practical difficulties of protection. The higher the duties imposed, the greater will be the rush into the protected branch of industry; and none will be satisfied until they make the business profitable, however imperfectly conducted. Hence there will be a constant call for increased Witness the history of protection in the United a tariff in 1816, a higher one in 1820, higher yet in 1824, still higher in 1828, with continued changes from that time to this.

duties. States,

CHAPTER VI.

BALANCE OF TRADE.

WHAT is meant by the balance of trade?

An actual balance of trade is the difference between the amount of values exported and the amount of values imported. This seems a very simple proposition; yet the question is one of great complexity, from the fact that it is difficult to determine with certainty whether the exports of a nation do or do not actually equal the imports. Superficial observers resort to the financial returns made to the government; and finding, for example, that the imports of 1854 amounted to $304,562,381, while the exports were but $278,241,064, leaving a difference of $24,321,317, they hastily conclude that the balance of trade was against this country to that amount. Such a conclusion would not have a sufficient foundation.

To understand this subject, we must notice that the exports are stated at their value at our own custom-houses, while the amount imported is stated at the value in foreign countries.* If we suppose the amount exported in 1854 was on American account, and paid a profit of only nine

* Besides, exports are estimated at currency prices; imports, in gold values, a very wide difference under a depreciated currency.

per cent on the custom-house valuation, we shall find that it will amount to $26,321,317, a sum larger than the assumed balance; and, if so, the commodities exported actually paid for the amount imported, and the supposed unfavorable balance is annihilated. As the goods exported should sell for enough abroad, and as they do generally sell for enough to pay all charges of freight, insurance, &c., with reasonable commissions, say in all fifteen per cent, we may justly infer that there was, in fact, a balance in favor of this country in 1854. But the question whether there was or was not an actual balance that year can only be determined by ascertaining whether our exports generally sold for an advance sufficient to pay for the imports. This is known only to those engaged in or familiar with the results of the export trade of 1854. The balance might have been greater or less than what it appears from custom-house statistics.

On the other hand, in 1855, our exports exceeded our imports by $13,688,326. Does that show a balance in favor of the United States? Apparently; yet there might have been a loss upon our exports which would more than balance the $13,688,326.

Although the financial tables of the Secretary of the Treasury do by no means decide the balance of trade, and the custom-house returns are never conclusive evidence, yet there are cases in which there is no reasonable doubt on which side the balance is. In 1836, for example, we exported one hundred and twenty-eight millions, and imported one hundred and eighty-nine millions; an excess of sixty-one millions, making a difference of sixty per cent over exports. In this case, there could be no doubt there was a larger actual balance against the country, because the profits could not have been equal to the excess. So too, to go further back, in 1816, the exports were fifty-two millions; imports, one hundred and twelve millions; excess, sixty millions, or more than one hundred per cent. The

unfavorable balance in both cases caused great distress by the necessary exportation of specie.

Balance of trade how adjusted.

We have heretofore said that an unfavorable balance must be liquidated with specie. This is the general fact; but it is not always disposed of in that way. For example, the balance against the United States in 1853, as per Financial Report, was thirty-seven millions. Now, if this were in fact an actual balance, a part of this might have been extended to the next year, and paid in cotton or wheat; or, what is more probable, several millions of railroad or other stocks might have been sent abroad and sold, and the balance settled from the proceeds.

If the commerce of a country is in a really prosperous condition, the value of its imports will, in the long-run, exceed its actual exports, because its export trade should pay a profit. No country is enriched by trade, unless its aggregate imports do exceed in value its exports. It is no matter whether the excess of imports over exports is brought into the country in specie or any other desirable commodity, provided its own currency be a true standard of value.

The trade of the United States for 1863 showed the following results: Exports (Financial Report, 1864), $350,152,125; imports, $252,187,587; balance, $97,864,538. The returns also showed an export of gold to the amount of $82,364,482, an import of gold of $9,584,105, giving a balance of $72,780,377. A considerable part of this gold was, doubtless, sent abroad for safe keeping by timid capitalists, and not over-loyal citizens. The large balance of seventy-two millions in favor of the United States was no indication of a profitable trade that year; quite otherwise. The balance of gold exported in 1864 was ninety-one millions. Another fact, that throws additional conjecture upon the apparent balance of trade, is, that false invoices are used to an enormous extent at our American custom-houses.

Whenever duties are charged upon the cost of the commodities, it is an object to have them invoiced as low as possible. Fraudulent invoices are often made out abroad and sworn to by the importers here, and thus the actual value or amount paid for the foreign merchandise is not accurately exhibited. The Revenue Commissioners (see their Report to the Secretary of the Treasury, January 29, 1866, page 45) estimate that the frauds at the New-York Custom-House alone are from "twelve to twenty-five millions annually." The aggregate of these frauds throughout the country has been estimated as high as forty millions per annum; but, if they amount to only thirty millions, the "balance of trade" is seriously influenced by them.

There is still another consideration; viz., that the United States are much indebted abroad, and a large sum is required to pay the annual interest. This can only be paid by our exports of merchandise or specie; for both are alike. reckoned in our list of "exports." We owed $500,000,000 abroad in 1860 (see Foreign and Domestic Commerce, 1863, page 42, Treasury Report). The Comptroller of the Currency, in his Report for 1865, page 7, estimates the amount of our securities sent abroad the last five years at $713,000,000, in all, then, $1,213,000,000. The interest on this sum, at six per cent, will be $72,780,000; and this must be provided for in our exports.

Many considerations of this general character might be brought forward; but sufficient has already been said, we trust, to show what the real nature of a balance of trade is, and how difficult a matter it must always be to determine with accuracy upon which side it actually is, and what its

amount.

PART SECOND.— INSTRUMENTS OF EXCHANGE.

CHAPTER I.

BARTER AND THE DIFFERENT FORMS OF CURRENCY.

WE have discussed the principles upon which exchanges are made. We now come to consider the instruments by which they are effected.

These are of three kinds:
:-

1st, Barter.

2d, A common medium, or currency.

3d, Different forms of credit.

No person produces every thing he wishes to consume. Even in the savage state, men will obtain different products, as they have skill and opportunity. These they will exchange among themselves in kind.

As the civilized state appears, the necessity for interchange of commodities increases. Every mechanic must exchange his products with every other mechanic, and all these with the agriculturist and fisherman; so that exchange becomes one of the greatest departments of human industry. But, under these circumstances, barter, or exchange in kind, becomes a very inconvenient and clumsy mode of effecting the desired object. For example, the farmer may wish to exchange wheat for a hat; but the hatter is already supplied: what, then, will the hatter accept? A table. The farmer must then go to the cabinet-maker, and offer his wheat for a table. But the cabinet-maker is supplied with wheat. He would, however, accept a pair of boots. The farmer applies to the boot-maker, who happens to wish for wheat and accepts the offer. With the boots the farmer gets the table, and with the table gets the hat which he desired.