&UU tyullsge of Agriculture At QJorncU IniuetBttB JIttiara. ST. f. Cornell University Library HF 1755.F24 Economic and industrial delusions; a disc 3 1924 013 819 879 II li Cornell University Whl Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924013819879 ECONOMIC AND INDUSTRIAL DELUSIONS A DISCUSSION OF THE CASE FOR PROTECTION ARTHUR B. AND HENRY FARQUHAR G. P. PUTNAM'S SONS NEW YORK LONDON 27 WEST TWENTY-THIRD STREET 24 BEDFORD STREET, STRAND Sjje fimchtrboclier ^re»s 1891 COMMERCIAL DEVELOPMENT OF THE UNITED STATES IN SEVENTY YEARS, AS INFLUENCED BY RATE OF IMPORT DUTIES. Compared with Great Britain, for the latter half of this Period. 1820 1830 1840 1850 i860 1870 1880 1890 10 pc 1820 1830 1840 1S50 i860 1870 1880 1890 U. S. returns (since 1843) all given for the latter half of one year and the former half of the next, making up a " Fiscal Year." The fiscal year until 1842 included the last quarter of one year and the first three quarters of the next. British returns (shown by dotted lines) are for entire years. Perpendicular dotted lines divide the seventy years into fifteen groups, during which the import duties were approximately uniform. For full explanation, see pages 55-65, 143-146. PREFACE. In September, 1889, I was honored with a request from the Reform Club of New York City for an address on the great economic question of the day. The time that could be so occupied, by the usage of the Club, was limited ; and yet the example set me by the brilliant and distin- guished speakers who had already addressed it, as well as the vital importance of the question itself, made an ex- tended preliminary study necessary. I thus found myself in possession, when the time arrived, of considerably more material than could be used for the original purpose, and the present volume is the result. The responsibility for its production my friends of the Club will have to share with me, since it grew out of their invitation. Their willingness to hear me unquestionably arose from a con- viction that the sincere, experience-tested conclusions of a thoroughly practical business man — my sole title to a hearing— are a matter of public interest. That conviction, shared as it is by others of my fellow-citizens, is my best excuse for seeking a larger audience. The address was delivered at a meeting of the Reform Club on the 14th of February, 1890, and forms part of the first, third, and fourth chapters to follow. The third chapter contains also a study of comparative statistics by my brother, bringing out the relation between the coun- try's merchandise export and its import duties. A similar study in the fifth chapter, connecting ownership of mer- IV PREFACE. chant-vessels with duty-rates, and another in the seventh, relating to crops and prices, were communicated by him to the American Association for the Advancement of Science at its 1 89 1 meeting. The discussion of True Independence, and that of Silver and Democracy (Chapters V., XI.) were originally contributed to the New York Saturday Globe. Other republications are duly noted in their place. Discoveries are rare in economic inquiry ; and no great abundance of points, at the same time novel and valuable, will be looked for in such a work as this. For that reason I have not thought it necessary to cumber these pages with acknowledgment ; although due recognition of my gifted compatriots who have skilfully and successfully dis- cussed the subject — Wells, Sumner, Perry, Walker, New- comb, Taussig, Henry George, Horace White, and others — is more a pleasure than a task, and no one whose aim is to make political economy popular could willingly omit the homage earned by that keen and captivating master of this art, Frederic Bastiat. My obligations to Mr. Edward Atkinson, for kind assistance with the Iron and Tin-Plate discussions, opening Chapter X., call for particu- lar notice ; and I have also to thank, for constant interest as well as active aid, my near neighbor and honored friend, Chauncey F. Black — worthy son of a noble father, the illustrious Judge, type of the " high-minded men " who truly constitute a State, whose friendship shall ever be to me a priceless memory. To the statistical and historical notes contributed by my brother, some of which are embodied in every chap- ter, I venture to attach a particular value ; partly because they have some claim to originality, and partly because they give the best possible support to the purpose I have had constantly in view : to present such conclusions, and such only, as have been approved by the test of practical PREFACE, V experience. It has been found possible to compose highly