it parted with that which was comparatively valueless for that which might be highly valuable. Better to part with them for silks and wines than to keep them; as some use and satisfaction, at least, could be got out of the former, while little or nothing could be got out of the latter. If, on the other hand, gold and silver be the highest, instead of the lowest, form of capital, then the greater the amount accumulated the richer the nation becomes. As they are capital, a favorable balance payable in them is that for which every individual and nation has always been and is constantly striving. The amount of such balances measures the degree of their acquisition or wealth. It is not necessary that the balances arising should be immediately paid over, or paid over at all, in coin. If the immediate payment of such balances be forborne, the party in whose favor they are found is compensated by receiving interest on the amount. Such interest or income makes a part of his wealth. Even Huskisson, one of the most intelligent of Englishmen, and hardly to be named in connection with the Economists, fell into their common error. In his essay in vindication of the Report of the Bullion Committee, of which he was a distinguished member, he uses the following language: "Two very erroneous opinions on this subject are most generally received in the theory of the mercantile world: "1st. That, whenever the exchange is against any country, the natural and general course of balancing the account is by a payment in bullion. "2dly. That the balance of these payments in favor of any country is finally to be measured by what is called the balance of trade, or the excess of exports above imports. . . . Such is affirmed to be the present situation of this country, and the true explanation of the very depressed state of our foreign exchanges. ... "The first of these positions is so little conformable to truth, and to the real course of business between nations, that there is, perhaps, no one article of general consumption and demand which forms the foundation of so few operations of trade between the different countries of Europe as bullion; and that the operations which do take place originate almost entirely in the fresh supplies which are yearly poured in from the mines of the New World, and are chiefly confined to the distribution of those supplies through the different parts of Europe. If this supply were to cease altogether, the dealings in gold and silver, as objects of foreign trade, would be very few, and those of short duration." 1 1 Huskisson on the Depreciation of the Currency, pp. 48-50. Huskisson could not have written so carelessly, but for the acceptance of dogmas the truth of which it never occurred to him to examine. He had been told that gold and silver were not the subjects-only the instruments of commerce; that the only way in which a nation could avail itself of their value was to export them. No man knew better than he "that," to repeat him, "whenever the exchange is against any country, the natural and obvious course of balancing the account is by payment in bullion." No man more often asserted, in general terms, such fact or law. It was the great theme and conclusion of the Bullion Report: yet, when he sat down to write upon it, he fell into the grossest of errors, simply for the reason that, from the want of a little reflection, he adopted the language and nomenclature in common use; and, in doing so, he asserted what he must have known to be exactly contrary to the fact. From the phenomena - from the sale of every thing for coin-it might well be inferred that the possession of gold and silver was the only object of commerce, instead of being, as he tells us, "the one article of general consumption and demand which forms the foundation of the fewest operations of trade between the different countries of Europe; and that, "were it not for the supply constantly coming in from the New World, dealings in bullion would in great measure cease." Was there ever an instance of a man of such real ability and originality so completely mastered by Bacon's "idol of the theatre"?1 There can be no doubt that the welfare of each nation is best promoted by the distribution of the precious metals the world over in proper equilibrium. Such equilibrium tends to a harmonious condition of production and trade; and, as all civilized nations form one great commercial community, the 1 There are idols which have crept into men's minds from the various dogmas of peculiar systems of philosophy, and also from the perverted rules of demonstration; and these we denominate idols of the theatre. For we regard all the systems of philosophy hitherto received or imagined as so many plays brought out and performed, creating fictitious and theatrical worlds. Nor do we speak only of the present systems, or of the philosophy and sects of the ancients; since numerous other plays of a similar nature can be still composed and made to agree with each other, the causes of the most opposite errors being generally the same. Nor, again, do we allude merely to general systems, but also to many elements and axioms of sciences, which have become inveterate by tradition, implicit credence, and neglect. - Novum Organum, Book i. 44. welfare of all is measured by that of each. Money, as such, is an instrument in production and distribution, and should be supplied in proper measure to all. If a balance result in favor of any one nation to be paid in coin, if that balance, or the greater part of it, can be employed more profitably by the community from which it is due than by the one to which it is due, it is for the interest of both that such balance should remain within the indebted community; the proper compensation to be paid for its use, till a balance arises against the community which is for the present the creditor. The one indebted can frequently pay interest with much less inconvenience than it could immediately pay the principal sum. Forbearance of present payment, as a rule, can always be had by payment of interest at some rate. In this way, if, from accidental causes, such as the failure of crops, any community be unable to meet its accruing obligations by exports of merchandise, it is not compelled to draw too largely upon its reserves of coin. It is of the utmost