308. In long-time
movements of prices, in contrast with brief changes due to foreign
trade such as are referred to above, high rates of interest are
connected with rising prices, and _vice versa._ See above, ch. 6, sec.
8, on fluctuating price-levels and the interest rate.]

CHAPTER 14

THE POLICY OF A PROTECTIVE TARIFF

Sec. 1. Military and political motives for interference with trade. Sec. 2.
Revenue and protective tariffs. Sec. 3. Growth of a protective system.
Sec. 4. The infant-industry argument. Sec. 5. The home-market argument.
Sec. 6. The "two-profits" argument. Sec. 7. The balance-of-trade argument.
Sec. 8. The claim that protection raises wages. Sec. 9. Tariffs and
unemployment. Sec. 10. Exports and exhaustion of the soil. Sec. 11. Protection
as a monopoly measure. Sec. 12. Harm of sudden tariff reductions.

Sec. 1. #Military and political motives for interference with trade.#
The considerations set forth in the last chapter raise a strong
presumption in favor of the sovereign state permitting its citizens to
trade freely across its boundaries, as the best way to further their
own prosperity and, on the whole and in the long run, that of the
nation. Indeed, this presumption and belief has been held by
nearly all serious students of the question, with more or less of
modifications and qualifications, ever since Adam Smith published his
work on the "Wealth of Nations" in 1776.[1] But in conflict with this
belief has been the all but unanimous policy of nations from
early times, throughout the Middle Ages, and down to this day, of
interposing some special hindrances (of varying degrees and kinds) to
this kind of trade. Sometimes this has been done by prohibitions, but
more often by taxes imposed upon either imports or exports. Sometimes
the attempt is made to justify the policy of governmental interference
with foreign trade by arguments which crumble before the slightest
examination, and again it is admitted that free trade is true in
theory, but it is declared to be false in practice. The latter view
is not to be entertained for a moment. If free trade in theory (as an
explanation) is complete and true, it will in practice (as a plan of
action) be sound and workable. In truth, however, the practical policy
of governmental interference with foreign trade has always in part
rested on other than the simple economic grounds.

Interference with free trade with the foreigner has always be