Free Trade or Protection? (January 1923)
The object of production is to obtain the requirements of life at a minimum cost in terms of effort and sacrifice. We, each require a great many different things, but each one of us is capable of producing only one or two things, and so even it it were desirable that everyone should be a kind of universal provider for himself, such a condition of affairs is utterly impossible. We might each pare our own toe-nails or wash our own faces, but most of us would be bad hands at pulling our own teeth or cutting our own hair. There is a great deal of economic wisdom in the proverb which says: 'Let the cobbler stick to his last'. And so we are all specialists for the production, each one of a particular thing and we exchange the things that we produce for the various things that we require. In this way the experience of ages has shown that it is easiest for us to provide ourselves with our various requirements.
Everyone appreciates this, and no one objects to the exchange of commodities amongst people of the same nation. But international trade is not always regarded as equally desirable, although the general reasoning which shows the advantage of trade between nations would also indicate the advisability of trade between inhabitants of different States. For if we look at the world as a whole, we find that the resources and aptitudes of different countries and different peoples are not the same. We cannot produce pepper or mustard or cocoa-nut oil in this country, and obviously if we want to use such products of tropical lands, we must export some of the products of our own land in exchange for them.
But even as between countries in the same latitude and longitude there are important differences in
their natural resources. There is absolutely no coal in Holland or Denmark. There is a great deal of' coal and other mineral deposits in England and Germany. And there is little coal, and very little iron, in Ireland. And so an international trade between Ireland, Holland and Denmark on the one hand and England and:Germany on the other hand, in which agricultural produce is exchanged for coal and manufactured articles depending on coal -- such an international trade is inevitable, and is from every point of view desirable, since it enables the inhabitants of all the countries concerned to provide themselves with the requirements of life at a minimum cost.
Thus there is a prima facie case for universal free trade, because only under such conditions is it likely that the available labour power of every country will be applied to its available resources in such a way as to produce a given output at a minimum real cost. Now, without Free Trade, under a system of protection, it is probable that a country will not make the most economic use of its available labour power, some labour being attracted into artificially fostered industries, to the neglect of other industries which, under conditions of Free Trade, would have yielded a larger output.
Without Free Trade we cannot have the most effective distribution of available labour power to available resources. But even with Free Trade we may, for other reasons, have failed to distribute our labour power in the most effective manner. Thus Ireland has lived under a system of Free Trade for many years, and yet many remain undeveloped which ought to have been developed.
To mention only one or two, the raw material for the pottery, fireclay and glass industries exist in considerable quantity, and yet these industries in Ireland are almost non-existent. We find also rich land which is capable of yielding a considerable output scarcely cultivated at all, while quite small farms and land which is relatively unproductive are occupied by small farmers who find it impossible fully to employ the available labour of their families on such land, and exceedingly hard to get a living from it. But the remedy for such a state of affairs has nothing to do with Free Trade or Protection.
Now, as regards international trade in general, certain important misconceptions exist. People act and talk as if the great object of international trade should be to export everything and import nothing. But a country which acted in this way would be either a nation of lunatics, or else would be the victim of some extraordinary misfortune.
For to export more than is imported is a sure sign of a country being exploited by another country. For example, as a result of the indemnity imposed on Germany, in so far as it will be paid, Germany will have to export an enormously greater value than she imports; and Ireland, under the operation of excessive taxation during the nineteenth century, and under the operation of absentee landlordism, was normally in the habit of exporting a greater value than she imported. So that to desire that exports should reach a maximum and imports should be reduced to a minimum is a form of economic insanity.
The next misconception is that referred to in the phrase 'sending money out of the country'. It is generally thought that when we buy an article which is manufactured abroad, the money is permanently lost to the country; but this is nonsense. The truth is that every imported purchase from abroad gives rise to a demand for a corresponding export.
When we 'buy English machinery or English coal, or any other English product, the money passes from hand to hand, and finally comes back to us in the form of payment for Irish bacon or Irish stout or Irish cattle, or some other Irish product. In fact, the only way in which the foreigner can pay us for our exports is with the money he gets for selling goods to us. And thus we cannot reduce our imports without at the same time reducing our exports. For if we reduce our imports, the demand for our exports will diminish by the diminution in the purchasing power obtained by the foreigner in payment for what he sends to us.
