convey minerals still, as a rule, carry only eight to ten tons. Quite a number of the smaller blast-furnaces are managed by ill-trained and inadequate staffs. All this is very true; and quite recently, at a meeting of blast-furnace owners at Düsseldorf, it was set forth with gusto by a well-known German authority for the comfort of his fellow-countrymen. The English were going downhill simply because they were stupid-that, in brief, was what he had to tell them. We heard the same condemnation in Britain itself, in the years before the war, from outside critics of the steel business. It is so easy, when an industry suffers, to say that it has only itself to blame, because of its antiquated methods. Just the same was said by the literary representatives of industrial interests in the '80s and '90s, when English arable farming suddenly collapsed before the competition of virgin soils. In each case there has been an element of truth in the assertion; in each case the declining industry had shortly before been at the zenith of its reputation in the world. It was, indeed, largely because our iron industry had so long led the world, and because the country was provided with plant that but lately had been the model of efficiency, that English iron-masters were slow to adapt themselves to the new situation.

Yet, however much truth there may be in the charge of defective technical methods, it is only a part of the truth. To single this out as the one explanation of our backwardness is to fall into that error of undue simplification of causes to which disputants on national commercial policy, on all sides, have been equally prone. That German iron-masters were more enterprising is not quite an ultimate fact; the question is, why they were more enterprising. In part, it was because the iron and steel trade was a newer thing with them; their business leaders were the first generation of their kind, while in this country big businesses were largely being run by men of the second generation, clogged by the self-satisfaction derived from the past achievements of their houses. But German iron-masters were also more enterprising because they could operate on the basis of a secure home market. The dumping of English iron on Germany was among the chief reasons for Germany's return in 1879 to the

policy of tariff defence. Naturally it can never be proved that, without the tariff, the German iron and steel industry would not have managed ultimately to get upon its feet-though that 'ultimately' might have been long deferred. But certainly it is the general opinion among German economists that a tariff barrier was necessary to enable the industry to make a good start, and that the possession of the home market has been ever since a source of strength. We may take as their representative Prof. Schmoller, a man of cautious judgment and reasonably impartial as between absolute theories on either side. His verdict is that, on the whole, the new development of trade policy in 1879 was a necessary and wholesome one; and the first reason he gives is that it did in fact secure for the rising German industry the home market which was then threatened.

Those who are still disposed to believe that no industry really suited to a country ever needs Government assistance in these days of widely diffused business enterprise will do well to meditate on a recent utterance of the Harvard Professor, Dr. Taussig. The use of J. S. Mill's 'Principles of Political Economy' as a text-book has survived at Harvard down to our own days; and for thirty years we have been accustomed to turn to the ever new editions of Prof. Taussig's 'Tariff History of the United States' to discover all the economic sins of the manufacturers' lobby in each revision of American duties. Yet this is how he now writes in 'Some Aspects of the Tariff Question':

'Notwithstanding early prepossessions to the contrary, I am disposed to admit that there is scope for protection to young industries even when the manufacturing stage has been fairly entered, and when the question is whether some particular kinds of manufactures shall be added to others already flourishing.'

He points out that the ordinary reasoning of the older economists about international trade belongs to the elementary stage' of the argument. It is necessary to proceed further and come to close quarters with the specific instance; to ask whether it is likely that eventual gain will counterbalance immediate loss and what the conditions actually are in the country in question.

'These are not (says Prof. Taussig) questions to be answered through deductive reasoning in terms of yes or no; they are to be answered, if at all, through laborious research and in terms of probabilities.'

What the probabilities are in the case of Germany is sufficiently indicated by a few figures. In 1879 the German iron manufacture had been undefended by customs duties for two years; between 1865 and 1877 the tariff had been gradually reduced to the vanishing point. The output of pig iron in 1879 was 22 million tons, or rather less than in 1873; the intervening years had shown lower figures. But from 1879 the output increased every single year, in most years quite considerably, down to 1890, when it reached more than 4.6 million tons. It fell slightly next year, but in 1892 and 1893 it leapt again to a point just below 5 million tons. We may for the moment pause at that date; for by 1893 Germany had accomplished the first stage in its rivalry with Great Britain. It had for the first time-and, as it proved, permanently-surpassed this country in the production of crude steel, turning out 31 million tons as compared with Britain's 29. It was still behind in pig-iron production. Having little to hold it back in the way of existing ironworks, Germany had embarked with vigour upon the new steel-making processes, while England still relied on its old-established wrought-iron manufacture, and preferred to export its metal in pig or puddled form. But only ten years were needed before, in 1903, Germany outstepped this country in iron also. Before that happened, important new developments had taken place.

