Segae. — The Balance of Trade. 175 



on a scale which with respect to the vertical measurements is 

 fifteen times as great. The graphs in figs. 1-4 are constructed 

 from data deduced from those given in the volume of Memoranda 

 and Statistical Tables (cd. 1761) issued by the Board of Trade. 

 The statistics do not in any case go further back than the year 

 1854, because of the unsatisfactory nature of the returns before 

 that date ; while in the case of Germany, for a similar reason, 

 they start from the year 1880. 



The graph representing the balance of trade for New Zealand 

 (fig. 5) is the only one representing statistics in which gold and 

 silver are included ; in the other figures the balance of import 

 or export of gold is represented by a second graph. In fig. 1 

 the lower graph represents it for the years 1858-1902 ; in fig. 2 

 the dotted graph represents it for the years 1878-1902 ; and 

 in figs. 3 and 4 the dotted graphs represent it for the period 

 1884-1902. 



Positive and Negative Balance. 



The balance of trade is commonly described as favourable 

 when the exports are in excess, and as unfavourable or adverse 

 when the imports are in excess. These words " favourable," 

 " unfavourable," and " adverse," as thus used, are misleading, 

 appearing to indicate as they do that an excess of imports is in 

 some way disadvantageous to a nation, and an excess of exports 

 an advantage. This use of the words originated in the old 

 mercantile theory in which it was regarded as of essential 

 importance to a country's prosperity to have, and to bring about 

 by restraints on foreign trade if necessary, an excess of exports 

 of merchandise and an inward flow of the precious metals. Very 

 little consideration makes plain the unsoundness of such a 

 notion ; for an excess of exports, or the nominally favourable 

 condition of trade, may be due to paying interest on loans, as in 

 the case of New Zealand, and an excess of imports may be due 

 wholly or in part to the receipt of interest, as in the case of the 

 United Kingdom. 



Adam Smith appealed to the experience of his time against 

 the notions exemplified in the use of the word " favourable " 

 as applied to the balance of trade. ' There is no commercial 

 country in Europe," he writes, " of which the approaching ruin 

 has not frequently been foretold by the pretended doctors of 

 this system, from an unfavourable balance of trade. After all 

 the anxiety, however, which they have excited about this, after 

 all the vain attempts of almost all trading nations to turn that 

 balance in their own favour and against their neighbours, it 

 does not appear that any one nation in Europe has been in any 

 respect impoverished by this cause. Every town and country. 



