Book review: Flies in the ointment

THE NEW PROTECTIONISM, by J. A. Hobson, London. The Cobden Club, Westminster, and T. Fisher Unwin Ltd., Adelphi Terrace. 6d. Net.

That monumental piece of bluff and fatuity the Paris Economic Conference has been taken seriously, not by the German capitalists—-they are not entirely devoid of intelligence—but by the Free Trade apostles ofvthis country. While almost everybody else has been laughing at the affair as a clumsy attempt to impress the mugs, not of the Germanic nations, but of the “entente” countries, the “economists” of the Cobdern Club have been regarding the Conference as a sort of “red light,” and have even been moved in their trepidation to inflict upon an already sufficiently suffering world a 150 pages or so of very serious and solemn consideration of the matter.

That the recommendations of the Conference were ever seriously intended to be carried into effect after the war has been thought hardly worthy of space for discussion in these columns. It will be the wonder of the age if the “Allies” can hang together through all that they have yet to endure before they arrive at the goal of victory, or survive the conflict of interests at the settlement, much less bind up those clashing interests with fiscal bonds and the like. Those interests are by no means made one by the war. It is extremely doubtful, indeed, if those interests are unified even as far as a complete and crushing victory over the Teutonic powers.

Be it said at once that in the brochure under review the author adduces many cogent reasons why the attempt to carry out the recommendations of the Paris Economic Conference would be sheer idiocy. Having said that I have done with that side of the question. If any reader wishes to waste a tanner on those cogent reasons he has my gracious permission to do so, and incidentally he can have my copy for tuppence, with the comment chucked in that “the fool and his money’s soon parted.”

But if the Socialist is not concerned with the question of statesmen making asses of themselves by chewing “New Protectionism” thistles, he generally feels disposed to have a cut at bourgeois economics (!) when opportunity offers, and opportunity offers now.

Mr. Hobson opens thus :

“The policy of Free Trade is based upon a reasoned belief that all commerce is an exchange between the goods or services of one person and those of another, this exchange being usually effected by two monetary transactions an act of sale and act of purchase. both parties in such commerce are gainers from it: and their gains tend to be equal.”

Our author having firmly based his creed on the unshakable quagmire of an economic fallacy, proceeds to enlarge upon a “series of separatist fallacies,” of which

“the second is the separation of the interests of the seller from those of the buyer, and the false assertion that the interests of the former are, or ought to be, superior.”

If Free Trade is based upon the first-mentioned belief, then the Free Traders had better shut up shop, for the Protectionists have all the best of the argument. An exchange may be “two monetary transactions—an act of sale and an act of purchase” but there is a vast difference between the two. The seller of a commodity realizes profit, the buyer does not. The commodity is not produced for consumption, but for profit. This profit can only be realized by sale. The seller, then, is simply completing the process which finds its volition in the motive for all capitalist activity—the incentive of gain ; the lust for profit. Therefore, it is not true that both parties are equal gainers by exchange, and under the system the interest of the seller is the paramount interest.

As a matter of fact, of course, it is not at all necessary to believe that both parties concerned in an exchange benefit equally from it in order to become an advocate of Free Trade, and it is mere moonshine to say that the policy of Free Trade is based upon such a belief. The Free Trader who counts—the Free Trader among the ruling class—recognises the paramountcy of his interets as a seller, since he knows that in each cycle of his industrial operations—in which field the vast bulk of both his buying selling is done—he sells more than he buys, and this difference between what he buys and what he sells is the sole incentive of his buying and seeing at all.

He starts by buying raw material and labour-power, and he ends by selling the product of the combination of the two. And always, except in the comparatively rare instances where he has made a sad muddle of things, the amount of his sales exceed the amount of his purchases, else where does his profit come in ?

Free Trade is mainly the policy of the manufacturer who hopes to sell in foreign markets, and for these reasons : If he has to pay a duty on his raw materials he cannot recover it in the world market, hence he is handicapped as a seller ; i.e., he must either sell for more and consequently sell less, or he must sell for the same as has foreign competitors and himself shoulder the duty. In either case he realizes less profit. The second reason is that if his wage-workers have to pay a duty on their necessaries of life he, the employer, will have to pay more for their labour-power, and again when he sells his commodity he realizes less profit.

And now mark the working of the mind of the bourgeois Protectionist. He usually is producing for the home market. If he has to pay more for his raw materials because of a tariff, be can get that back in the protected home market, while if he has to pay more for his labour-power because of the tariff on his wage-slaves’ necessaries of subsistence, he calculates that the higher price and wider market Protection enables his commodities to enjoy will more than counterbalance that disadvantage.