importance to communities making use of symbolic currencies that such reserves should not suddenly be drawn from them; for the reason that, if they be drawn, such currency must be reduced in far greater ratio. The currency of Great Britain, as already shown, equals, say £550,000,000. The reserves held by the Banks and bankers issuing it do not exceed, probably, seven per cent of its amount, or, say, £35,000,000. As the percentage of reserves to liabilities must be maintained, it follows that if £10,000,000 of such reserves be permanently drawn, the currency must be reduced by nearly £175,000,000. Of course, new reserves would be provided with all possible speed; but not before a large contraction had been made, and great loss and suffering caused. "The state of the trade" in that country is watched with the utmost care and anxiety by the only power competent to deal with the subject, the Bank of England. Should it appear that any considerable portion of its reserves, in which are included those of the whole country, are likely to be drawn, it would meet the emergency by an immediate advance in the rate of interest, and in this way reduce the volume of the currency by rendering it unprofitable for the public to borrow. What, therefore, the government could by no means do, the Bank, an imperium in imperio, is fully competent to do. The former might prohibit the export of coin; but it could add no proper sanctions to its decrees, and a law without a sanction is no law. If it were for the advantage of a party holding coin to export it, the government could not prevent its export. But the Bank can always enforce its legislation by an appropriate sanction. From such legislation there is no appeal. From the penalty imposed there can be no escape. The Board of Directors of the Bank meets weekly to consider the situation, and legislate as it may require. It may not directly attempt to import gold, assuming the action of natural law will bring in a quantity sufficient for its needs. It does undertake, and most vigilantly, that such quantity as is necessary for the proper maintenance of its industry and trade shall not suddenly be taken from it. The efficiency of its action, unsupported by a single legal enactment, in matters where governments wielding the power of life and death are wholly impotent, is a striking proof of the wisdom of that policy by which individuals, as well as nations, commit themselves to the guidance of natural laws in reference to production and trade, in preference to those of human contrivance. It is also a triumphant vindica- ' tion of the soundness of the doctrine of the "Balance of Trade;" and proves that the founders of the Mercantile System - if such system were ever deliberately founded, which is by no means probable were wrong, not in assuming gold and silver to be the highest and most desirable form of property, but only in the means by which they sought to acquire their possession. - It is assumed by the admirers of Smith that he proved the policy of Free-Trade to be preferable to that of Protection. As an abstract proposition, it may be preferable, as peace may be preferable to war. But such questions are to be decided by concrete if the word may be used rather than by abstract reasoning. It may be that war will be accepted by a people as far preferable to peace. They may admit all the objections that can be urged against it, yet obey sentiments or principles which transcend argument or reason. They may engage in it to avoid something worse than all the calamities it can impose. To such a people there may be things more to be dreaded than annihilation. So the abstract argument in favor of Free-Trade carries no sense or conviction to the Australian or Canadian. When it is addressed to him, he replies: "That may be a very good doctrine for you in England, but a very poor one for me in Australia. You are so strong there that you will declare war upon me the moment you see that I am about to engage in any industry which threatens to deprive you of your markets; and will certainly overthrow me, unless the community in which I live will, in self-defence, combine to keep you at a distance. Protection, with us, is but another word for selfdefence. It is the only means by which we can secure a material, economic, and, perhaps, political independence. What you call Protection is with us self-sacrifice. It is a sacrifice which individuals as well as communities must make, as a necessary condition of wealth and prosperity. A man just entering upon life with nothing but his hands, cannot indulge in the same habits, expenditures, and methods of business as one possessed of wealth, experience, and the confidence of the public, all of them acquired by long years of patient sacrifice and industry. The new rival must go through a similar experience and training, before he can engage in enterprises on a similar scale, or indulge himself in similar habits and expenditures." The truth, therefore, of the doctrine of Free-Trade, as a rule of universal application, can never be demonstrated by proof or argument. It results from a condition, not from a law. What is evidence to one party or community is no evidence to another. A Free-Trader is such from interest, not from benevolence or principle. So with the doctrine of Protection. In England, Free-Trade is accepted as an elemental truth. In her colonies, Protection is accepted with equal confidence. The same man, with the same reason, is a FreeTrader in one country and a Protectionist in another. In England, a manufacturer believes that, from the low price of labor and material, from the high mechanical skill and great abundance of capital at his command, and from his unrivalled means of distribution, he can supply goods at a lower price or cost than they can be produced in any other country in the world. He feels, therefore, that his success is assured, provided his fabrics, when they reach the consumer, shall be charged with no other burden than cost, and that the material he works up shall reach him charged with no other burden. He believes, consequently, that Free-Trade should be the policy of mankind. The same person placed in the colonies would very well know that he could not compete with manufacturers in England, - of textiles, for example. He would feel, however, |