26 INTERNATIONAL TRADE {gh on these terms is a matter of which no one in either country is conscious, unless indeed it be some sophisticated economist. All that appears on the surface is that some Americans sell wheat in Germany and some Germans sell linen in the United States; and that the two amounts are equal in the only terms of which most persons think — in money. That money wages are higher in the United States is also a circumstance of which they are aware; but they take this as a matter of course, as a sort of God-given relation, not to be further inquired into. The fundamental fact, which quite escapes their attention, is that in terms of physical quantity the people of the United States get 11% of linen for every 10 of wheat which they send to Germany. Observe what will be the conditions of prosperity — the incomes in terms of commodities — in the two countries. Assume that in both one-half of the money wages is expended on wheat, one- half on linen. Then, In the U. S. one day’s labor = $1.50 In Germany one day’s labor = $1.00 : a “1 wheat ‘1 linen % wheat 3 linen The American is able to buy with his day’s wages, in addition to the one bushel of American wheat, 1% yards of German linen; just more than he could buy if the linen were made in the United States. The German is able to buy, in addition to 4 yard of Ger- man linen, 2 bushel of American wheat, whereas he would have been able to buy only 4 bushel if the wheat had been of German production. The American gains + yard of linen from the inter- national exchange; the German gains % bushel of wheat. It is conceivable, however, as was indicated by the previous analysis of barter conditions, that the people of the United States might exchange with Germany on better terms. They might get — so it has been indicated — more than 11 linen for their 10 of wheat, up to a maximum of nearly 15 linen. Under what cir- cumstances will they get more? The Germans, under the above conditions of equilibrium, have been assumed to take 8,000,000 bushels wheat from the United