine.

The establishment of the independence of the United States, and later of the Spanish American republics, overthrew the colonial theory on which many of the navigation acts were based, and forced numerous revisions. The long wars of the Napoleonic period, also, led England to grant privileges to neutral powers in the carrying trade. Important breaches, therefore, had been made in the old system before the century was far advanced, and it was in no condition to withstand the assaults directed against it by people both abroad and at home whose interests it injured. The United States adopted a policy of reprisal which forced England to admit American ships freely to English ports, and threats of similar action by European countries led in 1824 and the years immediately following to a series of treaties putting foreign ships on an equality with English.

=439. Final repeal of the navigation acts.=—The navigation acts had grown into a most complicated system, and it is impossible to describe in detail their gradual relaxation. By 1830 English ships had lost all their privileges except in the coasting trade, and in the trade with and between the colonies. Even this amount of protection came to be regarded as a burden not only on commerce but on shipping itself, and was abolished in 1849 and 1854. Every step in the reform of the navigation acts was bitterly fought by adherents of the old system, who prophesied ruin to English shipping if it were denied protection and left to make its own way. How groundless were the fears of those who opposed reform can be seen in the following table, giving in millions the tonnage of English ships in the period 1800-1850: 1800, 1.6; 1810, 2.2; 1820, 2.4; 1830, 2.2; 1840, 2.5; 1850, 3.5.

QUESTIONS AND TOPICS

1. Are all taxes of equal amount equally burdensome? Would a country fare as well if it raised its revenue by taxing saws and chisels instead of cigarettes and playing cards?

2. What are the effects of smuggling on (a) the public revenue, (b) honest merchants, (c) consumers?

3. How do the rates of the English tariff, as established at this time, compare with the rates of the present tariff of the United States?

4. On what articles are import duties still levied in Great Britain? [See Statesman’s Year-Book, index, Great Britain, customs.]

5. The corn laws and their effects. [Morley, Cobden, chap. 7; Rand. Ec. hist., chap. 9.]

6. English agriculture under the corn laws. [Traill, Soc. England, 6: 75-84, 211-217.]

7. The agitation for repeal of the corn laws. [McCarthy, vol. 1, chap. 14; Morley, Cobden, chap. 6.]

8. The repeal of the corn laws. [McCarthy, vol. 1, chap. 15.]

9. English agriculture after the repeal. [Traill, Soc. England, 6: 404-421, 599-607.]

10. What were the main features of the navigation acts? [See above, sect. 358, or study the main provisions in Rand, Ec. hist., appendix 1.]

11. Conditions at the time when the Acts were repealed. [Lindsay, vol. 3, chap. 6.]

12. Development of the merchant marine. [Traill, Soc. England, 6: 392-404; Ward, Reign, 2: 111-118.]

BIBLIOGRAPHY

The best single source on the topics of this chapter is Bernard Holland, **The fall of protection, 1840-1850, London, 1913. Of more comprehensive and more elementary books may be mentioned Mongredien, *History of the free-trade movement, and Armitage-Smith, **Free-trade movement, which is well suited to topical assignment. Similar in scope is W. Cunningham, **Free-trade movement, with concluding chapters on recently projected changes.

The best account of the corn laws is to be found in Morley’s **Life of Cobden, and George Macaulay Trevelyan’s **Life of John Bright, London, 1913. Graphic pictures of conditions of life under the corn laws are provided by The hungry forties: life under the bread tax, London, 1904; and J. K. Snowden’s Corn law memories, in Contemp. Review, 1905, 88: 64-71. J. S. Nicholson, *History of the English corn laws, London, 1904, is a thoughtful study in brief compass, but is not suited to topical reading.

The navigation acts are treated by Holland, and at considerable length in the third volume of Lindsay. The best recent contributions on the subject are in periodical literature: John Rae, **English shipping under protection, in Contemporary Review, 1905, 87: 666-675; J. H. Clapham, ** The last years of the navigation acts, English Hist. Rev., 1910, 25: 480-501, 687-707.

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XXXVII. ENGLAND: COMMERCIAL DEVELOPMENT, 1850-1914

=440. Development of English commerce since 1850.=—An accompanying table sets forth the course of English trade down to the outbreak of the World War. The figures refer, as in the previous table, to imports for consumption in the country, and to exports of British and Irish produce. To indicate, however, the share of commerce which the English enjoyed merely as middlemen I add a column of re-exports, foreign and colonial wares imported but shipped away again. If the amount of these wares be doubled (since they figure both as imports and exports), and added to the other items, the sum gives the gross foreign trade (excluding that in precious metals). The system of valuation of imports changed in 1854; under the old system of “official” values the imports of that year would have been entered at twenty-eight million pounds less than under the new system of giving the “real” values. This table, therefore, is not directly comparable with the table of the preceding chapter; and to remind the student of this I have left a few years vacant, making a gap between the two tables.

=441. Importance of England and of British Empire in trade of the world.=—A mere glance at this table will be sufficient to show the progress that has been made since 1850. Some idea of the importance of this trade, not only to England but to the world at large, can be gathered from the fact that it amounted, about the middle of the period, to nearly one-fourth (23 per cent) of the estimated total foreign trade of the world, and at the close of the period, (1912), in spite of the commercial progress of other countries, it was still one-sixth. If we extend our view to embrace not only the little islands in the North Sea, but all the countries depending on them and forming the British Empire, we find the trade of this group over one-fourth of the trade of the world.

ANNUAL AVERAGE TRADE OF THE UNITED KINGDOM, IN MILLIONS, STERLING, WITH ROUGH EQUIVALENTS IN MILLIONS OF DOLLARS

========+==============+=============+========== | Imports | Exports |Re-exports --------+------+-------+------+------+---------- 1855-59 | £146 | $730 | £116 | $580 | £23 1860-64 | 193 | 965 | 138 | 690 | 42 1865-69 | 237 | 1185 | 181 | 905 | 49 1870-74 | 291 | 1455 | 235 | 1175 | 55 1875-79 | 320 | 1600 | 202 | 1010 | 55 1880-84 | 344 | 1720 | 234 | 1170 | 64 1885-89 | 318 | 1590 | 226 | 1130 | 61 1890-94 | 357 | 1785 | 234 | 1170 | 62 1895-99 | 393 | 1965 | 238 | 1190 | 60 1900-04 | 466 | 2330 | 289 | 1445 | 67 1905-09 | 522 | 2610 | 377 | 1885 | 85 1910-13 | 611 | 3055 | 474 | 2370 | 107 ========+======+=======+======+======+==========

A survey which omits from consideration trade across land-frontiers, and considers only sea-borne trade, is even more impressive. Of the total sea-borne trade of the world in 1912 it is estimated that 15% (in value) was between countries within the British Empire, and 39% was between the Empire and foreign countries. Thus the trade of which one or both terminals lay within the Empire was over half of the maritime trade of the world. The trade of which one terminal was in the United Kingdom amounted by itself to about 40% of the world’s total sea-borne trade.

=442. Chief causes of the rapid development of English commerce.=—The causes of this development may be summarized briefly as follows: (1) The English people were the most advanced, in industrial and mercantile ability, of any people in the world. They had the start on others in manufactures and trade, and reaped the benefits of their early training in this period. (2) The geographical situation of England, and the physical resources of the country, especially its coal, made the English superior to most peoples and equal to any, in this age of transportation and manufacture by steam. (3) The commercial policy of the government allowed the people to make the most of their advantages. Toward the close of the eighteenth century an English statesman had told Benjamin Franklin of his idea “to make England a free port, for which he said the English were especially fitted by nature, capital, love of enterprise, maritime connections, and position between the old and new world, and the north and south of Europe, and that those who were best circumstanced for trade could not but be gainers by having trade open.” This idea waited long for its realization, but on that account led to the more rapid progress when it was carried into effect. Within five years of the repeal of the corn laws exports rose fifty to one hundred million pounds sterling per annum; manufactures and trade developed by leaps and bounds. Free trade alone cannot be credited with all the progress that England made in this period. It was, perhaps, the least of the three factors enumerated, but still it was of such importance that the other two factors would have been of much less effect without it.

=443. Character of English exports.=—This trade had now in a more pronounced form, the characteristics which it had been gradually assuming and which make it one of the most remarkable examples of advanced commerce in the world. Considering first the exports, we find that over three-fourths of them (in value) have consisted of wares wholly or mainly manufactured. Only one raw material has gone out in great quantity; this is coal, which has contributed about one-tenth of the total value of exports. Aside from coal few wares, and those of relatively slight importance, have left the islands in their crude form.

=444. Leading items among the exports.=—Cotton manufactures kept their place at the head of the list of exports, comprising about one quarter of the total. England in 1913 exported the enormous sum of over seven thousand million yards of cotton cloth a year. The exports of iron and steel and their products rose in this period to the second place; England was now purveying to other nations the means of raising the structure on which modern manufactures and transportation are based. The growth in the exports of machinery is especially striking; this item increased over fivefold within the fifty years to 1900, and doubled again in the short period before the outbreak of the war. Below these leading items come others with which we are already familiar (woolen and linen manufactures) and some which had gained promotion on the list of exports; leather goods, chemicals, jute manufactures, pottery, etc.

=445. Imports; prominence of foodstuffs.=—The fact suggested by the list of exports, that England has specialized more and more in manufactures, is borne out by the list of imports during the past half century. Since the adoption of the free-trade policy the English people has been freed from dependence on the home supply of food and has supplied its necessities by purchases abroad. Among the imports, therefore, we find that the largest item is that of foodstuffs, which has grown rapidly both in its absolute value and in its proportion of the total imports. In contrast with the medieval period, when only luxuries like wines and spices could pay for their transportation, we find now the great food staples flowing to England from countries thousands of miles distant. Improvements in transportation, due especially to the use of steam, have enabled bulky cargoes to pay for their passage, and the weight of the imports in tons has increased much more rapidly than their value. Improved means of transportation and preservation have moreover enabled the English to import perishable articles like meat, fruits, and vegetables, and dairy products; and the imports of these wares have increased from ten to twentyfold in weight.

=446. Imports of raw materials and manufactures.=—The same conditions have affected the imports of raw materials. A century ago the manufacture of iron from imported ore would have been thought an absurdity, but it has become a regular practice now that freights are so low; and the import of minerals is a respectable item in a list in which the raw materials for the textile industry are still, of course, most important. Free trade encouraged also a great increase in the imports of manufactures, which grew nearly tenfold in the fifty years to 1900, though they still were less important than foodstuffs and raw materials. The largest item among them after the crude metals, was silk, for the manufacture of which other nations have always shown more aptitude; but the list included woolens, hardware, leather (boots and shoes), paper, and many other items.

=447. Explanation of the excess of imports over exports.=—A feature of England’s foreign trade deserving comment and explanation is the great excess of imports over exports. It is natural to expect that these two items, which seem to represent the two sides of a balance sheet, should be nearly equal to each other; but in fact the value of exports has for many years been far below that of imports, and the difference in the years toward 1900 amounted to the enormous total of $700,000,000 to $900,000,000 a year.

England did not receive this surplus of goods as a gift, but earned it by services in the past and in the present which put other countries under obligations to her. The English had invested enormous sums abroad, and had the right therefore to interest and dividends; their merchant marine did a large part of the carrying trade of the world, and naturally had a large bill for freight to render to other people; London was the financial center of the world, and made the foreigner pay tribute for the services and commissions executed for him. There were some items on the other side of the account, but on the whole England had the right every year to take from other countries in the form of goods vastly more than she exported to them.

=448. Detailed items in England’s international balance.=—The items which go to make up the credits and debits of England in relation to other countries may be set forth in the form of a balance sheet, as in the table below, which gives the estimate of these items for the year 1910. Figures are given in round millions of pounds sterling.

Credits Debits

Exports of merchandise 430 Imports of merchandise 678 Re-exports (foreign mdse.) 103 Imports of bullion 71 Exports of bullion 64 Income from investments 178 Capital invested abroad 170 Earnings of shipping 100 Banking and business earnings 55 Earnings due foreigners 15 —- —- 931 934

The students should note several characteristic features of this balance sheet. (1) Only the items at the head of the columns are measured accurately: the others are “invisible” items, represented only by pieces of paper passing through the mail, but these are, pound for pound, of equal importance. (2) The inflow and outflow of bullion are large items, but nearly balance; England has acted as a clearing house for the payments of the world’s debts, and the distribution of the world’s gold. (3) In this period England re-invested in other countries most of the great sum due in interest and dividends. The English investor may be pictured as receiving a dividend check from the United States or South America, and as mailing it back instead of cashing it, asking that it be added to the capital sum of his investment.

=449. Growth of the merchant marine.=—England was the leader among nations in the carrying trade in 1850, and retained her position still unchallenged at the close of the century. At the outbreak of the war in 1914 nearly half of the world’s steam tonnage was under the British flag; the tonnage of Germany, which came second on the list of countries, was not one-fourth of the British. The number of ships in the English merchant marine has actually decreased in this period of progress, but the carrying capacity has grown immensely by the increase in size of the ships and by the substitution of steam for sailing vessels. It will be remembered that the protection afforded by the navigation acts was removed before the beginning of this period. The government has made generous payments for the carriage of mails, but still has refused to pay regular subsidies or bounties for the encouragement of shipping. English shipping, nevertheless, has held its own. Of the steam shipping built in the twenty years preceding the war, two-thirds were built in the United Kingdom, and over one-half was built to sail under the British flag. While soon after 1850 the English merchant marine carried not much more than half of the foreign commerce of the country, the proportion grew in later years to two-thirds and nearly three-quarters. This proportion declined somewhat in more recent years, under the competition of Continental steamers, but it is estimated that in 1913 British shipping carried over one-half of the total sea-borne trade of the world, including nine-tenths of the trade inside the Empire, nearly two-thirds of the trade between the Empire and foreign countries, and nearly one-third (30%) of the trade between foreign countries.

=450. Relative rank of English ports.=—The great commerce of the United Kingdom was very unequally distributed among its parts, nine-tenths of it going to England and Wales and most of the remainder to the lowlands of Scotland. London still kept its place as the chief port not only in the United Kingdom but in the world, mainly by reason of its import trade; it was exceeded in the amount of exports by the second port, Liverpool, which distanced all rivals in the important trade with the United States. An immense gap separated these two leading ports from the others, Hull, Manchester, Glasgow, Southampton, etc. Ports whose names were famous in the Middle Ages and even in later times have dropped into obscurity, with fortunate exceptions like Harwich and Grimsby, which have recovered their positions in recent times. Their places were taken by ports from which cotton and coal products are shipped: Manchester, once an inland village but now united with the sea by a ship canal and standing (1913) fourth on the list, the Tyne ports, Cardiff, etc.

The importance of ports was measured in the preceding paragraph by the value of the cargoes imported and exported through them. While this appears to be the best standard by which to determine commercial ranking it is proper also to consider not the value of cargoes, but the volume of shipping entering and clearing from a given port. Measured by the tonnage of vessels London was but little superior to Liverpool before the World War, was inferior to New York and to Hamburg, and about even with Rotterdam and Antwerp.

=451. Relative share of different countries in England’s commerce.=—Taking up now the direction of England’s trade abroad and the changes in its course during the last half of the century, we find ourselves approaching questions which have roused acute political controversy. Reserving for future consideration changes which have shown themselves in the most recent period we may note conditions as they were about 1900. England still found the trade with her European neighbors the most important part of her commerce, making up about two-fifths of the whole; this trade had increased by over one-half during the last forty years of the century. Next in importance to it was the trade with the British dependencies, a little less than one-quarter of the whole, which had increased somewhat more slowly. In the third place we may put, not a continent or group of countries, but one country, the United States, between which and England the trade was greater than between any other two countries on earth. England bought from the United States in 1901 more than twice as much as she bought from the next largest seller (France); and she sold the United States in that year more than she sold to all the countries embraced in her great Empire. This part of English trade, moreover, had grown more rapidly than any other, increasing by once and a half in the period. Grouping together all countries beside those enumerated, we find that the trade with them had remained nearly stationary, and amounted only to about one-eighth of the total.

