FREE TRADE AND PROTECTION 259

One point in the foregoing argument needs some further
attention. It was urged that the action of the government
 in encouraging the development of special industries
practically diverted to them capital and labour which would
otherwise have found employment in other domestic
industries. It was pointed out, in discussing the encouragement
 of enterprises, such as the construction of railways, by
guaranteeing the interest on the capital invested, that such
a guarantee might induce the investment in a country of
capital which would not, otherwise, have been invested
there, Similarly, the institution of an import duty on
specified goods may induce the investment of capital in the
production of such goods within the country, capital which,
otherwise, would not have been invested in the country at all,
There are instances where capital and labour have both been
transferred to the protected area, attracted by the opportunity
of profit thus presented. By this is meant that, in place of
providing for renewals and extensions of appliances outside
that area, the capital which would have been so used is
employed in setting up new appliances within that area, and
that labour of the required degree and quality of skill is
attracted in the same way as the capital. A diversity of
industry is thus secured within the protected area. To
estimate the advantage obtained, we need to know how far
this capital and labour would have been attracted, by the
general industrial opportunities of the country in question,
had the special industry not been rendered profitable through
the operation of the tariff. This is difficult to determine in
practice. So far as the dearness of the particular product is
concerned, it forms a disadvantage to all industries in which
it is a raw material, and indirectly raises prices of other
goods, thus diminishing the real value of wages in so far as
they are spent on goods whose price is affected. In
producing for export, especially, such dearness is a disadvantage.
 The net advantage is what we are really concerned to
know, but the gross advantage is the feature that attracts
attention,
If the industries of a country be allowed to develop freely,
the resources which offer the greatest immediate profit will