Popular Science Monthly/Volume 34/November 1888/The Effects of Protection
THE
POPULAR SCIENCE
MONTHLY.
NOVEMBER, 1888.
| THE EFFECTS OF PROTECTION. |
By CHARLES S. ASHLEY.
THE people of the United States are this year applying them-selves with a concentration very rare in great masses of men to the problem of tariff revision. It is inevitable that in a nation of so fresh and independent a spirit the claims of authority and scientific results should not receive any great recognition; and I, for one, rejoice that the people rely upon themselves and their own judgment and experience, rather than on the theories, however respectable, of eminent writers. We are therefore brought face to face with the question. What has been our experience in the matter? What have been the effects of protection in this country? It is especially interesting to examine the question from a strictly practical point of view, because this is the chosen battle-ground of the defenders of the existing system.
Free trade is an extension of the practice of our daily lives. We each of us buy in the cheapest market what we wish to buy, and sell our wares or our labor where we can get the most for them. I do not make my own shoes, but employ the great length of time which it would take me to make them in doing something which enables me to buy several pairs and other things as well. Instead of making my own shoes (thus, in protection phraseology, "protecting" my own "labor"), I buy my shoes of a neighbor, and the Government does not attempt to prevent me or to tax me for so doing. Even my neighbor does not himself make the shoes which he sells me. He does not undertake to protect his labor, but buys of a wholesale house in New York, which in turn buys of a Lynn manufacturer. The result of all these complicated transactions going to give me a pair of shoes is, that I get them at an equivalent of a very moderate amount of work, instead of by a great deal of direct exertion and personal sacrifice. So, too, the citizens of Chicago do not attempt to raise their wheat in their own "back yards," but send their money into distant parts and buy it; while, on the other hand, the farmers of whom they buy do not attempt to make their own clothing, their furniture, or even their own flour. They buy them at Chicago. They do not think it good economy to expend $100 worth of their own labor for what costs but $10 in Chicago, but wisely prefer to use it in creating what will bring $100 in Chicago. So, too, rising in the scale of comparison, Iowa and Kansas do not "protect" themselves against New York and Massachusetts, nor do they attempt by legal means to "foster industries" which exist in the latter States. The national Constitution, fortunately, forbids such a course; and, as a party, the protectionists have not yet taken it on themselves to say that a "protection" policy would be for the advantage of the granger States as against the manufacturing States. But the moment we come to that imaginary line known as the national boundary, this simple and beneficent process ceases. The farmers of Manitoba would naturally buy their clothing, furniture, tools and machinery, and much of their food, at Minneapolis and St. Paul. The merchants of those cities would like to sell to the Manitobans, but the two Governments prevent it. Only last year the Manitobans had a very good potato-crop, while that of Minnesota was a failure; and, on the other hand, fruit was plenty in Minnesota and scarce in Manitoba. It would have been natural to have sold American fruit in Manitoba, and to have brought back potatoes. But no; protection "protected" the people of Minnesota from potatoes that year, and the Manitobans, as they tried to imagine that their superfluous potatoes were apples and pears, doubtless consoled themselves with the idea that they were growing rich, because no Yankees were selling them fruit and taking their money away.
It is useful to recur to these every-day facts of universal experience in order that we may have the great and complicated question before us in its simplest elements. I think the homely illustrations I have used at the outset will lend certainty and significance to the results of a survey of the effects of protection in the larger and vaguer field of our national life. Let the reader keep in mind the consequences which would ensue if I did not buy my shoes of a neighbor—the poor shoes I would have, and the great labor with which I obtained them. Let him imagine the result of the Chicago people attempting to raise their wheat in their own "back yards," or of the farmers of Iowa refusing to buy any cloths or machinery not produced in their own neighborhood. Let him imagine the poverty and want which would prevail in the frontier States if from the moment of settlement they adopted the policy of prohibiting all these importations from the East, by which, they save labor and build up their country. He will then be in a position to see, by analogy, the evils which have followed in the train of protection, even in this country of vast extent and limitless resources. And, on the other hand, he will not fail to see the analogy between the success of that natural system which prevails in the United States, and is practiced by each of us in our private capacities, and the policy of industrial liberty which a few nations have been led to adopt.
The plain primary effect of a tariff and its main purpose, so far as protection is concerned, is to raise the price of the article imported by the amount of the duty. It may be, and to some extent doubtless is true, as claimed, that internal competition afterward reduces the market price. But the primary effect is manifestly as stated, if the article continues to be imported. This increase of price necessarily is borne entirely by the consumers, except in certain special cases (as where the supply market is very small in extent, and where prices would consequently rise very fast with the unfettered demand of the American consumers), since we have no means of forcing foreigners to ship goods here except at the same rates which they would be willing to sell for if there were no tariff. But, of course, it may be that the tariff is so high that the imports practically cease, and the American market is supplied by American producers, though at an enhanced cost over what would have been necessary to pay, with the world to choose from. In this case the consumer, of course, still pays this enhanced price, whether or not, as the protectionist contends, he somehow gets it back. With these few points in mind we will proceed to determine in a few particulars, as nearly as may be what this country has actually paid by reason of our high tariff. It is greatly to be regretted that materials do not exist to make a complete showing of what the protective features of the tariff have cost the people without benefiting the Government; but a few instances may serve as illustrations, and will faintly indicate the enormous extent of that forcible transfer of wealth from buyers to sellers which has been made by prohibitory tariffs.
