Tales in Political Economy/Chapter 1
TALES
IN
POLITICAL ECONOMY.
I.
The Srimats.
Free trade—Protection of native industry.
I was spending a week in a country house a short time ago in which there was also staying an old sailor, Captain Adam. He told me some wonderful stories of adventures he had had when he was young; and it occurred to me that some of them might teach people a good deal about political economy, if they would take the trouble to use their heads a little. The first story that he told me I shall call a free-trade story, because I think it gives a very good example of what people gain by free trade, and shows also how it is that some people are injured through the introduction of free trade.
Captain Adam was once cruising in the Indian ocean to the west of the island of Sumatra. His object was to land on a small island inhabited by the descendants of some of the first Dutch settlers in Sumatra, and to set up a communication between them and Acheen for trading purposes. The most remarkable thing about the people who inhabited this island was that they had had no intercourse with any other people for two hundred years. They were not dependent on any other nation for food, clothing, or machinery; everything that they used they made themselves; they had no trade either with Europe or with the other islands of the archipelago. So far as getting any good from mixing or trading with other people was concerned, they might as well have lived in the moon.
Captain Adam found the Srimats, as they were called, much more civilized than he had expected. They were mild, gentle, and very courteous to strangers; they lived in houses neatly and carefully built; they were completely and simply dressed; they spoke a kind of patois of Dutch and Malay, in which Dutch took the chief part: and they had an organized system of government, which the whole tribe regarded with great pride and veneration. This government was very curious. It consisted of a kind of council or parliament, which possessed absolute power over the life and property of every member of the tribe. There was nothing so very strange in this; but the thing that astonished Captain Adam was that no one but the hereditary members of this council was allowed to own the palm trees which yielded the palm oil; and in order to make their monopoly the more valuable, the council had ordained that no Srimat should allow the light of the sun to enter his dwelling. There was not a window to be seen throughout the place. The doors were hung with heavy double matting, through which not a chink of light could pass. The Srimats would certainly have died of suffocation had they not been graciously permitted by their chiefs to take down the matting at night, and thus let some fresh air into the darkened cells in which they were condemned to live.
The object of the council in making this extraordinary rule, was to secure a good market for their palm oil, by making it necessary that it should be burnt all through the day. If they had heard as much about free trade as we have in England, they would have been able to prove most effectually that to exclude the light of the sun from Srimat dwellings was simply to protect native industry. The council owned the palm trees; palm oil was made, by their rule about the windows, a first necessary of life. Two-thirds of the Srimats found their constant occupation in tending the trees and preparing the oil. In return for the oil which they necessarily consumed, the Srimats gave to their chiefs the best of everything that they possessed. The oil sometimes ran short; then what competition and strife there was among the different families of the tribe to see which could give the most costly presents to the chiefs in exchange for the sacred oil.
Captain Adam soon found that the question of the oil stood in the way of his being able to effect his object of setting up a communication for the exchange of merchandize and agricultural produce between the Srimats and the rest of the world. One of the old chiefs, to whom he broached the subject, pointed out, with much gravity, that his project was impracticable. "Two-thirds of our people," he said, "are occupied in our most important industry, the making of palm oil; the other third work hard to provide enough food and raiment for us all. We can only just produce enough to maintain the tribe in decency and comfort; we have no surplus that we could exchange for the products of other lands."
"Your soil must be very fertile," replied Captain Adam, "and your people very industrious and very skilful workmen if one-third of the tribe is able to produce all that is required by the whole Srimat population."
"Yes, yes; it is true," said the old man. "We have much to be thankful for." And he gazed upwards to the bad-smelling palm-oil lamp, the emblem to him of all that was sacred.
"I have been thinking," said the Captain, "that you have much more to be thankful for than you know of. Two-thirds of your people spend their lives in manufacturing this oil. Give me leave to put out all the lamps, and let my men knock holes in the walls of every house in the place; and you will have two-thirds of your people free to turn to the cultivation of spices, rice, and coffee, which you could send away, and receive in return agricultural implements, English cutlery, calico, and other things which you never will be able to make, but which we in England can make any quantity of."
The old chief frowned, and said very sternly, "Knock holes in the walls of our houses! Allow the sun to flood our market with his light! Our island would be ruined: our most important industry would be destroyed in a day. We should have 400 people, who now work in the palm plantations and in the oil presses, reduced to beggary at one blow!"
"But consider for one moment," urged Captain Adam: "these 400 people work hard all their lives to produce a light very inferior to that which you could all get for nothing if only you would have windows."
