SECTION V.. Protection As a Policy.

PROTECTION AS A POLICY.

A. So long as a nation is, indeed, politically independent, but economically in a very low stage, it is best served by entire freedom of trade with the outside world; because such freedom causes the influences of the incentives, wants, and the means of satisfaction of a higher civilization to be soonest felt in the country.

B. The further advance which consists in the development of home industries by the country itself, may, indeed, be rendered exceedingly difficult by the unrestricted competition of foreign industries, which are already developed. The carriers on of industry in an old industrial country have a superiority over those in the new, in the amount of capital, the lowness of the rate of interest, the skill of undertakers (Unternehmer) and workmen, generally, also in the consideration in which the whole country hold industry, and the interest they take in it;[A3-5-1] while in the country which has hitherto been merely agricultural, it happens only too frequently that industry is undervalued, and that young industrial talent is, as a consequence, forced to emigrate. How frequently it has happened that England by keeping down her prices for a time has strangled her foreign rivals.[A3-5-2] Even on the supposition of equal natural capacity, the struggle between the two industries would come to a close similar to that between a boy of buoyant spirits and an athletically developed man. What then is to be said of the cases in which the more highly developed nation is at the same time possessed of the more favorable natural advantages, such, for instance, as England possesses over Russia in her incomparable situation in relation to the trade of the world, and which gives her for all distant countries, without any active commerce, a monopoly-like advantage; farther, her magnificent harbors, streams, her well-situated wealth in iron and coal, etc. The advantages of mere priority weigh most heavily, when the great development of all means of transportation almost does away with the natural protection afforded by remoteness; and when, at the same time, a certain universality of fashion, which, as a rule, is governed by the most highly developed nations, causes national and local differences of taste, which could be satisfied only by national or local production, to become obsolete.[A3-5-3] Under such circumstances, it would be possible, that a whole nation might be made continually to act the part of an agricultural district (plattes Land), to one earlier developed, leaving to the latter, almost exclusively, the life of the city and of industry.[A3-5-4] A wisely conducted protective system might act as a preventive against this evil, the temporary sacrifices which such a system necessitates being justifiable where some of the factors of industrial production unquestionably exist but remain unused, because others, on account of the mere posteriority of the nation, cannot be built up. The abusive term "hot-house plant" should not be used where there is question only of transitory protection, and where there is the full intention to surrender the grown tree to all the wind, rain and sunshine of free competition, and where it is foreseen that it shall be so surrendered.[A3-5-5] [A3-5-6] The want of a certain economic many-sidedness which must be given to a nation manifests itself in a particularly urgent manner in times of protracted war. Here the error of so many free-traders, that different states should comport themselves towards one another as the different provinces of the same state do, is most clearly refuted.[A3-5-7]

C. No less important is the political side of the question. Since the protective system forces capital and labor away from the production of raw material and into industry, it exerts a great influence on the relations of the classes or estates of a country to one another. The immense preponderance possessed in medieval times by the nobility, agriculture, the country in general as contradistinguished from the city, by the aristocratic and conservative elements, is curtailed in favor of the bourgeoisie, of industry, of the cities generally, and of the democratic and progressive elements. If when the history of a nation is at its highest point, there is supposed a certain equilibrium of the different elements, all of which are equally necessary to the prime of a nation's life, this height is now attained sooner than it would otherwise be. It is no mere accident that in almost every instance, those monarchs who humbled the medieval nobility and introduced the modern era, also established a protective system.[A3-5-8]

D. However, such an education of industry can be attempted with proper success only on a large scale, that is, on a national basis. The least hazardous (unbedenklich) measure of the system, import-duties supposes a relatively short boundary line, such as only a great country, even where its formation is the most favorable imaginable, can possess.[A3-5-9] The greater the tariff territory (Zollgebiet), the less one-sided is its natural capacity wont to be, the sooner may an active competition in its interior be built up, while the foreign market always suffers from uncertainty. Hence all tariff-unions (Zollverein) between related states are to be recommended not only as financially but also as economically advantageous. Between states not related and of equal power, so far-reaching a reciprocity, embracing nearly the whole of economic policy, can scarcely be established; and it would be still harder for it to continue long. If the states not related are of very unequal power, the probable consequence would be the early absorption of the weaker by the stronger.[A3-5-10] [A3-5-11]