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