2. RECIPROCITY AND RETALIATION

The wealth of England is the sum of the wealth of each individual in England. An individual may have L10,000 in England, L5000 invested in Australia. We may reckon his wealth in England either as including or excluding the L5000, which he could transfer (probably very speedily) to England in gold if he desired it tangibly. Whichever way we reckon his wealth and that of other individuals, we shall in like manner in the sum get the wealth of England: it will be in one case the wealth in England-in the other case the wealth in England plus the lien which residents in England have on other countries in the world. wealth

In parallel manner the effective capital of England, which can be brought into the wages fund, must be the sum of the capital of all the individuals. capital of England

• National Debt

•Englishman

• wheat for gold

When a merchant buys 1000 quarters of wheat from America and pays in gold, he does so to make a profit for himself; merchant buys



	These two self-evident truths are capable of many applications: we see directly from them that the National Debt, so far as it is held by residents in England, neither diminishes the national wealth nor affects the wages fund. We see also directly that any exchange between an Englishman and a foreigner which gives a profit to the Englishman gives an equal profit to the English nation.

	but he cannot make a profit for himself without making an equal profit for the nation. The exchange of the wheat for gold is profitable to both seller and buyer; otherwise the bargain would not be struck. A value is added to the wheat by its being brought from Minnesota (where it is wanted, as all good things are wanted) to London, where it is much more wanted, and this increased value is greater than the cost of moving the wheat from Minnesota to London;

this excess is the profit on the exchange which the buyer and seller divide between them. The exact shares in which they divide the profit between them depend on some of the most complicated considerations in the science of political economy. Indeed, political economy can no more work out a case in figures, even when every circumstance is given, than political economy can tell in pounds sterling what should be the rent of a given farm. But the point required for our present purpose is easy and certain,--unless the English buyer got _some_ share in the profit he would not give his gold for the wheat.

that he shall not be checked in his operations by import duties, bounties on exports, staples, or any other of the numerous obsolete interferences in the statute-book. The principle is that each individual can manage his own trade better than Government can manage it for him; that, therefore, Government shall let any individual do his best in trade his own way, knowing that whatever profit an individual makes in foreign trade is an equal national profit.

If I profit on the transaction of buying 1000 quarters of wheat for gold, I do so irrespectively of all other exchanges by others. Whether the firm next door to me has succeeded in selling to a Boston house L2000 worth of Sheffield cutlery or no is a matter entirely beside my bargain.

My profit will depend practically on the movements in the English corn trade: a small rise in the price of wheat at Mark Lane between the date of my purchasing by cable the wheat in America and my selling it at Mark Lane, may give me a large profit, or _vice versa_. But my exchange of gold for the wheat is a separate transaction of itself: it stands entirely on its own bottom.

Time and Date

The great principle of Free Trade is that in this, and in all similar cases, the individual shall be left to make what profit he can; that his dealings with foreigners shall be interfered with by Government in no way; that he shall not be checked in his operations by import duties, bounties on exports, staples, or any other of the numerous obsolete interferences in the statute-book.

The principle is that each individual can manage his own trade better than Government can manage it for him; that, therefore, Government shall let any individual do his best in trade his own way, knowing that whatever profit an individual makes in foreign trade is an equal national profit.

It is perfectly true that if my neighbour in Threadneedle Street does succeed in selling L2000 worth of cutlery to the New Englander, there is another distinct national profit to England and to America. [Footnote: I am assuming for simplicity throughout that every exchange made by private merchants in this foreign trade is a successful speculation; if in any particular speculation a merchant loses, his country loses the same amount. As foreign trade, on the whole, is an enormous national profit, I am justified in sinking the particular cases of loss. It may be said, "But perhaps all your exchange of gold for wheat is a national loss":

it is evident that when the trade takes this form the merchants who import foreign corn stop their operations instantly; in practice they stop them with prescient instinct.] But whether he succeeds in making a bargain or not, I object to being interfered with by Government, and prevented making my own little profit. If my neighbour is practically deprived of his profitable bargain by Government action on the part of the Americans--if they are Protectionists and believe that gold is the only National Wealth, and put a heavy duty on cutlery--if by doing this they prevent an exchange profitable to both nations--they stop TWO merchants from a profitable stroke of business.

Whether they injure the English merchant or the Bostonian would-be purchaser of cutlery MOST is (as above explained) very difficult to prove in any well-ascertained instance, but it is quite certain that the interference of the American import duty causes a loss to each merchant and to each nation.

Where now is Reciprocity and where Retaliation? We can no doubt say to the Americans, "As you have injured us in the matter of cutlery, so will we injure you by putting a duty on wheat." But it is merely cutting off one's nose to spite one's face. In the exchange of gold for wheat the division of the profit on one transaction is uncertain, but in the long run it is probably about equal between the English and the American merchants, i.e. between the English and the American nations. (I am not overlooking the fact that the ultimate benefit to England is cheap bread;

but it is unnecessary in the present argument to follow the food down the throats of the consumers: the wheat is really worth to the corn merchants what they can get for it from the consumers.) We cannot stop the corn trade with America by a duty (or diminish it) without as great a loss to ourselves (probably a greater) than to them; the retaliation in putting a duty on corn because the Americans put a duty on cutlery would be (with our lights) mere spite:

it would be as though a farmer who took one sample of wheat to market and one of barley, should meet a factor who offered him his price for the wheat, but would not spring to his price for the barley, and the farmer should thereupon sulkily carry both his samples home again.