Part 990

4. Bounties are sometimes not only the best, but the only proper expedient for uniting the encouragement of a new object of agriculture with that of a new object of manufacture. It is the interest of the farmer to have the production of the raw material promoted by counteracting the interference of the foreign material of the same kind. It is the interest of the manufacturer to have the material abundant and cheap. If prior to the domestic production of the material in sufficient quantity to supply the manufacturer on good terms, a duty be laid upon the importation of it from abroad, with a view to promote the raising of it at home, the interest both of the farmer and manufacturer will be disserved. By either destroying the requisite supply, or raising the price of the article beyond what can be afforded to be given for it by the conductor of an infant manufacture, it is abandoned or fails; and there being no domestic manufactories to create a demand for the raw material which is raised by the farmer, it is in vain that the competition of the like foreign article may have been destroyed. It cannot escape notice that a duty upon the importation of an article can no otherwise aid the domestic production of it than by giving the latter greater advantages in the home market. It can have no influence upon the advantageous sale of the article produced in foreign markets, no tendency, therefore, to promote its exportation. The true way to conciliate these two interests is to lay a duty on foreign manufactures of the material, the growth of which is desired to be encouraged, and to apply the produce of that duty by way of bounty either upon the production of the material itself, or upon its manufacture at home, or upon both. In this disposition of the thing the manufacturer commences his enterprise under every advantage which is attainable as to quantity or price of the raw material. And the farmer, if the bounty be immediately to him, is enabled by it to enter into a successful competition with the foreign material. … There is a degree of prejudice against bounties, from an appearance of giving away the public money without an immediate consideration, and from a supposition that they serve to enrich particular classes at the expense of the community. But neither of these sources of dislike will bear a serious examination. There is no purpose to which public money can be more beneficially applied than to the acquisition of a new and useful branch of industry, no consideration more valuable than a permanent addition to the general stock of productive labor. As to the second source of objection, it equally lies against other modes of encouragement, which are admitted to be eligible. As often as a duty upon a foreign article makes an addition to its price, it causes an extra expense to the community for the benefit of the domestic manufacturer. A bounty does no more. But it is the interest of the society in each case to submit to a temporary expense, which is more than compensated by an increase of industry and wealth, by an augmentation of resources and independence, and by the circumstance of eventual cheapness, which has been noticed in another place. It would deserve attention, however, in the employment of this species of encouragement in the United States, as a reason for moderating the degree of it in the instances in which it might be deemed eligible, that the great distance of this country from Europe imposes very heavy charges on all the fabrics which are brought from thence, amounting from 15% to 30% on their value according to their bulk. …

V. Premiums. These are of a nature allied to bounties, though distinguishable from them in some important features. Bounties are applicable to the whole quantity of an article produced or manufactured or exported, and involve a correspondent expense. Premiums serve to reward some particular excellence or superiority, some extraordinary exertion or skill, and are dispensed only in a small number of cases. But their effect is to stimulate general effort. …

VI. The exemption of the materials of manufactures from duty. The policy of that exemption, as a general rule, particularly in reference to new establishments, is obvious. …

VII. Drawbacks of the duties which are imposed on the materials of manufactures. It has already been observed as a general rule, that duties on those materials ought, with certain exceptions, to be forborne. Of these exceptions, three cases occur which may serve as examples. One where the material is itself an object of general or extensive consumption, and a fit and productive source of revenue. Another where a manufacture of a simpler kind, the competition of which with a like domestic article is desired to be restrained, partakes of the nature of a raw material from being capable by a further process to be converted into a manufacture of a different kind, the introduction or growth of which is desired to be encouraged. A third where the material itself is the production of the country, and in sufficient abundance to furnish a cheap and plentiful supply to the national manufacturers. … Where duties on the materials of manufactures are not laid for the purpose of preventing a competition with some domestic production, the same reasons which recommend, as a general rule, the exemption of those materials from duties, would recommend, as a like general rule, the allowance of drawbacks in favor of the manufacturer. …

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VIII. The encouragement of new inventions and discoveries at home, and of the introduction into the United States of such as may have been made in other countries; particularly those which relate to machinery. This is among the most useful and unexceptionable of the aids which can be given to manufactures. The usual means of that encouragement are pecuniary rewards, and, for a time, exclusive privileges. …

