298 MODERN ECONOMICS 



industries. Why, then, it may be asked, is there 

 an impression that high prices are favourable to 

 trade ? High prices must necessarily restrict 

 the number of purchases upon which a limited 

 income can be spent. The manufacturers upon 

 whose goods its expenditure is concentrated will 

 no doubt be benefited. But this will be at the 

 expense of those whose goods are no longer pur- 

 chased because they are beyond the consumer's 

 means. If a country is considered as self-con- 

 tained, high prices redistribute profits and acti- 

 vities, but do not increase them. If, however, 

 they are realized from foreign consumers, they 

 may be an actual gain to the country of export, 

 for the counterbalancing retrenchment of pur- 

 chases in the importing country may affect goods 

 which the country of export does not supply. 

 High prices may, accordingly, stimulate certain 

 industries at the expense of others ; and, if the 

 industries that suffer are in foreign lands, high 

 prices may increase the total wealth of an ex- 

 porting country. But they do not produce the 

 effect of low prices in increasing the wealth of the 

 world as a whole. 



If we look back to the early stages of human 

 society we shall find that the first step in increasing 

 the wealth of a community was the diversion of 

 labour from domestic employ, or feudal service, 

 to the more productive occupation of making 

 things. The ultimate fact upon which industrial 

 development is based is that a cultivator's labour 

 produces more than suffices for his support. He 

 has rarely been permitted to retain the surplus. 

 It has been taken from him as rent, and in days of 

 simplicity is mainly spent in the maintenance of 

 relatives, dependants, and retinues of servants. 

 Manufacture is limited to primitive conveniences, 

 and the craftsmen are commonly paid in produce. 