QUESTIONS AND TOPICS

1. Treat the statistics, sect. 440, by graphic representation, in the manner that has already been suggested.

2. Compare the reasons given for the increase of British commerce with reasons that may suggest themselves to you for the growth of the commerce of the United States. [See sect. 320 for a reference to Gladstone’s views.]

3. The following list gives, in million pounds, the value of the chief exports of home produce in 1900: cotton manufactures 62.0, do. yarn 7.7, woolen manufactures 15.6, do. yarn 6.1, linens and yarn 7.1, jute and yarn 2.4, apparel and haberdashery 6.8, ships 8.6, iron and steel 32.0, hardware and cutlery 2.1, copper 2.9, machinery 19.6, coal, etc., 38.6, chemicals 9.2. Total exports of home produce 291.4, exports of foreign and colonial produce 63.0, grand total 354.5. Treat the figures as suggested under sect. 419. [The figures are from the preliminary report for 1900, Statesman’s Year-Book, 1901, pp. 85, 87; details of iron and steel exports will be found p. 88.]

4. Development of the iron industry. [Jeans, The iron trade of Great Britain, London, 1906, or in Ashley, Brit. Industries, 2-37; Bell in Ward Reign, 2: 196-237; Lady Bell, At the works, London, 1907.]

5. Development of the textile industry. [Soc. England, 6: 589-599.]

6. The cotton industry. [Slagg in Ward, Reign, 2: 153-195; Helm in Ashley, 68-92; S. J. Chapman, The cotton industry and trade, London, 1905.]

7. The woolen and worsted industries. [Hooper in Ashley, 93-119; Graham in Lectures, chap, 10; J. H. Clapham, The woollen and worsted industries, London, 1907.]

8. Linen and flax. [Patterson in Ashley, 120-150.]

9. Pottery. [Soc. England, 6: 379-392.]

10. England as a wheat market. [Edgar, Story, chap. 5.]

11. The food supply of London. [Quarterly Review, Oct., 1899, 190: 467-486; Jan., 1900, 191: 117-137.]

12. England’s food supply in time of war; need of the navy. [H. Seton-Karr in North Amer. Rev., 1897, 164: 651-663; W. E. Bear in National Rev., 1896, 27: 133-144; Quarterly Review, 1905, 203-572-598.]

13. Project of national granaries for storing a supply of food. [R. B. Marston in Nineteenth Century, 1898, 43: 879-889; Yerburgh in Nat. Rev., 1896; 27: 197-207.]

14. British capital abroad and the balance of trade. [Mulhall in No. Amer. Rev., 1899, 168: 499-505; Crammond in Quarterly Rev., 1911; 215: 43-67; C. K. Hobson, The export of capital, London, 1914.]

15. Development of the merchant marine. [Ginsburg in Ashley, 173-195; Taylor in Forum, 1900-01, 30: 463-477.]

16. British shipping subsidies. [Root in Atlantic, 1900, 85: 387-394.]

17. Growth of British ports. [Ackland in Nineteenth Century, 1897, 42: 411 ff.; Browne in Contemp. Rev., Feb. 1918, 113: 190-199.]

18. The port of London and improvements. [Owen in Lectures, chap. 4; Quarterly Rev., 1903, 197: 252-269; Marchant in National Rev., 1902-3, 40: 715-737, with map; Miller in Fortnightly Rev., 1902, 78: 796-805.]

19. The supply of British seamen. [Cowie in Contemp. Rev., 1898, 73: 855-865; Tomlinson in English Rev., 1911, 9: 114-121; Longford in Nineteenth Cent., 1912, 72: 1114-1130.]

BIBLIOGRAPHY

The course of English commerce has attracted interest in increasing measure, and publications upon it multiply, as we approach the end of the century. Only a few books can be noticed here; the reader is referred to the topics for references to other books and periodical articles.

Ward, *Reign of Queen Victoria, contains good chapters on the industrial development of the reign. Stephen Bourne, *Trade, population, and food, London, 1880, is a careful analysis of the decade 1870-80, and furnishes a good starting-point from which to survey the course of recent trade. J. W. Root, Trade relations of the British Empire, Liverpool, 1903, provides a survey of English commerce at the close of the period, with special reference to the pending question of tariff changes. Similar books have been written by Edward Pulsford and L. G. Chiozza Money. A useful statistical survey is provided by John H. Schooling, *The British trade book, fourth issue, London, 1911. Lectures on British commerce, with preface by W. P. Reeves, is mainly a description of the present organization. A. J. Sargent, *Seaways of the Empire, London, 1918, is a good survey of the geography of British trade; and Adam W. Kirkaldy, **British shipping, London, 1914, includes both history and recent organization. **British industries, edited by W. J. Ashley, is, however, the book deserving of the warmest recommendation; nowhere else will the reader find such good descriptions of the leading industries of Great Britain. Each industry is described by a specialist of recognized authority, and though the book does not go far into history it gives indispensable information on the recent results of historical development. More popular and less valuable is Great industries of Great Britain, London, Cassell, no date (about 1880?), 3 vols.

Spotted a typo or a problem in this chapter? Tell us

XXXVIII. ENGLAND: PRE-WAR PROBLEMS

=452. Relative decline in value and quality of English exports.=—The questions agitating the minds of English business men and statesmen at the opening of the twentieth century rose from a consideration of the immediate past and of the future of English commerce. While the country had enjoyed a full measure of prosperity in recent years, and had witnessed a considerable increase in the quantity of its foreign trade, the quality of this trade awakened forebodings. The increase had been almost entirely confined to imports. Since 1872 the exports, though they had increased in bulk, had remained almost stationary in value; they had kept pace neither with the growth of population in England, nor with the growth in value of the exports of other countries. In the twenty years, 1881-1900, foreign countries enlarged their purchases (imports) by 11 per cent, while England augmented her sales to them (exports) by only 4 per cent; the British possessions enlarged their purchases by 17 per cent, while English sales to these dependencies showed an actual decrease of 1 per cent. The exports of which England has been most proud, as indicating her superior industrial strength—the textiles, and iron and steel—had either increased slowly or shown an actual decline. On the other hand, the exports which had increased in value were of a kind which the English viewed with disfavor. Many of them (apparel and slops, preserves, soap, furniture, etc.) were the product of cheap and unskilled workers and seemed to show a degradation of English labor. Others of them, potter’s clay and especially coal, were raw materials which the English would have preferred to use in their own industry at home.

=453. Growth in exports but decline in relative share of trade.=—The table of trade of the United Kingdom in the preceding chapter shows that the period of stagnation in the English export trade ended about 1900, and that there was a marked recovery between that date and 1914, even after allowance is made, as it should be, for the rise in the general level of prices, which magnifies the actual growth. Studying the course of trade during the generation comprised between the dates 1880-1909, the United Kingdom maintained or increased the value of its sales in all but two of the more important markets of the world; and the two countries to which British exports have declined, Russia and Roumania, would not by themselves form very serious exceptions. If, however, we select for study not the bare figures of export values, but the figures showing the percentage which British sales to any country form of that country’s total imports, the result is very different; for we are then measuring British progress not by the home standard but by the standard set by commercial competitors.

=454. Illustration by the recent commerce of Japan.=—The distinction is so important that it deserves illustration by a particular example, and we may choose for the purpose a country which during the recent period has furnished a rapidly growing market to the merchants of the world, namely, Japan.

ANNUAL AVERAGE IMPORTS OF JAPAN IN RECENT DECADES (Values in millions of yen)

==========+=========+=========+=======+===========+========== | From | | | From | | United | From | From | other | From all | Kingdom | Germany | U.S. | countries | countries ----------+---------+---------+-------+-----------+---------- 1881-1890 | 19.6 | 3.4 | 4.2 | 19.3 | 46.5 1891-1900 | 46.6 | 14.8 | 22.8 | 87.0 | 171.2 1900-1909 | 84.3 | 36.1 | 65.8 | 199.8 | 386.0 ==========+=========+=========+=======+======================

The Japanese monetary unit, the yen, has declined considerably in value in the course of the period, and therefore no exact equivalent for it can be given; but even allowing for this decline the growth of British export trade to Japan appears satisfactory if the student regards merely the figures in the first column. If we apply, however, the comparative standard, and measure the British exports to Japan alongside those from other countries, the result is not the same.

PERCENTAGE OF JAPAN’S IMPORTS FROM EACH COUNTRY ==========+=========+==========+=======+===========+========== | From | | | From | | United | From | From | other | From all | Kingdom | Germany | U.S. | countries | countries ----------+---------+----------+-------+-----------+---------- 1881-1890 | 42.2 | 7.2 | 8.9 | 41.7 | 100 1891-1900 | 27.3 | 8.6 | 13.3 | 50.8 | 100 1900-1909 | 21.8 | 9.3 | 17.0 | 51.9 | 100 ==========+=========+==========+=======+===========+==========

=455. Relative decline of the United Kingdom in the world’s markets.=—Pursuing the comparative method, illustrated by the last preceding table, we find that the United Kingdom during the generation 1880-1909 showed an increased share of sales in only three of the minor markets of the world: Spain, Argentine Republic, Sweden. It almost held its own in France, Switzerland and Norway; but in most of the important markets of the world it lost ground seriously.

Even in its trade with the British dependencies the United Kingdom did not hold its own. Comparing the percentage of British exports to a dependency with its total imports, we find that the United Kingdom kept its place in only one of its colonial markets, Mauritius, a purchaser of relative insignificance, while foreign countries gained ground from it in British India, Australia, Canada and all the other important colonial markets.

=456. Significance of the decline, and three possible explanations of it.=—The relative decline in English exports did not imply that the country was approaching industrial bankruptcy, but it did mean, if long continued, the loss of industrial leadership; and the causes of this decline and remedies proposed to meet it are worthy of careful attention. The decline in exports may be attributed to one of three factors: (1) weakness in manufacturing the wares which form the staple of the export trade; (2) weakness in marketing these wares, when they have been made; (3) the adverse influence of protective tariffs in other countries.

=457. (1) Competition in manufactures by low-grade labor.=—Considering the first of these factors, we find English manufactures menaced by competition from two different directions: from the East (countries like India and Japan), and from the West (countries like Germany and the United States). Eastern competition threatened especially England’s staple manufacture, cotton. The English laborer was superior in every point to his Asiatic competitor, but not enough better to earn his higher wages when employed in the manufacture of coarse goods. England had built up a serious and growing competition by exporting machinery and sending out skilled managers and foremen to superintend it. During the past generation there had been an immense development in the textile manufactures of India and Japan, and these countries were able now not only to supply a large proportion of their own demand, but also to reach out into neutral markets like China.

=458. Competition in manufactures of high-grade labor.=—More serious, because capable of far greater extension, was the competition which the Englishman had begun to experience from advanced western peoples. This confined itself to no one branch of production, but spread over the whole broad field of manufactures. Americans and Germans had begun to supply not only the British dependencies but England herself with manufactured wares, in increasing measure. Some of the reasons suggested to explain their superiority were as follows: (1) Elementary education had been developed only recently in England, and had been hampered by sectarian questions; the average laborer in Germany and the United States was better equipped for modern methods of manufacture than was the Englishman. (2) It was asserted that trade unions had seriously detracted from the productiveness of English manufactures, by preventing the introduction of improved machinery and by limiting output. (3) Technical education was even more backward than general education; improved processes were introduced earlier and developed further in other countries, for lack of a class of trained manufacturers in England. (4) Finally, and probably the most important point of all, English manufactures appeared to suffer from the very fact that they had been long established. An industry was divided among many independent firms, each clinging resolutely to the plant, the processes and the methods which had won for it success in the past. Foreign countries learned all that the English had to teach, and applied the lessons in a new field in which they could build up great manufacturing units, with fresh machinery adapted to production on a large scale, and with a more flexible and more efficient organization. It was charged that the directing class in England had lost its original energy, and did not realize its serious responsibilities. An English expert who investigated the American cotton industry reported that there was a great difference in the energy, intelligence, and adventurousness of the managing class in the two countries, all to the advantage of the United States.

=459. (2) Alleged weakness of the English mercantile organization.=—In the preceding paragraph we have suggested various elements of weakness in English manufactures, which in greater or less degree were bound to affect the power lying behind the English export trade. We have now to consider another set of conditions, which are easily confused with the foregoing, but which are better kept separate. English manufacturers might be strong, and still they would have but a small export trade if they were not informed as to the wants of their customers, and did not study their customers’ tastes in supplying goods. This set of conditions, which may be termed mercantile, the business of the merchant rather than of the manufacturer, we may study under two heads: (a) finding out what is wanted; (b) selling a suitable ware when it has been made.

=460. Insufficient knowledge of the needs of foreigners.=—(a) The complaint was general that the scouts of British commerce, the commercial travelers, were too few in number and that they were ill prepared, especially in their knowledge of foreign languages. The English exporter shipped goods which he thought were suitable, without knowledge or regard of the desires of his customers. A business man who had had seven years’ experience with trade in the Empire said, “There is a universal complaint: ‘You English will not make your goods to suit our markets. You send your samples and tell us to take them or leave them—you don’t care which. If we ask you to alter things you either refuse to do it or else you demand prohibitive prices.’” In countries where English is not spoken (Persia, Sumatra, South America, etc.) the conditions were still worse. The Merchandise Marks Act, the origin of the familiar “Made in Germany,” was designed to protect the British colonist from having foreign-made goods palmed off on him as English, and thus help the English manufacturer; but it served only to advertise foreign manufactures, and led the colonists to import goods directly from foreign countries, instead of taking them through English hands.

=461. Unwillingness to adopt foreign trade customs.=—(b) Finally, when wares suited to sale in any market have been manufactured, they need to be sold, to maintain trade. English exporters were criticised for allowing their wares to be driven out of foreign markets by other wares, no better in themselves but for some reason more attractive to the customer. Here again the commercial traveler was at fault, but part of the blame lay on the exporter. Sales must be made in small lots and on long credit in some countries, if they are to be made at all; and the English had shown a disinclination to adapt themselves to such conditions which had enabled others (especially Germans) to take trade from them. When other things are nearly equal slight differences in packing and shipping may turn the scale. The English lost trade in Australia because they sent tacks in paper packages instead of in cardboard boxes, because they sent cartridges in lots of one hundred instead of lots of twenty-five. An interesting example of an opportunity well met occurs in the career of an Englishman who left the field of manufacture to become a leading statesman—Joseph Chamberlain. He found that the trade with France in his product, wood-screws, was small; he introduced the metric system of measurement, put up the screws in packages of the size usual in France and wrapped in blue paper familiar to the French customer, and developed a large export trade. If there had been more men like Chamberlain in manufactures in England there would have been less need of the protective policy which he advocated as a remedy for the troubles of English business.

=462. Tendency to remedy these faults.=—There is no doubt that there was a good basis for these charges against the British manufacturer and merchant, though some of them doubtless were exaggerated, and it is impossible to apportion exactly the weight that should be allowed to any one of them. The crisis of the World War was needed to sweep away the customs and traditions of a long past. The stimulus of a struggle for national existence, with the insistent demand for the highest attainable efficiency, effected reforms reaching deeper and further than those of a whole previous generation. Even before 1914, however, many men in responsible positions in English politics and business recognized the need of mending the pace if England was to keep abreast of competitors in industry and commerce. Interest in elementary and technical education quickened; inquiry was directed to the means by which foreign rivals were getting ahead; the government, associations and individuals worked together or independently to further efficiency.

