Page:The Economics of Unemployment.djvu/159

temptation to retain this fiscal remedy for unemployment during normal trade conditions, so as to force disproportionate amounts of capital and labour into certain favoured industries and keep them fully furnished with lucrative orders at the expense of the general body of national trade, would be irresistible. Now the injurious effect of such a policy is obvious. It would offend the first principle of productive economy by forcing into certain avenues of employment capital and labour which could find more productive occupation elsewhere. The total wealth of the community would thus be diminished by spreading the same aggregate of employment in a more wasteful manner. In other words, it is only the recurrent phenomenon of general trade depression which gives specious validity to a tariff as a mitigation of unemployment.

The other fatal flaw in the policy, except on a short range expediency, is economic. It will be admitted, by all free traders at any rate, that the broad effect of any tariff, even under the circumstances here described, must be to force capital and labour to be less productively employed upon the average than if left to the undiluted play of free international trade and investment. This means that such action as we contemplated for the exclusion of Belgian rails would cause rails to be made more expensively in Britain by employing capital and labour in that country than by employing these factors of production in Belgium. If this simple case be expanded into the dimensions of a protective policy, designed primarily to keep the maximum of employment in the protected country, it must fail. For capital employed under these conditions will be less productively and less profitably employed than if it went abroad to Belgium or elsewhere where it was free to utilise cheaper or more efficient labour. The inevitable result of such a protective tariff would be to stimulate the export of new capital from this country, so leaving a reduced supply for the development of our internal industries. The reduced employment for labour thus brought about would stimulate the emigration of workers to countries where the supply of capital and of employment had been made more abundant by the operation of this tariff. The only way of preventing this reduction of her volume of employment in this country would be by preventing or penalising the export of capital, a policy actually proposed by certain persons who