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03/05/2010

Winston Churchill on Free Trade, Part II

Continuing our look at Sir Winston Churchill and his thoughts on free trade, from the 1906 book titled, “For Free Trade: A Collection of Speeches delivered at Manchester or in the House of Commons during the Fiscal controversy preceding the late General Election,” with Churchill then a member of parliament. 

Birmingham Town Hall meeting, November 11, 1903

[Excerpts]

When foreign countries have bad trade, said Mr. Chamberlain [Ed. I think this is Joseph Chamberlain, father of Neville, who was a leading liberal at the time] at Liverpool, they dump their surplus production in England. Observe the unconscious admission.  So they have bad trade, these foreign countries, for all their Protection, for all their scientific taxation. More than that. Next year they are expected to begin dumping in earnest. So they are to have worse trade in the future. I ask you to note that point. Perhaps it explains why these pauper aliens are said to trouble us so much. Perhaps it explains why they come here instead of growing rich in their own protected paradises. Because, in spite of the war, in spite of the shorter hours, in spite of the dark designs of the foreign members of the Cobden Club, in spite of our having followed for sixty years a fiscal system according to the Protectionists utterly stupid and ruinous, our trade prospects are by no means gloomy, our trade per head of population is already three times that of the United States, and twice that of Germany or France, and the official returns of this current year, as far as they are complete, indicate a steady expansion, particularly in exports.

But let me get back to this dumping. How does it arise? The German or American manufacturer obtains the protection of a high tariff. He forms a great combine, or trust, or syndicate. He charges his own people a very high price. Their purchasing power is diminished; and accordingly the manufacturer has some of his output left on his hands, and this he is obliged to sell in England, always without profit – sometimes at a dead loss. Mr. Chamberlain said at Liverpool, ‘It is like the great emporium underselling the little shops.’ With all due respect, it is nothing of the sort. England is not a little shop. The scale of British business and manufacture exceeds many times over the amount of the dumping. ‘Great emporium,’ forsooth! It is more like the selling of a small bankrupt stock. Take the steel and iron trade. Mr. Chamberlain tells us the steel and iron trade is going. We shall have to be content with making mousetraps soon. Well, I do not despise mousetraps. I do not see why any trade, however small, in which the conditions are healthy and the wages fair, should be unworthy of the respectful consideration of public men. I would not even banish jam and pickles if it be true that several thousands of our fellow-countrymen get a good living thereby. But is the steel and iron trade going? Yes, it is. It is going strong. Our present output is a hundred and forty millions a year. The outside limits of foreign dumping is seven millions a year, and it is instantly absorbed by this powerful trade. …

Is Protection a boon and a benefit to the poorest classes in a country? Do the poor of other countries think so? The lot of the poor is always harsh and their burden heavy; and I am one of those who think that with our great and growing wealth we have done too little of late years to elevate and alleviate their sad condition. But it is an undoubted fact, proved by the Board of Trade returns, that, as far as can be judged from figures, the English working-classes are better off, man for man and trade for trade, in every single respect – better fed, better clothed, better housed – than their fellows in the protected countries of Europe. And it is also proved that their wages are higher than in any other country except America, that the purchasing power of those wages is already greater and is increasing far quicker than in any other country, including America, and that the hours and conditions of labor are better regulated. But Mr. Chamberlain says that superior conditions do not prove superior happiness. Well, we can prove the conditions by facts and figures, but how shall we measure the happiness of nations? Who shall declare that civilized man, with all his contrivances and his knowledge, enjoys more enduring satisfactions than the savage?  It is a matter of opinion whether other poorer nations are happier than ours….I sometimes wonder whether the happiness of the working-classes in protected countries is all that our new economists pretend. To say that Protection means greater development of wealth is unspeakable humbug. The Democratic Party in America and the Socialist Party in Germany are made up of the poorest and least fortunate of the people of those countries; and have they not learned by bitter experience that high protective tariffs, whatever profits they may confer on capital, whatever privileges they may bring to certain of the higher ranks of labor, are to the poor and to the poorest of the poor an accursed engine of robbery and oppression?