A parliamentary committee which in the course of the World War made a careful study of the prospects of British industry and trade reached the following conclusions as regards conditions in the previous decade. England had taken but a small part in the development of some modern industries, particularly the chemical and electrical; the country had made comparatively little progress in the iron and steel industry, in which it was entirely overshadowed by Germany and the United States; but it had shown wholesome vigor and capacity for growth in some great manufactures, such as the textiles, ship-building and some branches of machine-making. British trade abroad was found to suffer from the competition of foreigners who were found, in some cases at least, to be following methods of organization and marketing that were distinctly more efficient than those which the British pursued.

=463. (3) Adverse influence of foreign tariffs; proposals to revise the English policy of free trade.=—Under conditions of adversity there is always an inclination to lay the blame, rightly or wrongly, on others. A considerable party in England asserted that the reasons for the recent decline were political rather than economic, resulting from the protective tariffs of other states; and this party asserted that a change in the tariff policy of England and of the colonies was needed to rescue British commerce.

There can be no question of the main fact, that protective tariffs had increased considerably during the last quarter of the century. It is estimated that the principal English exports were burdened with duties equivalent to 10 to 30 per cent ad valorem in most states, but amounting to far more than that in some cases (72 per cent in United States, 130 per cent in Russia). There can be no question that England suffered from these restrictions; every commercial state suffers from them. It is, however, open to grave doubt whether England could help herself by a change in policy; and the question of what change, if any, ought to be made, remained unsettled.

=464. Demand for customs duties as a means of defense and retaliation.=—One group of “tariff reformers” clung to the ideal of free trade, and favored its maintenance as the policy of the country in general. It would, however, permit deviations from it in particular cases. The adherents of this view asserted that England stripped herself of the armor and the weapons of commercial war when she adopted complete free trade. She could make no effective protest when other nations raised tariffs against her, marked perhaps by offensive discriminations; she must suffer everything because she was forbidden to retaliate. The adherents of this view laid particular stress on the practice of “dumping,” as it is called. The manufacturers of protected nations, themselves, secure from England’s competition, market their surplus output in England at prices which may not cover the costs, much less the profits, of production. It is cheaper to do this than to break prices in the protected market at home; it kills the English industries and enables foreign manufacturers in the long run to raise prices to a profitable level in the English market. For retaliation against protective countries, and for defense against “dumping,” this school demanded that the English government be armed with the power to impose heavy duties, to be temporary in character and to be removed as soon as their immediate object has been accomplished. Such a policy has been adopted in Canada.

=465. Proposal of an imperial customs union.=—Another school of tariff reformers, led by Joseph Chamberlain, accepted in general the views just indicated, but laid particular stress on another possibility in shaping English commercial policy. It would make the whole great group of English dependencies not only a political unit but a commercial unit as well, bound together in an imperial customs union (Zollverein), so that trade would flow from place to place within the Empire instead of crossing its frontier. It is not possible here to discuss the various aspects of this proposal, of which some of the most important are political rather than commercial in character. The attractiveness of the plan is at once apparent; it promises to assure to England a market for her manufactures in the colonies, and to the colonies a protected market for their raw materials in England. The practical weakness of the plan is, however, equally apparent; no law would be necessary to secure this result if the various parts of the Empire found it advantageous to trade with each other, and the mere suggestion that a law is necessary shows that trade would be cramped and the interests of individuals hurt by such an arrangement.

=466. Obstacles to a customs union.=—The course of trade has, in fact, taken lines more and more opposed to the scheme of a customs union. During the first part of the century, when England was still protectionist, and when the mother country made the laws for its dependencies, the plan could be carried out with comparatively little friction; the colonies were engaged chiefly in the production of raw materials, and were glad to exchange these for English manufactures. Since about 1850, however, both the political and the economic organization of the Empire have changed. The self-governing colonies have received the right to make their own laws, and have used it to raise protective tariffs, against England as well as against other countries. Behind the barriers of the tariff they have developed a considerable manufacturing industry. They were now unwilling, therefore, to open wide their markets to English manufacturers; and showed an increasing tendency to buy what manufactures they did import from other countries than England. They were unable, on the other hand, to supply in full the English demand for raw materials; and any measure designed to restrict supplies of raw materials to some source inside the British Empire threatened injury to producer and consumer at home. The self-governing colonies gave evidence of the strength of their political affection by enacting differential tariffs favoring the British producer. Canada began the practice in 1894, and later enlarged the concession until it amounted to a remission of one-third of the regular customs duty. New Zealand, South Africa and Australia adopted after 1900 the same principle, making their concessions less extensive. The differential advantage thus offered the English exporter must evidently have had an effect on the course of trade. The new policy was keenly resented in Germany, where it was pictured as an abuse by England of her political ascendancy to deprive other countries of the benefit that should go to superior economic efficiency. On the other hand the policy seems to have been less important than ordinary economic factors in determining the flow of goods, and certainly had no decisive influence in changing the customary channels of trade.

=467. Relative progress of England and other countries just before the World War.=—Just before the outbreak of the World War England appeared to have made a new start in the efforts to keep her place among commercial countries. It is interesting to compare the advance that she had made with the progress of Germany and of the United States.

ABSOLUTE INCREASE IN TRADE OF THE ANNUAL AVERAGE 1910-13 OVER AVERAGE 1895-99.

(Figures in millions of £ sterling, with rough equivalent in $) =============================+==============+==========+============= |United Kingdom| Germany |United States -----------------------------+------+-------+----+-----+-----+------- Net imports for consumption. | £218 | $1090 |£260|$1300|£188 |$940 Imports of manufactures. | 72 | 360 | 48| 240| 81 | 405 Exports of domestic products.| 230 | 1150 | 244| 1220| 221 |1105 Exports of manufactures. | 177 | 885 | 170| 850| 140 | 700 =============================+======+=======+====+=====+=====+=======

The figures, it should be noted, give not the total commerce of any country, but the gain which each country had made in the period in question. The figures do not take account of the difference in population in the three countries; they treat the three different countries as units. The reader in studying them cannot fail to be impressed by the closeness in the struggle for commercial leadership, and will be better prepared to understand how precarious was the situation if in one of the countries the view was dominant that commercial interests were group interests, to be furthered by any assistance which the state could render, if necessary by the sword.

QUESTIONS AND TOPICS

1. Note the different senses in which the commerce of a country may be described as “declining.” (1) Other things remaining the same, there may be an absolute decrease in the quantity and value of both exports and imports. (2) The decrease may affect only one side of the balance, while the total figures may remain the same. Why is the decrease viewed with especial apprehension if it affects exports? (3) Other things remaining the same, including the quantity of wares, there may be a decrease in the value of a country’s commerce, due to a change in the level of prices. (4) The quantity and value of a country’s commerce may remain the same, and yet be regarded as “declining” if the population of the country increases; the share of each person in commerce would be diminishing. (5) Similarly, a country’s commerce may keep pace with its population, and yet be termed “declining” if the commerce of other countries increased more rapidly, so that the given country conducted a diminishing share of the world’s trade. (6) Previous standards of “decline” have been based on quantity, measured either in bulk or value, but there may also be a decline in quality. A scientist might gain more income if he adopted the trade of an artisan, but he would be thought, nevertheless, to lose in rank. Endeavor to make clear to yourself the significance of each one of these various changes, and be prepared to distinguish them as you study the commercial tendency of different countries. Find examples of as many of them as you can.

2. Pick from following sections a concrete example to illustrate each of the three heads suggested in sect. 452.

3. English industry and Eastern competition. [R. S. Gundry, in Fortnightly Review, 1895, 64: 609-620.]

4. Recent history of elementary education. [Mathew Arnold in Ward, Reign, 2: 238 ff.; F. E. Smith in Fortnightly Rev., 1912, vol. 97, p. 400 ff.]

5. How trade unionism affects British industries. [E. A. Pratt, Trade unionism; B. Taylor in North Amer. Review, 1901, 173: 190-207; in defense of trade unions cf. Edwards in Contemporary Review, 1902, 81: 113-128, and writings of Sidney and Beatrice Webb.]

6. Technical education in England. [Rawson in Contemp. Rev., 1901, 80: 584-598.]

7. Reasons for decline of the English silk trade. [Parker in National Review, 1895, 26: 212-225.]

8. Relative strength of modern countries in manufactures. [Schoenhof in Forum, 1901, 31: 89-104 (statistical); Browne in National Review, 1899, 33: 568-580 (espec. U. S.).]

9. Faults of English mercantile organization. [Lambert in Nineteenth Century, 1898, 44: 940-956; Greenwood in same, 1899, 45: 538-547.]

10. Meaning of “dumping”; effects; means of prevention. [Ashley, Tariff problem; Marshall, Industry and Trade.]

11. Balfour’s view of the commercial situation. [A. J. Balfour, Economic notes on insular free trade, N. Y., Longmans, 1903, $.30; Tariff reform, $.10.]

12. Criticism of Balfour’s proposals. [Quarterly Review, 1903, 198: 613-648.]

13. Chamberlain’s view of the commercial situation. [Chamberlain, The policy of imperial preference, National Review, 1903-4, 42: 351-370.]

14. Discussion of Chamberlain’s proposals. [Nelson in North Amer. Review, 1903, 177: 183-191; Goschen in Monthly Review, 1903, 12: July, 38 ff.; Quarterly Review, 1903, 198: 246-278; Edinburgh Review, 1904, 200: 449-476.]

15. The project of an imperial customs union. [Mahan in National Review, 1902, 39: 390-408; Colquhoun in North Amer. Review, 1903, 177: 172-182; Giffen, in Nineteenth Century, 1902, 51: 693-705; Bastable in Econ. Journal, 1902, 12: 507-513.]

BIBLIOGRAPHY

I cannot attempt a survey of the vast literature which has sprung in recent years from the discussion of the proposal to change the commercial policy of England.

A bibliography of 38 pages compiled under the supervision of A. P. C. Griffin, Select list of references on the British tariff movement (Chamberlain’s plan), was published at Washington, 1904. For a defense of the protective policy the reader may see Ashley, Tariff problem; for representative statements of the free trade views see William Smart, The return to protection, London, Macmillan, 1904; and L. G. C. Money, Elements of the fiscal problem, London, King, 1903. Considerable historical importance attaches to the books by Gastrell and Williams, which did much to arouse interest in the great commercial question of the day. Useful surveys are provided in translations of two foreign works, Carl J. Fuchs, The trade policy of Great Britain, London, 1905, and Victor Berard, British imperialism and commercial supremacy, London, 1906.

Reading of a more substantial character is offered in books which analyze the organization of industry and discuss the merits and defects of the English. For a survey from the standpoint of theory see Alfred Marshall, Industry and Trade, London, 1919, which is adapted only to advanced students, and for more concrete discussions, suited to topical reading, Arthur Shadwell, **Industrial efficiency, London, 1906, two volumes, reprinted later in one; Sydney J. Chapman, **Work and wages, 3 vol., 1904-14. Interesting comparisons of methods and results in England and in the U. S. will be found in Report of the Moseley Industrial Commission, London, 1903, American engineering competition, N. Y., 1901, and Causes of decay of a British industry, (gun-making), by “Artifex” and “Opifex,” London, 1907.

The analysis of commercial statistics in Schooling and Fuchs is supplemented by later studies to be found in the Journal of the Royal Statistical Society.

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XXXIX. THE GERMAN STATES

=468. Connection of the commercial and the political development of Germany.=—Standing next to England in the extent of its commerce about 1900 is a country which at the beginning of the century, if not among the last, was certainly far below the leaders. This country is Germany. We shall have to note, in this sketch of commercial development in the nineteenth century, two remarkable examples of commercial expansion. One of them, furnished by the United States, was due to the spread of a people, originally small, over a great area rich in resources. The other, furnished by Germany, was due to different causes. The Germans of 1800 occupied a territory not greatly different from that which composed the Germany of 1900, and to which nature has given but a moderate endowment of resources. There was no Germany at the earlier date, however; the people were divided up among a great number of petty states, and their economic forces were cramped thereby so as to hinder their development. The commercial progress of the century has depended largely on the reform of these political conditions.

=469. Summary of the political development.=—It will be necessary, therefore, in the following pages, to refer frequently to the events of political history, and for the convenience of the reader a brief summary is here given of the course of that history. The Napoleonic wars wiped out the smallest and most backward of the German states, reducing the number from over three hundred to about forty. Then, until near the middle of the century, progress depended on negotiations between these states by which the worst effects of their separation were removed. In 1848 a liberal movement reformed the government of some of the important states on modern lines, and strengthened the demand for a unified Germany, leaving still undecided, however, the question whether Prussia or Austria was to be the leading state. The war of 1866 between the two states gave the leadership to Prussia; and the war of 1870 with France led finally to the foundation of the modern German Empire, under which at last the people found room for commercial expansion and advanced with astonishing rapidity.

=470. Conditions of Germany about 1815.=—In spite of the service which Napoleon did Germany by abolishing the smallest states, the country was still splintered into pieces in 1815. A network of tariff frontiers covered the land, cutting the great rivers and the natural high-roads of commerce, and preventing the movement of wares. Not only did each state have its own tariff; some had internal tariffs in addition. The single state of Prussia had altogether some sixty tariffs. Some of the states were made of scattered pieces, interspersed among the territories of their neighbors; even a small state might consist of eight or ten fragments. A merchant, to reach the center of the country from the national frontier, crossed about sixteen tariff boundaries.

Not only the customs tariffs consumed time and money. The separatism which they represented spread into all parts of the organization; there were seventeen different postal systems in the country; nearly threescore different laws on bills of exchange; hundreds of different coins.

=471. Backwardness of commerce and manufactures.=—The difficulties of internal commerce were so great that the life of the people was arranged in large part to enable them to exist without trade. Most of the people were engaged in agriculture and supplied themselves with nearly all the necessaries of life. Manufactures were still carried on almost exclusively by scattered artisans. The German governments still clung to the old ideas of the gild system and public regulation. Little by little these ideas fell into the background in the first half of the nineteenth century, but it is important to note that they were still a living force in Germany when England had discarded them and was in the full rush of the developing factory system.

=472. Factories dependent on antiquated sources of power.=—Hindered in development by the persistence of old institutions, and by the lack of any considerable market for the product, German manufactures remained on the same stage on which they had been for centuries previously. Even the textile and mining industries were conducted according to the time-honored methods of the past; little progress had been made in the application of machinery, and the steam-engine was practically unknown. In Electoral Saxony, the seat now of a great cotton and woolen manufacture, all spinning was done by hand up to 1786, and in 1812 the small factories were still dependent on this source of power. The factories of medium size got their power from oxen and horses; only the large factories were run by water; and no spinning was as yet done entirely by steam.

=473. Commerce small, and marked by the export of raw materials.=—No statistics exist which would give an accurate picture of the development of German commerce in the early part of the nineteenth century, but we can gain some idea of its backwardness from an estimate made for so late a date as 1842. At this time German foreign trade was little over one-tenth of what it was in 1900, and it must have been considerably less in earlier years, before the reforms which will be described immediately. The fact that the country was predominantly agricultural is shown in the fact that the most important items in export were raw materials and foodstuffs, especially grain. The industrial population had not advanced far enough to work up even the raw wool produced in the country, of which considerable quantities were exported to England. Germany did export, it is true, a number of manufactured wares, but they were in general those which could be made from raw materials produced at home, and in the manufacture of which cheap hand labor was still the important factor. In the products, however, affected by the improvements which had been introduced in English factories, Germany confessed her weakness, and purchased large quantities of yarn and iron of English manufacturers for use inside the country.

