It pays the exporting country, England, to sell coal in Cadiz _at less than its English economic value_, and to import the wine from Cadiz. It pays your English owner of coal, although the values attaching to it by the time it has got to Cadiz are £2 a ton, to sell a ton of coal there for only £1, and to exchange that against the wine of Cadiz, and bring that back to England. At first sight it sounds absurd to say that selling thus at a lower value than the cost of production and transport can possibly be profitable. But if you will look at it closely you will see that it is so. If the Englishman had tried to make his wine at home it would have cost him £100 to make twenty dozen bottles, but when he has sold his coal at Cadiz for £1 he can with that £1 buy twenty dozen of wine and bring it back to England. He is much the wealthier by the transaction, and so is the man at Cadiz. The Cadiz man could have spent his energies in digging out a ton of coal near Cadiz instead of importing it, but the same energies used in making wine produce enough wine to get him rather more coal from England. 2. The second Formula to remember about Exchange is this: =Goods do not directly exchange always one against the other, but usually in a much more complicated way, by what may be called= _Multiple Exchange_. Of course, the vehicle by which this is done is a currency, or _money_, which I will explain in a moment; but the point to seize here is that exchange is just as truly taking place when there is no direct barter of two things but a much longer and complicated process. For instance, a group of people called a Railway Company in the Argentine want a locomotive. A locomotive can be produced cheaper and better, that is, with less expenditure of energy for the result, in England than in the Argentine. But on the other hand, England wants to import tea. Now the Argentine grows no tea. What happens? How does England get the tea? That locomotive goes out to the Argentine. An amount of wheat sufficient to exchange against the locomotive goes against it, _not_ to England, but to Holland, a country which, like us, has to import a lot of wheat. As against the wheat sent to Holland, the people in Holland send, say, the cheeses which they make so well, on account of their special conditions, and the consignment goes to Germany. The Germans send out a number of rails equivalent to the number of cheeses and of the wheat and of the locomotive, as they are very good at making rails, and have specialised on it. But they do not send the rails to Holland. They send them to some Railway Company which has asked for them in Egypt. The Egyptian people send out an equivalent amount of cotton, which they can grow easily in their climate, and this cotton goes to mills in India, and against it there comes an equivalent amount of tea, but the tea does not go back to Egypt. It goes to England.