I consider it my duty to say a few words in regard to the delusion caused by the words dear and cheap. At the first glance, I am aware, you may be disposed to find these remarks somewhat subtile, but whether subtile or not, the question is whether they are true. For my part I consider them perfectly true, and particularly well adapted to cause reflection among a large number of those who cherish a sincere faith in the efficacy of protection.

Whether advocates of free trade or defenders of protection, we are all obliged to make use of the expression dearness and cheapness. The former take sides in behalf of cheapness, having in view the interests of consumers. The latter pronounce themselves in favor of dearness, preoccupying themselves solely with the interests of the producer. Others intervene, saying, producer and consumer are one and the same, which leaves wholly undecided the question whether cheapness or dearness ought to be the object of legislation.

In this conflict of opinion it seems to me that there is only one position for the law to take—to allow prices to regulate themselves naturally. But the principle of "let alone" has obstinate enemies. They insist upon legislation without even knowing the desired objects of legislation. It would seem, however, to be the duty of those who wish to create high or low prices artificially, to state, and to substantiate, the reasons of their preference. The burden of proof is upon them. Liberty is always considered beneficial until the contrary is proved, and to allow prices naturally to regulate themselves is liberty. But the roles have been changed. The partisans of high prices have obtained a triumph for their system, and it has fallen to defenders of natural prices to prove the advantages of their system. The argument on both sides is conducted with two words. It is very essential, then, to understand their meaning.

It must be granted at the outset that a series of events have happened well calculated to disconcert both sides.

In order to produce high prices the protectionists have obtained high tariffs, and still low prices have come to disappoint their expectations.

In order to produce low prices, free traders have sometimes carried their point, and, to their great astonishment, the result in some instances has been an increase instead of a reduction in prices.

For instance, in France, to protect farmers, a law was passed imposing a duty of twenty-two per cent. upon imported wools, and the result has been that native wools have been sold for much lower prices than before the passage of the law.

In England a law in behalf of the consumers was passed, exempting foreign wools from duty, and the consequence has been that native wools have sold higher than ever before.

And this is not an isolated fact, for the price of wool has no special or peculiar nature which takes it out of the general law governing prices. The same fact has been reproduced under analogous circumstances. Contrary to all expectation, protection has frequently resulted in low prices, and free trade in high prices. Hence there has been a deal of perplexity in the discussion, the protectionists saying to their adversaries: "These low prices that you talk about so much are the result of our system;" and the free traders replying: "Those high prices which you find so profitable are the consequence of free trade."

There evidently is a misunderstanding, an illusion, which must be dispelled. This I will endeavor to do.

Suppose two isolated nations, each composed of a million inhabitants; admit that, other things being equal, one nation had exactly twice as much of everything as the other—twice as much wheat, wine, iron, fuel, books, clothing, furniture, etc. It will be conceded that one will have twice as much wealth as the other.

There is, however, no reason for the statement that the absolute prices are different in the two nations. They possibly may be higher in the wealthiest nation. It may happen that in the United States everything is nominally dearer than in Poland, and that, nevertheless, the people there are less generally supplied with everything; by which it may be seen that the abundance of products, and not the absolute price, constitutes wealth. In order, then, accurately to compare free trade and protection the inquiry should not be which of the two causes high prices or low prices, but which of the two produces abundance or scarcity.

For observe this: Products are exchanged, the one for the other, and a relative scarcity and a relative abundance leave the absolute price exactly at the same point, but not so the condition of men.

Let us look into the subject a little further.

Since the increase and the reduction of duties have been accompanied by results so different from what had been expected, a fall of prices frequently succeeding the increase of the tariff, and a rise sometimes following a reduction of duties, it has become necessary for political economy to attempt the explanation of a phenomenon which so overthrows received ideas; for, whatever may be said, science is simply a faithful exposition and a true explanation of facts.

This phenomenon may be easily explained by one circumstance which should never be lost sight of.

It is that there are two causes for high prices, and not one merely.

The same is true of low prices. One of the best established principles of political economy is that price is determined by the law of supply and demand.