=474. Formation of the Zollverein (customs union).=—Such conditions called forth, naturally, remonstrances from the mercantile classes. Business men and manufacturers in all parts of Germany began soon after 1815 to agitate for a reform. We must content ourselves with noting only the main steps. Tariffs inside the separate states were reformed, and the navigation of the great rivers was made easier. Finally, and most important, the separate states began to draw together in groups, forming a customs-union (Zollverein), with a common tariff on the frontier and with free trade inside. The movement, slow at first, culminated rapidly in 1828, when three such groups were formed, one in the North (Prussia and others), one in the South (Bavaria and Würtemberg), and a third including states from central Germany to the coast. No state liked to remain isolated when consolidation had once begun. Out of this transition stage there had developed by 1834 one great union, embracing about two-thirds of the area and population out of which the German Empire was later to be formed. From this time the union grew more slowly, but the people within it could now afford to wait, utilizing its new commercial opportunities, and confident that the other Germans could not long resist its attractions.

=475. Development following the formation of the Zollverein.=—The introduction of free trade inside of Germany was opposed then, as the establishment of free trade in the world at large would be now, by producers who feared the competition of others in the same line of business. Some producers lost by the change, and were compelled to seek other lines of work. Many manufacturers, however, who opposed the change because they feared it would hurt them, found that it led actually to a great increase in prosperity; it extended their market and gave a rich reward to those who best served their customers. German manufactures developed and began to supply a demand which before had been met by purchases abroad. The importation of foreign manufactures was checked, while there was an increase in the imports of raw and half manufactured materials (dyes, coal, iron) and of colonial products (sugar, coffee), indicating a growth in industrial power and in welfare. The non-industrial population gained both as consumers, by the better supply of manufactured wares, and as producers, selling products to the developing industrial class.

=476. Protection and the free-trade movement.=—The tariff of the Zollverein of 1834, based on the liberal Prussian tariff of 1818, was less restrictive and less complicated than that of most of the European states of the time. Duties which had been moderate, however, at the time when they were framed, became protective or prohibitory as prices fell; and some changes toward protection were made consciously to stimulate manufactures or to retaliate against other countries. About the middle of the century the current set in the other direction. Germany was still an agricultural country, exporting grain, and the agricultural classes secured the aid of merchants and of political liberals in a contest for lower duties.

=477. Political factors in the tariff question.=—The free-trade movement was curiously intermixed with matters of national politics, especially the question which was acute from 1848 to 1866, whether Prussia or Austria was to lead in the unification of Germany. Austria had not entered the Zollverein, partly because the Austrian government had retained the protective or prohibitive duties of the previous century, and was unwilling to reduce them by entering the German customs union. It was the policy of Prussia, therefore, to keep the duties low and to make them even lower, that Austria might be excluded from influence on the other German states. Neglecting the details, which are extremely complicated, we may note only the result, which was a victory for Prussian statesmanship and for the free-trade party. Treaties with France and with many other states reduced the duties far in the direction of free trade.

=478. Reaction in customs policy after the founding of the German Empire.=—At the time of the foundation of the German Empire, therefore, the tariff was low and the free trade movement was in the ascendant. The free traders gained one more victory, in 1873, by securing the abolition of the duties on iron; and in 1877 about 95 per cent of all imports entered duty free. This victory of the free traders was their last. The founding of the empire stimulated the growth of national feeling, and “Germany for the Germans” was a rallying cry of which the protectionist made good use. A great commercial crisis, following the war and the expenditure of the huge indemnity received from France, caused urgent demands for relief from the manufacturers who had greatly extended their works and found now that they could not market the product at profitable prices. Of the iron producers it was said that one-third could continue under the existing tariff, that one-third could continue only with the aid of protection, and that one-third were bound to be ruined whether they received protection or not.

=479. Return to protection in 1879.=—Even the agricultural classes now joined the protectionists; they found their foreign market appropriated and their home market threatened by grain imports from Russia, America, and India; they were largely in debt and were paying the heavier taxes of the empire. Finally, political factors united with the economic to induce a change. Bismarck found it politic to reverse his position and to advocate protection instead of low duties or free trade; with remarkable adroitness he engineered the change which was realized in the tariff of 1879. The existing duties on manufactures were raised; old duties which had been abolished were restored; and duties protecting agricultural products were introduced. This tariff, with changes which we shall notice later, has formed the basis of the existing tariff.

QUESTIONS AND TOPICS

1. Review in one of the smaller manuals of European history the course of political development in Germany during the century.

2. Political condition of the German states at the beginning of the century. [Seignobos, first parts of chaps. 12, 14; Henderson, vol. 2, chaps. 6, 7; Bigelow, vol. 3, chap. 1.]

3. The Zollverein. [Rand, Ec. hist., chap. 8; Bigelow, vol. 3, chap. 4; Seignobos, end of chap. 14.]

4. The Prussian tariff of 1818. [Bigelow, vol. 3, chap. 17.]

5. The conflict between Prussia and Austria. [Henderson, vol. 2, chap. 9; Seignobos, chap. 15.]

6. The return to protection. [“Veritas,” chap. 5.]

BIBLIOGRAPHY

The best single reference is J. H. Clapham, **The economic development of France and Germany, 1815-1914, Cambridge, 1921. Ogg, ** Econ. development, chap. 10, industry, and chap. 14, commerce, is brief on the earlier part of the century but gives notably full bibliographies.

A bibliography of Germany, including references to a number of articles in English will be found in Homans, Cyclopedia of commerce, N. Y., 1858, p. 814. The student who is confined to reading in English must seek in Homans, M’Culloch and similar books, or in the general encyclopedias published before 1870, the descriptions there given of German commerce in the earlier parts of the century. Most of the English reading which is readily available takes up economic development only in connection with political history. Topical references have been given above to the general narrative histories: **Seignobos; Ernest F. Henderson, A short history of Germany, 2 vols., N. Y., Macmillan, 1902; Poultney Bigelow, History of the German struggle for liberty, 3 vols., N. Y., Harper, 1896-1903. An anonymous book, by “Veritas”, The German Empire of to-day, London, Longmans, 1902, includes chapters on the history of German commercial policy which make it a convenient source of information to readers of English. The best book in English, however, on German commercial policy is W. H. Dawson, **Protection in Germany, London, King, 1904, which covers the whole century; it is a book to be studied, not merely read. A valuable summary of the history of German American commercial relations throughout the nineteenth century is given by G. M. Fiske in Review of Reviews, N. Y., March, 1902, 25: 323-328.

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XL. GERMANY UNDER THE EMPIRE

=480. Effect on economic development of the establishment of the Empire.=—Leaving now the topic of commercial policy until we return to it in a concluding paragraph, we must attend to the material development of Germany. Down to the foundation of the Empire in 1871, progress, if steady, still was slow. The best energies of the people were absorbed in the great political conflicts out of which united Germany was to emerge; delicate questions of the relations between the German states had to be settled, and much needed still to be accomplished in the reform of industrial legislation inside the states. As late as 1862 it was estimated that five-eights of the people were still engaged in agriculture or in other extractive industries. In comparison with this period of preparation the progress which Germany has made since 1871 is startling. The direct gains which Germany made in the war with France, the acquisition of the rich provinces of Alsace and Lorraine, and the receipt of about $1,000,000,000, as a war indemnity, were large, but still they were less than the indirect results: the establishment of national unity on a lasting basis, freeing the people from political anxieties, and encouraging them to face their economic problems with a new energy and pride in their strength, and with a new hope in the future. This political factor, vague and intangible as it may be, is still most important; without it the recent economic development of Germany could be regarded only as a miracle.

=481. Development of commerce, 1870-1913.=—In the period between the founding of the Empire and the outbreak of the World War the population of Germany increased from 41 to 67 million, about 63%, while the foreign trade increased almost exactly 250%, four-fold as fast. Comparing the figures in the accompanying table with those given for the United Kingdom in a preceding chapter we see that in 1872 the Germans were much behind the English, separated roughly by an interval of ten years of development, but that they were closing the gap as time passed, and at the end of the period had passed the English in the value of their export trade.

SPECIAL COMMERCE OF GERMANY, SELECTED YEARS IN MILLIARDS OF MARKS AND OF DOLLARS.

=====+================+================ | Imports | Exports -----+------+---------+-------+-------- | Marks| Dollars | Marks | Dollars -----+------+---------+-------+-------- 1872 | 3.5 | .9 | 2.5 | .6 1875 | 3.6 | .9 | 2.6 | .6 1880 | 2.8 | .7 | 3.0 | .7 1885 | 3.0 | .7 | 2.9 | .7 1890 | 4.3 | 1.1 | 3.4 | .8 1895 | 4.2 | 1.1 | 3.4 | .9 1900 | 6.0 | 1.5 | 4.8 | 1.2 1905 | 7.4 | 1.9 | 5.8 | 1.5 1910 | 8.9 | 2.2 | 7.5 | 1.9 1913 | 10.8 | 2.7 | 10.1 | 2.5 =====+======+=========+=======+========

While in 1871 60 men out of 100 were engaged in agriculture, the proportion had fallen in 1907 to 27. The change was brought about not by an absolute decline of the number in agriculture, though sometimes that was observable, but by the young men leaving the country for the mines, factories, and commercial centers. Germany had in 1840 only 12 cities of over 100,000 inhabitants, while at the end of the century it had 28, of which the chief, Berlin, was growing more rapidly than Chicago; and in 1910 it had 48. The industrial development during the generation ending in 1900 may be inferred from the following: coal production increased over 250 per cent, pig iron production nearly 400 per cent, and shipping 500 per cent.

=482. Character of recent German commerce.=—England was characterized in a preceding paragraph as “offering one of the most remarkable examples of advanced commerce in the world.” In an earlier period England stood alone; it offered the most remarkable example. In 1913 Germany stood alongside England, not merely as regards the quantity but also as regards the quality of her trade. In Germany as in England manufactures formed the major part of the exports; their proportion of the total value approached if it did not reach the English. Exports of raw materials and crude food stuffs had declined to less than one-quarter of the total, and among exports of this character coal, as in England, took the dominant place. On the other hand the imports of raw material and food stuffs had grown until they amounted to about three-quarters of the total imports. Of the total value of imports finished manufactures formed only 13 per cent, a proportion actually less than that of the English, whose policy of free trade permitted wares to be brought in which were excluded from Germany by the customs tariff. If we arrange the wares imported in 1913 in the order of their value we do not find a single finished manufacture among the first 26 items, which include all those exceeding 100 million marks in value; crude copper was fifth on the list, but we find no product of factory industry until we reach the twenty-second item, woolen yarn, which itself was destined to feed the German factories and in large part to be exported in a finished form. To understand recent German commerce we need first of all, evidently, to study the development of Germany’s manufactures.

=483. Rapid development of factory industry.=—Before the founding of the Empire most of the people engaged in manufactures in Germany still worked at home, with simple machinery and no steam power. In Saxony, for instance, now one of the industrial centers of the country, the manufactures of cloth, stockings, lace, etc., were still carried on outside of factories in 1868. The proportion of people working in this simple way is still large in Germany, but the number has declined in many lines of work (weaving, milling, shoemaking, etc.), and the great growth of the recent period has been in the modern factory industry. Since 1882 the rate of growth of the factory population has been about fourfold that of the general population. The results of this development have been indicated in the previous paragraph, and they furnish a striking contrast to conditions as they were at the time of the Centennial Exposition of 1876, when the German representative reported that in the industrial field Germany had received a defeat equal to two Sedans, that German industry produced only articles of poor quality and of slight value (“schlecht und billig”), and that Krupp guns were the only product of which the Germans could be proud.

=484. Resources of coal and iron.=—Germany was favored by some important physical resources in building up its modern industry. The country had a rich supply of coal, the great source of modern power, and took in Europe a place barely second to England in coal production, far ahead of any other country. Germany was well supplied also with the raw materials for the staple products, iron and steel. The ore supplies in the province of Lorraine, taken from France in 1871, are the most extensive in Europe. At the time when they were acquired they were thought to be of poor quality, because of the phosphorus contained in them, but under the basic process they were made to yield metal of excellent grade, and in addition a valuable fertilizer, obtained from the phosphate slag. Germany has developed its iron resources with a rapidity exceeded only in the United States. It contributed only one-twenty-seventh of the world’s iron supply in 1866, but had raised its share to one-sixth at the end of the century, and to about one-fourth before 1914. It passed England in steel production shortly after 1890, and in iron production about ten years later; it raised constantly the figure of its output while that of England remained relatively stationary, and in the decade before the war it was advancing at a rate seven-fold that of England.

=485. Quality of the people.=—The richest resource of Germany, however, was its people. The past poverty of the country and the trials through which it had gone nurtured a steadiness and thriftiness among the working classes which made them admirable members of the modern productive organization. An effective system of elementary education was established in parts of Germany long before a similar step had been taken in most other countries; and practically all the people had not only the rudiments of education, but also, what is perhaps more important, a respect for knowledge, a desire to learn and to make the best use of their learning, which were in striking contrast with the careless spirit of other peoples. It has been said that it was the primary school-teacher who won for the Germans the victories of 1866 and 1870; and the Germans could hope now to beat their industrial rivals as they beat their military opponents, by method and steady application rather than by brilliancy and dash.

=486. Superiority in technical training.=—The effects of careful training were as evident in the class of the responsible managers of Germany’s industries as in the laboring class. Nowhere in Europe had technical education reached so high a development. Not only were the appliances, methods, and system of organization superior to those of other states; the technical schools reached a larger part of the population, training them not only in the fundamental subjects of science, but also in the special branches of production (mining, weaving, dyeing, etc.).

The results were everywhere apparent in German industry; to instance chemicals, sugar, glass, and electrical appliances is to pick only a few examples from a list which could be greatly extended. Especially noteworthy was the readiness of the Germans to adopt a new process or machine which was first brought out in some other country. Englishmen invented processes to make a fast black aniline dye, to manufacture potassium cyanide for the reduction of gold, to make steel by the basic process; all these inventions were developed first into commercial successes in Germany. The Germans imported, if necessary, foreign machinery and foreign foremen to superintend its action, until they had mastered the principles of operation and had firmly established the industry in its new home.

=487. Efficiency of the mercantile organization.=—Similar considerations account for the success of the Germans in commerce, and explain the rapid development of their export trade. They took pains to find out what wares their customers wanted, and to sell them when they had been made. The report of a consul of the United States in Chile suggests the methods which led to their success. “Thirty years ago,” he wrote in 1902, “the trade coming to the Pacific ports was monopolized by the British and a few American houses. The Germans were represented only by jobbers and shopkeepers in the coast towns. The Germans, appreciating the importance of this trade, made well-conceived plans to gain it. They carefully trained a number of able young men. When these were versed in commercial affairs and in the language of the people among whom they were to live, considerable shipments of goods were made to the British and American houses, and the young men found places as clerks and were given special charge of these consignments. They remained there till they acquired a complete knowledge of the coast trade; then they were provided with ample funds and stocks and opened German houses, with brilliant success. In many branches they now have a monopoly, and the British and American houses no longer attempt competition.”

=488. Commercial travelers and trade papers.=—No country in the world had commercial travelers so well trained, especially in the command of languages, as Germany. The Germans were said to be the only foreign people who had a thorough knowledge of Russia in a business way; they were able to meet the demand for long credits in that and other eastern countries, and so build up their trade and still avoid serious losses. The exporters were not content with sending abroad their ordinary trade catalogues, as were the English, Americans, and others; they sent personal representatives speaking the language of the country, or at least reached a prospective customer by some communication in his own language. Trade papers for foreign circulation were printed in Germany in the following languages: English, French, Russian, Spanish, Portuguese, Turkish, Japanese, and Chinese.

