CHAPTER III

PROTECTIONISM EXAMINED ADVERSELY

62. I have so far examined protectionism as a philosophy of national wealth, assuming and accepting its own doctrines, and following them out, to see if they will issue as is claimed. We have found that they do not, but that protectionism, on its own doctrines, issues in the impoverishment of the nation and in failure to do anything which it claims to do. On the contrary, an examination in detail of its means, methods, purposes, and plans shows that it must produce waste and loss, so that _if it were true, we should have to believe that waste and loss are means of wealth_. Now I turn about to attack it in face, on an open issue, for if any project which is advocated proves, upon free and fair examination, to be based on errors of fact and doctrine, it becomes a danger and an evil to be exposed and combated, and truth of fact and doctrine must be set against it.

1. _PROTECTIONISM INCLUDES AND NECESSARILY CARRIES WITH IT HOSTILITY TO TRADE OR, AT LEAST, SUSPICION AGAINST TRADE_

(_A_) RULES FOR KNOWING WHEN IT IS SAFE TO TRADE.

63. Every protectionist is forced to regard trade as a mischievous or at least doubtful thing. Protectionists have even tried to formulate rules for determining when trade is beneficial and when harmful.

64. It has been said that we ought to trade only on meridians of longitude, not on parallels of latitude.

65. It has been affirmed that we cannot safely trade unless we have taxes to exactly offset the lower wages of foreign countries. But it is plain that if the case stands so that an American employer says: “I am at a disadvantage compared with my foreign competitor, because he pays less wages than I”--then, by the same token, the American laborer will say: “I am at an advantage, compared with my foreign comrade, for I get better wages than he.” If the law interferes with the state of things so that the employer is enabled to say: “I am now at less disadvantage in competition with my foreign rival, because I do not now have to pay as much more wages than he as formerly”--then, by the same token, the American laborer must say: “I am not now as much better off than my foreign comrade as formerly, for I do not now gain as much more than he as I did--there is not now as much advantage in emigrating to this country as formerly.” Therefore, whenever the taxes just offset the difference in wages, _they just take away from the American laborer all his superiority over the foreigner_, and take away all reason for caring to come to this country. So much for the laborer. But the employer, if he has arrested immigration, has cut off one source of the supply of labor, tending to raise wages, and is at war with himself again (§ 47).

66. It has been said that two nations cannot trade _if the rate of interest in the two differs by two per cent_. The rate of interest in the Atlantic States and in the Mississippi Valley has always differed by two per cent, yet they have traded together under absolute free trade, and the Mississippi Valley has had to begin a wilderness and grow up to the highest standard of civilization in spite of that state of things.

67. It has been said that we ought to _trade only with inferior nations_. The United States does not trade with any other nation, save when it buys territory. A in the United States trades with B in some foreign country. If I want caoutchouc I want to trade with a savage in the forests of South America. If I want mahogany I want to trade with a man in Honduras. If I want sugar I want to trade with a man in Cuba. If I want tea I want to trade with a man in China. If I want silk or champagne I want to trade with a man in France. If I want a razor I want to trade with a man in England. I want to trade with the man who has the thing which I want of the best quality and at the lowest rate of exchange for my products. What is the definition or test of an “inferior nation,” and what has that got to do with trade any more than the race, language, color, or religion of the man who has the goods?

68. If trade was an object of suspicion and dread, then indeed we ought to have _rules for distinguishing safe and beneficial trade_ from mischievous trade, but these attempts to define and discriminate only expose the folly of the suspicion. We find that the primitive men who dwelt in caves in the glacial epoch carried on trade. The earliest savages made footpaths through the forests by which to traffic and trade, winning thereby mutual advantages. They found that they could supply more wants with less effort by trade, which gave them a share in the natural advantages and acquired skill of others. They trained beasts of burden, improved roads, invented wagons and boats, all in order to extend and facilitate trade. They were foolish enough to think that they were gaining by it, _and did not know that they needed a protective tariff to keep them from ruining themselves_. Or, why does not some protectionist sociologist tell us at what stage of civilization trade ceases to be advantageous and begins to need restraint and regulation?

(_B_) ECONOMIC UNITS NOT NATIONAL UNITS.

69. The protectionists say that their system advances civilization inside a state and makes it great, but the facts are all against them (see § 136ff). It was by trade that civilization was extended over the earth. It was through the contact of trade that the more civilized nations transmitted to others the alphabet, weights and measures, knowledge of astronomy, divisions of time, tools and weapons, coined money, systems of numeration, treatment of metals, skins, and wool, and all the other achievements of knowledge and invention which constitute the bases of our civilization. On the other hand, the nations which shut themselves up and developed an independent and self-contained civilization (China and Japan) present us the types of arrested civilization and stereotyped social status. It is the penalty of isolation and of withdrawal from the giving and taking which properly bind the whole human race together, that even such intelligent and highly endowed people as the Chinese should find their high activity arrested at narrow limitations on every side. They invent coin, but never get beyond a cast copper coin. They invent gunpowder, but cannot make a gun. They invent movable types, but only the most rudimentary book. They discover the mariner’s compass, but never pass the infancy of ship-building.

