OVERSEAS TRADE AFTER 1890 87
must be ventured. One difficulty in any discussion upon inter-
national trade lies in the common usage of the words ‘favour-
able’ and ‘adverse’ in connexion with the balance of trade. To
the extent that these words connote a theory of trade which
postulates the advantage of a credit balance in international
trade we can discern the influence of mercantilist tradition.
The commercial application of the doctrine that, in trade as in
charity, it is more blessed to give than to receive, had, of course,
it greatest significance in the effect of trade upon the movement
of gold; and belief in the advantage of a national system of
trade organized in such a way that it promotes an influx of gold
is still lively. For many reasons, but chiefly because they con-
centrate attention upon the mere physical volume of incoming
and outgoing commodities, such theories of trade must be dis-
regarded. Movements of goods in international trade are merely
the outward and visible signs of the operation of factors hidden
deeply and often inextricably in the fabric of national finance
and industry ; and it is rather upon the operation of the factors
causing the movement of goods between countries that we must
focus attention.
The first approach to ‘the complex problem of world trade
by way of the relatively simple problem of the exclusive trade
between two countries’ was made by Ricardo; and Marshall
took this a stage further by emphasizing the individual trans-
actions of which the fabric of international trade is built, and
by stressing the specialized function of the merchant in selecting
those goods for international exchange which offer the best
chance of profit.! The merchant’s work consisted in establishing
an equilibrium in trade by exchanging what the population of
a country produced for what they wanted. International trade
was thus recognized as pure barter; and, from the merchant’s
point of view, all he wants to know is ‘whether the prices for the
things which he has to sell, i.e. the country’s exports, are high
relatively to the things which he looks to bring back. If they
are he does not care so long as there is no appreciable change in
relative price-levels between the completion of his sales and the
settling of his terms of purchase.’ From this arose the concept
of the barter terms of international trade ; although Mill’s Theory
of International Demand recognized that the ratio at which
1 Qee Marshall, Money, Credit, and Commerce, Chap. VIL,