So I spent way too much money on this book of Sir Winston Churchill’s, “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. Published in 1906, it’s nonetheless amazing the parallels to today. I just apologize that it wasn’t easier reading, but if you at least get how the themes haven’t changed over the last century, maybe it’s been useful. So herewith is my last go at this topic before I put the book away… forever.
[Manchester, June 15, 1904]
[Excerpts]
Now let me come to dumping. What is dumping? A certain class of person uses dumping to describe any form of competition which injures him; but even in the imperfect terminology of the Free-trade controversy we have obtained a rather more active definition than that. Dumping is defined…as the sale of goods in this country which have been imported from a foreign country below the cost of production; and as such it is held up as a flagrant instance of the unfair competition which the Protectionist abhors, and from which we are said to suffer so much. Let us look into that. Dumping is of two kinds, perfectly separate, and hardly ever found in combination. There is a dumping from strength and from weakness; there is the deliberate dumping which is practiced by the set of traders who want to ruin another set and want to capture their business. There is also dumping from weakness, which is of another character. The sale of bankrupt stocks is one form of dumping from weakness. But there is s much larger form of it, which I will come to later. Let us, first, take dumping from strength, or price-cutting. I do not defend it. I regret it as a form of commercial piracy, as an offence against the honorable principles of commerce. I have not a word of defense, no Free Trader would have, for this unfair competition which seeks wealth by the ruin of others and not by an increase of the productivity of the earth….We believe that the keener the competition and the wider the area over which the competition operates, the harder it is to establish ‘corners’ and monopolies, and consequently the less worthwhile is it to embark on this dumping operation. And for proof take England, the United States, and Germany, the three greatest commercial countries in the world. What do we see? The fewest instances of cut-throat competition, of monopolist combination, and the smallest proportion of bankruptcies are found in that country which alone of those three States has not the protection of a tariff wall.
---
Now I submit to you with great respect, but with much confidence, this proposition, which Free-traders believe in. I don’t say it is always true in relation to individuals, because chance and so many other circumstances may affect individuals in their lives, but I firmly believe it is true of nations – Unfair competition countervails itself. Swiftly and surely, directed and impelled not by a muddled Government and a harassed Legislature, through the agency of stupid and expensive and often corrupt Customs officials, but by the inexorable laws of nature and science, come the retaliations of Free Trade. The German dumps sugar at a loss; we return manufactures of sugar at a profit. A foreigner dumps ship-plates at a price which cannot remunerate him; we retort in ships at a price with which he cannot compete. He dumps his steel, and we answer him with machinery. At every step our business is a paying transaction; at every step his business is a losing transaction. At every step our industries move forward into those higher grades where labor is more skilled, more varied, more generously rewarded.
---
[House of Commons, March 8, 1905]
The main argument against these taxes is based on a great principle, which is that this country should be free to purchase its supplies of food wherever it chooses and whenever it chooses in the open markets of the world….I have been told that within thirty miles of the Manchester Exchange – I might say of the Free Trade hall – there is gathered together the greatest concentration of human beings on the surface of the globe. This mass of people are absolutely dependent for the food they eat and the material they employ upon supplies which reach them mainly from foreign lands. They are dependent on the condition of a crop at one end of the world, and the state of a market at the other; and yet, upon this artificial foundation, through the inestimable advantages of unfettered enterprise, and of unrestricted sea communication, they have been able to build up a vast industrial fabric, which, it is no exaggeration to say, is the economic marvel of the world. They have had lately rather an unpleasant experience in Lancashire, a shortage of cotton and a ‘corner’ following thereon. The right hon. Member for West Birmingham has reminded us piously that that shortage was due to the act of God; it is not, like the Sugar Bounties Convention, due to the wisdom of a paternal Government. But what is the remedy proposed for that state of things? It is to vary and multiply the sources of cotton supply, so that, when there is a bad harvest in one place, good crops in another may repair the deficiency. But if your preference is effective, and in so far as it is effective, it must tend to limit and localize the sources of supply, and to make them more and more dependent upon a single source of supply.