able, and even highly valuable, treatises in which political economy has been deduced, like geometry, from a few fundamental axioms ; but so long as we have to deal with men, and not mere " economic units," so long will the inductive treatment of these problems command more confidence than the deductive. Its admitted diffi- culty, in the care and scrutiny necessary to bring out of a mob of loose facts an army of pertinent data, is a reason why this treatment should be more, rather than less fol- lowed by economic students. Notwithstanding the important part my brother has had in the preparation of this work, it is addressed to the reader in my name alone. The notes out of which it grew were so addressed and we have thought best to retain the same form for the completed volume. No one need hesi- tate to allow every page, every line it contains, whatever weight my business knowledge, experience, and standing can give it, or to throw on me an undivided responsibility for the whole, because of the aid of which I have been fortunate enough to avail myself. It is generally better to leave motives to find their own vindication, than to fill much space in vindicating them : but I cannot refrain from putting emphatically on record, at the very outset, the fact that political considerations have had no part whatever in dictating my course or my mental attitude on this question. So far as I ever felt such influence, I was for a long time led in a direction diametrically opposite to the one here followed. I never cast a Democratic vote in a national election, until 1888; and I even advocated a few years earlier, in a shipping convention held in Baltimore, a resolution favoring stimu- lation of our merchant marine by government subsidies. The following paragraphs from a letter published in the VI PREFACE. New York Times, February, 1 890, defended my course at that convention : " You must bear in mind one wide difference between 1885 and now, in the circumstances of our country. Then there was no strong movement to bring us the reform from which steamship lines to Chili and the Argentine would be certain to result — free admission to our ports of their principal products. No great party was committed to it or realized its importance. One of them promised to 'revise the tariff and correct its inequalities,' which might mean anything, and therefore meant nothing. The other gave us a platform that was claimed equally by hide-bound protectionists and enthusiastic free- traders, looking in both directions alike. The election turned mainly on the personal character of the candidates, and was very nearly indecisive. Subsidies appeared then the only hope of the exporter, on whom our tariff laws bore with such severity as to entitle him to special relief from some source. "On the appearance of the Presidential message of 1887, however, I was one of those who saw before the country a clear policy of statesmanship, which was destined to remain at the front until its certain triumph, however remote that triumph might be. Then I saw that the true interests of exporting manufacturers, which had won the President's advocacy, were committed to the hands of a powerful party. There was at last open before us the possibility of an enduring benefit, instead of a mere makeshift, and since that day my voice has never been heard in appeal for subsidies. " The condition of public opinion, growing daily sounder and healthier on commercial questions, gives the subject a very different appearance from the one it wore five years ago ; but even were that not the case I would not be ashamed to say, in the words of the world's great citizen, Gladstone, when accused of inconsistency upon the Irish question : ' I am older and wiser.' " A. B. FARQUHAR. York, Pennsylvania, September, 1891. CONTENTS. I. — The Case for Protection Examined Feeble and Powerful Delusions Instances of Political Delusions The Case Analyzed .... Quibbles and Juggles Illustrated Emotional Appeals ... II. -Abuse of Party Allegiance Mutability of Party Issues Career of the Republican Party Why the Party Became a Champion Republican Platform of 1888 . Who Are the True Republicans ? Ex-Confederates Hatred of England . Wastefulness of War Inutility of Defensive Measures Other Evils Due to War . Protection and National Hostility of the Tariff III. -Balance of Trade and Currency Supply . Effects of a " Favorable " Balance ..... How the Balance is Kept in the United States Commercial Development of the United States for Seventy Years, as Influenced by Import Duties Table . Description of the Chart — Tariff Rates .... Description of the Chart— Exports and