imported goods was vastly increased, as it always tends to be in such circumstances.

Such was the state in which the country found itself in the summer of 1857, largely indebted both at home and abroad.

In the mean time, much of the property on the strength of which these debts had been contracted, begun to decline in value. It begun to be discerned that there was a difference between reputed property and actual property. Real estate at the West, city lots and wild lands, begun to collapse from their state of inflation. Railroad property of every kind had depreciated down to the neighborhood of actual value; while a decided fall in the price of manufactured and imported goods was inevitable.

The materials for a panic were thus in readiness, when an event occurred which sent a shock through every limb and fibre of the immense credit-system. This was the failure of the "Ohio Life and Trust Company." It was a corporation that had enjoyed the utmost of public confidence, into whose hands many a poor man had passed over his hard earnings for safe keeping, and whose branches established in all the great cities had widely connected it. A large number of persons all over the country were interested in it, either as stockholders, or depositors, or holders of its obligations. Occurring too just at that critical time, its failure was a signal everywhere. Merchants and business-men came home from their summer resorts and watering-places with a rush. Confidence was gone. Every man was suddenly called on to pay, but looked in vain for a place where he might borrow. Extensions and new loans it was

impossible to obtain. Prices of all kinds of property went down to a minimum. Assets of debtors dwindled, till they could no longer sustain credit or furnish liquidation. As by a touch, property shrivelled from the dimensions imparted to it by universal confidence and anticipated profits, to a mere skeleton. To complete the disaster, the panic attacked the currency, and the banks suspended. I am not altogether without hopes that the one just characterized will be the last of the series of great national commercial crises.

CHAPTER XIII.

ON FOREIGN TRADE.

THE principles which determine the question of foreign trade have been already unfolded in these pages. It is only because their application to the wider field of international exchanges has been contested by some persons, while conceding their validity within the boundaries of the individual nations, that it is now needful to bestow upon the subject a separate treatment, to demonstrate that the laws of exchange are universal and not partial, and to attempt to answer with candor and thoroughness the objections that have been raised to the conclusions established by the almost unbroken unanimity of political economists who have written during the last hundred years. Here, as everywhere else within the science, the safe appeal lies to the common sense of men. A writer whose simple object is to reach the truth, and who has no interest, real or supposed, in defending or overthrowing a dogma, will not confuse the understanding of his readers, and his own, by leaping at once into the most complicated phenomena which the domain of exchange exposes to the observation of an intelligent science. He will take the simplest cases first, will display familiarly the principles applicable to them, and then with the clue well in hand, will pass on, and can be followed

through the most intricate portions of the subject. It is not owing so much to any inherent difficulties of the subject-matter, that the question of foreign trade has been the vexed question of the late centuries, as it has been owing to a false method pursued in discussing it; a method which, however favorable to the apparent establishment of current maxims, and however approved by men of interested views, can never be made useful in the investigation of truth. It may be considered as a point already well settled by experience, that no man's sagacity is sufficient to guide himself or others to any sound conclusions on this field, who takes his stand at the outset amid the whirl of interlocking phenomena, and then endeavors to work himself out through the entangling meshes which surround him at every step. Happily, there is no need of any such procedure. Man is man, motive is motive, and exchange is exchange; and the apparent chaos of commerce can be resolved through these alone into harmony and order.

In our third chapter it was put, I believe, beyond the reach of controversy or cavil, that the only reason why men ever exchange services at all, is on the ground of a relative superiority at different points. This relative superiority at different points was shown to depend in individuals partly on natural gifts, partly on concentration of mind, or muscle, or both, on a single class of efforts, and partly on the use and familiarity in the use of the gratuitous helps of Nature aiding that class of efforts. The tailor makes the blacksmith's coat, and the blacksmith shoes the tailor's horse, for no other reason in the world, except that each has a relative advantage of

the other in his own work, and therefore there is a mutual gain in their exchanging works. To pretend that there would be any exchange between them, in case the blacksmith could make coats as well as the tailor, and the tailor shoe horses as well as the blacksmith, would be to assert that man acts without a motive, and that exchanges take place without a gain. It was also shown in the same connection, that the greater the difference of relative advantage, the greater the gain of an exchange, because each purchases the service of the other at the rate of his own highest efficiency. To recur to the same example, while the efficiency of the tailor and the blacksmith each in his own trade remained at 6, the efficiency of each in the trade of the other being at 5, there was only a gain of 2 to be divided between them; but when by concentration and application the efficiency of each in his own trade rose to 15, his efficiency in the other remaining at 5, there was a gain of 20 to be divided between them. When the relative superiority of each over the other in his own trade was low, the gain, though sufficient to justify the exchange, was small; but when the difference of relative advantage increased, just in that ratio did the exchange become more profitable to both. The obvious inference from this, then drawn, and now repeated, is, that every person who exchanges with others is directly interested in the highest efficiency and success of their efforts as well as his own. The diversity of relative advantage at different points exhibited by different nations, and consequetuly the gains of international exchange, were expressly reserved at that point to a later stage of our inquiry. That stage is now reached.