The average price of steel rails in this country has for the past twenty years been at least $15 per ton more than in England. There has been a consumption of at least 30,000,000 tons necessary to lay and repair our 156,000 miles of railway. More than two thirds of this amount has been bought at home. The Government has, therefore, forcibly transferred about $300,000,000 belonging to one class of American citizens to another class, by laying an embargo on the business of the first in favor of the second.[1] In some years the demand for steel has been so great that rails have sold for double and even treble the natural cost; but still buyers were forced to buy in the home markets. And the reduction in duty from $28 to $17 per ton was accomplished only in the teeth of vigorous protestations that it would ruin American mills and workingmen. I say nothing of the effect of this tax on railroad building and operation in rendering transportation scarcer and more expensive. But it is probable that a line of railway with which I am connected would by this time have been completed and have been paying handsomely but for the $300,000 additional expense of construction entailed by the protection tariff.
Pig-iron enters into articles used in every house and in every business. It is turned into plows, kettles, and stoves, as well as into vast engines, railway material, building material, and firearms. Four million and a half tons of this material were made in the United States in 1882 and sold at an average of $22 per ton. In 1880 the market value reached $40, and in 1886 $17. According to Mr. Wilkeson, this material ought to be marketable at $9 per ton easily, and Mr. Vinton does not think its actual value much more. But making an allowance of $12 per ton as liberal, in fact very liberal, we may say that the people of the United States have paid an unnatural price for this product amounting in all to $45,000,000 in 1882 alone; and, assuming that to have been an average year, we may place the enhanced price of pig-iron to the American people for the past twenty years at the enormous aggregate of $900,000,000.
On lumber it is difficult to make an accurate estimate. But assuming the cut of Michigan in 1880 (4,172,000,000 feet) to have been half the product affected, and to have been enhanced in price to the extent of half the duty, which, in view of the enormous forests of Canada, and the great value of our standing pine, is very moderate, the tariff on lumber has cost the people of the United States $8,000,000 per annum. One peculiarity about this tax, or rather levy, is, that it inures to the benefit solely of a few land-owners in Michigan and elsewhere, who were fortunate enough to get the pine-lands when they were worth $2 per acre.
Labor does not produce the pine, nor does it gain any great proportion of its market value.[2]
The American people are clothed very expensively. They import about half their woolen goods, and pay thereon an enormous tax to the Government, amounting in 1885-1886 to $35,600,000. The other half of their clothing they buy of domestic manufacturers, and may be assumed to pay an unnaturally high price to about the same extent. We may say, then, that in twenty years the people have paid a bounty of about $700,000,000 to domestic manufacturers and about the same amount in taxes to the Government,
The average wage of Americans is, as is well known, considerably higher than that of the English; yet Mr. Mulhall estimates that the American works forty-nine days in the year to supply himself with clothing, while the Englishman accomplishes the same thing in thirty-four. This result has been brought about by the wool tariff of 1867, which imposed a heavy duty on an article not made or greatly added to in value by labor, wool, and also on woolen clothing. The history of the effect of this duty is interesting and even ludicrous. Foreign wools are needed to mix with American wools to make good cloth. Accordingly, when the tariff was put on wool the manufacturers found that the people would not buy the high-priced product, but bought foreign goods. Then they began to adulterate their woolen goods with shoddy and cotton. But, in spite of everything, the woolen industry was depressed, and the price of wool refused to go up.[3] Some of them saw the moral; but only the other day I was talking with one who expressed his opposition to the Mills bill by saying, "We do not think it will hurt our business; we know it." On being asked if he did not think free wool and a duty of thirty-eight per cent a fair equivalent for the present duty, he started and clearly showed he had no accurate idea of what the bill did provide; but he simply had a vague notion that he had an illegitimate advantage which somebody was trying to take away.
But, in addition to loss of this kind, the maintenance of the protection system has for a number of years resulted in a heavy surplus—a taxation of the people very far beyond the requirements of our Government. This surplus, therefore, must be charged up as one of the costs which the system entails upon the people. For the past seven years this annual absorption by the Government of the annual product has been very heavy. This present year, it seems, the House and Senate have by systematic extravagance succeeded in diminishing the surplus between fifteen and thirty millions. But it is admitted on all sides that the surplus fairly amounts to a sum not less than $125,000,000 annually. This is ten dollars per annum for every family in the United States. The total amount of the tariff taxation is about twice that sum. But if we view the family solely as consumers, and not at all as the recipients of protective bounty (which is practically a correct basis),[4] we have to add to this cost the enhanced prices of American products, some of which have been mentioned, and of which the Government gets no share. This indirect tax, of which examples have been given, is variously estimated in its total amount. On some articles it amounts to $13 when the tariff tax amounts to $1; that is to say, the consumer pays out $14 in enhanced prices, of which only $1 reaches the Government. On the whole, this indirect levy or transfer (it can not be called a tax) may be estimated to amount to about five times the tariff tax.[5] It amounts, therefore, to about $100 per family per annum, and, with the superfluous element of the tariff tax, to about $110. While this estimate is largely conjectural, no one who is aware of the increased expensiveness of our manufacturing, and even of our agricultural processes, will doubt that the figure is very large, and perhaps in excess of that named. This, be it remembered, is not a tax on property but a tax on consumption. The poor man pays as much on sugar and rice as the rich man. The carpenter with $2 per day pays nearly as much on clothing as Jay Gould, rated at $30,000 a day; and on no article of consumption or use are the rich and poor taxed in proportion to their wealth, because ninety-five per cent of the poor man's income is required to pay his family's living expenses, while the rich man uses a much smaller proportion for that purpose.[6]
If the foregoing estimate is well founded, it is clear that very serious effects must be found both in the general state of the people and in that of various industries. Let us, therefore, make some general comparisons between this country and the greatest of those nations which have adopted a free-trade policy, and then survey as far as practicable the several effects of high tariffs on the laboring, farming, and manufacturing classes. Such a comparison must needs be more than fair to the United States, because they are growing rapidly in every respect, while England has more nearly reached a stationary state.