Balance of Trade . Effect of the Tariff on Our Commerce — Instances of Misleading Tests A Better Test of the Tariff Effect . ... PAGE I 2 4 7 9 II 13 14 16 19 21 31 38 41 42 44 46 47 49 50 51 54 58 61 63 65 69 V1U CONTENTS. Law Comparison of Duties and Commerce, by Averages of Groups of Years Effects Stated as Laws Need of Demonstrating the Export Law . Examples of Assumption Overthrown by the Export Keeping Money in the Country Tariffs and Panics Testimony of Hugh McCulloch " The Reverses of 1837 " .... " Results of the Speculative Mania '' " After the Panic of 1837 " "The Panic of 1857" ... " The Financial Troubles of 1873 " IV. — Paternal Government and Industrial Progress, Encouragement of Iron and Steel Manufacturing Instance from the Agricultural-Implement Business . Examples of Encouraging Other Products Growth of Manufacturing Industry, by the Census Why the Manufacturers Hang Together . Diversifying Our Industries .... Establishing New Industries . Instance of Steel Rails Instances of Growth despite Discouragement Supposed Cause of Our Industrial Progress Mexico and New South Wales New South Wales and Victoria The Real Cause .... . . V. — Foreign Countries as Commercial Rivals . Governing Our Policy by ' ' What England does not Want Contrast between the Real and the Fancied England Some Foreign Commerce Necessary Commercial Treaties . . Reciprocity .... Subsidies to Merchant Vessels . Secretary Windom's Reports . American Experience with Subsidies History of our Mercantile Marine for Seventy Years Development of the British Mercantile Marine Influence of Tariff Rates Tested The Tariff Unfavorable to Our Coastwise Trade 73 75 77 79 82 84 89 89 91 94 95 96 99 101 103 104 107 108 in "3 "5 "7 119 121 123 124 126 129 131 133 135 137 141 142 145 147 150 CONTENTS. IX Difference from Great Britain in Economic Conditions Industrial Independence ...... Protection a Foe to True Independence . VI. — Prices vs. Wages Protectionist Efforts to Persuade the Working Man Does Free Trade Equalize Wages? How Wages are Fixed Wages in Other Countries Labor and ' ' Trusts " The Immigration Test The Wages Question from Another Standpoint Control of Markets by Cheap Labor Labor Not Overpaid in the United States Two Ways of Expressing the Same Idea . The Labor That " Needs " Protection Interest of the Laboring Class in Mechanical Improvements Types of "Pauper" Labor ..... " Invasion " of Our Markets by Cheap Goods . Danger of Increased Prices, with Foreign "Control" of Our Markets VII. — The Home Market In What Way Foreign Competitors are Kept Out Scarcity, Surplus, and Prices of Staples .... Prices as Influenced by the Exclusive Home Market Are Laws Needed to Send the Producer to His Best Market ? Instance of a Country Neighborhood in Maryland . None but the Farmer Benefited by Home Markets . Customers Prevented from Becoming Competitors . Policy of Hiring People Not to Compete .... Trust to Common-Sense VIII. — The Ideal " Revenue with Incidental Pro- tection " .... Distinction between Revenue and Protective Tariffs Necessity for a Revenue Tariff .... Minor Motives for High Taxation .... The Nation's Debt to the Soldier .... Gratuities to Owners of Silver Mines A Common Injustice in All Unnecessary Expenditure Other Qualities of the Ideal Tariff . An Appeal from Fancy to Reason . PAGE 151 155 157 163 164 165 170 173 175 177 180 181 183 189 187 189 191 192 194 198 200 205 208 210 212 214 215 220 222 223 225 227 230 234 237 241 242 246 CONTENTS. IX. — Protection and Agriculture . Open Letter to American Farmers, No. i Farmer and Farm-Implement Maker United in Interest Can We Accumulate Money by Taxing Imports ? . Exportations Diminish along with Importations . Do Import Duties Give Us a Home Market ? How Foreign Sales are Restricted Pretence that the Duty is Paid by the Foreigner . Points to be Tested and Pitfalls to be Escaped Present Agricultural Depression .... Duties on Farm Produce in the McKinley Bill The Other Side of the Account .... Secretary Rusk's Bid A Confidence Game ...... Open Letter to American Farmers, No. 2 What is Claimed for the McKinley Tariff The " Reciprocity Treaties " .... A Borrowed Policy ..... The Sub-Treasury and Loan Schemes Tampering with the Currency .... Alliance of the "Alliance " with the Protectionists X. — Special Discussions True Protection for the Iron and Steel Industry Comparison of British and American Prices . An Estimate of the Total Cost Feeble Plea for the Duties .... Changes of Profound Significance A Pertinent Question Repeated . Pretences Exposed by Census Returns . America could have Mastered the World Other Industries Oppressed .... Protecting Foreigners at Our Own Expense . The Tin-Plate Question ..... The Case as It Stands ..... A Fallacious Plea ..... The Workmen would be Imported When will the People's Eyes be Opened ? Postscript, 1S91 .... ' ' Drawbacks to the Drawbacks " . Free Raw Material ... What Is " Raw Material " ? . 