SOME years ago when a number of independent writers, each of whom had access to one or other of the leading Monthly Reviews, started the recent movement in the direction of Protection by putting the question on a somewhat different basis from formerly, - and supporting the doctrine by a more detailed analysis of the quality, composition, character, and proportions of the trade returns of exports and imports, - one of the most distinguished of the orthodox economists was asked as to what he had to say to an argument of mine published in the Fortnightly Review, and which ran to this effect; - that if Free Trade were universal to-morrow, it would not, as both Protectionists and Free Traders at that time believed, be the best for each particular nation, but would only be to the advantage of those nations who were supreme, each in its own special line of industry; and that the weaker nations, on the contrary, far from being benefited, would be more quickly wiped out than if each had enclosed itself in a ring fence, protected by tariff walls; in the same way as the weaker combatants would be more quickly routed on a battle-field in the open plain, than if they had to be driven out from behind the moats, trenches, and battlements of walled cities.

The distinguished economist in question, my informant told me, became indignant, and replied contemptuously, 'All nonsense! he does not even see that the mechanism of the Foreign Exchanges puts that all right.' There you have it in a nutshell. Like the perpetual-motion schemer, this economist evidently sincerely believed that if once trade was opened between two or more nations on a basis of absolute freedom from tariff or restriction, the mechanism of the Foreign Exchanges would keep that trade going on for ever unimpaired, whatever befell any one or other of them. That I was not wrong in my interpretation of his meaning, was made evident to me a year or so later when Mr. Chamberlain had brought the question again into the arena of practical politics, and the political world and the Press were aflame with its discussion. Mr. Sidney Webb, a most thoughtful economist, and by no means a doctrinaire of the type of the orthodox school, wrote, I remember, a letter to one of the newspapers with the object of proving this very point, of the power which the mechanism of the foreign exchanges had in perpetually starting afresh the trade between two nations when it began to show signs of languishing.

It was directly drawn from his own knowledge and experience, he said, when as a young man he was acting as correspondence clerk for a firm in the City doing business, if I remember rightly, with Belgium. It appears that for some time his firm had not been able to place an order in that country, but were waiting, like boatmen for the tide, in the full assurance that the 'turn of the exchanges' between the two countries would bring what they wanted. The order came in due course, as was anticipated, and the experience was one, he said, which, as it was regularly repeated, he had never forgotten. And in short, the conclusion to which it had led him was the same as that of the other economist I have mentioned, - the conclusion namely, that the trade between different nations, if kept free from tariff barriers, would when once started go on unimpaired indefinitely. In the meantime the tide of controversy in the Press and in the Reviews having begun to turn decidedly in favour of the Protectionists; - what with their elaborate analysis of statistics, and the proofs these afforded of the relative decline of great Britain's supremacy in many, if not all, of the great industries which had originally made her fortune; what with the shock the public received on the announcement that a large slice of our shipping had been detached by an American syndicate, with all the vague possibilities and menaces that this suggested, as well as the definite evidence it afforded of how easy it is for giant capitals concentrated in a few hands to steal away piecemeal from the smaller and more isolated and dispersed capitalists, by manipulation, intimidation, or unusually advantageous terms, whole blocks and instalments of that fixed capital - or instruments of production - which, as we have seen, is the only permanent wealth-producing asset of a nation; - while the public was inwardly if not outwardly excited by all this, the lists were entered by Mr. Pigou, one of the most thoughtful of the younger generation of orthodox Economists, who fully equipped with all the logic-proof armour and esoteric symbolism of the older professors, started with their approval and as their accredited representative, a series of articles in the 'Pilot' in defence of the abstract doctrine of Free Trade, threatened now on its immediately practical as well as on its speculative side.

But he too, after a preliminary pass or two in which he did some good scavenger work for both sides by clearing away some of the grosser errors of the older school of Protectionists who were habitually prejudicing their cause by harping on the excess of imports over exports in the statistical returns, etc., fell back again, like the other professors, on the mechanism of the Foreign Exchanges, and the function of Gold, as his ultimate line of defence against the aggressive arguments of the opponents of Free Trade.

But as he made his argument turn on the power of gold by its passage and re-passage between countries to make the trade between them go on indefinitely after once it had been started, rather than on the power of the turn of the exchanges to accomplish the same result, I propose to consider his special form of the argument before proceeding to the more general one. He starts out quite fairly by supposing the case of a nation which has greater natural advantages than another in every kind of commodity whatever, and then asks what will occur when trade is opened on a Free Trade basis between them. The ordinary man would naturally say that, like a row of tradesmen on one side of a street who could undersell a similar row on the other side, each in his own line - the baker the baker, the shoemaker the shoemaker, and so on, - the producers in the one nation would soon drive those of the other from the field, and that trade would soon cease between them. Not so, says Mr. Pigou, but on the contrary, trade would go on as merrily between them as if they were exchanging on even terms! But how so? asks the astonished reader.