Consequently we may as well face the fact, that if we manufacture what we formerly imported, we will diminish our exports as well as our imports. But as regards some commodities it may be an advantage, nevertheless, for us to produce thein at home instead of importing them from abroad. It will be an advantage if, after the new industryis started, it results in a more effective distribution of our available labour power to our available natural resources.
To illustrate, we will suppose that the export of 100 tons of Irish potatoes is balanced by the import from England. of 100 bicycles. By diverting the labour employed in producing 100 tons of potatoes, suppose we could produce, say 110 bicycles, and sell them for the same monev as the 100 English bicycles formerly fetched, there is a gain to the community as a whole. But if the labour diverted from potatoes to bicycles can only produce 90 bicycles for sale at the same money as 100 English bicycles formerly fetched, then there is a loss to the community as a whole.
Now the general effect of Protection is to substitute an artificial for a natural distribution of available labour to available resources. If foreign bicycles are made artificially dear, Irish labour and capital will be devoted more and more to the.production of bicycles. We will suppose that the tax is such that the price of 90 Irish bicycles equals the price of 100 English bicycles without the tax, or 90 English bicycles with the tax. If the import duty is at that, or any higher level, no English bicycles will come in. The result to the country at large.will be that the labour formerly employed in producing 100 tons of potatoes in exchange for 100 bicycles now produces 90 bicycles direct.
But if at the higher price the demand for bicycles in Ireland does not absorb the whole 90, then less than 90 will be manufactured and some of the labour formerly employed in growing potatoes will fail to find employment in manufacturing bicycles, and will, therefore, be out of a job altogether. In other words, Protection, though it increases employment in the favoured industries, may diminish employment in the country as a whole.
On the other hand, if by diverting the labour engaged in producing 100 tons of potatoes, 110 bicycles can be manufactured and sold at the same money as 100 imported English bicycles, then it is not necessary to resort to Protection in order to secure this result. It may be necessary to improve technical education in order to make the former agricultural worker a skilled mechanic. It may be necessary to extend and improve general education so as to increase the number of capable business leaders and organisers. It may be necessary to re-organise internal transport, to develop local sources of power, to increase the facilities for obtaining capital and credit; and these are proper objects for the care and attention of the National Government.
But to expect industrial development merely because the import of foreign manufactured articles has been made artificially dear is like the action of a gardener who, not knowing how to plant cabbages, should throw them on a hot-house floor and expect them, to grow although he had not planted them in the soil. We want our new industries to strike their roots deeply into the soil of Ireland, and to be able to survive, and even profit by the slings and arrows of international competition.
So far the general conclusion is that Protection is either unnecessary or undesirable -- unnecessary if it means the fostering of industries which are suited to the country and are quite capable of growing in the open air, undesirable if it means the protection of commodities the manufacture of which is not suited to the country, and in which we can never hope to excel the foreigner.
The staple industry of Ireland is, and is likely to remain, agriculture. Anything which injures agriculture is injurious to the country as a whole. By no possible reasoning can it be shown that Protection is likely to benefit agriculture, and any conceivable form of Protection is certain to injure agriculture.
Irish agriculture is mainly an export industry. That is to say, the home market of Irish agriculture is relatively small, compared to the foreign market. By no device known to political science can the action of a State protect the foreign market for its exports. It is quite beyond the power of the Free State to induce the English Government to put a tax on Danish butter or American beef imported into.England. All that the Government can do is to protect the home market, and when that is relatively slnall, such protection will be violently unpopular with all urban interests. The English cotton industry sells about two-thirds of its product abroad, and is, therefore, violently opposed to Protection.
We may take it, then, that the protection of the home market for Irish agriculture is not practical politics. It is possible that the protection of the Irish woollen and the Irish agricultural machinery manufacturing industries and the like may be asked for and obtained. A similar situation has existed in Canada, which, although mainly an agricultural country, has sought to force an unnatural industrial development in the towns by imposing a high protective tariff on the import of foreign manufactured articles. The consequence to the Canadian farmer is that he sells his produce in a free markets but he buys most of the requirements of life and industry in a protected market. And Canadian farmers, to a man, are violently opposed to the protective tariff.