70. The fact is, then, that _trade has been the handmaid of civilization_. It has traversed national boundaries, and has gradually, with improvement in the arts of transportation, drawn the human race into closer relations and more harmonious interests. The contact of trade slowly saps old national prejudice and religious or race hatreds. The jealousies which were perpetuated by distance and ignorance cannot stand before contact and knowledge. To stop trade is to arrest this beneficent work, to separate mankind into sections and factions, and to favor discord, jealousy, and war.

71. Such is the action of protectionism. The protectionists make much of their pretended “nationalism,” and they try to reason out some kind of relationship between the scope of economic forces and the boundaries of existing nations. The argumentation is fatally broken at its first step. They do not show what they might show, _viz._, that the scope of economic forces on any given stage of the arts does form economic units. An English county was such a unit a century ago. I doubt if anything less than the whole earth could be considered so to-day, when the wool of Australia, the hides of South America, the cotton of Alabama, the wheat of Manitoba, and the meat of Texas meet the laborers in Manchester and Sheffield, and would meet the laborers in Lowell and Paterson, if the barriers were out of the way. But what the national protectionist would need to show would be that the economic unit coincides with the political unit. He would have to affirm that Maine and Texas are in one economic unit, but that Maine and New Brunswick are not; or that Massachusetts and Minnesota are in one economic unit, but that Massachusetts and Manitoba are not. Every existing state is a product of historic accidents. Mr. Jefferson set out to buy the city of New Orleans. He awoke one morning to find that he had bought the western half of the Mississippi Valley. Since that turned out so, the protectionists think that Missouri and Illinois prosper by trading in perfect freedom.[6] If it had not turned out so, it would have been very mischievous for them to trade in perfect freedom. Nova Scotia did not join the revolt of our thirteen colonies. Hence it is thought ruinous to let coal and potatoes come in freely from Nova Scotia. If she had revolted with us, it would have been for the benefit of everybody in this union to trade with her as freely as we now trade with Maine. We tried to conquer Canada in 1812–1813 and failed. Consequently the Canadians now put taxes on our coal and petroleum and wheat, and we put taxes on their lumber, which our coal and petroleum industries need. We did annex Texas, at the cost of war, in 1845. Consequently we trade with Texas now under absolute freedom, but, if we trade with Mexico, it must be only very carefully and under stringent limitations. Is this wisdom, or is it all pure folly and wrongheadedness, by which men who boast of their intelligence throw away their own chances?[7]

72. _Trade is a beneficent thing._ It does not need any regulation or restraint. There is no point at which it begins to be dangerous. It is mutually beneficent. If it ceases to be so, it ceases entirely, because he who no longer gains by it will no longer carry it on. (See § 125.)

2. _PROTECTIONISM IS AT WAR WITH IMPROVEMENT._

73. The cities of Japan are built of very combustible material, and when a fire begins it is rarely arrested until the city is destroyed. It was suggested that a steam fire-engine would there reach its maximum of utility. One was imported and proved very useful on several occasions. Thereupon the carpenters got up a petition to the government to send the fire-engine away, because it ruined their business.

74. The instance is grotesque and exaggerated, but it is strictly true to the principle of protectionism. The southern counties of England, a century ago, protested against the opening of the great northern turnpike, because that would bring the products of the northern counties to the London market, of which the southern counties had had a monopoly. After the St. Gothard tunnel was opened the people of southern Germany petitioned the Government to lay higher taxes on Italian products to offset the cheapness which the tunnel had produced. In 1837 the first two steamers which ever made commercial voyages across the Atlantic arrived at the same time. A grand celebration was held in New York. The foolish people rejoiced as if a new blessing had been won. Man had won a new triumph over nature. What was the gain of it? It was that he could satisfy his needs with less labor than before; or, in plain language, get things cheaper. But in 1842 a Home Industry Convention was held in New York, at which it was alleged as the prime reason why more taxes were needed, that this steam transportation had made things cheap here.[8] Taxes were needed to neutralize the improvement.

(_A_) TAXES TO OFFSET CHEAPENED TRANSPORTATION.