250 251 252 254 261 262 267 269 276 279 280 282 283 284 286 287 290 294 294 299 302 304 304 304 307 309 310 3" 312 314 316 317 318 3i8 320 323 325 326 328 329 333 CONTENTS. XI Plundering the Farmers ...... Second Letter to the " Home Market" Club of Boston, A Specimen Question . ... XI. — The Silver Question Is Bi-Metallism Possible ? . . . . Bi-Metallic Coinage by International Agreement Present and Past Condition of the Coinage The "Crime" of 1873 . . Legislation in Favor of the Debtor The Cry for More Money Protection to the Mine-Owners Free-Coinage Probabilities Silver and Democracy ... . . Devices for Increasing the Circulation of Silver Index PAGE 337 Mass. 340 351 356 359 363 367 373 376 33 1 386 391 399 405 415 ILLUSTRATIVE CHARTS. To face Commercial Development of the United States in Seventy Years, as Influenced by Rate of Import Duties . Title t Value of Exported Merchandise and Merchandise Balance per Capita, Compared with Rates of Import Duty .... . . 74 Rates of Import Duty and Tonnage per Capita of Vessels in Foreign and in Coastwise Trade, 150 ECONOMIC AND INDUSTRIAL DELUSIONS. CHAPTER I. THE CASE FOR PROTECTION EXAMINED. It is the nature of delusions to group themselves to- gether and lend support to each other, so that he who would strike down one finds himself obliged to attack a whole compact body of them, just as, by driving off one wasp, he might bring the whole colony about his ears. It is the nature of delusions to yield their victim a helpless prey to some schemer who draws a profit from his weak- ness ; and but for this trait about them, few or none would be fixed or dangerous. As the Economic and Industrial Delusions with which I have to take issue, those by which the country has most suffered and over which a victory would be most precious to it, share this nature — agglome- rating themselves into a semblance of system and surviving by the strength of the interests they promote — it has not disheartened me to see myself confronted with a big, un- wieldy mass of them, formidable, like the plague of frogs or the Australian rabbit pest, by its very bulk. From that monstrous mass I have essayed to detach the more con- spicuous members — to prove them, severally and jointly, delusions and not verities. The task of exposing pre- tences, empty or plausible, of stripping the disguise from 2 EC&NOMIC AND INDUSTRIAL DELUSIONS. falsehood and setting up a guard against the misguiding solicitations of sentiment, is no light one. Complete success in it is impossible, if only from the multiplicity of the forms which Delusion takes. Any success at all, however, is worth striving after ; and possibly this dis- cussion, even if it fail to bring many converts to the " mourner's bench," may here and there, perhaps, incite to a candid study of the question, some mind now steeped in prejudice. If it do no more than that, it will repay the trouble it costs. FEEBLE AND POWERFUL DELUSIONS. Why are some delusions quite innocuous and fleeting, mere fantastic frost-pictures, dissolving under the first sunbeam, while others are so deeply rooted and firmly braced that tedious years of doubtful struggle or throes of bloody revolutions are needed to free us of them ? The latter class may be as manifestly groundless, and not a whit more plausible than the former. But they have, nevertheless, an incontestable advantage, whose nature and whose effectiveness an illustration will help to show. A few years ago the newspapers gave considerable space to the performance of an elderly colored gentleman, who appeared in divers and sundry places as the apostle of the time-honored but now unfashionable doctrine that " the Sun do move." With the arguments by which he supported this doctrine I have no present concern ; I merely ask attention to the treatment accorded him. He found no adherents, none to examine his proofs, none disposed even to enter the lists with him — on all sides nothing but ridicule. But what made the doctrine absurd and its apostle ridiculous ? Was it the untruth they pro- claimed ? It is quite safe to say that not one in a hundred of those who laughed loudest at poor Jasper could have THE CASE FOR PROTECTION EXAMINED. 