IX. Judicious regulations for the inspection of manufactured commodities. This is not among the least important of the means by which the prosperity of manufactures may be promoted. It is indeed in many cases one of the most essential. Contributing to prevent frauds upon consumers at home and exporters to foreign countries, to improve the quality and preserve the character of the national manufactures; it cannot fail to aid the expeditious and advantageous sale of them, and to serve as a guard against successful competition from other quarters. …

X. The facilitating of pecuniary remittances from place to place—is a point of considerable moment to trade in general and to manufactures in particular, by rendering more easy the purchase of raw materials and provisions, and the payment for manufactured supplies. A general circulation of bank paper, which is to be expected from the institution lately established, will be a most valuable means to this end. …

XI. The facilitating of the transportation of commodities. Improvements favoring this object intimately concern all the domestic interests of a community; but they may, without impropriety, be mentioned as having an important relation to manufactures. …

The foregoing are the principal of the means by which the growth of manufactures is ordinarily promoted. It is, however, not merely necessary that the measures of government which have a direct view to manufactures should be calculated to assist and protect them; but that those which only collaterally affect them, in the general course of the administration, should be guarded from any peculiar tendency to injure them. There are certain species of taxes which are apt to be oppressive to different parts of the community, and, among other ill effects, have a very unfriendly aspect towards manufactures. All poll or capitation taxes are of this nature. They either proceed according to a fixed rate, which operates unequally and injuriously to the industrious poor; or they vest a discretion in certain officers to make estimates and assessments, which are necessarily vague, conjectural, and liable to abuse. … All such taxes (including all taxes on occupations) which proceed according to the amount of capital supposed to be employed in a business, or of profits supposed to be made in it, are unavoidably hurtful to industry."

_A. Hamilton, Report on Manufactures (Works, volume 3)._

ALSO IN: _State Papers and Speeches on the Tariff._

_R. W. Thompson, History of Protective Tariff Laws, chapters 6-7._

TARIFF: (England): A. D. 1815-1828. The Corn Laws and Provision Laws. The sliding-scale.

During the Napoleonic wars in Europe there was a prolonged period of scarcity, approaching to famine, in Great Britain. There were scant harvests at home and supplies from abroad were cut off by the "Continental system" of Napoleon. "In 1801 wheat was 115 shillings and 11 pence per quarter; from 1801 to 1818 the price averaged 84s.; whilst in the 20 years ending 1874, it averaged only 52s. per quarter. … The cry of starvation was everywhere heard amongst the working classes, and tradesmen of all kinds suffered severely; whilst the only well-to-do people were the Farmers and the Landlords. As soon as the war was over, and our ports were opened for the reception of foreign grain, prices came down rapidly. Then the Landlords took alarm, and appealed to Parliament to resist the importation of foreign grain, which they asserted, would be the ruin of the English Farmers. They insisted that in this country, the costs of cultivation were extremely heavy, as compared with those of foreign producers of grain, and that therefore the British Farmer must receive protection in order to prevent his ruin. Hence a Parliament, composed mostly of Landlords, proceeded, in 1815, to enact the Corn Law, which excluded foreign wheat, except at high rates of duty, until the market price should reach 80s. per quarter; and other kinds of grain, until there was a proportionate elevation in prices. The discussions in Parliament on this question made a great impression, and led to a wide-spread sympathy, and to the belief that there was need of a measure, which, according to its advocates, would preserve our Agriculture from ruin, and be at the same time a provision