75. For the last twenty-five years, to go no farther back, we have multiplied inventions to facilitate transportation. Ocean cables, improved marine engines, and screw steamers, have been only improved means of supplying the wants of people on two continents more abundantly with the products each of the other. The scientific journals and the daily papers boast of every step in this development as a thing to be proud of and rejoice in, but in the meantime the legislators on both sides of the water are hard at work to neutralize it by taxation. We, in the United States, have multiplied monstrous taxes on all the things which others make and which we want, to prevent them from being brought to us. The statesmen of the European continent are laying taxes on our meat and wheat, lest they be brought to their people. The arts are bringing us together; the taxes are needed to keep us apart. In France, for instance, the agriculturist complains of American competition--not “pauper labor,” but gratuitous soil and sunlight. He does not want the French artisan to have the benefit of our prairie soil. The government yields to him and lays a tax on our meat and wheat. This raises the price of bread in Paris, where the reconstruction of the city has collected a large artisan population. The government then finds itself driven to fix the price of bread in Paris, to keep it down. But the reconstruction of the city was accomplished by contracting a great debt, which means heavy taxes. These taxes drive the population out into the suburbs. At least one voice has been raised by an owner of city property that a tax ought to be laid on suburban residents to drive them back to the city,[9] and not let them escape the efforts of the city landlord to throw his taxes on them. Then, again, France has been subsidizing ships, and when the question of renewing the subsidy came up, it was argued that the ships subsidized at the expense of the French taxpayer had lowered freight on wheat and made wheat cheap; that is, as somebody justly replied, had wrought the very mischief against which the increased tax had just been demanded on wheat. Therefore the taxpayer had been taxed first to make wheat cheap, and then again to make it dear.

76. Tax A to favor B. If A complains, tax C to make it up to A. If C complains, tax B to favor C. If any of them still complain, begin all over again. Tax them as long as anybody complains, or anybody wants anything. This is the statesmanship of the last quarter of the nineteenth century.

77. Bismarck, too, is going into the business. He has to rule a people who live on a poor soil and have to bear a crushing military system. The consequence is that the population is declining. Emigration exceeds the natural increase. Bismarck’s cure for it is to lay protective taxes against American pork and wheat and rye. This will protect the German agriculturist. If it lowers still more the comfort of the buyers of food, and drives more of them out of the country, then he will go and buy or fight for colonies at the expense of the German agriculturists whom he has just “protected,” although the surplus population of Germany has been taking itself away for thirty years without asking help or giving trouble. What can Germany gain by diverting her emigrants to her own colony unless she means to bring the able-bodied men back to fight her battles? If she means that, the emigrants will not go to her colony.

78. France is also reviving the old colonial policy with discriminating favors and compensatory restraints. She already owns a possession in Algeria, which is the best example of a colony for the sake of a colony. It has been asserted in the French Chambers that each French family now in Algeria has cost the Government (_i.e._, the French taxpayer) 25,000 francs.[10] The longing of these countries for “colonies” is like the longing of a negro dandy for a cane or a tall hat so as to be like the white gentlemen.

(_B_) SUGAR BOUNTIES.

79. The worst case of all, however, is sugar. The protectionists long boasted of beet-root sugar as a triumph of their system. It is now an industry in which an immense amount of capital is invested on the Continent, but cheap transportation for cane sugar, and improvements in the treatment of the latter, are constantly threatening it. Mention is made in _Bradstreet’s_ for June 28, 1885, of a very important improvement in the treatment of cane which has just been invented at Berlin. Germany has an excise tax on beet-root sugar, but allows a drawback on it when exported which is greater than the tax. This acts as a bounty paid by the German taxpayer on the exportation. Consequently, beet-root sugar has appeared even in our market. The chief market for it, however, is England. The consequence is that the sugar, which is nine cents a pound in Germany, and seven cents a pound here, is five cents a pound in England, and that the annual consumption of sugar per head in the three countries[11] is as follows: England, sixty-seven and a half pounds; United States, fifty-one pounds; Germany, twelve pounds. I sometimes find it difficult to make people understand the difference between wanting an “industry” and wanting goods, but this case ought to make that distinction clear. Obviously _the Germans have the industry and the Englishmen have the sugar_.

80. No sooner, however, does Germany get her export bounty in good working order than the Austrian sugar refiners besiege their government to know whether Germany is to have the monopoly of giving sugar to the Englishmen.[12] They get a bounty and compete for that privilege. Then the French refiners say that they cannot compete, and must be enabled to compete in giving sugar to the Englishmen. I believe that their case is under favorable consideration.

80_a._ I have found it harder (as is usually the case) to get recorded information about the trade and industry of our own country than about those of foreign nations. However, we too, although we do not raise beet-sugar, have our share in this bounty folly, as may be seen by the following statement, which comes to hand just in time to serve my purpose.[13] “The export of refined sugar [from the United States] is entirely confined to hard sugars, or, to be more explicit, loaf, crushed, and granulated. This is because the drawback upon this class of sugar is so large that refiners are enabled to sell them at less than cost. The highest collectable duty upon sugar testing as high as 99° is but 2.36, but the drawback upon granulated testing the same, and in the case of crushed and loaf less, is 2.82 less 1 per cent. This is exactly 43 cents per one hundred pounds more than the government receives in duty. But it rarely happens that raw sugar is imported testing 99°, and never for refining purposes. The following table gives the rates of duty upon the average grades used in refining:

Degrees Duty Fair refining testing 89 1.96 Fair refining testing 90 2.00 Centrifugal testing 96 2.28 Beet-sugar testing 88 1.92

It will be clearly seen from the above figures that with a net drawback upon hard sugar of 2.79 our refiners are able to sell to foreigners, through the assistance of our Treasury, sugar at less than cost. Taking, for instance, the net price of centrifugal testing only 97° and the net price less drawback of granulated:

Centrifugal raw sugar testing 97° 6.00 Less duty 2.28 Net ----- 3.72 Granulated refined testing 99° 6.37½ Less drawback 2.71 Net ----- 3.66½ -------- 6½

Nothing could demonstrate the absurdity of the present rate of drawback more clearly than the above. A refiner pays 6½ cents per hundred more for raw sugar testing 2° less saccharine than he sells refined for. Not, however, to the American consumers, but to foreigners. After paying the expenses necessary to refining by the assistance of a drawback, which clearly amounts to a subsidy of about 50 cents a hundred pounds, our large sugar monopolists are assisted by the government to increase the cost of sugar to American consumers. One firm controls almost the entire trade of the east; at all events it is safe to say that the trade of the entire country is controlled by three firms, and the Treasury assists this monopoly in sustaining prices against the interest of the country at large. Up to date the exports of refined sugar have amounted to 83,340 tons, which, taken at 50 cents a hundred, has cost the treasury over $830,000. All this may not have gone into the pockets of the refiners, as the ship owners have obtained a share, but the fact remains that the Treasury is the loser by this amount. Besides this bounty presses hard upon the consumers. They not only have to pay the tax, but during the late rise they were compelled to pay more for their sugar than they otherwise would have done had not the export demand caused by selling sugar to foreigners at less than cost, the Treasury paying the difference, increased prices. While an American consumer is charged 6½ cents for granulated, foreign buyers, through the liberality of our government, can buy it under 3¾ cents. Certainly it is time that the Secretary of the Treasury asked the sugar commission to commence a comprehensive and impartial inquiry.”

81. Of course the story would not be complete if the English refiners did not besiege their government for a tax to keep out this maleficent gift of foreign taxpayers. This, say they, is not free trade. This is protection turned the other way around. We might hold our own on an equal footing, but we cannot contend against a subsidized industry. A superficial thinker might say that this protest was conclusive. The English government set on foot an investigation, not of the sugar refining, but of _those other interests which were in danger of being forgotten_. There was a tariff investigation which was worth something and was worthy of an enlightened government. It was found that the consumers of sugar had gained more than all the wages paid in sugar refining. But, on the side of the producers, it was found that 6,000 persons are employed and 45,000 tons of sugar are used annually in the neighborhood of London in manufacturing jam and confectionery. In Scotland there are eighty establishments, employing over 4,000 people and using 35,000 tons of sugar per annum in similar industries. In the whole United Kingdom, in those industries, 100,000 tons of sugar are used and 12,000 people are employed, three times as many as in sugar refining. Within twenty years the confectionery trade of Scotland has quadrupled and the preserving trade--jam and marmalade--has practically been originated. In addition, refined sugar is a raw material in biscuit making and the manufacture of mineral waters, and 50,000 tons are used in brewing and distilling. Hence the _Economist_ argues (and this view seems to have controlled the decision): “It may be that the gain which we at present realize from the bounties may not be enduring, as it is impossible to believe that foreign nations will go on taxing themselves to the extent of several millions a year in order to supply us and others with sugar at less than its fair price, but that is no reason for refusing to avail ourselves of their liberality so long as it does last.”[14] (See § 83, note.)

82. One point in this case ought not to be lost sight of. If the English government had yielded to the sugar refiners without looking further, all these little industries which are mentioned, and which in their aggregate are so important, would have been crushed out. Ten years later they would have been forgotten. It is from such an example that one must learn to form a judgment as to _the effect of our tariff in crushing out industries_ which are now lost and gone, and cannot even be recalled for purposes of controversy, but which would spring into existence again if the repeal of the taxes should give them a chance.

83. On our side the water efforts have been made to get us into the sugar struggle by the proposed commercial treaties with Spain and England, which would in effect have extended our protective tariff around Cuban and English West Indian sugar.[15] The sugar consumers of the United States were to pay to the Cuban planters the twenty-five million dollars revenue which they now pay to the treasury on Cuban sugar, on condition that the Cubans should bring back part of it and spend it among our manufacturers. It was a new extension of the plan of taxing some of us for the benefit of others of us. Let it be noticed, too, that when it suited their purpose, the protectionists were ready to sacrifice the sugar industry of Louisiana without the least concern. We have been trying for twenty-five years to secure the home market and keep everybody else out of it. _As soon as we get it firmly shut, so that nobody else can get in, we find that it is a question of life and death with us to get out ourselves._ The next device is to tax Americans in order to go and buy a piece of the foreign market. At the last session of Congress Senator Cameron proposed to allow a drawback on raw materials used in exported products. On that plan the American manufacturer would have two costs of production, one when he was working for the home market, and another much lower one when working for the foreign market. As it is now, the exports of manufactured products, of which so much boasting is heard, are for the most part articles sold abroad lower than here so as not to break down the home monopoly market. The proposed plan would raise that to a system, and we should be giving more presents to foreigners.

84. To return to sugar, our treaty with the Sandwich Islands has produced anomalous and mischievous results on the Pacific coast. In the southern Pacific New Zealand is just going into the plan of bounties and protection on sugar.[16] It would not, therefore, be very bold to predict a worldwide catastrophe in the sugar industry within five years.