The total wealth and annual product of this country and England (applying that name to the United Kingdom of Great Britain and Ireland) are given as follows:[7]
| 1870. | 1880. | |||
| Total wealth. | Wealth per capita. |
Total wealth. | Wealth per capita. | |
| United States | $34,379,640,000 | $899 | $46,145,700,000 | $923 |
| England | 33,436,680,0000 | 1,065 | 42,379,200,000 | 1,210 |
| 1870. | 1880. | |||
| Annual product. | Product per capita. |
Annual product. | Product per capita. | |
| United States | $5,098,000,000 | $129 | $6,901,200,000 | $132 |
| England | 4,613,000,000 | 146 | 5,549,000,000 | 171 |
Thus we see that the United States are not only behind England in wealth per capita, but in product per capita; and, still further, that the same relation existed in 1870, but not to the same degree as in 1880; England having made a greater gain during the decade. America gained $24 per capita in wealth during the decade, England $145; while the product per capita in America increased $3, and that in England increased $25.
In wealth per capita, Mr. Mulhall ranks the nations as follows: 1. England; 2. Holland; then France, Denmark, Australia, United States, Sweden, Canada, Belgium, Germany. In annual earnings per capita Australia is first; then England, the United States, Canada, Holland, France, Denmark, Belgium, Germany, Sweden, in the order named, Mr. Mulhall also computes that the average man in the United States works 113 days to gain his food for a year, as compared with 114 days' work in England; in England he works 34 days for his clothing, here he works 49; house-rent and taxes take 29 and 33 days in England, 30 and 33 days in the United States; and the Englishman consequently has 91 days in the 300 left for other purposes, including savings, whereas the American has but 75. The banking capital and deposits of England are $125 per inhabitant; of Australia, $150; of the United States, $50. The railroads of the United States carried 270,000,000 passengers in 1882, those of England carried 752,000,000; and the slight difference in railway rates is by no means an explanation of the difference. The school attendance in England has increased from forty per cent less per capita than ours in 1880 to about the same. The post-office returns show a greater increase in the use of the mails in England than here. And that faithful index of popular condition, the criminal calendar, shows a steady decrease for a long period, until, in 1885, there was but one conviction to 3,272 persons in England; while America has one conviction to 930 persons, which has been about the rate for a considerable time. And the statistics of pauperism, while not so favorable for England, show a steady and rapid decrease for fifty years, and the ratio of paupers to population is about one fourth what it was in 1840. It would be interesting, had we space, to show the greater consumption per capita of many articles in England than in America, as of woolen clothing, sugar, and rice, the total consumption of food products being about the same per capita; and to show the vast increase seen in England during the past forty years. Suffice it to say that the facts indicate a greater average of welfare in England than in this country. "There are few questions of fact upon which the general public are more misled by our public men than this," says Mr. Gunton, in his "Wealth and Progress"; "but the facts all point to the same result, viz., that the increase in wealth, in proportion to population, has been greater in England than in this country." Lastly, but most important of all to lovers of liberalism, legal equality, and popular government, England has, during the past twenty years, grown democratic "by leaps and bounds," and her vast wealth is certainly known to have been reaching a state of more equal distribution, while we have been erecting an aristocracy of wealth. The explanation of all this reduced to its simplest form is not difficult. England's citizens buy in enormous quantities and in the cheapest markets, and sell in enormous quantities in the dearest markets. The Englishman buys at $10, puts $1 worth of labor on the material, and sells at $15. We buy at $15, put $1 worth of labor on the material, and sell only to ourselves. The American is not naturally slow, but he can not run with the Englishman while his feet are fettered.
The protection system would obviously not stand for a year in this country were it not for the belief that it results in an increase of wages among our working-people. It is, therefore, especially important to observe the effects of protection upon our wage-earning class. First of all it is to be noted that great numbers of the working-people can not, in the nature of things, be any more subject to foreign competition under free trade than they are at present. This applies to railroad-men, now nearly 700,000 in number; men in the building trades, agricultural laborers, household servants, clerks, professional men, and the like. The numbers belonging to protected and non-protected industries stand about as five to ninety-five, as above noted. The vast discrepancy between the two is not usually taken into account in tariff discussions; but it is instructive, as tending to show that American labor is not in any danger of great displacement by any possible legislation or by any possible competition.