---

Manchester, February 19, 1904

Cheapness of production is vital to the cotton trade above all other trades, because of the severe and nicely calculated competition by which it is assailed in the foreign and neutral markets on which it depends, and because our customers in India and China are very poor people, and can only buy a large quantity of our goods if the price is cheap. Raise the price only a little, and the demand must fall off. Now, cheap food and cheapness of living must be the foundation of cheapness of production. Supposing by taxes imposed on food, or on clothes, or on houses, or personal necessaries, the sovereign loses some of its purchasing power, and suppose it only purchases as much as fifteen shillings does now, one of two things must happen. Either the operative must live worse than he does at present, or he must obtain an immediate rise of wages. Now when wages grow – as they have grown steadily since this hall was built – through the natural normal increase and expansion of wealth and trade, every one benefits. But if they were forced up at a bound without any corresponding natural enrichment the industry would receive a great shock, which might lead to a disaster….

We Free Traders are often told that we should consider the producer more, and not think so much about the consumer. The great manufacturers are the largest producers in the country, but they are also by far the largest consumers. The more they produce, the more they have to consume. The bigger the mill, the more it costs to run. The manufacturer, therefore, wants one thing dear – the thing he sells – and a hundred things cheap which he uses. Now let anybody who is familiar with the workings of some big mill…think how much the cost of production would be increased if every thing (sic) used in that mill cost 10 percent more. If the machinery cost more, and the oil, and the lamps by which the mill was lighted, and the building, and the paper on which the accounts were kept, and the glass in the spectacles of the senior partner – and so on.

It seems to me that if all this increased cost was to be recovered, the manufacturer will have to charge the public a pretty figure to recoup himself, let alone make higher profits. ‘Well,’ you will say, ‘at any rate he is no worse off. What does it matter if you make everything 10 percent higher all around?’ But it does matter very much. When things are cheap, people will buy them who will not buy them when they are dear. When things are cheap, people can buy them who cannot buy them at all when they are dear. And people will buy more of everything. If prices are raised, every one (sic) will have to pay more. As they pay more, so they will buy less. This is true always everywhere; but most of all is it true about the trades which depend on foreign export, which have to compete with other nations in foreign or neutral markets.

Part III next week…we’ll wrap this topic up, for now.

Brian Trumbore



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Wall Street History

03/05/2010

Winston Churchill on Free Trade, Part II

Continuing our look at Sir Winston Churchill and his thoughts on free trade, from the 1906 book titled, “For Free Trade: A Collection of Speeches delivered at Manchester or in the House of Commons during the Fiscal controversy preceding the late General Election,” with Churchill then a member of parliament. 

Birmingham Town Hall meeting, November 11, 1903

[Excerpts]

When foreign countries have bad trade, said Mr. Chamberlain [Ed. I think this is Joseph Chamberlain, father of Neville, who was a leading liberal at the time] at Liverpool, they dump their surplus production in England. Observe the unconscious admission.  So they have bad trade, these foreign countries, for all their Protection, for all their scientific taxation. More than that. Next year they are expected to begin dumping in earnest. So they are to have worse trade in the future. I ask you to note that point. Perhaps it explains why these pauper aliens are said to trouble us so much. Perhaps it explains why they come here instead of growing rich in their own protected paradises. Because, in spite of the war, in spite of the shorter hours, in spite of the dark designs of the foreign members of the Cobden Club, in spite of our having followed for sixty years a fiscal system according to the Protectionists utterly stupid and ruinous, our trade prospects are by no means gloomy, our trade per head of population is already three times that of the United States, and twice that of Germany or France, and the official returns of this current year, as far as they are complete, indicate a steady expansion, particularly in exports.

But let me get back to this dumping. How does it arise? The German or American manufacturer obtains the protection of a high tariff. He forms a great combine, or trust, or syndicate. He charges his own people a very high price. Their purchasing power is diminished; and accordingly the manufacturer has some of his output left on his hands, and this he is obliged to sell in England, always without profit – sometimes at a dead loss. Mr. Chamberlain said at Liverpool, ‘It is like the great emporium underselling the little shops.’ With all due respect, it is nothing of the sort. England is not a little shop. The scale of British business and manufacture exceeds many times over the amount of the dumping. ‘Great emporium,’ forsooth! It is more like the selling of a small bankrupt stock. Take the steel and iron trade. Mr. Chamberlain tells us the steel and iron trade is going. We shall have to be content with making mousetraps soon. Well, I do not despise mousetraps. I do not see why any trade, however small, in which the conditions are healthy and the wages fair, should be unworthy of the respectful consideration of public men. I would not even banish jam and pickles if it be true that several thousands of our fellow-countrymen get a good living thereby. But is the steel and iron trade going? Yes, it is. It is going strong. Our present output is a hundred and forty millions a year. The outside limits of foreign dumping is seven millions a year, and it is instantly absorbed by this powerful trade. …