85. Now what is it all for? What is it all about? Napoleon Bonaparte began it in a despotic whim, when he determined to force the production of beet-root sugar to show that he did not care for the supremacy of England at sea which cut him off from the sugar islands. In order not to lose the capital engaged in the industry, protection was continued. But this led to putting more capital into it and further need of protection. The problem has tormented financiers for seventy-five years. There are two natural products, of which the cane is far richer in sugar. But the processes of the beet-sugar industry have been improved, until recently, far more rapidly than those of the cane industry. Then the refining is a separate interest. If, then, a country has cane-sugar colonies which it wants to protect against other colonies, and a beet-sugar industry which it wants to protect against neighbors who produce beet-sugar, and refiners to be protected against foreign refiners, and if the relations of its own colonial cane-sugar producers to its own domestic beet-sugar producers must be kept satisfactorily adjusted, in spite of changes in processes, transportation, and taxation, and if it wants to get a revenue from sugar, and to use the colonial trade to develop its shipping, and if it has two or three commercial treaties in which sugar is an important item, the statesman of that country has a task like that of a juggler riding several horses and keeping several balls in motion. Sugar is the commodity on which the effects of a world-embracing commerce, produced by modern inventions, are most apparent, and it is the commodity through which all the old protectionist anti-commercial doctrines will be brought to the most decisive test.

(_C_) FORCED FOREIGN RELATIONS TO REGULATE IMPROVEMENT WHICH CAN NO LONGER BE DEFEATED.

86. If we turn back once more to our own case, we note the rise in 1883–1884 of the policy of commercial treaties and of a “vigorous foreign policy.” For years a “national policy” for us has meant “securing the home market.” The perfection of this policy has led to isolation and ostentatious withdrawal from cosmopolitan interests. I may say that I do not write out of any sympathy with vague humanitarianism or cosmopolitan sentiments. It seems to me that local groupings have great natural strength and obvious utility so long as they are subdivisions of a higher organization of the human race, or so long as they are formed freely and their relations to each other are developed naturally. But now suddenly rises a clap-trap demand for a “national policy,” which means that we shall force our way out of our tax-created isolation by diplomacy or war. The effort, however, is to be restrained carefully and arbitrarily to the western hemisphere, and we have anxiously disavowed any part or lot in the regulation of the Congo, although we shall certainly some day desire to take our share in the trade of that district. Our statesmen, however, if they are going to let us have any foreign trade, cannot bear to let us go and take it where we shall make most by it. They must draw _a priori_ lines for it. They have taxed us in order to shut us up at home. This has killed the carrying trade, for, if we decided not to trade, what could the shippers find to do? Next ship-building perished, for if there was no carrying trade why build ships, especially when the taxes to protect manufactures were crushing ships and commerce? (§ 101.) Next the navy declined, for with no commerce to protect at sea, we need no navy. Next we lost the interest which we took thirty years ago in a canal across the isthmus, because we have now, under the no-trade policy, no use for it. Next diplomacy became a sinecure, for we have no foreign relations.

87. Now comes the “national policy,” not because it is needed, but as an artificial and inflated piece of political bombast. We are to galvanize our diplomacy by contracting commercial treaties and meddling in foreign quarrels. No doubt this will speedily make a navy necessary. In fact our proposed “American policy” is only an old, cast-off, eighteenth-century, John Bull policy, which has forced England to keep up a big army, a big navy, heavy debt, heavy taxes, and a constant succession of little wars. Hence we shall be taxed some more to pay for a navy. Then it is proposed to tax us some more to pay for canals through which the navy can go. Then we are to be taxed some more to subsidize merchant ships to go through the canal. Then we are to be taxed some more to subsidize voyages, _i.e._, the carrying trade. Then we are to be taxed some more to provide the ships with cargoes (§ 83).

88. All this time, the whole West Indian, Mexican, and Central and South American trade is ours if we will only stand out of the way and let it come. It is ours by all geographical and commercial advantage, and would have been ours since 1825 if we had but taken down the barriers. Instead of that we propose to tax ourselves some more to lift it over the barriers. Take the taxes off goods, let exchange go on, and the carrying trade comes as a consequence. If we have goods to carry, we shall build or buy ships in which to carry them. If we have merchant ships, we shall need and shall keep up a suitable navy. If we need canals, we shall build them, as, in fact, private capital is now building one and taking the risk of it. If we need diplomacy we shall learn and practice diplomacy of the democratic, peaceful, and commercial type.