To take an extreme case. We will suppose a protective tariff imposed on all foreign manufactured articles so high as effectively to keep out all such goods. In that case there would be a tendency for
Irish labour and capital to be diverted to the Production of such articles fornerly imported.
There would be a corresponding diminution of the export of agricultural produce from Ireland. The effect on England would be that the labour formerly employed in supplying the Irish market with manufactured goods would be displaced; but owing to the shortage in the supply of agricultural produce, due to the fact that Ireland was no longer exporting such produce to England, there would be a demand for increased labour in agriculture in England. There would be thus a tendency for labour in England to be diverted to agriculture, and for labour in Ireland to be diverted to manufacturing industry.
This would almost certainly mean a less effective distribution of labour to available resources in Ireland and also in England, and thus would cause a diminution in the real incomes of both countries. If this would take place in the. extreme case we have supposed, a similar result, differing only in degree, would take place if, by protecting certain Irish industries we divert Irish labour to the production of commodities for which the country is not suited.
As regards new Irish industries for which the country is suited, I have already pointed out that such industries do not require protection in order to bring them into existence. But perhaps the chief objections to Protection are not economic, but political. If politicians were omniscient, and if they really had the interests of the country at heart, thev might conceivably use Protection as a means of giving support to a new industry which was well suited to the country, and as soon as it had reached a certain stage, would take it out of the hot-bed and allow it to grow in the open air.
This is the favourite argument for Protection. It is called the 'infant industry' argument. But in practice the infant strongly objects to being taken out of the hot-bed. By the time the question arises the infant is exceedingly vocal, and is able to produce 100 plausible arguments to prove that the country will be ruined unless it is for over protectecl from the cold winds of competition.
In other words, vested interests grow up around protected industries. These interests find their spokesmen in a democratically elected Parliament. They find no difficulty in identifying their own supposed interests with the general interest of the community. And although. the two are diametrically opposed, the representatives of other interests are not sufficiently alert or well-informed to resist the clamour and the intrigues of the interested infants.
This is what happens in the long run if an industry which is really infantile should happen to obtain protection. Even when the child is quite able to walk alone, it refuses to fling away the crutch which has hitherto supported it. But in practice it is not the infant industries that obtain protection, but the well-grown and quite successful industries which have their interested voters in the country, and their interested representatives in Parliament.
To take an example: the spinning of wool into woollen thread is relatively undeveloped in Ireland. But the weaving of woollen thread into cloth has obtained considerable development. A theoretical case might be made for putting a tax on the import of woollen thread, with a view to the encouragement of this infantile industry. But the weavers of woollen cloth, who have already developed a considerable business, would, naturally and rightly, oppose the imposition of a tariff which would have the effect of making the raw material they use more expensive than before, although the same people would probably welcome a tariff on foreign cloth. And so the infantile wool-spinning industry would be most unlikely to be protected, whereas the woollen cloth industry would have a much better chance.
The trouble is that what is a finished product at one stage of manufacture is the raw material at the next. The farmer might like a tax on the import of raw hides, but the tanner would certainly object to anything which made hides dearer, though he would, no doubt, appreciate a tax on the import of foreign leather. But the boot-maker would have a word to say about the wisdom of imposing a tax on raw leather, though he might not object to a tax on the import of foreign boots.
In practice, once Protection is introduced for one industry, the representatives of the various other kindred industries will clamour for 'protection' too. Thus we might have leather manufacturing interests, boot-making and hide-tanning interests competing with one another for tariffs on their respective products, or combining in a dishonest combination to fleece the consumer. After each of them had got his protective tariff, he would be no better off than before, but the country as a whole would be the loser.
This is what invariably goes on in all high Protectionist countries, and its disastrous effects on the morale of public life have to be experienced in order to be fully realised. At the present moment the various new States of Europe are ruining themselves and one another by the imposition of protective tariffs, and England, by her Safeguarding of Industries Act, has quite possibly done more to injure English commerce than the Germans were able to effect with their submarines.
