166 SECTIONAL ADDRESSES. 
the Baltic lands in the 17th and 18th centuries. And in the 19th 
century, when the Prussian Junker was a strong free trader in order to get a 
foreign market for his corn, he consolidated the economic ‘ advantages ’ 
of the lands east of the Elbe by buying up peasants’ holdings and creating 
an agricultural labourer class which has become the most unsatisfactory 
feature in the German agricultural position.5* Similarly, I suppose we 
all feel that the expansion of the American cotton area, and with it of 
slavery—during a period when the Southern planters were ardent free 
traders and anxious that England should be free to buy their raw cotton 
with its manufactures®’—was a means of elevating the coloured race which 
it is difficult to look back upon with equanimity. 
. 6. The next idea with which we have to deal is that every country 
has a particular supply of capital and labour, and that the State can do 
nothing, by protective measures, beyond diverting them to what is pre- 
sumably a less profitable employment. This is stated by Adam Smith, 
first generally : when he says that a monopoly of the home market fre- 
quently turns towards a particular employment ‘a greater share of both 
labour and stock of the society than would otherwise have gone to it’ ; and 
then when he makes everything depend on capital, and says that ‘ no regu- 
lation of commerce can increase the quantity of industry beyond what its 
capital can maintain: it can only divert a part of it.’ 58 ‘ Diversion’ is 
the key-word.*® 
I will follow Smith’s example by concentrating first on capital.. And as 
soon as one looks into the exposition as found in Smith or McCulloch or 
John Stuart Mill, it must be apparent that the idea has a close resemblance 
to another once dominant *° which Mill himself publicly abandoned in 
1869, and which few English-writing economists have since had the temerity 
to say a good word for : the so-called Wage-fund Doctrine. In formulating 
the ‘ diversion ’ argument Smith uses language about wages of which the 
doctrine of the Wage Fund, as defined later, was merely a crystallisation : 
‘ As the number of workmen that can be kept in employment by any par- 
ticular person must bear a certain proportion to his capital, so the number 
of those that can be continually employed by all the members of a great 
55 See the interesting account in Naudé, Getreidehandelspolitik, I., 385 (in the series 
Acta Borussica: Denkméler der Preussischen Staatsverwaltung, 1896). Naudé 
attributes the social condition of Poland, the cause of most of its political troubles, 
to the fact that its Government was not allowed by the landlords in the eighteenth 
century to pursue a mercantilist policy. 
56 See Memorandum V. on Germany, by the present writer, in Final Report of the 
Agricultural Tribunal of Investigation (1924), especially §§ 3, 4, 10. 
57 The English reader to whom the connection between slavery and the free trade 
views of the Southern States may be unfamiliar will find some of the relevant facts in 
Dewey, Financial History of the United States (1903), § 80; Bogart, Economic History 
of the United States (1907), § 217; Coman, Industrial History of the United States 
(1905), p. 190. 
58 IL., pp. 25-26; cf. p. 272. Cf. J.S. Mill, Principles, 1., v.,§1; Rogers, Manual, 
235. 
5° The phraseology was probably suggested by Hume, who, expounding an idea 
considered below, says, ‘If the spirit of industry be preserved, it may easily be 
diverted’ (Essay Of the Jealousy of Trade). 
60 How dominant we are inclined to forget. But we may be reminded of it by 
reference to the once famous work of Buckle, History of Civilisation (1857), Vol. IL., 
ch. vi., p. 357. Buckle speaks of it as ‘ this vast step in our knowledge.’ 
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