Is Protection a boon and a benefit to the poorest classes in a country? Do the poor of other countries think so? The lot of the poor is always harsh and their burden heavy; and I am one of those who think that with our great and growing wealth we have done too little of late years to elevate and alleviate their sad condition. But it is an undoubted fact, proved by the Board of Trade returns, that, as far as can be judged from figures, the English working-classes are better off, man for man and trade for trade, in every single respect – better fed, better clothed, better housed – than their fellows in the protected countries of Europe. And it is also proved that their wages are higher than in any other country except America, that the purchasing power of those wages is already greater and is increasing far quicker than in any other country, including America, and that the hours and conditions of labor are better regulated. But Mr. Chamberlain says that superior conditions do not prove superior happiness. Well, we can prove the conditions by facts and figures, but how shall we measure the happiness of nations? Who shall declare that civilized man, with all his contrivances and his knowledge, enjoys more enduring satisfactions than the savage?  It is a matter of opinion whether other poorer nations are happier than ours….I sometimes wonder whether the happiness of the working-classes in protected countries is all that our new economists pretend. To say that Protection means greater development of wealth is unspeakable humbug. The Democratic Party in America and the Socialist Party in Germany are made up of the poorest and least fortunate of the people of those countries; and have they not learned by bitter experience that high protective tariffs, whatever profits they may confer on capital, whatever privileges they may bring to certain of the higher ranks of labor, are to the poor and to the poorest of the poor an accursed engine of robbery and oppression?

---

Manchester, February 19, 1904

Cheapness of production is vital to the cotton trade above all other trades, because of the severe and nicely calculated competition by which it is assailed in the foreign and neutral markets on which it depends, and because our customers in India and China are very poor people, and can only buy a large quantity of our goods if the price is cheap. Raise the price only a little, and the demand must fall off. Now, cheap food and cheapness of living must be the foundation of cheapness of production. Supposing by taxes imposed on food, or on clothes, or on houses, or personal necessaries, the sovereign loses some of its purchasing power, and suppose it only purchases as much as fifteen shillings does now, one of two things must happen. Either the operative must live worse than he does at present, or he must obtain an immediate rise of wages. Now when wages grow – as they have grown steadily since this hall was built – through the natural normal increase and expansion of wealth and trade, every one benefits. But if they were forced up at a bound without any corresponding natural enrichment the industry would receive a great shock, which might lead to a disaster….

We Free Traders are often told that we should consider the producer more, and not think so much about the consumer. The great manufacturers are the largest producers in the country, but they are also by far the largest consumers. The more they produce, the more they have to consume. The bigger the mill, the more it costs to run. The manufacturer, therefore, wants one thing dear – the thing he sells – and a hundred things cheap which he uses. Now let anybody who is familiar with the workings of some big mill…think how much the cost of production would be increased if every thing (sic) used in that mill cost 10 percent more. If the machinery cost more, and the oil, and the lamps by which the mill was lighted, and the building, and the paper on which the accounts were kept, and the glass in the spectacles of the senior partner – and so on.

It seems to me that if all this increased cost was to be recovered, the manufacturer will have to charge the public a pretty figure to recoup himself, let alone make higher profits. ‘Well,’ you will say, ‘at any rate he is no worse off. What does it matter if you make everything 10 percent higher all around?’ But it does matter very much. When things are cheap, people will buy them who will not buy them when they are dear. When things are cheap, people can buy them who cannot buy them at all when they are dear. And people will buy more of everything. If prices are raised, every one (sic) will have to pay more. As they pay more, so they will buy less. This is true always everywhere; but most of all is it true about the trades which depend on foreign export, which have to compete with other nations in foreign or neutral markets.

Part III next week…we’ll wrap this topic up, for now.

Brian Trumbore