3 given the reason why the sun is believed to be so much heavier than the earth, that it does not move, but causes movement. The sun is, in fact, the lighter of the bodies, bulk for bulk ; and I fear that the majority, even of the well educated and thoughtful, would be puzzled to tell how it is known to have one fourth rather than one mil- lionth of our planet's density. No, his misfortune came not from the falsity of what he taught, nor from anything unwelcome or incomprehensible about it. The weakness that exposed him without supporters to the jeers of an unsympathetic world was simply that there was in his teaching no money for anybody. How different would all have been if some man or group of men were making a snug little sum by the inculcation of the belief that " the Sun do move." The preacher of the doctrine would then have been supplied with golden reasons for stead- fastness in his faith and zeal in its propagation ; or, sup- posing him inaccessible to such influences, he could have found encouragement on every hand in the ardent co- adjutors raised up for him wherever they would do most good. It would easily and instantly have been proved that the teachings of our present race of astronomers were but babblings of vain theorists, and the potent aid of ridicule have been turned against them by the able news- paper editors as effectively as now against poor Jasper himself. Under guidance of their insinuations it would have been widely believed that the astronomers were themselves corrupt, receiving pay from some imagined source for teaching as they did. Patriotism or piety would finally have been invoked, if the subsidy held out, and the cause identified with that of country or faith ; the feebleness of the logical connection being concealed under bold assertion and violent appeal to passion. This is no ideal picture. Its truth is shown in too 4 ECONOMIC AND INDUSTRIAL DELUSIONS. many instances ; and there has hardly been any absurdity too glaring, or inhumanity too cruel, to furnish one. In the very case of modern astronomical theory, against which the Church, Catholic and Lutheran alike, flew at once to arms on its publication in 1 543, does any one believe that the older doctrine could have held its place so stub- bornly, could have retained strength enough to burn Bruno and humiliate Galileo more than half a century later, if the ecclesiastical body had not believed its worldly interests involved ? When another century had passed, and it was discovered that churches could be supported without teach- ing that the sun was a satellite of the earth — in other words, that promises of post-mortem payment in heavenly blessings still found sale for ready money — the opposition became reconciled. Every quack medicine has a similar tale to tell. The profit it makes for its compounder is sufficient to urge him to great efforts in advertising, and a moderate outlay will secure a loud chorus to sing its praise ; the public meekly pays the cost and hugs its deluder to its bosom, until it either gains more knowledge or hears the voice of some more skilful quack singing a sweeter carol into its willing and ample ear. I need not cite examples ; their name is Legion ; not a reader but can at the moment recall a multitude of them, whose instructive history many chapters would not suffice to recount. I introduce this familiar illustration merely to enforce by it the well-known, but not too well-known, lessons : what kind of a mind our public has, and how little the wide acceptance of a belief avails in proving its truth. INSTANCES OF POLITICAL DELUSIONS. Can it in the least surprise us to find the same infec- tion, of sophistries and fallacies and absurdities gravely THE CASE FOR PROTECTION EXAMINED. 5 advanced and upheld because of the pecuniary profit in them for certain men, in the political as in the business world ? Some sort of a case must have been made out on behalf of the French nobility just before the great outbreak a hundred years ago. Few can remember what it was, but all know that they were growing rich by legal- ized plunder of the people — or, worse yet, in their frivoli- ties and vices were wasted the sums wrung from the popular necessities ; that the state treasury was empty and credit exhausted ; that these nobles were ever ready with such arguments and excuses as they could lay hold of to uphold them in refusing to bear their part, or any part, of the general burden ; and that finally, sophistries — and nobles themselves — were swept away by the popu- lace they had despised and trampled on. We have almost forgotton the reasons promulgated by and for the owners of the English " rotten boroughs " against any reform of this abuse, for more than forty years after it first roused the attention of William Pitt. But we may be sure