The price is then affected by two conditions—the demand and the supply. These conditions are necessarily subject to variation. The relations of demand to supply may be exactly counterbalanced, or may be greatly disproportionate, and the variations of price are almost interminable.

Prices rise either on account of augmented demand or diminished supply.

They fall by reason of an augmentation of the supply or a diminution of the demand.

Consequently there are two kinds of dearness and two kinds of cheapness. There is a bad dearness, which results from a diminution of the supply; for this implies scarcity and privation. There is a good dearness—that which results from an increase of demand; for this indicates the augmentation of the general wealth.

There is also a good cheapness, resulting from abundance. And there is a baneful cheapness—such as results from the cessation of demand, the inability of consumers to purchase.

And observe this: Prohibition causes at the same time both the dearness and the cheapness which are of a bad nature; a bad dearness, resulting from a diminution of the supply (this indeed is its avowed object), and a bad cheapness, resulting from a diminution of the demand, because it gives a false direction to capital and labor, and overwhelms consumers with taxes and restrictions.

So that, as regards the price, these two tendencies neutralize each other; and for this reason, the protective system, restricting the supply and the demand at the same time, does not realize the high prices which are its object.

But with respect to the condition of the people, these two tendencies do not neutralize each other; on the contrary, they unite in impoverishing them.

The effect of free trade is exactly the opposite. Possibly it does not cause the cheapness which it promises; for it also has two tendencies, the one towards that desirable form of cheapness resulting from the increase of supply, or from abundance; the other towards that dearness consequent upon the increased demand and the development of the general wealth. These two tendencies neutralize themselves as regards the mere price; but they concur in their tendency to ameliorate the condition of mankind. In a word, under the protective system men recede towards a condition of feebleness as regards both supply and demand; under the free trade system, they advance towards a condition where development is gradual without any necessary increase in the absolute prices of things.

Price is not a good criterion of wealth. It might continue the same when society had relapsed into the most abject misery, or had advanced to a high state of prosperity.

Let me make application of this doctrine in a few words: A farmer in the south of France supposes himself as rich as Croesus, because he is protected by law from foreign competition. He is as poor as Job—no matter, he will none the less suppose that this protection will sooner or later make him rich. Under these circumstances, if the question was propounded to him, as it was by the committee of the Legislature, in these terms: "Do you want to be subject to foreign competition? yes or no," his first answer would be "No," and the committee would record his reply with great enthusiasm.

We should go, however, to the bottom of things. Doubtless foreign competition, and competition of any kind, is always inopportune; and, if any trade could be permanently rid of it, business, for a time, would be prosperous.

But protection is not an isolated favor. It is a system. If, in order to protect the farmer, it occasions a scarcity of wheat and of beef, in behalf of other industries it produces a scarcity of iron, cloth, fuel, tools, etc.—in short, a scarcity of everything.

If, then, the scarcity of wheat has a tendency to increase the price by reason of the diminution of the supply, the scarcity of all other products for which wheat is exchanged has likewise a tendency to depreciate the value of wheat on account of a falling off of the demand; so that it is by no means certain that wheat will be a mill dearer under a protective tariff than under a system of free trade. This alone is certain, that inasmuch as there is a smaller amount of everything in the country, each individual will be more poorly provided with everything.

The farmer would do well to consider whether it would not be more desirable for him to allow the importation of wheat and beef, and, as a consequence, to be surrounded by a well-to-do community, able to consume and to pay for every agricultural product.

There is a certain province where the men are covered with rags, dwell in hovels, and subsist on chestnuts. How can agriculture flourish there? What can they make the earth produce, with the expectation of profit? Meat? They eat none. Milk? They drink only the water of springs. Butter? It is an article of luxury far beyond them. Wool? They get along without it as much as possible. Can any one imagine that all these objects of consumption can be thus left untouched by the masses, without lowering prices?

That which we say of a farmer, we can say of a manufacturer. Cloth-makers assert that foreign competition will lower prices owing to the increased quantity offered. Very well, but are not these prices raised by the increase of the demand? Is the consumption of cloth a fixed and invariable quantity? Is each one as well provided with it as he might and should be? And if the general wealth were developed by the abolition of all these taxes and hindrances, would not the first use made of it by the population be to clothe themselves better?

