The consequence was that governments could now obtain all the gold they wanted for national purposes at practically a moment's notice by means of loans based on their national credits and assets. It would have been madness therefore to have gone on restricting all foreign imports as such, now that the fear of not having enough gold in the Treasury when it was most urgently needed for self preservation or defence had passed away. If then we find that this policy of restricting imports was still continued, it is evident that it must have been for some other reason than the mere necessities of the State. And so, indeed, it was. The imports continued to be restricted, but it was now mainly for purely trade considerations. It was not now a question of the Government getting what it wanted in spite of having to interfere with the legitimate interests of trade, but was distinctly a policy of protecting and encouraging native industry in the interests of trade itself, and under the belief that national wealth was more likely to be increased by this particular system of commercial policy than by any other.

And the proof of this is, that the restriction of imports was not now one embracing all imports alike as formerly, but was confined as far as possible to the import of those commodities only which competed in the home market with native productions; and especially, as was natural, to those that competed with the interests of the ruling classes of the time, - the landlords, the shippers, the merchants, and the larger manufacturers. But once the governments and the nations were at one in their whole-hearted policy of making the increase of trade itself their main object in their trade regulations, they were able, now that the home market was sufficiently protected by the restriction on certain classes of imports, to push more vigorously than ever the policy of extending their foreign markets by means of exports. The system of drawbacks and bounties, as well as of treaties of commerce with favoured nation clauses, was continued and enlarged; and to these was added a new device for the extension of markets abroad, which combined the maximum of certainty and safety with the minimum of sacrifice.

This was the establishment of Colonies in new countries, and the exploiting of their natural resources for the benefit of the mother country by the creation of strict monopolies in her favour, both in the home export trade and in as much of the import trade as was thought desirable or profitable.

Now this policy of extending the foreign markets by the above and other devices, while protecting the home markets by duties on imports likely to compete with their own productions, marks the final stage in the evolution of the old Mercantile System which was in vogue everywhere up to the time of Adam Smith. But as it has persisted ever since, with only temporary interruptions in all the great countries of the world with the exception of England; and as the industrial success of England in her opposite regime of Free Trade has up to the present, with certain reservations, been so unquestionable, it would seem as if this were the proper place for the full discussion of a problem and a situation which combined at present one of the most curious anomalies in the commercial policy of nations. But this is impossible at our present stage, inasmuch as the problem is complicated by the intrusion into its domain of the orthodox system of Political Economy as a scientific specialism; and I must therefore postpone its full discussion until the different stages in the evolution of the orthodox Economy have been passed under review and all the practical factors bearing on the solution of the problem have come into line.

If we could only represent the Free Trade of England as the next stage in the normal evolution and development of Protection, there would of course be no anomaly to resolve; but as the two systems are speculatively in point blank opposition to each other, this would seem to be an impossibility. And yet not necessarily so; any more than the apparent paradox that if a man were to walk far enough due East, he would, without altering his line of route, finally find himself due West of the point whence he started; or that if a man who is clothed will only continue to undress himself garment after garment, he will at last find himself naked. This would explain the policy of Free Trade if it could be shewn as well that at the period in question England had succeeded in making herself supreme over the rest of the world in some one or more great world-wide industries. For the effect of this would be, that she would neither require to stimulate her exports by drawbacks, bounties, or treaties of commerce, inasmuch as by the hypothesis she is already supreme and can undersell the foreigner without their aid; nor would she require to put duties on her imports, for by the same hypothesis the imports which would compete with hers are undersold already, while those that would not so compete would be imported free anyway.

And so Free Trade would be seen to be really the next stage in the evolution of Protection, when that system as a practical policy had to be adapted to an unique and unprecedented stage of industrial development, although speculatively and theoretically it was in direct antagonism to it; resembling in this those fishes which, like the shark, turn on their backs the better to secure their food, while theoretically reversing all the ordinary methods for the performance of that function.

Now, that England had in actual fact obtained the industrial supremacy assumed in our hypothesis will be seen later on; in the meanwhile we have to remark that the speculative doctrine of Free Trade, together with the orthodox Economy which formed its setting, actually took its rise not from the condition of industry in England, but from the abstract speculations of a handful of thinkers in France, and that it has been evolved purely along the lines of these speculations down through Adam Smith and his successors to the present day. It was adopted by Adam Smith, as foreshadowed in his Glasgow lectures, not only on its own speculative merits, but because it suited the industrial condition of England at the time; but it afterwards continued to run its course independently of, though parallel to, the evolution of her Free Trade policy. It was indeed a concomitant rather than a cause; and although it supported, strengthened, and intensified the movement in favour of Free Trade through every stage, still in its own development as a doctrine it proceeded on abstract grounds entirely, and quite independently of the practical policy.

And the consequence was that while the doctrine began as the intellectual support of a policy peculiarly adapted to the practical requirements of a particular nation, it ended, like a doctrine of Theology, in being elevated into an infallible dogma which was held to be true for all nations at all times. All this will be seen in detail as we proceed; I have alluded to it here mainly for the purpose of introducing the reader to the theories of the Physiocrats who were not only the real founders of the speculative doctrine of Free Trade but of the orthodox system of Political Economy as well.