ABSTRACT
A recurrent feature of McCulloch's thought on international trade mechanisms, and one the full significance of which has not been realized, is the expression of the belief in the automatic nature of the achievement of balance of payments equilibrium. It is, as will be seen, of the greatest importance both for McCulloch's view of the transfer mechanism and also for his view of trade policy. The basic argument that imports were automatically balanced by exports was expressed by McCulloch as follows: 'Every sale supposes an equal purchase, and every purchase an equal sale. In whatever degree, therefore, an unfettered trade may lead a nation to import products from others, it will, in the same degree, render them customers for its commodities, promote its manufactures and extend its trade.'1 Any protection imposed by us automatically reduced our own exports.2 This statement was often crudely bilateral in which form it simply was not valid. Thus for instance McCulloch argued that American restrictions on the importation of British cotton manufactures would lose the United States its market here for raw cotton. 3 By excluding French silks we automatically forced France to manufacture woollens and cottons.4 By preventing imports from Norway, we prevented ourselves exporting t h e r e . 5 This was asserted despite the fact that McCulloch himself sometimes recog-
* Taxation, 1852, p. 213; see also, ibid., 1845, p. 205; Scotsman, May 24, 1817, p. 137; ibid., January 10, 1818, p. 11; ibid., May 8, 1819, p. 145; Edinburgh Review, 1819, loc. cit., pp. 67-9; ibid., May 1820, loc. cit., p. 337; ibid., October 1829, l°c* PP51 ,65 -7; ibid., April 1834, loc. cit., pp. 188-9; CD 1832, pp. 353-4; ibid. (Supplement), i860, p. 9; BD 1842, p. 258; Principles, 1864, p. 103. Article 'Manufactures' in eighth edition of Encyclopaedia Britannica, p. 275. So strong did McCulloch believe this balancing mechanism to be that he sometimes argued that if we took imports from a country which did not reciprocate, goods would be smuggled into that country (e.g. Edinburgh Review, 1828, loc. cit., p. 410).