The fact is that there is no royal road to industrial development, and to follow the Protectionist star is to follow a will-o'-the-wisp. But there are various things which, if accomplished, would facilitate industrial development. The great objection to Protection is that it is a great impediment to exchange, lessens the gain from international trade to all concerned, and causes a wrong distribution of labour power to available resources.
Inadequate transport facilities are a similar impediment to exchange. Looking at Ireland, we find that the arrangements for internal transport are inadequate, though the arrangements for the export of Irish produce are tolerable enough. For example, a quantity of lobsters caught off the coast of Donegal was shipped first of all to Aberdeen, from there to Billingsgate in London, from there to the Dublin fish market, and from there back to Derry, where they wore finally consumed.
Now the lack of facilities for landing and storing fish on the coast of Donegal, and for their transport in refrigerating railway waggons or motor trucks to Derry, has exactly the same effect as if there was a protective tariff imposed on the sale in Derry of fish caught off the coast of Donegal. I take this illustration from the Diil Commission's Report on the Irish fishing industry.
Now, if 'Protection is not a good thing in the trade of one country with another, the situation is certainly no better when a thing similar to Protection has the effect of imposing barriers to the trade of Co Donegal with Co Derry, or Co Cavan with Co Roscommon. The obvious thing to do is to improve the internal transport by road, railway and canal, and to co-ordinate these various forms of transport into a single system.
It is also desirable to develop local sources of power, especially water power; education in all its branches, and for all classes of the community, should be improved out of all recognition. If this is the policy of our new Government, industrial development in every part of Ireland will follow as a matter of course.
Such a policy will have the effect of increasing the production and circulation of wealth at home. It will cause no violent dislocation in our existing international trade, and will benefit ourselves without injuring others.
There is a large field of possible industrial development in Ireland in connection with small-scale village industries -- basket-making, furniture manufacture, and so on; in connection with more ambitious undertakings, like the establishment of a dead meat factory in Waterford, and in the various industries that arise from the working up of the bye-products of such larger industries.
But agriculture will remain our staple industry. It will remain the broad foundation on which all other industrial developments will be solidly and securely built. Agriculture, too, will benefit by the better organisation of transport, and by improvement in the general standard of education. These will be proper objects for Government activity.
But much will remain to be done by the farmers, acting, individually and co-operatively. For example, we lose millions every year by selling dirty and stale eggs. This enormous loss could be remedied by a little attention to the nests, and by a more, general realisation of the dishonesty, as well as the inex- pediency, of selling stale eggs for fresh ones.
With regard to Free Trade and Protection, a right policy on the part of the Government will depend on a right opinion among the people. It is well to know what Governments ought to do. It is still better to know.what we ourselves ought to do, and to do it.
Co-operation in Northern Ireland
(The following appears on p104 ff of the London 1927 Year Book of Agricultural Co-operation, under the title 'Note on Northern Ireland'. It is attributed to one JJ Johnston, and there is a reference in it to a J Johnston who was Secretary of the UAOS after the split in the IAOS imposed in 1922. I am again indebted to Kate Targett in the Plunkett Foundation, Oxford, for digging it up. Despite the double J in the attribution, I am inclined to think it might be attributed to my father, as it shows evidence of his concerns. He was not however the J Johnston mentioned therein. RJ June 2000)
The effect of the separation of Northern Ireland from the Irish Free State in 1922, upon the hitherto undivided co-operative movement in Ireland, was that the IA0S in Dublin found itself obliged to terminate the engagement with its staff employed in the northern branch office in Belfast. The reason for this was that the IA0S received a grant from Free State Government funds, and the Government would not allow any of it to be spent outside the Free State. With commendable promptitude Mr Harold Barbour launched the Ulster A0S to carry on the work in Northern Ireland, with Mr J Adams as Secretary. The Northern Government gave a grant on a pro rata basis, which, with the support of the societies and friends of the movement, enabled a good start to be made.
The number of co-operative societies in Northern Ireland in 1922 was 152; of these seventy-nine affiliated to the UA0S. As the area was pretty well covered by existing societies, the Organisation Society concentrated on the education of members and the promotion of improved business methods. The support of the societies, however, did not come up to expectations. After the second year, the Ministry of Agriculture withdrew the grant, and took Mr Adams over to their staff; the organisers employed by the society resigned. The position was carefully considered by the committee, and it was decided to carry on with a reduced staff and keep expenses as well as possible within the income.