It is a startling fact, of which the application is not obvious, that, while the protected industries have produced more millionaires, perhaps, than any others, the wages paid to workmen in them reach a much lower level than the usual one in wages-paid occupations, and in some cases a most miserably low level. This circumstance is well known, and as such was stated by a number of iron-manufacturers who united in a letter to the late Secretary Manning, in reply to that of the Iron and Steel Association—for there are manufacturers of iron who do not believe that the tariff duty should be three or four times as high as the labor cost of the product:[8] "The figures of the census show that in the year 1879-1880 the total wages of $9,538,117 paid for mining ore, distributed among 31,668 men and boys, averaged but $301 per working year each, or less than a dollar for each working day. Since that time wages have been again and again reduced. It is a notorious fact that men are working in the mines for eighty cents a day or less." So true is this that, while the cost of living is much higher in this country than in England—for the reason that taxes are there not levied altogether on articles consumed in daily use—the wage-workers receive in many cases about the same in both countries. For example, Joseph D. Weeks, special agent for the tenth census, gives ("Statistics of Wages," pp. 112 and 119) a table of wages paid in the iron-making business in the Cleveland district in England, and in "an establishment in Pennsylvania":
| EMPLOYMENT. | American. | English. |
| Keepers, per day. | $1 47 | $1 61 |
| Keeper's helper, per day. | 1 35 | 81 |
| Common laborer, per day. | 1 00 | 75 |
| Carpenter, per day. | 1 23 | 1 05 |
| Blacksmiths, per day. | 1 23 and 1 00 | 1 13 |
With this we compare American and English wages in non-protected occupations.[9] Mr. Wells gives from the last census the
| EMPLOYMENT. | American. | English. |
| Carpenters, per week. | $14 00 | $9 45 |
| Bricklayers, per week. | 20 00 | 9 45 |
| Masons, per week. | 18 00 | 9 45 |
| Locomotive-engineers, per week. | 27 00 | 7 30 to 12 15 |
average pay of the railroad employés of this country as $450 per annum; and that of the iron-workers as $312. The difference in the degree of skill required is not obvious, nor apparently sufficient to explain the great discrepancy. Lastly, we may cite the statistics brought together by Mr. Gunton in his "Wealth and Progress," and compiled from the concurrent data and results of Giffin, Mulhall, Levi, the United States census, and other great authorities. The comparison is made between several countries, none of whom have a tariff anything like as high as that of the United States. Mr. Gunton thus states the "rise in actual wages" in non-agricultural occupations, making the most favorable allowance to France and Germany, as follows:
| Wages per week. |
Increase since 1850. |
Hours of labor per week. | |
| England. | $7 44 | $2 40 | 60 |
| France. | 5 04 | 1 72 | 72 |
| Germany. | 3 84 | 1 62 | 75 |
| United States. | —— | (1 87) | About 66 |
These are very surprising facts, which merit careful attention. The very idea that American workingmen are not in every way in a better position than the English is so strange that we are naturally incredulous. The fact that we have such vast quantities of land, practically free, inviting the poorly paid to settle, would seem to be a sure defense of high wages, and doubtless is such. But there is an explanation, though it is probably but a partial one, in the effects of the tariff. The cost of living has been constantly rising in this country, while that in England has been falling. The census estimate of the increase in the cost of living in the United States during the thirty years ending in 1880 was 20·17 per cent, while during the same period the cost of articles of common use has fallen about twenty-four per cent. Obviously, the effect of this would be to put the English wage-worker in a constantly better position to demand better wages; while the American, with his cost of living tending more and more to consume his whole income, is in a constantly worse position to demand an increase. It need not be remarked how potent a factor this is, nor need the responsibility of the high tariff for the high prices prevailing be carefully demonstrated. There is not a thing eaten or a cloth worn which does not pay a tariff tax. The wheat is sown after a plow taxed twenty-five per cent in actual extra cost; and is transported on railroads, ground up in mills, put in bags, and sold in stores, all heavily taxed in their construction and maintenance by the tariff on iron. And on many articles, such as clothing, the amount of the tax is scandalously oppressive.
