§ 1. Cost of Production not a regulator of international values. Extension of the word “international.”

Some things it is physically impossible to produce, except in particular circumstances of heat, soil, water, or atmosphere. But there are many things which, though they could be produced at home without difficulty, and in any quantity, are yet imported from a distance. The explanation which would be popularly given of this would be, that it is cheaper to import than to produce them: and this is the true reason. But this reason itself requires that a reason be given for it. Of two things produced in the same place, if one is cheaper than the other, the reason is that it can be produced with less labor and capital, or, in a word, at less cost. Is this also the reason as between things produced in different places? Are things never imported but from places where they can be produced with less labor (or less of the other element of cost, time) than in the place to which they are brought? Does the law, that permanent value is proportioned to cost of production, hold good between commodities produced in distant places, as it does between those produced in adjacent places?

We shall find that it does not. A thing may sometimes be sold cheapest, by being produced in some other place than that at which it can be produced with the smallest amount of labor and abstinence.

This could not happen between adjacent places. If the north bank of the Thames possessed an advantage over the south bank in the production of shoes, no shoes would be produced on the south side; the shoemakers would remove themselves and their capitals to the north bank, or would have established themselves there originally; for, being competitors [pg 378] in the same market with those on the north side, they could not compensate themselves for their disadvantage at the expense of the consumer; the amount of it would fall entirely on their profits; and they would not long content themselves with a smaller profit, when, by simply crossing a river, they could increase it. But between distant places, and especially between different countries, profits may continue different; because persons do not usually remove themselves or their capitals to a distant place without a very strong motive. If capital removed to remote parts of the world as readily, and for as small an inducement, as it moves to another quarter of the same town—if people would transport their manufactories to America or China whenever they could save a small percentage in their expenses by it—profits would be alike (or equivalent) all over the world, and all things would be produced in the places where the same labor and capital would produce them in greatest quantity and of best quality. A tendency may, even now, be observed toward such a state of things: capital is becoming more and more cosmopolitan; there is so much greater similarity of manners and institutions than formerly, and so much less alienation of feeling, among the more civilized countries, that both population and capital now move from one of those countries to another on much less temptation than heretofore. But there are still extraordinary differences, both of wages and of profits, between different parts of the world.

Between all distant places, therefore, in some degree, but especially between different countries (whether under the same supreme government or not), there may exist great inequalities in the return to labor and capital, without causing them to move from one place to the other in such quantity as to level those inequalities. The capital belonging to a country will, to a great extent, remain in the country, even if there be no mode of employing it in which it would not be more productive elsewhere. Yet even a country thus circumstanced might, and probably would, carry on trade with [pg 379] other countries. It would export articles of some sort, even to places which could make them with less labor than itself; because those countries, supposing them to have an advantage over it in all productions, would have a greater advantage in some things than in others, and would find it their interest to import the articles in which their advantage was smallest, that they might employ more of their labor and capital on those in which it was greatest.

It might seem that a special theory of value is required for international trade, as compared with domestic trade, for the particular reason that in the former there exists no free movement of labor and capital from one trading country to another. But we shall see that no new theory is necessary. As before pointed out,258commodities exchange for each other at their relative costs wherever there is that free competition which insures perfect facility of movement for labor and capital. It has been usually assumed that capital and labor move freely as between different parts of the same country, but not between different countries. This, however, is not consistent with the facts. We saw that there were non-competing industrial groups within the same nation. Mr. Mill here, in a pointed way, suggests this, when he speaks of “distant places.” The addition, therefore, made to Mr. Mill's exposition by Mr. Cairnes259is, that the word “international” (in default of a better term) should be applied to those conditions either within a country, or between two countries, which, because of the actual immobility of labor and capital from one occupation to another, furnishes a substantial interference with industrial competition. The obstacles to the free movement of labor and capital which produce the conditions called “international” are: 1. “Geographical distance; 2. Difference in political institutions; 3. Difference in language, religion, and social customs—in a word, in forms of civilization.” These differences exist between Maine and Montana; or even between two adjoining States, Ohio and Kentucky, one a free and the other an old slave State. Labor and capital have not in the past moved freely even across Mason and Dixon's line. There is, therefore, no treatment of international trade and values separate from the laws of value already laid down concerning non-competing groups, since there is also no free competition between all the industrial groups within a country.

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