Before going on with the history let us pause to allow that, down to 1914, the economist of the older school had a quite impressive argument to set against such an apparent success of tariff measures. He would argue that, even if a tariff helped one industry, it did so only at the expense of others. The mere fact, he would urge, that a tariff was necessary to attract capital and labour to a particular industry, proves that they would otherwise have found some other more profitable employment, and that therefore there must have been a net loss to the country as a whole. The argument is not, indeed,

as conclusive as it seems. It assumes that the amount of capital to be invested at home is fixed; it forgets, also, that the immediate loss may be more than counterbalanced by future gain, if the industry proves to be well adapted to the country. Arguments like these, however, can be bandied to and fro with little likelihood of producing conviction. What is more pertinent to the matter immediately on hand is to point out that the laissez-faire argument assumes that, in respect of national interests, all industries are on a par. It concerns itself with undifferentiated 'wealth,' and sees no difference, 'from the purely economic point of view,' between a pound's worth of steel and a pound's worth of wooden toys. But no great country, for a long time to come, is likely to disregard these other, 'non-economic,' points of view; they can, in fact, only be forgotten if we assume the existence of perpetual peace.

To go back to 1892-3. It was about that time that the syndication movement in the iron and steel industry began to achieve continuous and substantial success. There had been many short-lived attempts long before. But in 1892 the German pig-iron producers came together; and in 1893 the Westphalian Coal Syndicate was formed. With this association the financial interests of the iron and steel makers have been so closely intertwined that it has largely dominated the situation ever since. In the years immediately following, the example was followed by the various branches of the steel trade. These sectional combinations usually began with a mere price agreement; next they had to apportion the sale; and then they found it necessary to concentrate all the marketing of their commodity in a common selling organisation. The most important was the Syndicate of makers producing the ingots and billets which are the raw material of the rolling mills. In German it called itself the Halbzeugverband, which English writers attempt to render by Half-products or Semi-finished Steel Syndicate. By its side were the Rail and Beam Pools, and several others.

Now, no reasonable observer can deny that the formation of these Cartels' was facilitated by the existence of a tariff. Yet with the longer experience we are

gaining of industrial evolution, it can hardly be asserted with the old confidence that the tariff is the mother of the trusts.' The really essential fact is that combination is the direct outcome of unlimited competition. So long as manufacture is carried on by a number of competing concerns, there are bound to be recurring periods of over-production, with its results in acute depression, stagnation, and slow recovery. Confidence eventually returns; demand once more reaches and then exceeds productive capacity; new plant is laid down; fresh masses of commodities are put forth; and then comes another collapse, and the cycle begins over again. It is naturally the immediate selfish interest of the capitalists concerned which causes them, after a time, to tire of the fight, and to seek a more secure basis for their operations.

From the point of view of social interests, it can hardly be maintained that the results of free competition in recurring periods of unemployment, with all the waste of human labour and human character which they involve, are so satisfactory that we can be content with it. Moreover, combination can not only steady the productive process, it can also cheapen it, by introducing such a distribution of orders as will make the manufacturing operations more continuous and therefore more economical, and will lessen the expenses of transportation, while the combination itself renders many of the old marketing expenses no longer necessary. Thus, even if combination were only rendered possible by tariffs, that fact would not be a conclusive argument either against tariffs or against combination. But, in fact, more important favouring conditions for combination are the reduction in number and the increase in size of the competing concerns. Competition has to do a good deal of preliminary work to prepare the way for combination by eliminating the weaker competitors; and the growing cost of plant, particularly evident in the iron and steel trade, does the rest, by making it exceedingly difficult for new competitors to start up from outside. It is the opinion of leading experts in Germany to-day that no new steel works can profitably be put down which have an output capacity of less than 400,000 tons. And such forces, quite apart from tariffs-forces which we may