This may or may not explain the failure of American wages to rise to the same extent as English in the non-protected occupations, and, at any rate, there are other causes acting, such as the waste of capital caused by the war, and the heavy immigration of wage-workers. But we need a special explanation for the singular fact that wages in the protected occupations continually fall, even while the general trend is upward. In General Lieb's recent book on the tariff he has a comparative table of wages in twelve unprotected and in twelve protected occupations. In the first, wages rose in the six years following 1880 from ten to thirty-five per cent, while wages in the protected occupations fell from five to thirty-five per cent at the same time. These facts are well authenticated and even "notorious," as remarked in the letter before mentioned to Secretary Manning; but we seldom if ever are shown the reason. I think this can be directly traced to the high tariff. Take, for example, the iron-manufacturing business. In general the American prices are much below the foreign price plus the duty, and importation is impracticable. When the operators have this margin to work on they frequently accumulate a considerable supply beyond the immediate demands of the market. Then, asserting that the market is dull, they reduce wages. The men strike, of course, and the mills close. As production ceases, the price of iron goes up; and, as the foreign iron can not come in, the masters are fairly coining money out of the necessities of the public and the suffering of their own employés. In the course of a few months the latter accept the situation and go back to work at reduced wages. If foreign iron could come in the moment production ceased in this country, the masters would not be so quick to shut down as they are when they make money out of it; the laborers would be on an equal footing witb the masters. But as it is, the masters have both the public and their employés "in chancery," and have so far been able to resist the otherwise universal tendency to advance in wages. The little circle of events which I have outlined has taken place again and again in Pennsylvania, as the frequent strikes (more frequent, I believe, than anywhere else in the Union) in part testify. These circumstances can not long escape the attention of the leaders of the laboring-people, and from the rising unpopularity of protection among them we may confidently predict that they will not much longer be deceived.[10]
The depression of American agriculture is well known. In the ten years 1850-'60 the value of American farms more than doubled. In the following twenty years the value increased slightly over 50 per cent. So far as the influence of the tariff is felt in the value of farms, it might be supposed that its operation would be very favorable in the manufacturing States. Yet even here the percentage of increase in value for the decade 1850-'60 is greater than for the twenty years following 1860. All the New England States, save Massachusetts and Rhode Island, show a nominal decrease in the decade 1870-'80, and, even allowing for the 25-per-cent depreciation of greenbacks in 1870, the increase is not great; it does not by any means keep pace with the decade of 1850-'60, during which there was a low tariff. The State of Illinois should be a fair example of what has happened in purely agricultural States. From 1850 to 1860 the increase was 412 per cent; from 1860 to 1880 it was but 250 per cent. The census does not show the mortgages on farms; but, according to the statistics printed in the "New York Times," ten agricultural States have their farms mortgaged for $3,422,000,000 on a total valuation of less than four times as much. It would be surprising if agriculture were not depressed. The same state of affairs exists in American farming as existed in 1840 in English manufacturing, when Cobden and his friends associated themselves to bring in free wheat and to break the power of the landlords. Every tool which farmers use, and nearly every article they consume, bears a heavy tax, just as in Great Britain the high-tariff prices of provisions made it impossible for the manufacturers to pay subsistence wages to workmen. This country naturally manufactures agricultural machinery, and would do so even under absolute free trade, as is proved by the fact that we export it, but the duty on iron-ore and pig-iron makes the price from 15 to 25 per cent higher. Sugar is enhanced in price about 75 per cent by the tariff, and clothing, furniture, and lumber are largely raised in price to the farmer. In return, lie gets the "home market"; but, inasmuch as he gets precisely the same for his grain, whether it is sent to Liverpool or to Pittsburg for consumption, this does not seem quite compensatory.
As might be expected, the manufacturing interests make a better showing than the agricultural. Yet even in this favored branch of business the percentage of increase in 1850 and 1860 is greater than that between 1860 and 1880; if the rate shown in the former period had been maintained, the manufactured products for 1880 would have been greater in value than it is shown to be by the census by about a billion dollars. It will be observed that these figures are based upon the products of the census years 1860 and 1880, and, as the year of 1860 was one of great depression and that of 1880 of great prosperity, the facts are more strongly in favor of the low-tariff period than is indicated on the face of the figures. Thus, though the manufacturing interest is supposed to be the particular beneficiary of protection, it, too, shoulders some of the burdens of the tariff; and the New York "Evening Post" publishes a list of two hundred manufacturers who favor a reduction. Some industries, such as ship-building, have been nearly destroyed by the high tariff on everything which goes into a ship, and while in 1860 there were twenty ship-yards about New York, there is hardly one left. So with many manufacturers of hardware, which is made altogether too expensive to be readily marketable, by reason of the high cost of the material of which it is made.[11] And countless derangements and dislocations of industry might be instanced as manifestly due to the tariff. The loss of the carrying-trade has perhaps been sufficiently dwelt upon, but it is still somewhat startling to be brought face to face with the fact that, while in 1860 our ocean marine equaled England's, it at present is about seven per cent of that great country's, and is yearly decreasing. It is calculated that nearly four billion dollars have been paid out on American ocean freights since the war, of which the Americans have got very little. Not only have we lost the carrying-trade, which was rapidly falling into our hands, but we have thus lost opportunities of export. If an American locomotive is shipped, as many have been, to the Argentine Republic in competition with English engines, it has to be sent in English boats via Liverpool, our people standing the disadvantage of the additional charges, time of transport, and interest. Under these circumstances we lose all trade except that gained by great superiority, as in the case of locomotives. Thus the very duty intended to benefit the iron industry reacts. It secures the home market for the manufacturer, but destroys the foreign market, and in times of inactivity, or when the market is glutted by overproduction, there is no opportunity for relief by recourse to a foreign customer. Again, if our manufacturers wanted a machine not to be obtained in America, or raw materials to be had here only at great expense, the Government taxes them at a fearful rate. I am credibly informed that it is for this reason that Mecham & Co., glass-manufacturers of Pittsburg, have resolved to locate in Belgium, where they can get their materials and machines free. So with the Rochester tumbler-works, which, I am also informed, are about to leave an illiberal country. It is thus that we may see one reason for the existence of the great American business colony in Europe. This country pays a premium to many industries to get out of it. Obviously, too, our railway lines lose heavily by the diminished volume of exchanges, just as they would if State or country tariffs were set up. They pay thirty per cent extra for their supplies, and, by way of compensation, are deprived of part of their natural trade. Turn where we will, we find derangements, if not actual loss. Placing, as protection does, everything upon an unnatural footing, liable at any moment to give way, it would be irrational to expect sound and healthy industrial growth. The hysterical fear of some of the protectionists, that English competition and "pauper labor" will "crush" American industry, is rather ludicrous, in view of the history of the American and English competition. If there has been any instance where English competition has not been successfully met in America I do not know it. Indeed, Cobden himself recognized that the United States were the great and only menace to English commercial supremacy. Not to mention others, Mr. Gladstone is quoted as saying, in a public speech: "I will say this, that as long as America adheres to the protective system your commercial primacy is secure. Nothing in the world can wrest it from you while America continues to fetter her own strong hands and arms, and with those fettered arms is content to compete with you, who are free, in neutral markets."