=489. Other factors in commercial development.=—The rapidity of their industrial and commercial development forced a departure from the methods of the past, and stimulated new forms of co-operation in business. The same period which was marked in the United States by the rise of the great aggregations of capital known generally as “trusts” produced in Germany the “cartel” of a somewhat similar nature, which had its shady sides but which made some very important contributions to efficiency in the making and marketing of goods. German banks followed a course which in contrast to the conservative methods of the old established banks of England and the United States appeared speculative, but which in this period when so many conditions were favorable proved immensely profitable and effective. The great German banks promoted and financed to a successful conclusion many new enterprises in industry and trade. The government played an active part, not merely by such services as were expected of the State in other countries, but also by more positive contributions. Its control of internal transportation, by the system of state-owned railways and canals, gave it great power in directing and assisting economic development; and it supported most generously the development of shipbuilding, and the extension of German lines of shipping, for the benefit of the exporter.

=490. Deductions to be made in estimating German progress.=—We must note some factors which help to account for the great development of German commerce, but which should be offset by other considerations, and which therefore do not represent net contributions to the world’s welfare. The Germans themselves were being taxed for the particular benefit of the export trade. The government so far as possible freed the export industries from the burden of the tariff, which weighed heavily on some classes in the country, and beyond that, gave actual bounties to stimulate exports. These were commonly concealed, for instance in the form of special rates in transportation, but had nevertheless to be paid out of the pockets of the German taxpayer and business man. Furthermore, private organizations followed substantially the same practice. The great “cartels,” kept prices high at home to gain resources with which they might finance their fight against competitors in foreign markets. They won much trade, but they won it at costs, borne sometimes by Germans and sometimes by outsiders, which need to be taken into account if a fair balance is to be struck. Finally, there must be put on the debit side of the account some gains which the Germans made in commerce, not by greater efficiency but by less honesty: by the imitation of trade marks, by the bribery of agents, etc. In this regard they were not the only offenders. They did not win the bulk of their trade in this way. Their departures from accepted standards of commercial morality were, at least, sufficient to establish for German trade methods an unenviable reputation.

=491. Examples of German success in trade.=—If we add all these influences helping Germans to market their goods, to those which enable them to manufacture to advantage, we can understand the development of the German export trade, and can see why German wares, even when they were no better than the wares of other countries, won foreign markets. A French brewery got the first prize at Baden Baden, but German beer was sold all along the Parisian boulevards. German brewers sent an increasing amount of their beer to the British colonies and India, because they had learned not only all that English brewers can teach them, but they had learned, too, the tastes of their customers in distant countries, and had adapted their product to suit these tastes, while English brewers clung fast to the old methods. They had greatly extended their trade in textiles, carpets, etc., “not so much because they are cheaper, as because they are quicker and more dexterous in fitting their supply to the changing demands of the market.” They had taken away a large part of the French export trade in dolls, by taking pains to fit the doll for the country to which it is going, getting English cloths in which to dress a doll for England, reproducing exactly national types of furniture, etc. German wares, wrote the British consul at Paramaribo, displaced Sheffield wares in his district, not because they were more serviceable, but because they were cheaper, were polished and painted, and arranged for display in shop windows, while the English wares were laid away in brown paper on a shelf. Measuring German commerce as we have measured that of England, by noting the percentage which German sales to any country formed of the country’s total imports, we find that in the period from 1881 to 1909 Germany’s share of sales fell off in only one foreign market of importance, the Netherlands, and, on the other hand, its share grew, and in some cases grew greatly, in nine of the ten great markets of the world.

=492. The German tariff and the agrarian party.=—It is impossible to say just how far the progress of Germany in this period was furthered by the government’s commercial policy, for, as will appear, this policy retarded development in some lines to favor it in others. This, at least, may be said with assurance, that the policy was strikingly characteristic of the attitude of the German state, and throws much light on the conditions preceding the outbreak of the World War. The recent history of commercial policy in Germany may be discussed under two aspects: its relation to domestic politics and its relation to foreign politics.

The protective tariff of 1879 was designed particularly to favor the growing manufactures of the country. Agriculture had been in the past an export industry, and the agrarian representatives had favored free trade. Already, however, there were signs of that far-reaching change by which cheap food stuffs from distant parts of the world were enabled to under-sell the domestic product; and a moderate protective duty on the cereals was granted in the tariff of 1879. The German producers of bread stuffs and meat found, however, that they had underestimated the danger to which they were exposed, and that they could keep their home market only by sacrifices which appeared to them desperate. They obtained additions to the duties; they managed, under the guise of sanitary precautions, to subject the importation of certain foods to expense and delay, even when it was not altogether prohibited; and in the general revision of the tariff, in 1902, they obtained not only a general increase in the agrarian duties but also a specific provision which prevented the government from reducing these duties below a certain point, in treaties which it might make with other powers. These favors to the agrarian interest were accompanied by the revision of rates in the interest of manufacturers, but the government was evidently taking with one hand from the producer what it appeared to offer him with the other hand. There is unmistakable evidence that the higher duties on food stuffs restricted consumption and checked the rise in the standard of living. The policy threatened to impair the ability of the industrial and mercantile classes to compete with foreign rivals who were not thus burdened in getting the necessaries of life. On the other hand, it offered but slight advantage to the major part of the German agriculturists, who carried on mixed farming on a small scale; its benefits were mostly restricted to the owners of large estates, east of the Elbe river, who specialized in the production of grain and meat with hired labor. What, then, is the explanation of the policy? It was, to use the German phrase, a Machtfrage, a question of power. The characteristic agrarian was a Junker, a Prussian squire, devoted to the military ambitions of the Hohenzollerns, endowed by custom and indeed by law with superior political influence. In spite of its industrial development, and in spite of some democratic features of its constitution, Germany was still at heart a military monarchy. The course of policy was determined by reference not to the general economic welfare, but to the interests of those special groups which shared the political and military traditions of the Prussian monarchy.

=493. International aspects of German tariff policy.=—Likewise in foreign relations German tariff policy was colored by the traditional Prussian view that commercial competition was not merely the struggle of individual producers and merchants, but was a group conflict, in which the state should take an active part, making the most of the particular weaknesses of states opposed to it. In 1871 Germany had forced France to subscribe to the principle that each country would grant the other all commercial favors accorded another power. Being a part of the treaty of peace this provision was interminable; it could be amended only by formal treaty. Germany at the time appeared to get more than she gave. As she realized her industrial and commercial strength, however, she became dissatisfied with a position of mere equality. About 1890, under Chancellor von Caprivi, Germany began the policy of making special bargains with individual states by treaties fixing the tariff rates. In the negotiations with Russia each party stood out obstinately for certain favors, and since agreement appeared impossible each party sought to punish the other by imposing punitive rates, amounting to prohibitions. This war of tariffs lasted less than a year, for it affected so disastrously the commerce between the two countries, that each was glad to reach an agreement by mutual concession. The same spirit, however, which marked this contest, appeared in the commercial relations of Germany with other states; she conducted similar tariff wars against Spain and against Canada, and seems to have meditated like action against the United States but prudently refrained from a breach with a country which was approaching industrial independence and which was the source of indispensable raw materials.

=494. The tariff of 1902; Central Europe.=—Before the treaties framed under Count Caprivi were due to expire Germany prepared for another commercial campaign. A new tariff was passed in 1902, but was held in suspense until treaties could be negotiated under it, and was not put into effect until 1906. The new tariff was ingeniously devised to enable Germany to offer special favors to individual countries, in spite of nominal adherence to the principle of granting to every country with which a treaty was made the concessions granted to the most favored nation; and gave to the government, on the other hand, if occasion demanded, the power to wage commercial war by the imposition of triple duties. Germany is commonly supposed to have driven some hard bargains in the treaties that were framed under this act, but did not have recourse, as in the preceding period, to tariff wars as a means of opening foreign markets. Still, the practice of bargaining for commercial advantage by treaty, which Germany had so vigorously developed, introduced a tension in international economic relations that caused the states of Europe to look forward with apprehension to the years 1917-1918 when the important German treaties expired. The project of a customs union of Central Europe, which had long been discussed in an academic way, and which appeared to many Germans in the early years of the World War as a practicable plan, shortly to be realized, did not propose to introduce free trade immediately among its member states, but it did promise to assure Germany such dominance over the others that she could use not only their economic but their military resources as well, to further her plans for commercial expansion. The plan was characteristic of German ambitions, a summary of the tendencies that had long been manifesting themselves in German policy, and a significant index of results that would have followed if Germany had won the war.

QUESTIONS AND TOPICS

1. What other examples can you find of countries apparently invigorated by a war for independence or national unity?

2. Recent political development of Germany. [Seignobos, chap. 16; Dawson, chap. 11; Schierbrand, chap. 6.]

3. Development of commerce under the Empire. [Whitman, chap. 12; Dawson, Evolution, chap. 4.]

4. Prepare, in the manner suggested in the chapter on England, graphic representations of the chief imports and exports. [Statistics in Statesman’s Year-Book.]

5. Recent commerce of Germany. [Schierbrand, chap. 13; Arndt, Germany in international commerce, International Monthly, 1902, 5: 526-546; Bernstein, Growth of German exports, Contemporary Review, 1903, 84: 775-787; Williams, Made in Germany—five years after, National Review, 1901-2, 38: 130-144; Gastrell, chap. 8 (statistical).]

6. Development of factory industry and condition of factory labor. [Dawson, chap. 3.]

7. The Krupp iron works. [Schierbrand, chap. 14.]

8. Methods and results of education. [Dawson, chap. 6; Schierbrand, chap. 18.]

9. Various reasons alleged to explain German superiority in manufactures and commerce. [Williams, Made in Germany, chap. 7.]

10. The German chemical industry, [O. Eltzbacher, in Contemporary Review, 1904, 85: 627-639; or Barker, Mod. Germany, chap. 25.]

11. Effect of education on the mercantile organization. [Findlay, Genesis of the German clerk, Fortnightly Review, 1899, 72: 533-536; Bashford in Fortnightly Rev., 1905, 84: 692-707.]

12. The German colonial movement. [“Veritas,” chap. 7; Schierbrand, chap. 20; Birchenough in Nineteenth Century, 1898, 43: 182-191; Keller, Colonization, chap. 14; Dawson, Evolution, ch. 18, 19.]

13. Development of German shipping. [Bashford in Fortnightly Review, 1903, 79: 287-302; Schierbrand, chap. 15; Barker, chap. 24.]

14. German transportation system and policy. [“Veritas,” chap. 6; Dawson, Evolution chap. 11; Barker, chap. 22, 23.]

15. German tariff policy to about 1890. [Villard in Yale Review, 1892-3, 1: 10-20.]

16. Commercial treaties about 1890. [Farnam in same, 1: 20-34.]

17. The agrarian movement. [Schierbrand, chap. 9.]

18. Tariff policy about 1900. [Schierbrand, chap. 12; Schoenhof in Forum, 1901-2, 32: 105-115; Eltzbacher in Nineteenth Century, 1903, 54: 181-196; H. Dietzel in Quarterly Jour. of Econ., 1902-3, 17: 365-416; W. H. Dawson in Econ. Jour., 1902, 12: 15-23.]

19. Effects of German tariff policy. [Lotz in Econ. Journal, 1904, 14: 515-526; Mann in Contemp. Rev., 1905, 87: 347-358.]

20. German methods in the commercial penetration of a particular country. [See articles in the Quarterly Rev., as follows: U. S., July, 1919, 232: 16-37; France, 1916, 225: 383-399; Italy, 1915, 224: 136-149; Turkey, Oct. 1917, 228: 296-314.]

21. German banks and “peaceful penetration.” [McLaren in Quart. Rev., Jan. 1919, 231: 76-96.]

BIBLIOGRAPHY

Readers of English will find the recent commercial history of Germany treated more fully than that of any other country of the Continent. Besides the books by Clapham and “Veritas” named in the preceding chapter, may be mentioned: S. Whitman, Imperial Germany, 1901; W. H. Dawson, German life, N. Y., 1901, and **Evolution of modern Germany, revised edition, 1918; W. von Schierbrand, *Germany, N. Y., 1902 (better than the later editions); J. Ellis Barker, Modern Germany, various editions of which the fourth, N. Y., 1912, is to be preferred. Dawson, Protection, and Ogg will continue to be of service in this period; and reference may also be made to report of the U. S. Tariff Commission, 1919, on Reciprocity and Commercial Treaties, 467-487.

G. A. Pogson, Germany and its trade, London, 1903, is a compilation of statistics for the period preceding 1900, and a convenient statistical survey for the period since that date is given by Helfferich, Germany’s economic progress, Berlin, 1913.

Arraignments of German business methods will be found in A. D. McLaren, Peaceful penetration, London, 1916; H. Hauser, Germany’s commercial grip on the world, London, 1917; Millioud, The ruling caste and frenzied trade in Germany, London, 1916; Claes, The German mole, London, 1915, (for Belgium).

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XLI. FRANCE

=495. Condition of France before the Revolution.=—France was considered, as the reader will recall, the richest and most powerful state of Europe till near the end of the eighteenth century. The population of the country was more than double that of Great Britain, the resources were envied by all other nations, the commerce was exceeded only by English commerce and surpassed that in some respects. The French sugar colonies were considered the most valuable colonial possession in the world, and France surpassed England in trade with her direct neighbors (some of the German states, Italy, Spain). Under the political and economic system, however, which had fastened itself on the country in the course of time, growth was hampered; and opposition rose until it burst out finally in the Revolution of 1789. Then followed a period of twenty-five years of rapid political change and of bitter war, ending finally with the defeat of Napoleon in 1815.

=496. Effect of the Revolution.=—The losses of France during this period in men, money, and colonial territory need only to be suggested; the effect of the wars on French commerce has already been described. It is proper here to emphasize the good of the Revolution. In appearance, at least, it swept away all the old institutions, and liberated the people from burdens which they had been bearing for centuries. It abolished the former class divisions and inequalities in taxation; it freed the agricultural classes, and extended the ownership of land; it amended the former restrictions on the pursuit of manufactures and handicrafts; and it established perfect freedom of trade inside the country.

=497. Backward features of industry and commerce.=—No country can make an entire breach with its past, and France after 1815 was more like France before 1789 than the reader may suppose. The people had not acquired the skill and boldness in industry and commerce which the English had won by generations of experience. The government after 1815 was still highly centralized, with strong absolutist tendencies, and moved more by personal influences than by far-sighted views of the welfare of the whole people. These facts appear in the course of commercial policy followed after the Restoration. France had made only the barest beginnings in the modern industries depending on coal and iron, and on the application of machinery, at the time of the Revolution, and though industries developed when commerce was interrupted by war, they were weak in organization and technique, and loudly demanded protection when peace returned, and opportunities for commerce developed.

=498. The French tariff in the first part of the century.=—The result was a tariff system which goes far to explain the sluggish development of French commerce in the first part of the nineteenth century. It gave protection to shipping, to agricultural products, from wheat to sumac and garden roses, to the raw materials as well as the finished products of industry. Colbert’ s tariff of 1664 and 1667 has often been cited as an example of high protection, but the French tariffs of the period before 1850 imposed still higher duties on some of the most important raw materials of industry (wool, cotton, flax, pig and bar iron, steel, alum); many duties had risen to a prohibitive height, and there were many actual prohibitions.

=499. Sluggishness of industrial development.=—At the time when England was building up her system of manufactures, when every decade was marked by some important step in industrial progress, France resolutely excluded herself from the influences which would have stimulated progress at home. While England was endeavoring to keep her improved machinery in the country, by forbidding export, France aided her by imposing on machinery duties running up to 100 per cent. Means to spin linen by machinery were invented by a Frenchman, Girard, in 1810, but were first utilized in England; and England could show nearly a million and a half spindles in 1849, against a quarter of a million in France. A Frenchman estimated in 1827 that the steam-engines in Great Britain amounted to a force of 6,400,000 laborers, while they amounted in France to but 480,000. About 1840 there were still less than 2,000 steam-engines in France. The French iron industry was far behind the English in efficiency and in output, but was secured the home market by protective duties, and built up large fortunes for the iron producers at a direct loss to the country estimated to be $10,000,000 a year, and an indirect loss far larger.