At present we stand on very firm ground in respect to food. With the telegraph and with steamships there is hardly a food-exporting country in the world that is more than sixty days from Liverpool. The harvests of the world are at our disposal, and, by a system which averages climatic risks, we secure not merely a low but a fairly stable price. With that marvelous operation by which the crowded population of this island is fed, we cannot take the responsibility of interfering. There will be good years and there will be bad years. Great fluctuations must necessarily occur from time to time in all commodities which depend upon climatic conditions; they have occurred in cotton, in corn, in sugar; and the right hon. Member for West Birmingham reminded us the other night they are now occurring in onions.It is quite true that the workings of nature are beyond our control. There are many factors in prices – harvests, freights, speculations – which we do not recognize the authority of the House of Commons. Taxes alone are absolutely in our hand. These fluctuations have occurred in the past; no one can doubt that they will occur in the future. Whatever rise may take place in the future the preferential duties, if imposed…will have to bear the brunt of public indignation. It is upon these very links of Empire so laboriously and expensively forged that the direct impact of public displeasure in times of scarcity must inevitably descend. If there is an unpopular tax today we are in no great difficulty. If public opinion is sufficiently incensed a pliant Chancellor of the Exchequer, or, failing that, a vote in the House of Commons, will remove the cause of offense and gratify the national will….
It is a sober fact that the British Empire produces within its limits every commodity which luxury can imagine or industry require. I do not wonder that many hon. Gentlemen have been captivated by the idea of creating a self-supporting and self-contained Empire. I frankly admit myself the fascination of the idea – until you look into it. Then it is apparent – though this, of course, is disputable – that it rests on no moral, logical, or scientific foundation, it does not make for prosperity, it does not make for international peace. The dangers which threaten the tranquility of the modern world come not from those Powers that have become interdependent upon others, interwoven by commerce with other States; they come from those Powers which are more or less detached, which stand more or less aloof from the general intercourse of mankind, and are comparatively independent and self-supporting. Quite apart from the economic argument, which on this side we regard as sanctioned, we do not want to see the British Empire degenerate into a sullen confederacy, walled off, like a medieval town, from the surrounding country; victualled (sic) for a siege, and containing within the circle of its battlements all that is necessary for war. We want this country and the States associated with it to take their parts freely and fairly in the general intercourse of commercial nations. We do not mind even if we become dependent on foreign nations, because we know that by that very fact we make foreign nations dependent upon us.
---
That’s for hanging in there, folks. Wall Street History returns next week with a look at the last ten years and the anniversary of the March ’09 low. Much less weighty.
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Wall Street History
03/12/2010
Winston Churchill on Free Trade, Part III
So I spent way too much money on this book of Sir Winston Churchill’s, “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. Published in 1906, it’s nonetheless amazing the parallels to today. I just apologize that it wasn’t easier reading, but if you at least get how the themes haven’t changed over the last century, maybe it’s been useful. So herewith is my last go at this topic before I put the book away… forever.
[Manchester, June 15, 1904]
[Excerpts]
Now let me come to dumping. What is dumping? A certain class of person uses dumping to describe any form of competition which injures him; but even in the imperfect terminology of the Free-trade controversy we have obtained a rather more active definition than that. Dumping is defined…as the sale of goods in this country which have been imported from a foreign country below the cost of production; and as such it is held up as a flagrant instance of the unfair competition which the Protectionist abhors, and from which we are said to suffer so much. Let us look into that. Dumping is of two kinds, perfectly separate, and hardly ever found in combination. There is a dumping from strength and from weakness; there is the deliberate dumping which is practiced by the set of traders who want to ruin another set and want to capture their business. There is also dumping from weakness, which is of another character. The sale of bankrupt stocks is one form of dumping from weakness. But there is s much larger form of it, which I will come to later. Let us, first, take dumping from strength, or price-cutting. I do not defend it. I regret it as a form of commercial piracy, as an offence against the honorable principles of commerce. I have not a word of defense, no Free Trader would have, for this unfair competition which seeks wealth by the ruin of others and not by an increase of the productivity of the earth….We believe that the keener the competition and the wider the area over which the competition operates, the harder it is to establish ‘corners’ and monopolies, and consequently the less worthwhile is it to embark on this dumping operation. And for proof take England, the United States, and Germany, the three greatest commercial countries in the world. What do we see? The fewest instances of cut-throat competition, of monopolist combination, and the smallest proportion of bankruptcies are found in that country which alone of those three States has not the protection of a tariff wall.