That protection has any effect in fostering "trusts" has been vehemently denied, but so have many other obvious propositions. Protection lessens the number of possible competitors, and consequently makes combination easier. It might be practicable to get up a combination to control production and prices in the United States, and yet be impracticable to form one to cover the entire world. Of the enormous sums beyond a reasonable profit which these concerns have taken from the people we have no accurate knowledge, but the amount even in single cases, such as the sugar trust, is simply vast. It is not argued here that these combinations are criminal. But will it, on the other hand, be argued that we are bound to "protect" them? Are they to combine to force high prices from the people, and are the people to meekly assist in the process?
The central idea of the protective system is to compel our people to buy at home, while allowing them to sell abroad—thus retaining our money at home and adding to it. This is the old mercantile theory so popular during the middle ages. It needs but little reflection to see that such a programme can not be indefinitely carried on. If hundreds of millions of gold are brought into this country, gold becomes cheap, while abroad it becomes dear. There soon comes a time, therefore, when the gold will seek purchases abroad in consequence of its high value there. If we "corraled" all the gold in the world, the only thing we could do with it would be to send it abroad and buy with it. This process has already begun; for, during the year 1887, and much more the year ending June 30, 1888, the balance of international trade was against us. Some protection organs, failing to see the meaning of this, called for still higher tariffs. But that gold is only valuable as it enables our people to buy with it would seem to be axiomatic, however much it is forgotten.
It might be inferred from the above, as it is certainly demonstrated by experience and well understood by economists, that in the long run imports and exports must balance each other, except where, as in the case of England, imports are made to balance incomes derived from foreign investments. But if this be true, then a tariff on imports is also a restriction on exports. Have we found this to be true? Not to rely on such general principles as that all international trade is essentially barter—an exchange of product for product—because payment in gold instead of bills of exchange is too expensive; because freights without return freights are too high; and because, as experience everywhere shows, people learn to buy wherever they sell; not to rely on abstract propositions, let us appeal to the statistics of American and English exports and imports:
| Exports.-Average, 1861-1880. | Imports.-Average, 1861-1880. | |
| Great Britain | £245,000,000 | £321,000,000 |
| United States. | 74,000,000 | 74,000,000 |
Passing by such important facts as that we have almost entirely lost our South American trade; that Europe shows an increasing tendency to buy her grain elsewhere than here—I appeal to the following interesting fact cited in one of Mr. Kurd's speeches: In 1870, before sugar was admitted free from the Hawaiian Islands, our exports to them amounted to $590,000; and in 1883, after the sugar kings had been favored, our exports were $3,683,460. In a few years our exports increased sixfold; and Americans now control both the business and the politics of the islands. There is no reason why something like the same proportion should not hold for other countries, especially for Australia, South America, Canada (whose trade has been most senselessly sacrificed), and even for England. But supposing that our whole trade would have increased in only half the above proportion, we find that our exports might have been, in 1887, $2,250,000,000 instead of $750,000,000. Had this been the case, our imports would similarly have increased, and our people would have bought and sold to an advantage of at least a billion dollars more than they have, and would have been at least a billion dollars better off.
