must in the end be fed by the surplus food products of other countries.

§ 8. Failure of Protection to prevent Rural

Depopulation.

The history of the English Corn Laws1 is full of examples of the negative argument for freedom. The laws affecting imports were ostensibly designed not for revenue but for protection.

And yet so far as rural labour was concerned they failed to keep up the numbers of labourers engaged in agriculture. "In spite of the high protective duties, the proportion in Great Britain of families engaged in agriculture declined from 35.2 per cent in 1811 to 25.9 per cent in 1841 of the total number of families. Between 1821 and 1831 there was an absolute decrease in the number of families in agriculture in spite of an increase of about 19 per cent in the aggregate number of families in Great Britain. . . . If we compare 1831 with 1841, with an absolute increase in population of over two millions, there was an absolute decrease in the number of adult males employed in agriculture.'

"2

§ 9. Other Means of encouraging Agriculture.

In the last chapter of his fourth book, Adam Smith deals with the Agricultural System of Political Economy which had been expounded by the French economists with whom he had on the whole great 1 Cf. Hist., op. cit. pp. 111, 118.

2 Porter's Progress of the Nation, pp. 61, 62.

sympathy. So complete, indeed, is the harmony of views as regards the system of natural liberty in general, that until Dr. Cannan published the notes of the original lectures given by Adam Smith at Glasgow, it was generally supposed that he had derived some of his leading ideas from actual conversations with Quesnay and others during his visit to France.

But in spite of his insistence on the fundamental national importance of agriculture, and his partial acceptance of the idea of a net product arising in agriculture over and above the ordinary profits of industry, Adam Smith comes to the conclusion that it is not desirable to attempt artificially to encourage agriculture. "Those systems, therefore, which, preferring agriculture to all other employments in order to promote it, impose restraints on manufactures and foreign trade, act contrary to the very end which they propose, and indirectly discourage that very species of industry which they mean to promote."

It may be recalled, also, that Adam Smith strongly condemned the bounty on the export of corn, although it was expressly designed to encourage agriculture. It is unnecessary to examine at this place either of these arguments; it is enough to note that in spite of what are generally considered extravagant eulogies of the employment of capital in agriculture, even in this case Adam Smith does not suppose that the encouragement of the state would have the results anticipated. And it is not because he is led away by doctrinaire prejudices against the interference of the

state; for he admits very large exceptions to the general policy of laisser faire, and the principles at the basis of these exceptions are capable of much wider extension under modern conditions.1

Adam Smith sought for the real encouragement to agriculture in freeing land from the restraints of antiquated laws and customs, improving facilities for transfer and increasing the security for the investment of capital-ideas which have been the leading principles of all the reforms of laws affecting agriculture since his time.

§ 10. Present Importance of the Negative Argument.

The negative argument for free trade demands special emphasis at the present time. When Adam Smith wrote, and for seventy years afterwards, the people of this country had before their eyes living examples of the difficulties of putting into practice such theories, for example, as the encouragement to native industry by a mass of protective duties; the effective use of retaliation; the adjustment of reciprocity treaties; the preferential treatment of colonies and other devices of state control, advocates of free trade could point to the actual inconveniences and imperfections of state interference. The famous report of 1842, on which was based the budget of that year, is in its way as remarkable a document as the report of the poor law commission of 1834. If in either case, owing to change in conditions, we have again to modify the legislation

1 See next chapter.

The

founded on these reports we ought at any rate to take good care that with new reforms we do not resuscitate old evils. In both cases the fundamental difficulty was unemployment. The old poor law broke down because, with the best of intentions in the desire to cure unemployment, it aggravated the disorder; in the same way the old protective system, with the laudable idea of giving encouragement to the labour of the country checked the expansion of industry and lowered real wages. Every Every one who has studied the subject is agreed that such was the result of the "bad old system"; no practical statesman would dream of proposing to return to such a system, any more than he would propose to restore the old allowance system and other devices of the old poor law.

The negative argument for free trade founded on history and experience reveals three main dangers in the opposite system. First, there is the danger, so constantly appealed to by Adam Smith, of giving the monopoly of the home market to particular traders against their own countrymen. We think the trusts are wholly modern; that monopoly is the result of modern conditions summarised under the law of increasing return. In fact, as Adam Smith showed, the whole mercantile system was permeated through and through with monopoly. In any departure from free trade we must guard against the recurrence of monopoly. Secondly, there is the danger that though we visibly encourage one or more industries we may impose greater restraints on the whole industry of the country; that the aggregate value of

the annual produce of the land and labour of the country, including what is got in exchange, may become less; and the consuming power of the masses of the people be diminished. And thirdly, there is the danger of losing the advantages of reciprocity or of the most favoured nation clause by the complications introduced through a network of commercial treaties, and attempts at retaliation.

But although the negative argument must be fully considered, it does not follow that under no circumstances is the state to interfere with the natural course of foreign trade. Adam Smith himself admitted exceptions to free trade which are of the greatest range and importance. An examination of these exceptions will throw light both on the negative and the positive arguments for free trade. (See Chapter XI.)