89. Thus, under the philosophy of protectionism, the very same thing, if it comes to us freely by the extension of commerce and the march of improvement, is regarded with terror, while, if we can first bar it out, and then only let a little of it in at great cost and pains, it is a thing worth fighting for. Such is the fallacy of all commercial treaties. The crucial criticism on all the debates at Washington in 1884–1885 was: _Have these debaters made up their minds to any standard by which to measure what you get and what you give under a commercial treaty?_ It was plain that they had not. A generation of protectionism has taken away the knowledge of what trade is (§§ 125, 139), and whence its benefits arise, and has created a suspicion of trade (§§ 63 ff.). Hence when our public men came to compare what we should get and what we should give, they set about measuring this by things which were entirely foreign to it. Scarcely two of them agreed as to the standards by which to measure it. Some thought that it was the number of people in one country compared with the number in the other. Others thought that it was the amount sold to as compared with the amount bought from the country in question. Others thought that it was the amount of revenue to be sacrificed by us as compared with the amount which would be sacrificed by the other party. If any one will try to establish a standard by which to measure the gain by such a treaty to one party or the other, he will be led to see the fallacy of the whole procedure. The greatest gain to both would be if the trade were perfectly free. If it is obstructed more or less, that is a harm to be corrected as far and as soon as possible. If then either party lowers its own taxes, that is a gain and a movement toward the desirable state of things. No state needs anybody’s permission to lower its own taxes, and entanglements which would impair its fiscal independence would be a new harm.[17]

90. Protectionism, therefore, is at war with improvement. It is only useful to annul and offset the effects of those very improvements of which we boast. In time, the improvements win power so great that protectionism cannot withstand them. _Then it turns about and tries to control and regulate them at great expense by diplomacy or war._ The greater and more worldwide these improvements are, the more numerous are the efforts in different parts of the world to revive or extend protection. No doubt there is loss and inconvenience in the changes which improvement brings about. A notable case is the loss and inconvenience of a laborer where a machine is first introduced to supplant him. Patient endurance and hope, in the confidence that he will in the end be better off, has long been preached to him. It is true that he will be better off; but why not apply the same doctrine in connection with the other inconveniences of improvement, where it is equally true?

3. _PROTECTION LOWERS WAGES_.

91. On a pure wages system, that is, where there is a class who have no capital and no land, wages are determined by supply and demand of labor. The demand for labor is measured by the capital in hand to pay for it just as the demand for anything else is measured by the supply of goods offered in exchange for it. In Cobden’s language: “When two men are after one boss, wages are low; when two bosses are after one man, wages are high.”

(_A_) NO TRUE WAGES CLASS IN THE UNITED STATES.

92. The United States, however, have never yet been on a pure wages system because there is no class which has no land or cannot get any. In fact, the cheapening of transportation which is going on is making the land of this continent, Australia, and Africa available for the laborers of Europe, and is breaking down the wages system there. This is the real reason for the rise of the proletariat and the expansion of democracy which are generally attributed to metaphysical, sentimental, or political causes. A man who has no capital and no land cannot live from day to day except by getting a share in the capital of others in return for services rendered. In an old society or dense population, such a class comes into existence. It has no reserves; no other chances; no other resource. In a new country no such class exists. The land is to be had for going to it. On the stage of agriculture which is there existing very little capital and very little division of labor are necessary. Hence he who has only unskilled manual strength can get at and use the land, and he can get out of it an abundant supply of the rude primary comforts of existence for himself and his family. If it is made so cheap and easy to get from the old centers of population to the new land that the lowest class of laborers can save enough to pay the passage, then the effect will reach the labor market of the old countries also. Such is now the fact.

93. The weakness of a true wages class is in the fact that they have no other chance. Obviously, however, _a man is well off in this world in proportion to the chances which he can command_. The advantage of education is that it multiplies a man’s chances. _Our_ noncapitalists have another chance on the land, and the chance is near and easy to grasp and use. It is not necessary that all or any number should use it. Every one who uses it leaves more room behind, lessens the supply and competition of labor, and helps his class as a class. The other chance which the laborer possesses is also a _good_ one, and consequently sets the minimum of unskilled wages high. Here we have the reason for high wages in a new country.

94. The relation of things was distinctly visible in the early colonial days. Winthrop tells how the General Court in Massachusetts Bay tried to fix the wages of artisans by law. It is obvious that artisans were in great demand to build houses, and that they would not work at their trades unless the wages would buy as good or better living than the farmers could get out of the ground, for these artisans could go and take up land and be farmers too. The only effect of the law was that the artisans “went West” to the valley of the Connecticut, and the law became a dead letter. The same equilibration between the gains from the new land and the wages of artisans and laborers has been kept up ever since.

