new colonies, as shown by Adam Smith on a wide inductive survey, is the capital, living and dead, which they acquire from the old civilisations. If the United Kingdom has much to gain from the development of the natural resources of the colonies, the colonies have much to gain from the accumulations, material and immaterial, of the old country.

§. 8. Difficulties in the Establishment of Internal Free Trade-how met.

In the light of history it would be foolish to deny that the sudden abolition of all protective duties now imposed by the British dominions against British goods might be inconvenient to certain classes and industries and localities.

If, however, the real advantages of internal free trade are once appreciated by the statesmen and the people of the dominions, these difficulties are not insuperable.

The most formidable are not founded on facts but on opinions, and opinions may be changed. In the forefront there is the idea of impossibility; and so long as statesmen are content to repeat, one after the other, that a thing is impossible, it is ipso facto impossible. It will cease to be impossible as soon as it seizes the imagination of a great colonial leader of the order that believes in a thing because it is impossible. Every great success in war and in peace has been impossible until it has been accomplished. In the background there are the prejudices of the people; but though the race continues, the

individuals change and the prejudices change with them.

These are, no doubt, commonplace generalities, but they are sufficient to clear the way for practical considerations of a more detailed kind.

The difficulties, once they are faced, may be met by a variety of methods, some of which are being tried for other purposes at the present time.

In the first place, we may apply Adam Smith's idea that the freedom of trade should be only restored by slow gradations. The precise nature of the gradations must be left to the practical man; but some of the possible ideas to be applied may be noticed.

Internal free trade, as already insisted, does not necessarily mean either now, or in the future, external free trade with foreign states. From the point of view of gradations this distinction may be of importance. Already some of the colonies have granted preferences to the mother country by the simple plan of putting supertaxes on foreign goods; and a further reduction of the duties on British goods. might be accompanied, in the period of transition, by a corresponding supertax on the foreign.

If the idea of internal free trade is accepted the real difficulty is with the vested interests. And these vested interests ought to be reduced to their true dimensions in equity, before compensation, direct or indirect, is provided. "There is no prescription of institutions"; the utmost that is required is the adequate compensation to the vested interests of

individuals. And what constitutes adequate or equitable compensation varies indefinitely according to the circumstances of the case; it ranges in practice from the pretium affectionis above the mere market value given to hereditary landowners (with John Stuart Mill's approval) down to the cancelment of arrears of rent or interest or debts, without any compensation whatever. From the economic point of view-in which the principal consideration is the possible shock to security through interference without compensation-there is no doubt that compensation to vested interests has been carried to an unjustified extreme. In the progress of society security must be sacrificed to security in Bentham's phrase; and it is only by such sacrifices that any social improvements have been accomplished; e.g. in the laws of bankruptcy and the laws affecting the tenure of land.

In some cases it seems sufficient to give a reasonable intimation of the impending change; and sometimes people may be expected to notice for themselves the growing changes in public opinion which are likely to be expressed in interference with private interests. A limit of time might be indicated for the coming of age of the infant industries, and in the meantime a stop might be put to the creation of new differential duties within the empire. Certainly it has never been admitted that the permanence of protective duties ought to be considered one of the reasonable expectations implied in industrial contracts; and in fact the favourite argument in support of such

duties in new countries is that they are essentially temporary, and for the benefit of infant industries only.

If in an old country such as England a complete abolition of a complicated mass of protective duties could be accomplished in the course of a very few years, it seems absurd to suppose that in new countries which show themselves ready to undertake all sorts of social experiments, especially in the interests of labour, the one task which they dare not attempt should be the abolition of protective duties. In general, in any interference with vested interests, it is only the owners of property that have received compensation, but Adam Smith's main reason for the gradual abolition of protective duties was that labour might not be suddenly thrown out of employment. If this difficulty were carefully examined and fairly met, there seems no reason why the labour parties in the colonies should oppose free trade with the United Kingdom. We are often reminded of the solidarity of labour, and in this country the labour leaders are in favour of free trade even with foreign countries. Free trade within the empire would promote the establishment of labour exchanges between the United Kingdom and the dominions, and the increase in the mobility of labour would increase the total revenue available for labour.

§ 9. The Method of Preferential Duties.

The method, so much favoured at present, of purchasing freedom of trade with the colonies by

preferential duties on their products (i.e. by taxes on foreign goods of similar character) does not get over the difficulty of the divergence of class interests. The United Kingdom must give preferences for the most part on agricultural products if they are to be of any advantage to the colonies. Whatever method of compensation is adopted taxes on ordinary foodstuffs would be unpopular in this country with a very large number of people. And in a matter of union sentiment is of the first importance. The people in the colonies who would benefit are the agricultural classes, who are confessedly in no need at present of any such aid. The bargain so far would have the appearance of giving a bounty to the thriving farmers of the colonies to be paid for out of the necessities of the poor in the old country. It may be proved by experts to the satisfaction of statisticians that there would be no real injury to the poor, but the sentiment would not be disposed of so readily.

Those who would gain in the first place from the preferences granted by the colonies are the manufacturers of this country, at the expense ostensibly of the manufacturers in the dominions overseas. The extent of the gain and the loss would depend on the nature and degree of the preferences. If they are only supertaxes on foreign goods, the rates against Britain being practically the same as before, the main result will be a substitution of a certain amount of British imports for foreign, and the colonial manufacturers will not suffer. But by preferences of this kind no real advance is made towards free trade within the empire.

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