=500. Effect of the tariff on commerce.=—The effect of the tariff in checking commerce between the two great states in this period can be seen in the fact that in 1829 less than one seventieth of British exports were declared for France; England found better customers in Spain, in Turkey, or in Chile. The amount of trade was in fact somewhat larger, for smugglers evaded the restrictions of the tariff, and by a number of ingenious devices (including the use of trained dogs), succeeded in bringing wares to the people who wanted them.

This one example indicates how the French were losing the opportunities for commercial expansion which this period offered to them as to other peoples. No more striking commentary on the history of the commerce of France at this time can be furnished than the following fact: nearly sixty years after the French Revolution the special commerce of the country was only just beginning to exceed the figures which it had attained at the earlier date.

=501. Reform of the tariff by Napoleon III.=—The astonishing increase of French commerce in the decade 1850-1860 (from less than two to over five milliards of francs) was due chiefly to the reform of the tariff by Napoleon III. Attempts before this time to lower duties had failed because of the determined resistance and the strong political organization of the protectionists, but the new Emperor enjoyed a position of exceptional strength, and was not fettered by the dependence on the manufacturing class which had stopped action by the previous government. By his mere decrees he lowered or suspended duties on agricultural products and on important raw material (coal, iron, steel, wool, etc.).

=502. Effect of the reform on commerce.=—French industry and commerce, checked so long in their development, responded with surprising quickness. In a period of little over ten years (1847-1859) the steam power of France increased over threefold. The commerce with England, which in the previous period of twenty years had merely doubled, now quintupled in ten years. With Portugal and Greece commerce quadrupled; with Germany, Switzerland, Brazil, etc., it tripled; with Belgium, the Netherlands, Spain, Italy, the United States, etc., it doubled. French commerce recovered its lost ground so quickly that, according to a French estimate, it amounted to more than three-fifths of English commerce about 1860, and the country took easily second place among the trading countries of Europe.

=503. The free-trade treaty of 1860.=—At the end of the decade which we have been studying, in 1860, the movement toward greater freedom of trade progressed still another stage by the ratification of a treaty of commerce between France and England. Free traders, of whom Richard Cobden was the chief, convinced the Emperor that France would benefit by a further reduction of duties. Cobden asserted that French operatives worked 20 per cent more time for 20 per cent less wages, and paid upwards of 10 per cent more for their clothing than the same class in England; and promised the Emperor that the French would share in the advantages of the English if they would only adopt a similar commercial policy. The Emperor, moreover, was desirous of winning the good-will and support of the English to strengthen his international position; and agreed to the proposals partly on this account. England abolished the duties on a number of articles of French origin, and reduced the duties on wine and spirits; while France removed all prohibitions on trade, and scaled duties down to about half their former amount in commerce between the two countries. This treaty, which was to last ten years from its ratification in 1860, is one of the turning-points in European commercial policy; it marked the extension of the free-trade movement from England to the other states of Europe; and it inaugurated a succession of similar treaties on the part of France and other states on the Continent.

=504. Results of the treaty of 1860.=—There had, of course, been opposition in France to the further reduction of duties; and many people prophesied that the movement to free trade would entail the industrial ruin of the country. The results did not justify these predictions. Commerce expanded greatly, as was to be expected; it grew in the period 1859-1869 from 5.4 to 8 or from 3.9 to 6 milliards of francs, according as the general or special trade of the country is taken as the standard of measurement. This commerce, however, was serving French industry and agriculture, and not destroying them. There was a marked increase in the importation of the raw materials of industry; the amount of wool and silk brought into the country for manufacture more than doubled in ten years, and in spite of the disastrous effects of the American Civil War there was a considerable increase in the importation of cotton. The use of coal and iron, both important indexes of industrial development, extended largely; and the population engaged in industry and commerce grew by nearly a million workers in the period 1861-1866. The increase in the products of French industry found a market both abroad and at home. The exports of manufactures increased, it is true, but slowly except in the case of special products; but the consumption of manufactures within the country extended greatly, as new purchasers appeared for wares which formerly had been beyond their means.

=505. Return to protection after the war with Germany.=—It has long been the misfortune of France to have her commercial and industrial interests at the mercy of politics; and at this point in her growth her progress was stayed by the outbreak of the great war with Germany. From the direct losses of the war the country recovered with a quickness surprising to those who did not realize the thrift and saving power of the French people. The war led, however, to the overthrow of the government of Napoleon III, and in time to the overthrow also of the liberal commercial system which he had established. Though the commercial treaties were allowed to continue for a few years, the tendency was strongly toward protection. It was a period of bad times in business, and French agriculture was beginning to feel the competition of countries outside of Europe; the new French republic, with all its merits, lent itself too easily to the representation of class and sectional interests.

=506. Growth of protective duties.=—In 1881, therefore, a new tariff was established, which raised many duties about one quarter, though it allowed many of the higher rates to be abated by treaties with other states. Proposals to increase duties now multiplied. Not only manufacturing industry but also agriculture became clamorous for protection. The duty on a quintal (about 220 pounds) of wheat, which had been 60 centimes since 1861, was raised to 3 francs in 1884, to 5 in 1887, to 7 in 1894. While in the past the agriculturists had been free traders they had become by 1890 almost a unit for protection, whether they raised wheat or cattle, grapes or sugar-beets, hemp or flax. In 1892 an entirely new tariff was adopted, considerably higher than that of 1881, affecting some important raw materials, and not affording the same freedom in the negotiation of commercial treaties.

=507. Attitude of the French toward commerce.=—A writer who published a study of the French tariff system in 1892 thought that public opinion would force a revision of the recent tariff if it checked the country’s commerce. Such was actually its result. Exports and imports did not reach again the figures of 1892 for five and six years respectively. Nevertheless the protective duties were raised again in 1910 to a level far above that which prevailed in the neighboring states of northwestern Europe. The French had to choose between a career in commerce and the maintenance of the traditional organization. They could not extend their trade without lowering the barriers of their tariff. This step they were unwilling to take, apparently because it would have entailed efforts and sacrifices in the readjustment of their industries. The caution and disinclination to change, which mark the great peasant population of the country, appear to have determined the course of commercial policy, and to have decided the French to hold fast to what they had, rather than to take the chances involved in a struggle for a higher place in the open market of the world. In such a struggle they were at a disadvantage, because of the scarcity of their mineral resources and still more because of the many backward features in their industrial organization. On the other hand they could comfort themselves with the reflection that few if any of the neighboring states were qualified as were they to renounce the possible benefits of trade. The great agricultural resources of the country make possible an approach to self-sufficiency which elsewhere could not be considered.

=508. Statistics of French commerce in the recent period.=—The table on page 429, presenting the course of French commerce in the period immediately preceding the outbreak of the World War, illustrates what has been said regarding the checks imposed on commercial expansion; and provides the means of comparison with the commercial development of other countries.

=509. Position of France in recent commerce.=—In matters of taste and of artistic finish, in which personal aptitude and training are the important factors, the French remained unrivaled; in production on a large scale, in which elaborate organization and the extensive use of machinery determine success, the French did not compare with English, Germans, or Americans. Thus the French, though always assured a respectable position in the commerce of the world, could not hope to share the progress which other nations attained by the export of cheap manufactures in great quantities. An Englishman said of the trade between his country and France in 1878, “Broadly it may be said France supplies us with our luxuries, and we minister to the necessities”; even at the close of the century this held true, in general, of the relations between France and the other great countries. France supplied objects of art, luxury, and fashion, delicacies and wines, and took from others in exchange the articles of solid utility, the product of mines and of power machinery.

SPECIAL COMMERCE OF FRANCE, SELECTED YEARS IN MILLIARDS OF FRANCS AND OF DOLLARS.

=====================+==================+================== | Imports | Exports ---------------------+--------+---------+--------+--------- | Francs | Dollars | Francs | Dollars ---------------------+--------+---------+--------+--------- 1870 | 2.9 | .6 | 2.8 | .5 1880 | 5.0 | 1.0 | 3.5 | .7 1890 | 4.4 | .9 | 3.8 | .7 1900 | 4.7 | .9 | 4.1 | .8 1910 | 7.2 | 1.4 | 6.3 | 1.2 1913 | 8.4 | 1.6 | 6.9 | 1.3 =====================+========+=========+========+=========

=510. Failure of the government in its attempts to stimulate commerce.=—Attempts of the French government to stimulate commercial expansion have not met the expectations of their promoters. The government has built up a colonial empire about sixteen times as large as France, but most of the dependencies are in a backward condition, and their total commerce (including that of Algiers) was before 1914 only about one-quarter of that of France. So far France has lost money on her colonial enterprises, and there seems no likelihood, in view of the extremely small emigration from the home country, that she will recover it. Nor can the results of attempts to build up the merchant marine be regarded as satisfactory. Measures to protect French shipping, which disappeared to a large extent during the period of the movement to free trade, have been resorted to again since 1880, and have led to the payment of two to four million dollars a year to aid the building and renewing of French ships. They have done no more than keep the French fleet stationary while other merchant marines were rapidly advancing, and seem to have hurt rather than helped the interests of French commerce. It is noteworthy that of the total output of merchant ships in France in 1901, 70 per cent of the tonnage was in the form of sailing vessels, a means of transportation now out of date for most purposes of foreign commerce; and that two-fifths of the total tonnage under the French flag in 1912 were in the form of sailing ships.

QUESTIONS AND TOPICS

1. Burdens from which French commerce and industry were freed by the Revolution. [Review chap. 25, above; Rand, Ec. hist., chap. 3; Adams, Growth, chap. 15.]

2. Hayti as a French colony and as an independent state. [A. K. Fiske chap. 20 ff.; Spenser St. John, Hayti, Lond., 1884, chaps. 2, 3, 10.]

3. Backward political condition of France after 1815. [Adams, Growth, chap. 18; Seignobos, chap. 5.]

4. Write a report on one of the following topics in French commerce, about 1850: import and export trade, manufactures, customs tariff, colonial system. [Homans, Cyclopedia, p. 710 ff.].

5. France under Napoleon III. [Seignobos, chap. 6.]

6. The commercial treaty of 1860. [McCarthy, Hist., vol. 2, chap. 41; Morley, Cobden, chap. 32.]

7. What is the difference between “general” and “special” commerce? [Statesman’s Year-Book, France, Commerce.]

8. France under the third republic. [Seignobos, chap. 7.]

9. The protectionist reaction. [Herbert A. L. Fisher, in Econ. Journal, 1896, 6: 341-355.]

10. The situation of France in international commerce. [Lebon, in International Monthly, 1901, 3: 252-273.]

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XLII. MINOR STATES OF CENTRAL AND NORTHERN EUROPE

=511. States of minor commercial importance.=—In the year 1912 four great states carried on nearly one-half of the foreign commerce of the world, considerably more than one-half if their dependencies be counted with them. Three of these, England (including the British Empire), Germany, and France, have already formed the subject of study, and the fourth, the United States, will be considered at length in a later section. We must now attend to the commercial development in other countries, reviewing their history more briefly as accords with their minor importance. We shall take up first two countries, the Netherlands and Belgium, which stand not far below the leaders, and which would even rank high among them but for their small size. It may not be unnecessary to remind the reader that Belgium is a creation of the nineteenth century; the country had formed a province subject to Spain or Austria until the period of the French Revolution when it was for a time incorporated in France, then (1815) joined to the Netherlands in a single kingdom, and finally, in 1830, established as an independent state.

=512. Commerce of the Netherlands to 1830.=—Dutch commerce had long passed its best days when, toward the close of the eighteenth century, it received what seemed to be its death blow in the war with England, growing out of the American war of independence. Before the Netherlands had begun to recover from its reverses it was engulfed in the movements of the French Revolution; was conquered and heavily taxed by the French; suffered under the ban of Napoleon’s continental system; and lost for a time its most valuable colonial possessions. At the close of the wars, in 1815, it recovered its colonies, except Ceylon, the Cape of Good Hope, and parts of Guiana, which remained in the possession of the English, but it could not recover its former commercial position. Other peoples had learned to do for themselves what the Netherlands had once done for them as a merchant and carrier; and Amsterdam and Rotterdam saw their commerce pass to London, Hamburg, and other ports. In striking contrast with the earlier period the Netherlands had in 1824-5 only 7 large ships under construction while England had about 800. The union with the Belgian provinces, lasting from 1815 to 1830, increased the area and the internal trade of the country, but was a hindrance rather than a help to the development of foreign commerce. The Belgian industries required protection, and the tariff, framed to meet both their demands and a protectionist sentiment in the Netherlands which had grown up in the period of decline, hampered free commercial relations with other states.

=513. Dutch commerce since 1830.=—The Netherlands, even after the separation of Belgium in 1830, clung to the protective tariff, and remained outside the great current of commerce. A colonial policy known as the culture-system, adopted in their East Indian possessions, especially Java, returned a large revenue to the government, but prevented commercial development there, while the West Indian possessions suffered severely from the lack of labor following the abolition of slavery. Meanwhile, however, a movement for free trade had grown up which resulted, after 1850, in a lowering of tariff rates until they were little more than nominal in amount. The growth of the European railway system gave to the Netherlands a new importance as a place of import for wares destined for central Europe; and the country profited largely by the growth, on either side, of the two great industrial powers, England and Germany. In the last half of the century the growth of the Dutch commerce has been rapid and nearly constant. The annual value of the total special trade (exports plus imports, in this case including the precious metals) was as follows at ten-year intervals from 1850 to 1910, in milliards of dollars: .1, .2, .2, .6, 1.0, 1.5, 2.4. Figures for the general trade of the country, including goods imported and then re-exported, would be considerably larger.

=514. Position of the Dutch in recent commerce.=—The Netherlands suffers from a lack of mineral resources, as the country is largely “made” land, composed of sand and silt which the great rivers have deposited at their entrance to the sea. The Dutch, therefore, have been handicapped in their attempts to share in the development of modern industry, and find in agriculture rather than in manufacturing their chief occupation. They have succeeded in certain special manufactures (diamond-cutting, chocolate, oleomargarine), in gaining a leading place, but cannot compete with other nations in the staple machine industries. They produce a surplus of dairy products for export, and import raw materials and manufactures which cannot be produced in sufficient quantity at home; but the striking feature of their trade is the fact that in general the same products appear among both the imports and the exports. The Dutch, favored by their national training and geographical position, and diverted from other means of livelihood by lack of resources, are the middlemen of Europe, arranging exchanges between other countries.

=515. Belgium: early industrial development.=—Belgium is far more richly endowed with mineral resources; in spite of its small area it produced in 1912 more than half as much coal as France, and has also rich supplies of ore of iron, and other metals. Even before the full value of these resources was realized Belgium was a distinctly industrial state, and for many centuries Flanders and other districts have been noted for their manufactures. Belgium did not suffer, therefore, as did the Netherlands, from the period of French occupation; it was freed by the French from many trammels on industry dating from the gild period, and it found in France a market for its manufactures which enabled it to endure the restrictions of the Continental System. During the period of union with the Netherlands (1815-1830) Belgian industries continued to develop, with the aid of Dutch capital, commerce, and colonies; the districts represented by Ghent, Brussels, Charleroy, and Liege became widely known for the manufacture of textiles, iron wares, etc. Progress was checked for a time by the breach with the Netherlands (1830), but this was just the period when steam began to be applied to manufactures and to railroads, and with the aid of this new force Belgium quickly recovered her former position. The prosperity of Antwerp, the one important port of modern Belgium, was seriously threatened by the act of the Dutch in closing the Scheldt to navigation; but the Belgians were willing to pay for this means of access to the sea, and finally bought outright the privilege of using it.