95. In 1884 an attempt was made to unite the Eastern and Western Iron Associations for common effort in behalf of higher wages. The union could not be formed because the Eastern and Western Associations _never had had the same rate of wages_. The latter, being farther west, where the supply of labor is smaller and the land nearer, have obtained higher wages. It may be well to anticipate a little right here in order to point out that this difference in wages has not prevented the growth of the industry in the West, and has not made competition in a common market impossible.[18] The fact is of the first importance to controvert the current assumption of the protectionists. They say that an industry cannot be carried on in one place if the wages there are higher than must be paid by somebody in the same industry in another place. This proposition has no foundation in fact at all. Farm laborers in Iowa get three times the wages of farm laborers in England. The products of the former pay 5,000 miles transportation, and then drive out the products of the latter. Wages are only one element, and often they are far from being the most important element, in the economy of production. _The wages which are paid to the men who make an article have nothing to do with the price or value of that article._ This proposition, I know, has a startling effect on the people who hold to the monkish notions of political economy, but it is only a special case of the theorem that “_Labor which is past has no effect on value_,” which is the true cornerstone of any sound political economy. Wages are determined by the supply and demand of labor. Value is determined by the supply and demand of the commodity. These two things have no connection. Wages are one element in the capitalist’s outlay for production. If the total outlay in one line of production, when compared with the return obtained in that line, is not as advantageous as the total outlay in another line when compared with the return available in the second line, then the capital is withdrawn from the first line and put into the second; but the rate of wages in either case or any case is the market rate, determined by the supply and demand of labor, for that is what the employers must pay if they want the men, whether they are making any profits or not.

96. The facts and economic principles just stated above show plainly why wages are high, and put in strong light the assertion of the protectionists that their device makes wages high (§ 47), that is, higher than they would be otherwise, or higher here than they are in Europe. Wages are not arbitrary. They cannot be shifted up and down at anybody’s whim. They are controlled by ultimate causes. If not, then what has made them fall during the last eighteen months, ten to forty per cent, most in the most protected industries (§ 26)? Why are they highest in the least protected and the unprotected industries, _e.g._, the building trades? Hod-carriers recently struck in New York for three dollars for nine hours’ work. Where did the tariff touch their case? _Why does not the tariff prevent the fall in wages?_ It is all there, and now is the time for it to come into operation, if it can keep wages up. Now it is needed. When wages were high in the market, and it was not needed, it claimed the credit. Now when they fall and it is needed, it is powerless.

97. Wages are capital. If I promise to pay wages I must find capital somewhere with which to fulfill my contract. If the tariff makes me pay more than I otherwise would, where does the surplus come from? Disregarding money as only an intermediate term, a man’s wages are his means of subsistence--food, clothing, house rent, fuel, lights, furniture, etc. If the tariff system makes him get more of these for ten hours’ work in a shop than he would get without tariff, _where does the “more” come from_? Nothing but labor and capital can produce food, clothing, etc. Either the tax must make these out of nothing, or it can only get them by taking them from those who have made them, that is by subtracting them from the wages of somebody else. Taking all the wages class into account, then the tax cannot possibly increase, but is sure by waste and loss to decrease wages.

(_B_) HOW TAXES DO ACT ON WAGES.

98. If taxes are to raise wages they must be laid not on goods but on men. Let the goods be abundant and the men scarce. Then the average wages will be high, for the supply of labor will be small and the demand great. If we tax goods and not men, the supply of labor will be great, the demand will be limited, and the wages will be low. Here we see why employers of labor want a tariff. For it is an obvious inconsistency and a most grotesque satire that the same men should tell the workmen at home that the tariff makes wages high, and should go to Washington and tell Congress that they want a tariff because the wages are too high. We have found that the high wages of American laborers have independent causes and guarantees, outside of legislation. They are provided and maintained by the economic circumstances of the country. This is against the interest of those who want to hire the laborers. No device can serve their interest unless it lowers wages. From the standpoint of an employer the fortunate circumstances of the laborer become an obstacle to be overcome (§ 65). The laborer is too well off. Nothing can do any good which does not make him less well off. The competition which troubles the employer is not the “pauper labor” of Europe.

99. “Pauper labor” had a meaning in the first half of this century, in England, when the overseers of the poor turned over the younger portion of the occupants of the poorhouses to the owners of the new cotton factories, under contracts to teach them the trade and pay them a pittance. Of course the arrangement had shocking evils connected with it, but it was a transition arrangement. The “pauper laborers’” children, after a generation, became independent laborers; the system expired of itself, and “pauper laborer” is now a senseless jingle.

100. The competition which the employers fear _is the competition of those industries in America which can pay the high wages and which keep the wages high because they do pay them_. These draw the laborer away. These offer him another chance. If he had no other way of earning more than he is earning, it would be idle for him to demand more. The reason why he demands more and gets it is because he knows where he can get it, if he cannot get it where he is. If, then, he is to be brought down, the only way to do it is _to destroy, or lessen the value of, his other chance_. This is just what the tariff does.

101. The taxes which are laid for protection must come out of somebody. As I have shown (§§ 32 ff.) the protected interests give and take from each other, but, if they as a group win anything, they must win from another group, and that other group must be the industries which are not and cannot be protected. In England these were formerly manufactures and they were taxed, under the corn laws, for the benefit of agriculture. In the United States, of course, the case must be complementary and opposite. We tax agriculture and commerce to benefit manufactures. Commerce, _i.e._, the ship-building and carrying trade, has been crushed out of existence by the burden (§ 86). But the burden thus thrown on agriculture and commerce lowers the gains of those industries, lessens the attractiveness of them to the laborer, lessens the value of the laborer’s other chance, lessens the competition of other American industries with manufacturing, and so, by taking away from the blessing which God and nature have given to the American laborer, enable the man who wants to hire his services to get them at a lower rate. The effect of taxes is just the same as such a percentage taken from the fertility of the soil, the excellence of the climate, the power of tools, or the industrious habits of the people. Hence it reduces the average comfort and welfare of the population, and with that average comfort it carries down the wages of such persons as work for wages.