Heretofore we have taken a survey, necessarily rapid and incomplete, of the strictly industrial effects of the tariff. Let us now pass to a consideration of its general social and moral effects. We shall find their mere enumeration a serious task. The tendency to undervaluing of imports is well known, and is inevitably inherent in the tariff system; and on this account alone the tariff has been said to make us "a nation of liars." Newspapers are subsidized by its beneficiaries, and false information is systematically spread and groundless fears aroused among the ignorant. Money is sent to districts of tariff reformers to defeat them. Each protected industry maintains a watchful lobby at Washington in its interest. Sham conventions are got up to affect public opinion. In short, it is the old story of privilege maintaining itself by all means fair and foul. Just as Bright and Cobden were denounced as red-handed revolutionists for advocating untaxed bread for the people, so the mildest revenue reformer is now "in favor," in the words of General Alger, of Michigan (who owns several millions' worth of protected pine), "of moving American industries to England." Mr. Cleveland, according to other profound statesmen, "desires to ruin American workingmen." Ludicrous as such talk is, it has its serious side in the debasement of politics and the destruction of intelligent discussion. It is not indeed to be expected that the political discussion of any subject will be remarkable for research or breadth of view. Still, one must be surprised at the manner in which the protection side has been defended by its chief supporters. Mr. William McKinley, Jr., is supposed to be the ablest and most intellectual of the champions of a high tariff, and his speech on the Mills bill, which was carefully revised, contains some interesting examples of the political and intellectual effects of protection. In one place (p. 32) he asserts that "the working-people of England find that competition with countries employing cheaper labor is too oppressive to bear longer, and are demanding to be saved from further degradation," etc. This, in the face of the marvelous and universally admitted increase in wages and comfort of English labor already mentioned, and also in the face of the conspicuous fact that not a single prominent politician in England champions protection, and that the only protectionists are landlords whose rents are being reduced. In the same speech (p. 27) he attacked the Administration because it bought two thousand blankets for the army of an English firm, when, by paying $606 more, it might have patronized an American firm. Mr. McKinley's theory was that this money should not be saved to the tax-payers, but should be paid, as a bounty, to the American firm. On page 18 he said, "I would not allow a single ton of steel to come into the United States if our own labor could make it." If this is economic wisdom, why should not each State, each county, take the same policy? Mr. McKinley offers no explanation, save that we have "one flag"; but leaves to the imagination what the flag has to do with industrial success. But the ne plus ultra doctrine is on page 13: "I would rather have my political economy founded on the every-day experience of the peddler than the professor." In other words, the more we study the subject the less we know about it. Science is a delusion and snare for the impracticable. Ignorance alone is learned. We should not expect to hear from Mr. McKinley that industrial growth, like all organic growth, should be in the line of least resistance and greatest traction, which is the opinion of a sociologist; but we are hardly prepared for his assumption that labor cost is identical with the rate of daily wages. I instance Mr. McKinley's speech, because it is a type. On looking through the other leading speeches against the Mills bill we find the same neglect of facts, the same contempt for science, violence of assertion, disregard of business principles, and coarseness of reasoning. Nowhere do we find any account taken of the history of trade, the prosperity of trading nations, or even the elementary fact that English labor successfully competes with Indian and Chinese labor five times as poorly paid. Indeed, their theory would make this impossible, and therefore it can not be true.
Another very serious indirect effect of the high tariff is that the surplus revenue obtained breeds profligate schemes without number. It seems to be forgotten that the Government of the United States was carried on during J. Q. Adams's administration—one of the best this country has seen—for about $10,000,000 a year. While our population has only increased five times since then, and our area doubled in extent, the Government spends twenty-five times as much. Extravagance has permeated every department of Government. Perhaps $150,000,000 is wasted in this way every year. Aside from this, however, we have to notice a few of the ridiculous schemes which have been advanced to dispose of the surplus. The worst is probably the proposal to use it to bring up the price of silver, advanced in a congressional speech against the Mills bill.[12] This was devotion to "labor" with a vengeance. Then it is proposed to use it in educating the South, in defiance of the Constitution and of every healthful dictate of expediency. Another proposition, likewise well supported in Congress, has been to dig the Hennepin Canal, which can not be soberly regarded as anything more than a local enterprise of so poor a commercial character that no private company would think of going into it. And in the improvement of harbors, the supporters of protection have encouraged the waste of enough money seriously to diminish the surplus.[13] Governor Foraker proposes that the Government buy land and put up public buildings in every town of three thousand inhabitants and over. Then there are innumerable people who want bounties and subsidies for their enterprises. Not to speak of the extravagance and heedlessness of our present pension legislation, we are dangerously near the institution of civil pensions. Lastly, there are schemes to spend any imaginable surplus in fortifications against imaginary enemies and on a navy, which, amounting to nothing with $400,000,000 put upon it since the war, might possibly amount to something if twice that amount were expended. The surplus has also attracted the attention of one of the Labor parties, which thinks the Government ought to "loan" it to "the people." Other protection countries have had the same experience. Canada has been given over to profligate government ever since she adopted a protection policy. Where the Government goes on the theory that the more money taken from the people the better for everybody, it will not be very careful of its expenditures.
One further serious effect to be apprehended, if the protection idea obtains sway, must be mentioned. This is a demand for State and local protection. No logic that makes it advantageous for Kansas to protect herself against England can long resist the conclusion that it would also be well to protect her against Pennsylvania. This idea would the more readily spread because it is obvious that the tariff is a tax on the Western States for the benefit of the Eastern, it being as certain as anything can well be that tariff taxes cost Kansas $100 where they bring her $1. Various efforts made by Tennessee and other States to fetter interstate exchange by taxation of drummers, etc., have already been made, but have happily been nullified by the Supreme Court of the United States. Nevertheless, if the idea becomes implanted that this is the best policy, the true way to get rich, the will of the people will in the end prevail. The legitimate and logical outcome of protection is a dissolution of the Union, and the establishment of fifty tariffs instead of one. Although I do not believe that any such thing will happen, it is worth while to point it out to those who, like Mr. McKinley, are logical and thorough-going protectionists, and believe in the speedy and permanent triumph of their idea.