Mr J Johnston was appointed Secretary, and Miss MC McVicker, Assistant Secretary. The societies rallied to the support of the central body, and funds were provided to carry on for a year, 1924. In proof of the useful work done, the contributions from the societies and friends of the movement still enable the UAOS to carry on. The small staff employed does not, however, admit of the promotion of other forms of co-operative organisation, such as the co-operative marketing of produce, which, nevertheless, is regarded as vital to the agriculture of Northern Ireland.
In view of the continued successful working of the UA0S, and of the evidence provided by the support of the societies that there is a real demand for this work, its supporters have invited the Ministry of Agriculture to reconsider their decision and renew the grant. The greater interest in co-operative agriculture which is finding practical expression by the Free State Government should also help to incline the Government of Northern Ireland toward a more sympathetic treatment of the movement in the six counties.
As it is, the co-operatively organised farmers, who constitute the majority of the farmers, feel they have not been fairly treated, in that the grant withdrawn from the UA0S, a non-political organisation, was given to the Ulster Farmers' Union, generally regarded as a political body. This was done, apparently, under the impression that the Union would be able to organise the marketing of agricultural products.
It did undertake the purchase and sale of farmers' produce and requirements, but ignored the advice of the Organisation Society -- namely, to adopt a co-operative policy and avail itself of the existing organised co-operative societies. Instead, it formed a joint stock cornpanv, the Farmers' Produce Company, which, after two years' trading, showed a loss of over £14,000. The company has since been converted into a co-operative society.
Nothing having been said about this change of policy, however, at a joint conference of the UFU and the UA0S, held under the chairmanship of the Secretary to the Ministry of Agriculture, prior to the change, in September, 1925, the committee of the UA0S felt they were not justified in taking any action regarding a proposed amalgarnation of the two bodies.
A special committee from each body was appointed to meet and discuss the possibility of closer working relations and joint action on questions of common interest, but no meeting of this joint committee has yet been held (March, 1926).
There is, in the opinion of Ulster co-operators, a great need for an extension of co-operative marketing. lt is, however, regarded as essential that there should be some form of binding rule or members' contracts in any marketing or manufacturing scheme, and the uncertainty of the legal standing of such rules or contracts has delayed progress in this direction.
A case was recently carried to the Court of Appeal by a newly organised co-operative city milk supply society, which had incorporated a five years' binding rule in its rules. The Court decided against the rule as being in restraint of trade, with the result that the newly formed society has had to go into liquidation. Before any further organisation is undertaken, it will be necessary for the Ministry of Agriculture to define a form of members'.contracts which will stand in law.
The production and marketing of creamery butter is the outstanding achievement of Ulster co-operation. The marketing of eggs is also slowly gaining ground. There will be large possibilities in organisation for the sale of potatoes and grain, and for bacon curing and the sale of cattle, when the Ministry of Agriculture is prepared to encourage the development of agricultural co-operation in Northern Ireland, at least to the extent it is being encouraged in England through a separate branch of the Ministry of Agriculture devoted to the furtherance of every form of co-operative effort amongst farmers, or on the broider lines of the Free State and IA0S policy, from the benefits of which, by political accident, Ulster farmers are excluded.
Plunkett House Library: the Irish Statesman (new series)
This, when it re-started after the Civil War, was a focus for the writings of most of the leading Irish intellectuals, and it lasted up to 1930; its demise was the measure of the fragility of Free State cultural life. I give a brief overview of the available volumes, to some of which JJ contributed. RJ Oct 2000)
Volume I of the new series extends from Sept 15 1923 to March 8 1924. Authors include frequently AE, Aodh de Blacam and David Houston (on milk quality); occasionally Austin Clarke, Padraig Colum, Edmund Curtis, RM Fox (on the death of Lenin). There is on October 6 1923 a letter from James Douglas calling for Ireland's membership of the League of Nations on the same basis as the Commonwealth countries. There is a strong anti-treaty letter from Mary McSwiney. Joe Lemberger the Queens economist supports the Workers Educational Association (27/10/23). Arnold Marsh (16/02/24) writes on English as the mother-tongue.