there were plenty of them ; and they were suffi- cient to maintain the iniquitous system under which the famed " Old Sarum," a place deserted by all inhabitants, was allowed to return two members to every Parliament by mere nomination of the proprietor, while the great city of Birmingham was disfranchised. Here, too, when at last the injustice could be no longer borne, force was required to carry the day for the people's cause ; the House of Lords resisted until 1832, and then yielded only under a threat to reverse its majority by increasing its numbers. Similar in character were the well-remem- bered pleas so recently made for the institution of slavery in our own country, before it hurled itself to a similar violent death. Of course, it was " to the best interest of the improvident slave himself," insuring him kind care- 6 ECONOMIC AND INDUSTRIAL DELUSIONS. takers. It was " more productive than free labor " would be in the same regions. It involved vested interests, whose ruin "would bring about that of many others — if not indeed the entire community." And then it was American, the pet "peculiar institution" of its section, and all the more meritorious because England detested it. These reasons were, of course, liberally reinforced by denunciations of the partisans of freedom, limited in compass and untempered violence only by the imagina- tion of the denouncers ; and as a clincher or capstone, every one who ventured a word in the cause of liberty, humanity, and true economy, saw himself confronted with the Socratic question, " Do you want your daughter to marry a nigger?" What has happened so often may happen again — is happening now. Our country is this day dominated by an abuse which owes its continuance altogether to the money which it enables the few to filch from the many, and the sophisms which the expenditure of a part of that money procures to be worked up into plausible shape, and passed off as words of wisdom. The arguments brought forward to support the system of protection run precisely parallel with those that have been used to sell patent medicines elsewhere, or bolster up aristocratic pretensions in the Old World, or serve the interest of American slavery; even down to the Socratic question, which demands but the small change into " Do you want to work for European wages ? " or, " Do you want to give England all our manufactures?" to make the parallel a practical identity. But the difference yet outlying is so important, between an abuse which still controls us and one we have so thoroughly overcome that even its former advocates rejoice in our deliverance from it, that it has seemed worth while to review the case for protection in THE CASE FOR PROTECTION EXAMINED. 7 some detail. It will be impracticable to track the serpent through all the mazes wherein he "wriggles in and wriggles out," but it will answer almost as well to give several instances, under different heads, of the kind of reasoning that must be met. Such a discussion is still timely. It was very proper to strike our heaviest blows where and when our enemy raised his head most insolently, and they were so struck when we last appealed to the people. The result of that appeal has amply justified in their confidence those who declined to believe that political economy was any more effectually killed by the barter and traffic which decided the presidential election, than was astronomy by the fires of the inquisition, or liberty by the Dred Scott decision. But the position which has been occupied has now to be held. The strongholds just won, in country which the defeated but yet unsubdued foe has most confidently claimed for himself, have now to be manned and pro- visioned against the desperate assault he is preparing for their recapture. Revenue reform through the recent congressional elections, emphatic though they were, and of a significance too deep to be decried, has only gained fair fighting ground. Its battle is yet before it ; and it requires of every champion, the weakest along with the strongest, his utmost efforts to make its final victory as speedy and complete as possible. THE CASE ANALYZED. For many years political economy has been the favorite study of my scanty leisure hours. In this study I have given constant attention to the protective side. I owe less for the presentation of that side in my mind to the caricatures of the subject in the so-called " Political Economies " and " Economic Philosophies " of Carey, 8 ECONOMIC AND INDUSTRIAL DELUSIONS. Greeley, Thompson, and Denslbw — though those works have been by no means neglected — than to a daily read- ing of the New York Tribune. The