"The government is entrusted to the owners of the palm plantations," said the chief. "Put yourself in our place, and tell me if you would throw 400 people out of employment for the sake of a sentimental preference for the light of the sun over the light of the oil lamps. Call our people together. Describe your scheme of knocking holes in their walls and abandoning the plantations, and they would tear you to pieces, gentle as they are. It is easy for you to come here and advise us to ruin our industry; if we were so foolish as to take your advice we should have to bear the punishment of our folly, while you, when you saw the misery and desolation you had caused, would be able to hoist sail and leave us."
Captain Adam saw that the old man was too angry to listen to him any more, so he went away, first having obtained leave to come back in two or three days with a scheme which he said would prevent all the disasters which the chief had predicted as sure to follow the abandonment of the palm plantations.
Captain Adam set to work to get this plan into shape: the main feature of it was not to abandon the plantations suddenly, but gradually to transfer the labour they now absorbed to more profitable occupations. In two years he calculated that the whole 400 people now employed in the palm plantations might be growing spices and coffee enough to form a valuable export trade, and that at no time during the process of transition should any of the labourers be out of employment. They were to be removed from the palm plantations in companies of fifty at once; an eighth of the entire population was at the same time to be permitted the privilege of having windows; and in return for this favour the non-oil growers were to provide the ex-oil growers with necessary food and clothing till the first crops of coffee and spices could be sold, when the ex-oil growers would be quite independent of the help of their neighbours. Captain Adam was very pleased with his scheme; it was as clear as daylight, he thought, that it would make everybody in the island better off, and that owing to the great fertility of the land the transition from the palm to the coffee plantations could be carried out with very little difficulty.
A time was appointed for him to explain his plan to the council of the chiefs. They listened to him patiently till he came to the part where he tried to make it clear that in two years the palm plantations might be entirely abandoned; and then they rose in great wrath, and shouted him down. A comparative calm followed in a few minutes, when the old chief, to whom he had first broached the subject, rose and said: "Your scheme would ruin us; the palm plantations are our own property; you propose to us that they should be abandoned, and that we should submit to ruin and degradation. Leave our calm and peaceful island for ever: it was an evil day that ever you set foot in it."
Captain Adam blamed himself very much for not having found out that the palm plantations were the private property of the council, for he knew men too well to think they would ever pass laws involving loss to themselves. He tried to say something about compensation, and about other crops being raised on the land where the palm trees now stood; but they would listen to nothing, and ordered him forthwith to leave the island. This order he was obliged to obey, but not before he had attempted to interest the general population in his scheme. His success with the people, however, was not greater than with the chiefs; he tried to put the advantages of sunlight, good tools, ploughs, and scythes, and cheap clothing in as striking a light as possible; he did his best to show the people that they would have all these good things in exchange for their unwholesome oil. But they only saw in his plan the destruction of the most important industry in the island, and they joined heartily with their chiefs in driving him to his ship.
He left the Srimats full of indignation at their folly, and as far as he knows they are still living in a pestilential atmosphere, the darkness of which is feebly illumined by their ill-smelling oil-lamps.
This story is an illustration of the fact that when you have once got protection it is impossible to get rid of it without injuring the people who have invested their capital and labour in the protected industry. The case of the Srimats was an extreme one. The foreign competition with which the palm-oil industry was threatened would have swept the palm-owners out of the market in one day. The sun not only offered a vastly superior article, but he was ready to make a free gift of it to all comers. What tradesman could compete against such odds? The existence of protection interests a number of people in its maintenance, although its maintenance often fatally impoverishes the entire community. What protection really does is to take away labour and capital from those employments where they would produce the greatest return, in order to confine them to industries where they are comparatively unremunerative. The Srimats would have done the best thing possible with their capital and labour if they had cultivated the spices, for which their land was particularly well suited. They threw away the advantages which nature had freely bestowed upon them, and by one of the most extraordinary cases of protection in the world imprisoned their capital and labour in an industry where it was absolutely unproductive of wealth to themselves or anyone else. And this in a modified degree is what happens in every case where a native industry is protected against foreign competition. Home-grown beet-root sugar, in France, is protected against the competition of West Indian cane sugar by a heavy import duty. If the duty were removed, West Indian sugar would undersell the French sugar. The effect of the duty is that all people who live in France pay more dearly for their sugar than they otherwise would; and that a certain amount of French capital and labour is driven into an industry in which it can only be made profitable by taxing those who consume the commodity produced by it. Nature gives more help to the production of sugar in the West Indies than in France. Just as the sun was ready to supply the Srimats gratuitously with light, so the sun, the soil, and the climate, in the West Indies, perform gratuitously a great part of the work of producing sugar. This free gift the French might profit by if they would. But they say, "No; we won't be under such an obligation to nature, we will not take from her more help than she can give us in our own country." And so they refuse the greater and accept the smaller gift; just as the Srimats refused to take their light as a free gift from the sun, although they could not have grown their palm trees without his aid.