The underlying motives, therefore, of both the Free Trade and the Protectionist policies are not any concern for the equality or inequality of benefit arising from exchange, but the desire to have established that system best suited to the economic of the individuals holding the respective views. And it may be said that the tendency is to protect the home market when that market is of greater importance than the world market, and to resort to Free Trade as the export trade is developed. In view of this we may expect to see a revivifying of the Protectionist policy as the development of the manufacture of the more backward countries brings about a relative restriction of the foreign market for every country.

In close connection with this phase of the question “Free Trade versus Protection” Mr. Hobson may be quoted again. He says on page 8 :

“If the Bradford weaver gets Protection and nobody else, he stands to gain. But if all other British trades, local and national, engaged in making articles he needs in his trade—e.g., wool, coal, machinery, dyes, etc.—or articles of food, clothing, furniture, on which he spends his wages, also get Protection, each duty to protect those other trades filches from him a bit of the gain he stood to make if the Bradford woollen trade were alone protected. A general tariff protecting all British trades equally would thus be found to make so many deductions from the value of the special Protection enjoyed by the woollen trade as to convert it from a gain into a loss. The higher prices of woollens which his Protection enabled him to get would be outweighed by the added higher prices of the various article required for use in his trade and for his private consumption.”

This, of course, is incorrect, as is easily demonstrated. Let us suppose “a general tariff protecting all British trades equally to the tune of, shall we say, 10 per cent. Our Bradford weaver buys “wool, coal, machinery, dyes, etc.” (much of which being home produce, he would not have to pay any duty on) value say, £100 prior to the tariff. He then purchases labour-power of the pre-tariff value of say £50. Even if we assume that the whole of the material had been subject to the tariff, and the labour-power had been produced entirely upon duty-bearing substance, the Bradford wearer would hare to pay on account of the tariff 10 per cent. on only the amount of his outlay, £150. But when he came to sell his commodity in the home market he would find his foreign competitor penalised to the extent of 10 per cent. of the full value of the commodity, which would he, say, £200. So against an penalty of 10 per cent. on £150 the Bradford weaver finds he has increased opportunities (so long as he sells in the protected market), in the way of increased sales and higher prices, equal to 10 per cent. on £200. “His private consumption” is by no means sufficient to materially affect this argument.

Again, on page 6, our author talks through his hat. He says of the Protectionist :

“He makes his separate appeal to the man as producer, tells him that selling is more important than buying, and that the money he receives is more important than what he can buy with it.
It is through consumption that the co-operative nature and value of commerce is realized.”

The crux of the whole matter is, who does the Protectionist appeal to, or, for that matter, who does the Cobdenite appeal to ? If to the capitalist, then it has already been shown that the capitalist is far more of a producer (in the controling, not the operative sense) than consumer, and that it is to production that he owes all he possesses, which he realizes through the act of selling. It is logical, therefore to appeal to the capitalist as a producer, and both the Protectionist and the Free Trader are found to do so in the last analysis. Even Mr. Hobson does so when he says, “the higher prices . . which his Protection enabled him to get would be outweighed by the added higher prices of the various articles required for use in his trade.” On the other hand, if the appeal is to the workers, then it is about as logical to appeal to him as a consumer as it would he to try to interest a horse in the cost of his forage. Mr. Hobson assents to this when he states that the higher price of the worker’s “food, clothing, furniture, etc.,” “filches . . a bit of the gain” from the Bradford weaver.

There are plenty of other fallacies in the book under review, but I have room only to deal with one or two more. Mr. Hobscn says on page 4 that

“The notion that the expansion of foreign markets obtained within the last two decades by German or American traders is a corresponding loss to British traders is sheer nonsense. To a large extent those markets were “created” by the special economic and commercial activities of the German or American trader. For the rest, an enlargement of our foreign markets which, in default of German or American competition, might have taken place, would have involved a diminution of our home markets.”

What a conception of the capacity of the commodities market ! And what a conception of the modern capitalist power for production ! Mr. Hobson says it is a falsehood to represent the commercial competition between two nations as “a struggle between two nations for a limited amount of profitable foreign market.” He declares that “There is no such absolute limit to quantity of foreign market.” Yet our author admits that there is competition. It would be interesting to hear Mr. Hobson’s explanation of what that “commercial competition” is for, and how it arises. Nobody competes for that which is (in the practical sense) unlimited. It is limitation which is the very foundation of competition.

And then mark the ludicrous suggestion that it is productive capacity that is limited in that statement, “an enlargement of our foreign markets . . . would have involved a diminution of our home markets.” The army of unemployed means nothing to Mr. Hobson : the factories working short time or closed down are without significance to him ; the periodical crises, when the warehouses are choked with goods which can find no outlet in any market, at home or abroad, make no impression on his mind. One can go on producing to any extent, in our author’s view, and the problem of markets will solve itself. If the market does not exist you simply “create” it. The only danger is that, if you “create” much “foreign market” the home market will have to go short because capitalist production is so inelastic that it cannot respond to the call for expansion.

A. E. J.

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