against famine. But by many thoughtful and patriotic people this law was viewed with intense dislike, and was characterised as an atrocious fraud. The fact was, that … when rents ought either to have been lowered, or the methods of cultivation improved, the Corn Law was passed by the Landlords in order to keep out foreign corn and to maintain high rents; and many of the common people saw, or thought they saw, what would be the effect; for whilst the legislature was engaged in the discussion of the question, the people of London became riotous, and the walls were chalked with invectives such as 'Bread or Blood,' 'Guy Fawkes for ever,' etc. A loaf, steeped in blood, was placed on Carlton House, (now the Tory Club House.) The houses of some of the most unpopular of the promoters of the measure were attacked by the mob. At Lord Eldon's house the iron railings were torn up, whilst every pane of glass and many articles of furniture were broken and destroyed, and it was facetiously remarked that at last his lordship kept open house. The military were called out, and two persons were killed; the Houses of Parliament were guarded by soldiers, and, indeed, the whole of London appeared to be in possession of the Army. In various parts of the country similar disturbances prevailed. … Large popular meetings were held at Spa Fields, in London, public meetings were also held at Birmingham, and in many other parts of the kingdom. … In some of the towns and populous localities, the operatives having in view a large aggregate meeting to be held on St. Peter's field in Manchester, submitted themselves to marching discipline. … Regardless, however, of the public demonstrations of dislike to the Corn and Provision Laws, the Legislature persisted in upholding the most stringent provisions thereof until the year 1828, when the duties on the importation of grain were adjusted by a sliding scale, in accordance with the average prices in the English market. {3069} The following abstract may serve to denote the provisions of the amended Law;—When the average price of wheat was 36 shillings the duty was 50 shillings 8 pence per qr.; when 46s. the duty was 40s. 8d. per. qr.; when 56s. it was 30s. 8d. per qr.; when 62s. it was 24s. 8d. per qr.; when 72s. it was 2s. 8d. per qr.; and when 73s. it was 1s. per qr. It was soon found that as a means of protection to the British Farmer, the operation of the sliding scale of duties was scarcely less effective, by deterring imports of grain, than the previous law, which absolutely excluded wheat until it reached 80s. per quarter. The Act certainly provided that foreign grain might at any time be imported, and be held in bond till the duty was paid; a provision under which it was expected to be stored until the price should be high, and the duty low; but the expenses attendant upon warehousing and preserving it from injury by keeping, were usually looked upon as an undesirable or even dangerous investment of a merchant's capital. … Agricultural protection, as exhibited by the Corn Law, would, however, have been very incomplete without the addition of the Provision Laws. By these Laws the importation of Foreign Cattle and foreign meat were strictly prohibited. Butter and Lard were indeed allowed to be imported, but they were not to be used as food, and in order to provide against any infraction of the law, the officers at the Custom Houses were employed to 'spoil' these articles on their arrival, by smearing them with a tarred stick. They could then be used only as grease for wheels, or for the smearing of sheep. With bread purposely made dear, with the import of cattle and of flesh meat prohibited, and with lard and butter wilfully reduced from articles of food to grease for wheels, there is no difficulty in accounting for the frequent murmurs of discontent, and for the starvation among the poorer classes in every part of the Kingdom. Soup kitchens were opened almost every winter, and coals and clothing gratuitously distributed in many places; but such palliatives were regarded with derision by all who understood the true causes of the evil. Such help was scorned, and a cry for justice was raised; scarcity was said to be created by Act of Parliament, in order to be mitigated by philanthropy."