(_C_) PERILS OF STATISTICS, ESPECIALLY OF WAGES.

102. Any student of statistics will be sure to have far less trust in statistics than the uninitiated entertain. The bookkeepers have taught us that figures will not lie, but that they will tell very queer stories. Statistics will not lie, but they will play wonderful tricks with a man who does not understand their dialect. The unsophisticated reader finds it difficult, when a column of statistics is offered to him, to resist the impression that they must prove _something_. The fact is that a column of statistics hardly ever proves anything. It is a popular opinion that anybody can use or understand statistics. The fact is that a special and high grade of skill is required to appreciate the effect of the collateral circumstances under which the statistics were obtained, to appreciate the limits of their application, and to interpret their significance. The statistics which are used to prove national prosperity are an illustration of this, for they are used as absolute measures when it is plain that they have no use except for a comparison. Sometimes the other term of the comparison is not to be found and it is always ignored (§ 52).

103. A congressional committee in the winter of 1883–1884, dealing with the tariff, took up the census and proceeded to reckon up the wages in steel production by adding all the wages from the iron mine up. Then they took bar iron and added all the wages from the bottom up again, in order to find the importance of the wages element in that, and so on with every stage of iron industry. They were going to add in the same wages six or eight times over.

104. The statistics of comparative wages which are published are of no value at all.[19] It is not known how, or by whom, or from what selected cases, they were collected. It is not known how wide, or how long, or how thorough was the record from which they were taken. The facts about various classifications of labor in the division of labor, and about the rate at which machinery is run, or about the allowances of one kind and another which vary from mill to mill and town to town are rarely specified at all. Protected employers are eager to tell the wages they pay per day or week, which are of no importance. The only statistics which would be of any use for the comparison which is attempted would be such as show the proportion of wages to total cost per unit. Even this comparison would not have the force which is attributed to the other. Hence the statistics offered are worthless or positively misleading. In the nature of the case such statistics are extremely hard to get. If application is made to the employers, the inquiry concerns their private business. They have no interest in answering. They cannot answer without either spending great labor on their books (if the inquiry covers a period), or surrendering their books to some one else, if they allow him to do the labor. If inquiry is made of the men, it becomes long and tedious and full of uncertainties. Do United States Consuls take the trouble involved in such an inquiry? Have they the training necessary to conduct it successfully?

105. The fact is generally established and is not disputed that wages are higher here than in Europe. The difference is greatest on the lowest grade of labor--manual labor, unskilled labor. The difference is less on higher grades of labor. For what the English call “engineers,” men who possess personal dexterity and creative power, the difference is the other way, if we compare the United States and England. The returns of immigration reflect these differences exactly (§ 122, note). The great body of the immigrants consists of farmers and laborers. The “skilled laborers” are comparatively a small class, and, if the claims of the individuals to be what they call themselves were tested by English or German trade standards, the number would be very small indeed. Engineers emigrate from Germany to England. Men of that class rarely come to this country, or, if they come, they come under special contracts, or soon return. Each country, spite of all taxes and other devices, gets the class of men for which its industrial condition offers the best chances. The only thing the tariff does in the matter is to take from those who have an advantage here a part of that advantage.

4. _PROTECTIONISM IS SOCIALISM_

106. Simply to give protectionism a bad name would be to accomplish very little. When I say that protectionism is socialism I mean to classify it and bring it not only under the proper heading but into relation with its true affinities. _Socialism is any device or doctrine whose aim is to save individuals from any of the difficulties or hardships of the struggle for existence and the competition of life by the intervention of “the State.”_ Inasmuch as “the State” never is or can be anything but some other people, socialism is a device for making some people fight the struggle for existence for others. The devices always have a doctrine behind them which aims to show why this _ought_ to be done.

107. The protected interests demand that they be saved from the trouble and annoyance of business competition, and that they be assured profits in their undertakings, by “the State,” that is, at the expense of their fellow-citizens. If this is not socialism, then there is no such thing. If employers may demand that “the State” shall guarantee them profits, why may not the employees demand that “the State” shall guarantee them wages? If we are taxed to provide profits, why should we not be taxed for public workshops, for insurance to laborers, or for any other devices which will give wages and save the laborer from the annoyances of life and the risks and hardships of the struggle for existence? The “we” who are to pay changes all the time, and the turn of the protected employer to pay will surely come before long. The plan of all living on each other is capable of great expansion. It is, as yet, far from being perfected or carried out completely. The protectionists are only educating those who are as yet on the “paying” side of it, but who will certainly use political power to put themselves also on the “receiving” side of it. The argument that “the State” must do something for me because my business does not pay, is a very far-reaching argument. If it is good for pig iron and woolens, it is good for all the things to which the socialists apply it.