=516. Belgian commercial policy.=—During the first decades of Belgian independence the tariff which had been inherited from the period of Dutch rule was made more strict, and before the middle of the century it had been changed so as to grant considerable protection to agriculture, industry, and the carrying trade. Belgium, however, like the Netherlands, is too small a country to be able to afford high protection. After 1850 a free-trade movement led to lower duties and to liberal commercial treaties, the policy which has since been followed in the main. Many influences were at work in this period to further commerce, chief among them the technical improvements in manufactures and transportation; so it is dangerous to argue that the prosperity of Belgium in the following period was due to the policy of greater freedom of trade. It is certain, however, that Belgian commerce could not have attained the development it did without this policy.

=517. Survey of the recent development of Belgian commerce.=—Giving figures roughly in millions of dollars, the total commerce rose in the protectionist period, 1840 to 1850, from 70 to 80. In the following ten years of transition it rose to 190; in 1880, after twenty years of nearly free trade, it had risen to 560, and in the decades since then the figures have been 600, 856 and 1480. To this commercial expansion the port of Antwerp owed its position as second only to Hamburg among the ports of the Continent. An analysis of the different items of which the recent trade of the Belgians was composed shows that their strong exporting industries were manufactures (yarns and textiles, iron, glass, etc.), while they were obliged to import a large part of their food supply, and of the raw materials for their industries.

=518. Switzerland: obstacles to industrial development.=—Another country, small in area but with a commerce exceeding that of many greater states, is Switzerland. With its agricultural capabilities restricted by the area covered by mountains, and with no important mineral resources, Switzerland has to depend upon the character of its people as its chief industrial asset. In the early part of the nineteenth century it suffered not only from the restrictive tariffs of the states surrounding it, but also from the fact that it had itself not become a political unit, and was cut into small pieces by dues and tolls on trade. The hindrances to internal trade were finally swept away in 1848, when Switzerland became a federal republic; and the people made use of their greater freedom at home and of the lowering of tariff rates abroad to extend their commerce rapidly.

=519. Position of the Swiss in recent commerce.=—Switzerland has developed almost entirely along the line of manufactures. The agricultural population has actually decreased since 1870, as it has become easier to purchase food products from abroad by the export of manufactured products: silk and cotton textiles, clocks and watches, etc. Swiss industries have not reached the development of those in more advanced countries, and much of the work is still done outside of factories, and with simple home machinery. These conditions imply hard work and low returns, but the Swiss must choose between securing in this way some share in the world’s commerce, or starving in the vain attempt to support themselves by the scanty resources of their own country.

=520. Austria-Hungary: survey of commercial development.=—The state of Austria-Hungary, though it was in size the third in Europe, ranked only seventh in commerce in 1912, taking place after the Netherlands, Belgium, and Russia. Reference to an earlier chapter, describing conditions before 1800, will suggest that Austria-Hungary entered the nineteenth century handicapped by its economic and political conditions. It required roughly a full half of the century to remove the more serious obstacles to progress, and the latter half of the century has not given time enough to enable the people to win a place with their more advanced neighbors of the West of Europe.

=521. Obstacles to the growth of commerce and industry.=—Of the difficulties under which commerce labored the following are among the most important: (a) the character of the government, which was a personal absolutism like that in France before the French Revolution, absorbed by the family interests of the ruling house and by questions of foreign policy, and attending but slightly to the interests of the people as a whole; (b) the system of prohibitive tariffs, which was maintained more strictly than in any other state of central Europe; (c) the separation of different parts of Austria-Hungary by tolls and tariffs; (d) the slight development of manufacturing industry, due not to the lack of natural resources but to the backwardness of the people and to the persistence of restrictions dating from the period of the gilds.

=522. Gradual removal of these obstacles.=—(a) The revolution of 1848 began a movement for constitutional government, which led in time to the fall of absolutism and the introduction of modern representative assemblies. At the same time, however the spirit of nationalism was awakened among the various peoples, and their conflicting claims (especially in Hungary and in Bohemia) have seriously affected the working of the parliamentary system. (b) The prohibitive system, which had absolutely excluded the most important manufactures or had allowed them to be imported only as a special favor and by payment of high duties, was abandoned after 1848 for a more moderate system of protection, and commercial treaties with various states were made to facilitate the movement of wares. (c) The freedom of internal trade was secured for the Austrian half of the monarchy in 1826, and for the whole state (with slight exceptions) in 1851. (d) The restrictions on industry continued even after 1850. A man could not exercise any trade requiring the use of a machine, or any but the simplest household employments, without securing a public license; a man might exercise only one trade, and a cabinet-maker might not upholster the furniture he made, nor might a baker make confectionery. Most of these restrictions were abolished in 1860.

=523. Growth of commerce since 1850.=—Commerce and industry, which had developed with exceeding slowness before 1850, were quick to respond to the change in conditions, aided by the extension of the railroad system which marked this period. In spite of heavy taxes and a depreciated paper currency there was an extraordinary increase of energy and growth of business. Foreign trade more than doubled in twenty years, and each part of the monarchy developed along the line of its strongest resources; the Austrian lands, especially Bohemia, extended their mines and built up their backward manufactures, while the Hungarian lands exported increasing quantities of agricultural products (wheat, flour, stock, etc.). A reaction toward protection, felt since the ‘70’s, did not check the growth of commerce; a more serious danger appeared to be the possibility that a tariff barrier would again be established between the two parts of the monarchy as the result of the national aspirations of the Hungarians.

=524. Position of Austria-Hungary in recent commerce.=—Austria-Hungary carried on by far the largest part of its commerce with its neighbor, Germany, and found the greatest hope of the future in building up the trade with the Balkan states, and along the route to Salonika and Constantinople. Hampered by its position, it has not succeeded, in spite of generous bounties, in developing its shipping trade to important proportions. The first ships to pass through the Suez canal in 1869 were three steamers of the Austrian Lloyd, but in 1913 less than one twentieth of the tonnage using the canal was Austrian. The two ports that served the monarchy, Trieste for the Austrian part and Fiume for the Hungarian, were favored by every sort of assistance that the government could render, but remained still ports of the second class, surpassed in importance by a score of other ports in Europe.

=525. The Scandinavian states; their position in recent commerce.=—The Scandinavian states (Sweden, Norway, Denmark) held a lower rank among commercial countries than others which will be mentioned later, but in a geographical grouping they may be properly considered here; and their commerce was important, at least, in proportion to the irrelatively small population. These states were characterized, in general, by a lack of coal and by the slight development of manufactures; and by a soil and climate which are disadvantageous to the ordinary operations of agriculture. The difficulties of life have forced many inhabitants to emigrate, and forced those who stayed at home to make the most of their extractive industries (forestry, mining, dairying), the products of which they could exchange for the wares of more favored nations. The time when the Baltic trade was one of the great branches of world commerce was long past. The rest of Europe would have been but slightly affected if it had been separated from the Scandinavian countries, while such a separation would have entailed ruin on them.

=526. Denmark.=—The little state of Denmark, with a population of but slightly over two million, had taken advantage of modern commercial facilities to specialize in the dairy industry, in which it has been a leader and teacher of Europe. When we add to butter the pork products raised in connection with the dairies, and the eggs from Danish poultry yards, we have the articles which made up more than two thirds of the total value of the country’s exports.

=527. Norway; Norwegian shipping.=—In Norway, also, a country so barren that far less than 1 per cent of its area is suited to cultivation by the plough, dairying has been an important industry; and the dairy and forest industries supplied most of the exports. The difficulties of life on land were so great that the people were forced to take to the sea; they gained one tenth of the national income from the fisheries, and had, in proportion to their numbers, more merchant shipping than any other people. In 1913 Norway ranked second in tonnage of sailing ships (after the United States), fourth in total tonnage (after Germany), and fourth in tonnage of steamers. The position of Norwegian shipping was even higher before the use of iron ships had become general, and when Norway could utilize its forest products in shipbuilding. Norway enjoyed the most brilliant period of its shipping in the generation following 1850, when it took the place of the United States as one of the great carrying nations of the world.

=528. Sweden.=—Sweden was somewhat more fortunate than the other Scandinavian countries in its agricultural resources, and during part of the century has been able to export a surplus of grain. It has been recently, like the others, reduced to importing the cereals, and found its chief strength in products of the forest, the pasture and the mine. From its rich iron deposits it contributed raw materials for maintaining the iron industry in other countries, especially England.

QUESTIONS AND TOPICS

A profitable exercise on each of the minor countries treated in this and in the following chapters is a study of the statistics of present-day commerce, and a reduction of these statistics to the form of a graphic chart. [Statesman’s Year-Book.]

1. Experience of the chief Dutch colony during the Napoleonic wars. [Day, Dutch in Java, chap. 5.]

2. The culture system. [Same, chaps. 7, 8.]

3. Political and social conditions in the Netherlands. [Hough, Dutch life, N. Y., 1901; Campen in Westminster Review, 1890, 134: 479-492; National Review, 1890, 15: 748-763.]

4. Recent political history of Belgium. [Seignobos, chap. 8.]

5. Recent history of the Swiss. [Seignobos, chap. 9.]

6. Labor conditions in Switzerland. [Scaife in Forum, 1901, 31: 30-46.]

7. Conditions in Austria-Hungary in the period of the absolute monarchy. [Seignobos, chap. 13.]

8. Political development of Austria-Hungary in the last half of the century. [Same, chap. 17.]

9. Austria-Hungary’s colonial experiment. (Bosnia-Herzegovina.) [Monthly Review, 1902, 8: 72 ff.]

10. Recent commercial policy. [Philippovich in Economic Journal, 1902, 12: 177-181.]

11. The conflict of nationalities. [Edinburgh Review, 1898, 188; 1-36; Quarterly Review, 1901, 194: 372-395, with map; Coubertin in Fortnightly Review, 1901, 76: 605-614.]

12. Recent history of the Scandinavian states. [Seignobos, chap. 18.]

13. Danish agriculture. [Westenholz in Monthly Review, 1904, 14: Feb., 69-77; Givskor in Economic Rev., 1902, 12: 410-419.]

14. Modern Iceland. [Quarterly Review, 1894, 179: 58-82; Statesman’s Year Book.]

15. The Danish West Indies. [Waldemar Westergaard, The Danish West Indies, N. Y., 1917.]

BIBLIOGRAPHY

The narrative history of the minor states is well treated in Seignobos; present conditions are described in volumes of the series Our European Neighbors, N. Y., Putnam.

On Belgium, see Belgium, its institutions, industries, and commerce, Brussels, 1904, a handbook published by the government for the Louisiana Purchase Exposition. Similar handbooks have been published for the Scandinavian peninsula; they include much historical material and are valuable sources for our purposes. See Norway, edited by Sten Konow and Karl Fischer, Kristiania, 1900; Sweden, its people and its industry, edited by Gustav Sundbärg, Stockholm, 1904. Drachmann, Industrial development and commercial policies of the three Scandinavian countries, published for the Carnegie Peace Endowment in 1915, is the best survey of commercial development, but is not an easy book for the elementary student to use. Kiaer has published a valuable historical sketch of the development of Scandinavian shipping in Journal of Polit. Econ., 1891-2, 1: 329-364.

On Switzerland see The Swiss Confederation, by Francis O. Adams and C. D. Cunningham, London, 1889, and W. H. Dawson, Social Switzerland, London, 1897. On Austria-Hungary see S. Whitman, The realm of the Habsburgs, N. Y., Lovell [1893], and the volume by F. H. E. Palmer in the series of Our European Neighbors, N. Y., Putnam.

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XLIII. STATES OF SOUTHERN EUROPE

=529. Condition of Italy in the first half of the century.=—Of the countries of southern Europe none has gained so rapidly as Italy in the latter part of the nineteenth century. The explanation, however, must be sought largely in the fact that none was sunk so low as Italy in the first part of the century. Conditions of an earlier period, described in the previous chapter on Italy, lasted far into recent times. Here is the description given by an English author, writing in 1878: “Before 1848, Italy, all except Piedmont, seemed hopelessly crushed. Austria, the Pope, and the Bourbons held her in their grasp. Even the comparatively native sovereigns of Tuscany had turned oppressor, and all Italy groaned like a man in the grasp of the torturer. Commerce languished, divergent fiscal laws and arbitrary raids on private wealth choked up the channels of intercourse between one part of the kingdom and another; without shipping, without manufactures or foreign trade of a solid kind, possessed of no political security, Italy was, thirty years ago, more insignificant in the eyes of neighboring nations than Greece or Spain is now.” In southern Italy the government was incompetent to perform the first of its public duties, the protection of its citizens. It could not withstand even the half-civilized corsairs of Tripoli, who pillaged the Neapolitan ships, and finally, long after the United States had shown the proper way to deal with such pirates, bought from them a disgraceful peace.

=530. Lack of political and commercial union.=—The peninsula was divided among seven independent states, so stratified as to cut the natural lines of trade, and to prevent effectually the development of any national commercial life. Of these states six had the protective tariffs characteristic of the prohibitive period, and toll stations existed even inside the frontiers. A Milan manufacturer, shipping silks to Florence (about 1840), had to pass eight customs stations in 150 miles; a merchant on his way from Bologna to Lucca was stopped at seven stations in the stretch of about 125 miles. Commerce would have been in desperate straits except that all but two of the states touched the sea, and hence could find some opening for trade. It is noteworthy, however, that the leading commercial city of Italy in this period was one which many people now would be puzzled to place on the map, Leghorn. It owed its commercial importance, not to the advantages of situation or to the productive resources of surrounding territory; it stood, about 1900, sixth in the list of Italian ports, and had but a fraction of the trade going to Naples or Genoa. It gained its prosperity at this time simply by “the comparative security and freedom” which foreigners found there, and which they were denied in other parts of Italy.

=531. Establishment of Italian unity.=—The example of Germany, in extricating herself from a somewhat similar situation by the formation of customs unions, made, naturally, an impression in Italy, and led in 1847 to an attempt there to form a similar union. The attempt was paralyzed by the opposition of Austria, who saw in it a blow aimed at her political influence in the peninsula. The Italian states, unlike the German, could secure commercial union only as a result of national unity, not as a means of preparation for it. National unity was in preparation, nevertheless, in the brain of a great statesman, Cavour, and was obtained through his far-sighted plans and the cooperation of the king whom he served, Victor Emanuel, ruler of Piedmont. In the few years following 1859 a real kingdom of Italy was established, and the country, which for nearly fifteen hundred years had formed the prey of rival powers, became at last a power herself, worthy to rank with the other great states of Europe. The old barriers to internal trade disappeared, and the whole country accepted the customs tariff of Piedmont, which was extremely liberal. Rarely, if ever, in the history of commerce, have changes of such sweeping importance taken place so quickly. The tariff of the Kingdom of the Two Sicilies, to choose an extreme example, which levied a duty of over $2,500 on a centner of silk goods, gave place to a tariff of United Italy, in which the corresponding duty reached a minimum of $10.