Therefore the question, the eternal question, is not whether protection favors this or that special branch of industry, but whether, all things considered, restriction is, in its nature, more profitable than freedom?

Now, no person can maintain that proposition. And just this explains the admission which our opponents continually make to us: "You are right on principle."

If that is true, if restriction aids each special industry only through a greater injury to the general prosperity, let us understand, then, that the price itself, considering that alone, expresses a relation between each special industry and the general industry, between the supply and the demand, and that, reasoning from these premises, this remunerative price (the object of protection) is more hindered than favored by it.

APPENDIX.

We published an article entitled Dearness-Cheapness, which gained for us the two following letters. We publish them, with the answers:

My Dear Free Trader:—Allow us to say that you have but half read the article which provoked your letter. We said that free trade acted precisely like roads, canals and railways, like everything which facilitates communications, and like everything which destroys obstacles. Its first tendency is to increase the quantity of the article which is relieved from duties, and consequently to lower its price. But by increasing, at the same time, the quantity of all the things for which this article is exchanged, it increases the demand, and consequently the price rises. You ask us what the people will gain. Suppose they have a balance with certain scales, in each one of which they have for their use a certain quantity of the articles which you have enumerated. If a little grain is put in one scale it will gradually sink, but if an equal quantity of cloth, iron and coal is added in the others, the equilibrium will be maintained. Looking at the beam above, there will be no change. Looking at the people, we shall see them better fed, clothed and warmed.

My Dear Protectionist:—We say that the end and aim of your restrictive measures is a wrongful one—artificial dearness. But we do not say that they always realize the hopes of those who initiate them. It is certain that they inflict on the consumer all the evils of dearness. It is not certain that the producer gets the profit. Why? Because if they diminish the supply they also diminish the demand.

This proves that in the economical arrangement of this world there is a moral force, a vis medicatrix, which in the long run causes inordinate ambition to become the prey of a delusion.

Pray, notice, sir, that one of the elements of the prosperity of each special branch of industry is the general prosperity. The rent of a house is not merely in proportion to what it has cost, but also to the number and means of the tenants. Do two houses which are precisely alike necessarily rent for the same sum? Certainly not, if one is in Paris and the other in Lower Brittany. Let us never speak of a price without regarding the conditions, and let us understand that there is nothing more futile than to try to build the prosperity of the parts on the ruin of the whole. This is the attempt of the restrictive system.

Competition always has been, and always will be, disagreeable to those who are affected by it. Thus we see that in all times and in all places men try to get rid of it. We know, and you too, perhaps, a municipal council where the resident merchants make a furious war on the foreign ones. Their projectiles are import duties, fines, etc., etc.

Now, just think what would have become of Paris, for instance, if this war had been carried on there with success.

Suppose that the first shoemaker who settled there had succeeded in keeping out all others, and that the first tailor, the first mason, the first printer, the first watchmaker, the first hair-dresser, the first physician, the first baker, had been equally fortunate. Paris would still be a village, with twelve or fifteen hundred inhabitants. But it was not thus. Each one, except those whom you still keep away, came to make money in this market, and that is precisely what has built it up. It has been a long series of collisions for the enemies of competition, and from one collision after another, Paris has become a city of a million inhabitants. The general prosperity has gained by this, doubtless, but have the shoemakers and tailors, individually, lost anything by it? For you, this is the question. As competitors came, you said: The price of boots will fail. Has it been so? No, for if the supply has increased, the demand has increased also.

Thus will it be with cloth; therefore let it come in. It is true that you will have more competitors, but you will also have more customers, and richer ones. Did you never think of this when seeing nine-tenths of your countrymen deprived during the winter of that superior cloth that you make?

This is not a very long lesson to learn. If you wish to prosper, let your customers do the same.

When this is once known, each one will seek his welfare in the general welfare. Then, jealousies between individuals, cities, provinces and nations, will no longer vex the world.