PROTECTION. 463 PBOTECTION. The Tariff Act of ISIG, the first out-and-out protective tariff that the country had known, was defended more on the ground of protecting industries already establislied than of buildinf; up new industries. In fact, the highest duties provided were to remain in force only three years, since it was believed that by that time our manufactures would be adjusted to the condi- tions of peace and able to hold their own against foreign competitors. The erroneousness of this view was soon demonstrated, and succeeding tariffs continued the protectionist policy, al- though with modifications, down to 18.57. Dur- ing this period the 'vested interests argument,' the ■home-market argument,' and the 'infant- industry argument' were those most frequently urged in support of pro^ction. The vested inter- ests plea needs no explanation. It is always urged by conservative people in favor of the continu- ance of an established policy and does not pretend to throw any light upon the expediency or inex- pediency of the policy itself. The home-market argimient, as advanced by Henry Clay, the father of the 'American system,' as protection began to be called, was designed to reconcile the interests of the agricultural South and West with those of the manufacturing North. It rested upon the proposition that the prosperity of the American farmer depends upon a regular and constant market for his products and that such a market is to be obtained onlv by building up manufactur- ing centres within the country. The experience of the years from 1816 to 182.5 was cited to prove that the foreign market was not to be depended upon, and farmers were exhorted to unite with manufacturers in establishing a system which should i)ind different sections of the country to- gether by furthering the interests of all. To the greater stability claimed for the home market — a quality now .seriously questioned by economists — later analysis has added another merit. The home market calls not only for the stable prod- ucts which will bear ocean transportation, but for all kinds of perishable goods. Substituting it for the foreign market renders possible diver- sified farming and enables cultivators to substi- tute for one-crop systems of agriculture scientific rotation of crops, which serves to preserve and perjietuate the fertility of the soil. This ad- vantage is believed by protectionists to outweigh the admitted losses incidental to the protectionist policy and to insure in the long run a greater degree of prosperity than will result from the free play of economic forces. The infant-industry argument is the one to which economists generally have conceded great- est weight. It is urged in both a special and a general form. As it applies to special industries, it rests on a recognition of the risks and difficul- ties which attend the domestication of new branches of production. In the successful prose- cution of any industry three factors coiiperate — the requisite natural resources, skilled and un- skilled workmen of different grades, and the ap- propriate forms of capital. As regards each one of these the coxmtry which has practiced an industry has a marked advantage over the coun- try which has not. The natural resources of the latter may be superior, but they are undeveloped : its labor force mav be ample and adaptalile, but it is untrained: its people may be competent to ■use tools and machines, but they have no fa- miliarity with the special forms of capital needed. Under such circumstances the encour- agement of a protective tariff may suffice to induce investors to establish the new industry when without it they would not venture on such a step. After a few years, if the industry to be domesticated has been wisely chosen, the initial difficulties will have been surmounted and the protective duty may be withdra^^■n without dan- ger of crushing out the now vigorous infant. Advocates of such a policy recognize quite clearly that resort to protection entails a serious burden on consumers. They justify the temporary loss on the ground that the establishment of the new industry on a permanent footing affords in the end a more than compensating gain. The infant-industr_v argument in its general form recognizes that countries must usually pass through different stages of industrial develop- ment, and advocates protection as a means of accelerating progress during the periods of tran- sition from one stage to another. The best state- ment of this argument is that given by Fried- rich List in his Das nationale System dcr politi- scheii Oekonomie (1841). The conclusions at which List arrived were based on the contrast between an industrial country like England and an agri- cultural country such as Germany was at the ( time he wrote. In his opinion England's success as a manufacturing countrj* was due chiefly to the development of certain industrial qualities among her people. Germany, he thought, might develop the same qualities among Germans by !!!eans of a protective policy which would force them to manufacture for themselves. Through protection the natural resources of the country necessary to the development of manufacturing would also be opened up to exploitation. From this point of view protection is a temporary means by which an agricultural country may transform itself into an industrial country. After the transformation is completed the 'new manu- facturing industries, or at least a great many of them, will be quite capable of holding their own in competition with the manufacturing industries of other countries and protection will be no longer required. The last stage in the development of protec- tion in the United States was closely connected with the Civil War. The outbreak of that strug- gle caused the withdrawal from Congress of the Representatives of the Southern States, who had been the most active opponents of the protective policy. L'nder the guidance of Representatives from the Xorth and West successive tariffs were passed carrj'ing the, policy of protection to the most extreme lengths which the coimtry had known. Factors in this development were the anti-foreign sentiment which resulted from the somewhat hostile attitude of Europe and espe- cially of England to the cause of the Xorth. and the comprehensive system of internal revenue taxation adopted during the war. which had to be offset by higher import duties if American ])ro- ducers were not to be placed at a disadvantage in competition with foreign producers. The change in the level of duties which resulted from this combination of circumstances is indicated by the fact that whereas under the act of 18.57 the high- est duties imposed were 24 per cent, ad rnlorrm, under the act of 1804 the average rate on duti- able articles was over 47 per cent. During the first fifteen years after the close of the war the attention of Congress was occupied by questions