But this is not the American idea. It is not the idea of the Declaration of Independence or of the Constitution. Our fathers did not intend that Congress should have the power to create an industrial aristocracy, that certain classes should be saddled on the rest, and that American citizens should be deprived of the manifest and inalienable right to exchange the fruits of their labor wherever they saw fit. A more liberal spirit pervades that document, and in an important case the Supreme Court, through Justice Miller, has used language clearly implying that protection per se is unconstitutional.[14]
- ↑ In the year 1887 Carnegie Brothers & Company, of Pittsburg, manufactured 192,998 tons of steel rails at a cost of $26.79 per ton, and sold them at an average of $37.1212 per ton; making a profit of about $1,158,000 on that item alone of their manufactures. For the making of these rails they paid out in wages $778,075, equal to about 68 per cent of their profits. During the same year the same firm turned out about 30,000 tons of iron and steel beams (used in large buildings, bridges, etc.), at a cost of about $28.02 per ton, and sold them at $66 per ton, through a trust; making a total profit of about $1,150,000, which is 135 per cent, of the total expenses and about seven times the sum paid by them to their labor employed on this product. The exorbitant profit thus made at the expense of the owners and patrons of railways and buildings was rendered possible solely by the high tariff (on rails $17 per ton, or about 75 per cent; on beams, l 14 cent per pound, or about 102 per cent).—Abridged from the speech of W. L. Scott, in the House of Representatives, May 11, 1888.
- ↑ Soon after the duty was put on pine-lumber the pine was advanced $1 per thousand feet. Seeing this, the men at the camps in Michigan thought it was a good time to ask for a slight increase in pay, inasmuch as the tariff was, they were assured, for their benefit. They asked an increase from $1.50 to $1.75 per day, an increase equivalent to perhaps 5 per cent of the increased profit. Thereupon they were all dismissed. Canadians were imported at $1.25 per day, and were only worked three fourths time at that. Great is "the American system."—"Indianapolis Signal" (Labor paper).
- ↑ After the enactment of the high duty on wool in 1867, both wool-manufacturing and wool-growing were very much depressed, owing to the fact that the public would not buy woolens at the enhanced prices. During this period it was very common for the commission-merchant to find that he had over-advanced to the manufacturer. The almost invariable result was a mortgage on the mill-property and a foreclosure. In this way A. T. Stewart acquired mill after mill, but even he failed to make his factories pay, and he is believed to have lost heavily by his woolen-mills. At his death his estate was burdened by a large number of these properties.—From the paper of Rowland Hazard, woolen manufacturer, before the Chicago Free-Trade Conference, November 12, 1885.
- ↑ In 1886 W. C. Ford, E. B. Elliot, and Simon Newcomb, statistical experts, reported to the Secretary of the Treasury their estimate of the number of persons in "protected" industries. Their estimates vary from 4·7 per cent to 5·2 per cent.
- ↑ I believe this is Mr. Wells's estimate.
- ↑ It is a frequently made reply to considerations like the above that, though protection takes from some and gives to others, yet all are Americans—"it is all in the family." This proposition and the other great stand-by, that "foreigners pay the tariff-taxes," I find it difficult to answer seriously. When a philosopher starts out with an inconceivable proposition, it is rather difficult to argue. But we may say, in the first place, that justice has some place in the family as well as elsewhere. Moreover, much of what is taken from the people is, from an economic point of view, wasted: it is used up in sustaining extravagant and old-fashioned processes, unfavorable locations, and the like.
- ↑ See Mulhall's "History of Prices," which is generally accepted as a work of the highest authority.
- ↑ Letter of J. B. Sargeant and others to Hon. Daniel Manning, December 21, 1885.
- ↑ These figures are given for New York and London in the Government publication, "Labor in Foreign Countries," pp. 635 and 1663 to 1667.
- ↑ This explanation was first made, T think, by Mr. Benjamin Reece, at the Free-Trade Conference of 1885.
- ↑ In the "New York Times" of July 18, 1888, Mr. Frank Wilkeson makes a remarkable showing of the effect of the tariff on iron- and steel-making. He computes that pig-iron ought to be produced in Alabama and on the southern shore of Lake Erie at $7 per ton cheaper than anywhere else in the world, and with no reduction of wages whatever. (Moreover, he takes no account of natural gas.) He claims that iron is now made in Ohio and Alabama for little more than that amount, and that the duty of $7 per ton has simply enabled furnaces to stay in Pennsylvania, where every element of cost is very great except the cost of labor, and that the manufacture of iron is thus unnaturally expensive and profitless to everybody. Pig-iron has within eight years sold for $40 per ton, and manufacturers claim that it costs them $15. Mr. Wilkeson says, "The iron-works which will inevitably be built on the shores of Lake Erie will bankrupt every blast-furnace and rolling-mill in Europe." But not so long as a high tariff and combinations protect every manner of extravagance.
- ↑ By Congressman Cheadle.
- ↑ One harbor within my knowledge has had more spent upon it by the Government than the entire town is worth.
- ↑ Judge Story (sections 1077-1097 of his book on the Constitution) has lent the weight of his name to the opposite view. But Judge Cooley says ("Principles of Constitutional Law"): "Constitutionally, a tax can have no other basis than the raising of revenue for public purposes, and whatever has not this basis is tyrannical and unlawful. A tax on imports, therefore, the purpose of which is not to raise revenue, but to discourage and indirectly prohibit some particular import for the sake of some manufacturer, may well be questioned as merely colorable, and therefore not warranted by constitutional principles." And in Citizens' Savings-Bank vs. Topeka, 20 Wall, 635, the court said: "There are limitations" on all American legislatures "which rise out of the essential nature of all free government. Among these is the limitation of taxation that it can only be used in the aid of a public object. It can not, therefore, be exercised in the aid of enterprises strictly private for the benefit of individuals, though in a remote or collateral way the public may be benefited thereby." It was decided in this case that it was illegal to tax Topeka to pay manufacturers to locate there.