=532. Survey of Italian commerce since 1860.=—The effect on commerce of this great political upheaval was instantaneous. Contrasting the two years, 1859 and 1861, we find that in this brief interval the value of imports into Italy more than doubled. It will be convenient to insert here figures giving the total value (exports plus imports) of the special trade of Italy, at ten year intervals from 1860 to 1910. Reduced to dollars and given in round figures of millions they are as follows: 130, 320, 440, 440, 590, 1,020. The reader will note that trade grew at a rapid rate from 1860 to 1870, and more slowly to 1880. Then came a stoppage; in some years there was an actual decline, and the value of exports was considerably less at the end of the decade than at its beginning. There was a recovery in the ten years closing in 1900, and a rapid advance thereafter. The figures show, however, that Italian commerce advanced but slowly in the latter part of the century, and a study of conditions at its close would show that Italy had a commerce then far from commensurate with the country’s large population. The average share of each Italian in the annual movement of commerce was much less than that falling to the inhabitants of most of the other states of Europe. Among the great states only Spain and Russia ranked lower, in this respect.

This survey suggests the topics which demand discussion in the following sections. We must know the reasons for the rapid development of Italian commerce till about 1880, and for the check to progress after that date; we want an explanation of the comparatively slight share which the average Italian has had in the world’s commerce.

=533. Development of agriculture and commerce after 1860.=—When Italy secured national unity, about 1860, the country was almost purely agricultural. The ordinary trades, of course, were exercised to satisfy local needs, and the silk manufacture had not altogether perished, but, to use the phrase of a modern writer, though there were industries in Italy there was no Italian industry. Restrictive taxes and tariffs had prevented the development of any considerable manufacture. When, therefore, comparative freedom of trade was introduced, the people made full use of the opportunity to purchase the cheap wares of the factory industry of other countries; they imported manufactures in increasing amount, and paid for them by exporting their surplus agricultural products. The railroad system, which grew from 800 to 5,000 miles in the period 1860-1880, gave greatly improved facilities for the marketing of wares, and affected distinctly the course of foreign trade; the proportion of commerce carried on across the land frontier rose in this period from a third to nearly a half of the total.

=534. Increase of customs duties; protection; tariff war.=—The Italians realized at once the benefits of the movement which led to national unity, but ever since they have been carrying its burdens. The expense of the national movement was enormous, especially in view of the poverty of the country; it weighted the government with debt, and required a constant increase in taxes. The treasury, reaching out in every direction for money, and forced to some fiscal devices which seem now positively iniquitous, did not spare commerce. Duties were raised from time to time, and a general revision of the tariff in 1878, while it reformed some old abuses, tended still to raise the general level of duties, and introduced a distinct element of protection. The revised tariff, however, did not go far enough to satisfy the demands either of the treasury or of the protectionists, and was altered again in 1887. Commerce labored henceforth under high revenue duties, under increased duties designed to protect Italian manufactures, and, furthermore, under new or increased duties on agricultural products.

One disastrous result of the new tariff appeared quickly in the outbreak of a tariff war between Italy and France. France had been Italy’s best customer, taking at one time nearly half of her total exports and furnishing about a quarter of her imports. Trouble between the two countries had, however, been brewing for years; they were following different lines in foreign politics, and the protectionists on both sides of the frontier viewed with jealousy a commerce which stimulated the development of international rather than national industries. The tariff of 1887 called forth a reply in kind from France; this was met by a rejoinder from Italy; and so the duties grew rapidly on either side, and had soon reduced the commerce between the countries to a small part of its former dimensions. The most important export industries of Italy (wine, raw silk, fruits, live stock, eggs) suffered severely, and many producers were absolutely ruined.

=535. Italian agriculture; poverty of the people.=—The course of tariff policy explains, in large part, the check which Italian commerce had experienced in the last decades of the century. Reasons why this commerce was so small in proportion to the population will appear as we review now some features of the Italian productive organization.

Few of the large states of Europe showed so large a proportion of the people engaged in agriculture, so small a proportion in manufactures, as were found in modern Italy. Considerably more than half the people lived directly from the land. Not only did Italy show backwardness in this respect; the character of Italian agriculture was itself backward. The land was worked largely “on shares,” a system which does not encourage improvement or stimulate efficiency. A government commission reported in 1881 that production depended almost entirely on mere labor, and that capital and intelligence contributed only a minimum. Antiquated implements and wasteful and careless methods of treating the crop, went far to nullify the natural advantages of soil and climate. When we consider that, of the small surplus which the agriculturist obtained, the government demanded a good share for taxes, we can understand why the mass of the people were wretchedly poor, and must content themselves with a bare living. It is worth noting that about 1900 the consumption of sugar in Italy was only about six pounds per head, less, even, than in Turkey, while in most European countries people consumed from 20 to 50 pounds or even more. Salt itself was a luxury, which was heavily taxed. The protective tariff appeared to extend favors to farmers as well as to manufacturers, but the people who gained by it were chiefly the great landlords, while the mass of the people simply paid more for bread because of it.

=536. Manufactures.=—As agriculture was the strongest branch of production in Italy, it was bound to suffer more than any other from the protective tariff. Italian agriculturists did not need protection for most of their products, and they did need the chance to market their products in free exchange for industrial wares imported from abroad. We have now to see what success the Italian tariff had in building up the native industry on which the people were forced, in large part, to rely.

Italian manufactures, in 1880, had scarcely advanced beyond the meager beginnings which we found in 1860. Nearly all conditions were adverse. Capital was scanty. Of important raw materials the country lacked all but silk and hemp. Coal, the mainstay of modern manufacturing, had to be imported at an expense which nearly doubled its price. Most serious, perhaps, of all difficulties was the lack of a class of industrial leaders, men of technical knowledge and business energy. We may take as typical the case of a macaroni manufacturer in Naples, who declined some important foreign orders, for no other reason than that he had, as it was, enough business to make both ends meet, and saw no reason for adding a new worry to life. The single important advantage which Italian manufacturers enjoyed was that of cheap labor. The government was lax in its factory legislation, and allowed employers to secure their labor supply from women and children, at an extremely low rate.

The great development, therefore, which Italian manufacturers have shown in the last decades of the century has been due not to any natural fitness of the country, but solely to the tariff, which has raised prices paid by consumers enough to counterbalance natural disadvantages, and to attract men into manufacturing industry. The artificial character of Italian manufactures is shown strikingly by the fact that at the very close of the century not one of the protected manufactures was strong enough to contribute in any considerable degree to the exports of the country.

=537. Shipping; colonies.=—Some of the most unfortunate features of Italian policy seem to have been the result of national vanity, of the desire on the part of Italians, now that they had made for themselves a great state, to make their state resemble the other great powers in all respects. This feeling was certainly responsible in part for their determination to build up a system of national manufactures, regardless of expense. It led them to profuse expenditures for the encouragement of shipping, which resulted, indeed, in a growth of the merchant marine, but created in it merely a costly luxury. The Italian navigation companies charged high freight rates, and included in their fleets many antiquated vessels.

The instinct of imitation, finally, led the Italians to follow the lead of other powers in colonial expansion. They did not escape the colonial fever prevalent in the eighties, and spent money and lives lavishly, in the attempt to build up a dominion on the African side of the Red Sea. Their attempt ended in disastrous failure (Adowa, 1896), and popular opposition to such enterprises grew so strong that the government did not dare to carry out a later project for the establishment of an Italian station on the coast of China (San Mun, 1899).

=538. Recent progress of Italy.=—The preceding sections have been avowedly critical in tone, and are designed to make clear the great gap which separates Italy from the leaders in the world’s industry and commerce. It is important, however, that the reader should distinguish Italy, on the other side, from such backward countries as Spain and Portugal. Though Italy was poor it was not so poor as they, and it offered vastly richer promises for the future. In the closing years of the century it showed marked advances in many lines. Italian agriculturists awakened to the possibilities of their profession; they showed an eagerness to improve their methods, and by various forms of association and cooperation they scored great advances. The exports of dairy and poultry products doubled in about ten years, and became more important than the export of wine. Italian manufacturers secured now from natives the technical assistance for which they formerly depended entirely on foreigners. They emancipated themselves, in part, from coal, by their skilful management of water power, and have come to enjoy a high reputation for electrical appliances for the transmission of power and other purposes. The tariff has been made more liberal by treaties with other states and by a reconciliation with France; and commerce in the period before 1914 gave evidence of the capacity for healthy growth.

=539. Spain.=—Spain, with an area much larger than that of Italy, and with a population more than half as large, had in 1912 a commerce less than half that of the Italian. The fault lay not with the country, which in mineral resources is perhaps the richest in Europe, and which under the skilful agriculture of the Moors was made to bloom like a garden, but with the people who have neglected or misused their opportunities. Spain furnishes a striking example of the evil that bad politics can work in economic development. The personal absolutism of the period before 1800 has been shaken off in the nineteenth century, but experiments in constitutional government under monarchs of various families and even under a republic, have not succeeded in bettering conditions greatly. The mass of the people remained ignorant, and most of their leaders were inefficient and corrupt. There can be no wholesome economic life under these conditions. Shrewd politicians used economic enterprises merely as a means to draw money from the public treasury or from the pockets of consumers, while the investor or worker without political influence was deterred from enterprise by the heavy taxes which were heaped upon him.

=540. Spanish commerce in the first half of the century.=—A partial reform of the Spanish colonial system toward the close of the eighteenth century led to a growth of trade with the colonies, so that it formed, if the figures can be trusted, a considerable part of the total Spanish commerce, which was small at best. The promise of commercial development inside the Spanish Empire was of short duration. While Spain was still harassed by the Napoleonic wars, revolutions began among the Spanish colonies on the American continent; and as soon as they had achieved their independence they used it to trade with states like England rather than with the country which had asked so much of them and could offer them so little. The commerce of Spain with other countries was hampered by the Spanish commercial policy, which an Englishman of the time called “one of the most pernicious and restrictive of all the systems of trading exclusion.” Duties were levied both on imports and on exports, and included not only rates of 50 to 100 per cent but also many absolute prohibitions. Spanish commerce would have been starved out of existence if the government which set these rules had not, by its inefficiency and corruption, furnished the means of evading them. A veritable army, including, it is said, 300,000 persons, of whom one third were armed, found its chief occupation in smuggling; Spanish manufacturers maintained factories only to mask the sale of contraband goods, and even members of the government engaged in the contraband trade.

=541. Recent commerce of Spain.=—The turning-point in the recent history of Spanish commerce came about the middle of the century, when the worst abuses of the old tariff were shorn off. The reform was followed by a rapid increase in the country’s trade, which grew to more than fourfold in the forty years following. Especially noteworthy was the increase in this period of the importation of the implements and raw materials of industry (coal, machinery, textile fibers, etc.), showing that Spain was at last beginning to seek a place for herself among modern commercial nations. Such indications of progress must not, however, blind our eyes to the fact that it was attained by a colonial and commercial policy which retained many of the old restrictive features. The loss of the remaining important colonies to the United States in the war of 1898 was a severe blow to Spanish industries, and they have been supported since then by a protective tariff which bore heavily on many producers as well as on all the consumers in Spain. The considerable development in mining (iron, copper, quicksilver, etc.) has been due to foreign energy and capital, and the native Spaniards offered as exports to other countries little more than dessert for their dinner tables: wine, fruit, nuts, and raisins. It is noteworthy and significant that Spain suffered seriously from the competition of California in the sale of fruit in Europe; this most perishable of wares, in which a nearby country ought to control the market without effort, was packed and transported in such a slovenly fashion by the Spaniards that a people 6,000 miles distant could excel them in the quality they offered to the consumer in Paris or London. In the period from 1890 to 1910 the figures showing the value of Spanish commerce remained almost stationary.

=542. Portugal.=—In all the respects which concern a student of recent commerce Portugal is but a miniature of Spain, with the faults of Spain exaggerated rather than lessened by the weakness and smaller size of the country. “It is scarcely credible, but it is nevertheless a fact, that agriculture is nearly in the same condition as it was some hundreds of years since”; these words of an English author would apply now nearly as well as when they were written in 1843. Few of the inhabitants were engaged in occupations other than agriculture; rich mines remained unworked, and manufacturing has remained insignificant throughout the century. After 1850 it could still be said of the Portuguese that “their entire faith is reposed in protectionism, monopolies, restrictions, and high duties.” Portuguese trade, nearly ruined already, received a further blow by the separation of Brazil about 1820; and though considerable colonial possessions in Africa and the East were retained, the Portuguese have shown no capacity to base on them commerce of any importance. By exports, of which wine and cork were the most important, the Portuguese were able to satisfy their most pressing necessities; but the backwardness of commerce can be seen when it is realized that the trade of this country, approximately equal in population to the Netherlands, was in 1911 less than one twentieth of Dutch trade.

QUESTIONS AND TOPICS

1. Social and economic conditions in Italy after 1800. [King, Hist., vol. 1, chaps. 3-5.]

2. Formation of United Italy. [Seignobos, chap. 11, middle part.]

3. Commerce of Italy about 1850. [Homans, Cyclopedia, p. 1114 ff.]

4. Burden of debt and taxes. [King and Okey, p. 270 ff., chap. 15; Villari, chap. 4; W. Calkins, Taxation and business in Italy, Forum, 1902, 33: 333-345.]

5. Italian agriculture. [King and Okey, chap. 8; Villari, chap. 11.]

6. Life of the agricultural classes. [Phillipps, Peasants of Romagna, Fortnightly Review, 1897, 68: 407-417.]

7. Poverty of the people. [King and Okey, chap. 6; Villari, chap. 4; Strutt, Monthly Review, 1901, 4: August, 62 ff.]

8. Emigration. [King and Okey, chap. 17; Schuyler, Italian immigration into the United States, Polit. Science Quarterly, 1889, 4: 480-495.]

9. Italian manufactures. [King and Okey, chap. 7: Villari, chap. 12.]

10. The Italian colonial venture. [Edwards in Westminster Review, 1897, 148: 477-489; Keller, 517-531.]

11. Recent commerce of Italy. [Statesman’s Year-Book; treat exports, imports, countries traded with, etc., as has been already suggested.]

12. Commerce of Italy with the United States. [Luzzatti, in North Amer. Review, 1903, 177: 247-259.]

13. Recent development of agriculture. [King and Okey, chap. 9.]

14. Political conditions in Spain. [Dillon in Contemporary Review, 1898, 73: 876-907, 74: 305-334; Foreman in National Review, 1897, 29: 721-734, 30: 547-560.]

15. Commerce of Spain about 1850. [Homans, Cyclopedia, p. 1739 ff.]

16. The recent commerce of Spain. [Statesman’s Year-Book.]

17. Resources and industries of Spain. [E. D. Jones in North Amer. Review, 1898, 167: 39-47.]

18. Recent commerce of Portugal. [Statesman’s Year-Book; see Homans, Cyclopedia, for conditions about 1850.]

BIBLIOGRAPHY

For the general history of Italy, see besides Seignobos, Bolton King, History of Italian unity, N. Y., Scribner, 1899, 2 vols., with bibliography. The book by the same author in collaboration with Thomas Okey, **Italy to-day, London (N. Y., Scribner), 1901, is excellent for recent conditions, and has a full classified bibliography. Villari, *Italian life, N. Y., Putnam, 1902, is more popular and depends in part on King and Okey, but still is good. Orsi’s book in Story of the Nations Series is mainly political.

On Spain good reading in English is as scarce as on Italy it is plentiful. Seignobos is dull, and Hume’s histories are almost entirely political. There is, however, a good book in the series of British Colonies and Foreign Countries, W. Webster, *Spain, London, 1882; and Higgin, Spanish life, N. Y., Putnam, 1902, has some material of value. The U. S. Monthly Summary, Commerce and Finance, published several reviews of Spanish commerce at the time of the Spanish war (March, June, 1898, April, 1899), and a considerable amount of material on various aspects of Spain appeared about that time in the periodicals.

The close commercial relations between Portugal and England have given rise to two excellent books on the condition of Portugal in the nineteenth century, J. J. Forrester, *Portugal and its capabilities, third ed., London, 1856; Oswald Crawfurd, *Portugal, old and new, London, 1880.

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