F.—ECONOMIC SCIENCE AND STATISTICS IOI 
costs which did not take place. It is not necessary here fully to explain 
why; but it is evident that wages, one of the main elements in cost, 
cannot easily be reduced, and costing schemes in general are not sufficiently 
elastic to meet very rapidly changing conditions. When it was realised 
that this readjustment was not possible the alternative remaining was to 
prevent gold prices falling still further. ‘This demanded a continuous 
export of gold as long as world prices went on falling, a policy which 
would not have steadied prices in Great Britain even if it had been possible 
to pursue it; for the loss of gold would only have led to still lower price 
levels at home. When, ultimately, the gold standard had to be abandoned 
in 1931, the only weapons left were tariffs and the whole apparatus of 
restrictions under which economic self-sufficiency cloaks its aims. ‘These 
expedients had already been utilised by other countries when they sought 
to improve their balances of trade so as to maintain price levels and 
protect monetary standards. It is probably correct, therefore, to con- 
clude that one of the principal reasons underlying the institution during 
the past few years of the very great mass of restrictions on international 
trade is the protection of currencies and the financial solvency of govern- 
ments. Under normal circumstances a country by imposing tariffs and 
restrictions on imports can hope to protect its currency from attack and 
maintain it at or near gold parity without experiencing an intolerable 
downward pressure on prices; for its limitation of imports is not 
accompanied by a fallinits exports. The success of this policy, therefore, 
depends on the extent to which other countries freely admit its goods. 
If every country simultaneously restricts imports the trade of each is 
depressed by the tariffs and quotas of the others more than it is stimulated 
by its own. The object sought, improvement in trade balances, is not 
attained. Instead, the general effect is contraction in the volume of 
international trade with increase of unemployment and additional currency 
cifficulties all round. 
VI. 
Much can be learned from a review of the growth of high protective 
policies and of restrictive economic nationalism during the years of the 
depression. Few countries were without import duties of some kind in 
1929. The obvious and immediate step, therefore, when trade balance 
difficulties were encountered, was to raise those duties so as to guarantee 
to home producers a larger or more exclusive share of the domestic 
market, and, in this way, relieve the growing unemployment caused by 
the fall in prices combined with the constancy of costs. Budgetary 
difficulties, too, due to reduced public income led to general or flat 
increases in duties in many countries so that revenue might be main- 
tained ; and governments of debtor countries (Australia, Latin America, 
e.g.), which were large borrowers on private or public account, finding 
their burdens increased owing to the decline in prices and their lower 
returns from exports, were driven to reduce all imports which were not 
indispensable so that national receipts and national payments might be 
balanced. Retaliation then followed from countries at the moment less 
embarrassed ; for these were finding their usual export trades hindered 