_H. Ashworth, Recollections of Richard Cobden, chapter 1._

ALSO IN _D. Ricardo, On Protection to Agriculture (Works, pages 459-498)._

_J. E. T. Rogers, The Economic Interpretation of History, chapters 17-18._

TARIFF: (United States): A. D. 1816-1824. The beginning of the protective policy (the "American System").

"The return of peace at the beginning of 1815 brought the manufacturers face to face with a serious danger. War had been their harvest time. Favored by double duties and abnormal conditions their industry had attained a marvelous though not always safe development. … By limitation, the double duties were to expire one year after the conclusion of peace, and unless Congress intervened promptly and effectually their individual ruin was certain. … As new industries sprang up, petitions were promptly laid before Congress praying for new duties, for the permanence of the war duties, and for certain prohibitions. … In laying before Congress the treaty of peace, February, 1815, Madison called attention to the 'unparalleled maturity' attained by manufactures, and 'anxiously recommended this source of national independence and wealth to the prompt and constant guardianship of Congress.' … To Dallas, Secretary of the Treasury, the manufacturers had already turned. Six days after the treaty of peace was ratified, the House, February 23, 1815, called upon Dallas to report a general tariff bill at the next session of Congress. … In his annual report in December, 1815, Dallas had proposed the extension of the double duties until June 30, 1816, in order to give time for the elaboration of a new tariff bill; and after some discussion Congress agreed to this plan. February 13 he transmitted his reply to the resolutions of the previous February, closing with a carefully prepared schedule of new tariff rates. This, after being worked over in the Ways and Means Committee, was embodied in a bill and introduced into the House March 12, by Lowndes of South Carolina. Debate began March 20, and continued till April 8, when the bill was finally passed by a vote of 88 to 54. April 20 it passed the Senate with some amendments, and April 27 received the approval of Madison. … The features of Dallas' proposed tariff were the enlarging of the ad valorem list from three groups at 12½, 15, and 20 per cent to eight groups at 7½, 15, 20, 22, 28, 30, and 33 1/3 per cent; the increase of specific duties by about 42 per cent; and, most important of all, in the article of coarse cottons, the insertion of a minimum, by which, as far as the custom-house was concerned, no quality was to be regarded as costing less than 25 cents per square yard. Except in the case of coarse cottons the new rates on articles which it was desired to protect fell slightly below the double rates of the war. Three positions were brought out in debate—two extremes, seeking the formulation of economic reasons for and against the policy of protection, and a middle party, composed mainly of men indifferent to manufacturing as such, but accepting the establishment of manufactures as one of the chief results of the war. … The two extremes, however, were far from taking the positions assumed later by extreme protectionism and extreme laissez-faire. … Only a few articles occasioned any discussion, and these were items like sugar, cottons, and woolens, which had been reduced in the Ways and Means Committee from the rates proposed by Dallas. Dallas had fixed the duty on cottons at 33 1/3 per cent, which was reduced to 30 per cent in Lowndes' bill. Clay moved to restore the original rate. … Later Webster proposed a sliding scale on cottons, the rate to be 30 per cent for two years, then 25 per cent for two more, and then 20 per cent. Clay moved to amend by making the first period three years and the second one year. … Lowndes assented to the motion. … Dallas proposed 28 per cent on woolens. The committee reduced this to 25 per cent, and following the example set in the case of cottons, Lowndes moved that after two years the rate be fixed at 20 per cent. … After some debate the first period was made three years, and Lowndes' amendment agreed to. The tariff of 1816 was a substantial victory for the manufacturers. … But … in its working out the tariff of 1816 proved a bitter disappointment to the manufacturing interest. The causes, however, were widely varied. … {3070} Yet it would be easy to exaggerate the distresses of the country. The years from 1816 to 1820 especially, were years of depression and hard times, but the steady growth of the country was hardly interrupted. In the main the tariff did not fail of its legitimate object. For the most part the new manufactures were conserved. … More and more there was a growing impatience with the tariff of 1816, and a tendency to lay the bad times upon its shoulders. … March 22, 1820, Baldwin of Pennsylvania, chairman of the newly created Committee on Manufactures, introduced a tariff bill embodying the general demand of the protected interests. … The bill passed the House by a vote of 90 to 69; it was defeated in the Senate by one vote."

_O. L. Elliott, The Tariff Controversy, 1789-1833 (Leland Stanford Junior University Monographs No.1), pages 163-211._

"The revision of the Tariff, with a view to the protection of home industry, and to the establishment of what was then called, 'The American System,' was one of the large subjects before Congress at the session of 1823-24, and was the regular commencement of the heated debates on that question which afterwards ripened into a serious difficulty between the federal government and some of the southern States. … Revenue the object, protection the incident, had been the rule in the earlier tariffs: now that rule was sought to be reversed, and to make protection the object of the law, and revenue the incident. … Mr. Clay, the leader in the proposed revision, and the champion of the American System, expressly placed the proposed augmentation of duties on this ground. … Mr. Webster was the leading speaker on the other side, and disputed the universality of the distress which had been described; claiming exemption from it in New England; denied the assumed cause for it where it did exist, and attributed it to over expansion and collapse of the paper system, as in Great Britain, after the long suspension of the Bank of England; denied the necessity for increased protection to manufactures, and its inadequacy, if granted, to the relief of the country where distress prevailed. … The bill was carried in the House, after a protracted contest of ten weeks, by the lean majority of five—107 to 102-only two members absent, and the voting so zealous that several members were brought in upon their sick couches. In the Senate the bill encountered a strenuous resistance. … The bill … was carried by the small majority of four votes—25 to 21. … An increased protection to the products of several States, as lead in Missouri and Illinois, hemp in Kentucky, iron in Pennsylvania, wool in Ohio and New York, commanded many votes for the bill; and the impending presidential election had its influence in its favor. Two of the candidates, Messrs. Adams and Clay, were avowedly for it; General Jackson, who voted for the bill, was for it, as tending to give a home supply of the articles necessary in time of war, and as raising revenue to pay the public debt."

_T. H. Benton, Thirty Years' View, volume 1, chapter 13._

ALSO IN _A. B. Hart, Formation of the Union, sections 122 and 132 (chapters 11-12)._

_A. Walker, Science of Wealth, page 116._

_F. W. Taussig, Tariff History of the United States, pages 68-76._

_A. S. Bolles, Financial History of the United States, 1789-1860, book 3, chapter 3._

TARIFF: (United States): A. D. 1828. The "Bill of Abominations." New England changes front.