Vol II, 15/03/24 - 15/09/25; regular contributors were AE, Curtis, de Blacam, Houston, Susan Mitchell and George O'Brien. On 5/04/24 Houston reports on the setting up of a laboratory for dairy bacteriology, in Plunkett House. He also has articles on the National Brand for Export Butter, and on the identification of sources of contamination, mostly in the cooler. Vol III 13/09/24 - 7/03/25 is dominated by AE and George O'Brien; there is a bog increase in reviews.
Vol IV 14/03/25 - 15/09/25 contains the first appearance of JJ; George O'Brien reviews his 'Groundwork of Economics'; I have abstracted this along with the book itself elsewhere. JJ also has an article on municipal reform; at about this time he was standing for election to the Seanad. He also had a letter on the Universities. There is the first of a series of Paris letters from Simone Tery, whom we have encountered with JJ in the Albert Kahn stream; it is reasonable to suggest that JJ might have contributed to encouraging her interest in Ireland, about which she wrote articles and a book for the French market.
On 18/04/25 RN Tweedy attacks the Shannon Scheme. Tweedy had been a supporter of the DU Co-op; he was an engineer; he subsequently went to Russia and reported on peat production; he became a supporter of left-wing politics, and we will encounter him via RJ in the 40s and 50s. His opposition to the Shannon Scheme would perhaps have been based on support for the alternative more modest proposal to harness the Liffey which was then being propounded by Purser Griffith and the engineering establishment; McLaughlan was an outsider, and tended to be dismissed as visionary. It is to the credit of the Free State Government that McLaughlan prevailed.
Vol V 12/09/25 - 6/03/26 has a review by JJ of Foster and Catchings Profits and in this he refers to his earlier review of Money; this turns out to have been signed 'MS'. So JJ was inclined to use pseudonyms when he wrote quasi-politically or polemically. The main contributors are AE, Curtis, Fox, JM Hone, Houston, Susan Mitchell, George O'Brien, JP O'Reilly.
(It can credibly be suggested that JJ's writings during this time were dedicated to the development of a public profile in the context of the 1926 Seanad election, in which however he was unsuccessful.)
Vol VI 13/03/26 - 4/09/26 has an article by JJ on Protection, presumably an update of his earlier one in the Irish Economist given above. Contributors no longer include Susan Mitchell, whose obituary appears in the scrap-book JJ kept covering this period, which I have summarised in the Seanad stream. So he must have valued her, as indeed he did the Statesman group.
The publication lingers on until April 12 1930; its last issue contains an 'obituary' by Horace Plunkett. Simone Tery remained in contact as the Paris correspondent. Contributors in the later period included, as well as the stalwarts mentioned above, PS O'Hegarty, Walter Starkie, Frank O'Connor and others. Towards the end James Douglas on 23/11/29 contributed a review of Keith's Sovereignty of the British Dominions.
***
I found also in the Plunkett House library a conference report, July 28-31 1924, Agricultural Co-operation in the British Empire. This was the first act of the new Plunkett Foudation in Oxford; there were about 100 from England, 5 from Wales, 11 from Ireland, 3 from Scotland, 1 Newfoundland, 10 Canada, 13 Australia, 10 New Zealand, 9 South Africa and 1 Malaya. The Irish group included Lionel Smith-Gordon representing the Land Bank and HF Norman for the IAOS.
(We have encountered Smith-Gordon in the Oxford Union debates during 1911-12, where he had taken a strong Socialist position.)
The introduction by Plunkett built on the DATI (Dept of Agriculture and Technical Instruction) and the IAOS (Irish Agricultural Organisation Society) as a positive experience, despite his more recent negative ones (his house had been burned by the 'irregulars'; he refers to this in a footnote as the work being 'temporarily dislocated by political disturbances in recent years').
The work of the Plunkett Foundation continues to this day, and is global in its scope. Plunkett House in Dublin on the other hand has declined in significance, in proportion as more and more of the larger creameries abandon their co-operative ownership for the capitalist 'plc' structure. I treat this in subsequent decade modules.
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Copyright Dr Roy Johnston 1999