---
Now I submit to you with great respect, but with much confidence, this proposition, which Free-traders believe in. I don’t say it is always true in relation to individuals, because chance and so many other circumstances may affect individuals in their lives, but I firmly believe it is true of nations – Unfair competition countervails itself. Swiftly and surely, directed and impelled not by a muddled Government and a harassed Legislature, through the agency of stupid and expensive and often corrupt Customs officials, but by the inexorable laws of nature and science, come the retaliations of Free Trade. The German dumps sugar at a loss; we return manufactures of sugar at a profit. A foreigner dumps ship-plates at a price which cannot remunerate him; we retort in ships at a price with which he cannot compete. He dumps his steel, and we answer him with machinery. At every step our business is a paying transaction; at every step his business is a losing transaction. At every step our industries move forward into those higher grades where labor is more skilled, more varied, more generously rewarded.
---
[House of Commons, March 8, 1905]
The main argument against these taxes is based on a great principle, which is that this country should be free to purchase its supplies of food wherever it chooses and whenever it chooses in the open markets of the world….I have been told that within thirty miles of the Manchester Exchange – I might say of the Free Trade hall – there is gathered together the greatest concentration of human beings on the surface of the globe. This mass of people are absolutely dependent for the food they eat and the material they employ upon supplies which reach them mainly from foreign lands. They are dependent on the condition of a crop at one end of the world, and the state of a market at the other; and yet, upon this artificial foundation, through the inestimable advantages of unfettered enterprise, and of unrestricted sea communication, they have been able to build up a vast industrial fabric, which, it is no exaggeration to say, is the economic marvel of the world. They have had lately rather an unpleasant experience in Lancashire, a shortage of cotton and a ‘corner’ following thereon. The right hon. Member for West Birmingham has reminded us piously that that shortage was due to the act of God; it is not, like the Sugar Bounties Convention, due to the wisdom of a paternal Government. But what is the remedy proposed for that state of things? It is to vary and multiply the sources of cotton supply, so that, when there is a bad harvest in one place, good crops in another may repair the deficiency. But if your preference is effective, and in so far as it is effective, it must tend to limit and localize the sources of supply, and to make them more and more dependent upon a single source of supply.
At present we stand on very firm ground in respect to food. With the telegraph and with steamships there is hardly a food-exporting country in the world that is more than sixty days from Liverpool. The harvests of the world are at our disposal, and, by a system which averages climatic risks, we secure not merely a low but a fairly stable price. With that marvelous operation by which the crowded population of this island is fed, we cannot take the responsibility of interfering. There will be good years and there will be bad years. Great fluctuations must necessarily occur from time to time in all commodities which depend upon climatic conditions; they have occurred in cotton, in corn, in sugar; and the right hon. Member for West Birmingham reminded us the other night they are now occurring in onions.It is quite true that the workings of nature are beyond our control. There are many factors in prices – harvests, freights, speculations – which we do not recognize the authority of the House of Commons. Taxes alone are absolutely in our hand. These fluctuations have occurred in the past; no one can doubt that they will occur in the future. Whatever rise may take place in the future the preferential duties, if imposed…will have to bear the brunt of public indignation. It is upon these very links of Empire so laboriously and expensively forged that the direct impact of public displeasure in times of scarcity must inevitably descend. If there is an unpopular tax today we are in no great difficulty. If public opinion is sufficiently incensed a pliant Chancellor of the Exchequer, or, failing that, a vote in the House of Commons, will remove the cause of offense and gratify the national will….
It is a sober fact that the British Empire produces within its limits every commodity which luxury can imagine or industry require. I do not wonder that many hon. Gentlemen have been captivated by the idea of creating a self-supporting and self-contained Empire. I frankly admit myself the fascination of the idea – until you look into it. Then it is apparent – though this, of course, is disputable – that it rests on no moral, logical, or scientific foundation, it does not make for prosperity, it does not make for international peace. The dangers which threaten the tranquility of the modern world come not from those Powers that have become interdependent upon others, interwoven by commerce with other States; they come from those Powers which are more or less detached, which stand more or less aloof from the general intercourse of mankind, and are comparatively independent and self-supporting. Quite apart from the economic argument, which on this side we regard as sanctioned, we do not want to see the British Empire degenerate into a sullen confederacy, walled off, like a medieval town, from the surrounding country; victualled (sic) for a siege, and containing within the circle of its battlements all that is necessary for war. We want this country and the States associated with it to take their parts freely and fairly in the general intercourse of commercial nations. We do not mind even if we become dependent on foreign nations, because we know that by that very fact we make foreign nations dependent upon us.
---
That’s for hanging in there, folks. Wall Street History returns next week with a look at the last ten years and the anniversary of the March ’09 low. Much less weighty.