Tribune was in my younger days " the leading American newspaper." It was the first I ever took pleasure in reading, and I long valued it as the most vigorous and efficient defender of the causes I had nearest at heart : freedom, equal rights, the national Union, the national credit. I still retain the habit of reading it which I then formed, wide as is the divergence between the doctrines it now espouses and those that used to delight me in it. Of a body of teach- ing which is not destined to any lasting continuance, which lives only in the present, the newspaper leading- article is the fitting expositor ; and an extended course of Tribune editorials, with due attention to the speeches and magazine-writings commended therein, has given me, I believe, a very fair presentation of the protectionist case. This, when considered according to method, ap- pears to be made up of five parts, as follows : Conclusions insufficiently supported — and overthrown by presentation of sufficient data, Empty pretences — often degenerating into plain lying, Quibbles and juggles, Appeals to short-sighted selfishness, Appeals to blind sentiment. The logical difference between the first and second of these heads is quite pronounced, but it is difficult to dis- tinguish between them practically, either in their nature or in their effect. A pretence will receive no attention unless there is some circumstance to give it plausibility ; in which case, however uncandidly it was made, it passes as a conclusion from that circumstance as a premise. The same statement* indeed, may be the hasty conclusion of some minds and the empty pretence of others. It is, TttH CAS£ F0£ P&OTECTION EJCAMWE£>. Q therefore, impossible to treat the two separately, as it was originally my desire to treat the many instances I had collected under each of my five heads. There seems to be no advantage in giving any extended separate treatment to instances under the third head. I shall only adduce a few capable of amusing the reader in connection with his more serious study of the -subject in the chapters to follow. QUIBBLES AND JUGGLES ILLUSTRATED. The " shipping-bounty " device. Foreign commerce is treated as nothing but evil, when all our citizens are going to get advantage in purchasing their supplies by it. The same thing is treated as a great blessing when a few favored citizens are going to get subsidies, at the cost of the rest, out of it (see Chapter V.). Another, with the same purpose. Great Britain pays out to about one twentieth of her merchant vessels, for transportation of mails and construction-indemnity to possible war-ships, liberal sums — which may be considered, so far as they are in excess of due compensation, as subsi- dies. This is taken as proof that her whole mercantile marine is the creation of subsidies. The " laboring-man " dodge. Goods are no cheaper abroad, it appears, when the poor fellow complains of the price of what he has to buy. But, it appears in almost the same breath, the reason why they are cheaper abroad is that the difference -is given here as higher wages to the working man (Chapter VI.). > Another, in the same connection. High duties are the cause of high wages, their advocates always tell us. But those very duties, say these same advocates, are made necessary by our high wages — being thus cause and effect at the same time. IO ECONOMIC AND INDUSTRIAL DELUSIONS. Yet another. The fact that the purchase of an article of foreign make renders it impossible for home artisans to ' make that article for us, is loudly and widely proclaimed. The inseparable corresponding fact that that very purchase calls for additional home labor, in the production of the article that has to be paid in exchange, is suppressed. In other words : in order to get anything he needs, a man must work, beg, or steal. But when many men associate themselves under a government, it is intimated that they can contrive to get things in some other way. The " duty-is-paid-by-the-foreign-producer " trick. The import tax is vaunted by some statesmen, as a license paid by a foreigner for access to our market — thus not being added to the price of the goods. But were the tax taken off, the same statesmen warn us, it would bring down on us a " flood of cheaper goods " — just because at present it is added to the price (Chapters VI., IX.). Another form of the same. Some English dealers make objections to our high duties, thus proving that they lose thereby. It is then taken for granted that whatever they lose is clear gain to our citizens, and that the question of loss or gain among our own citizens is no concern of the government. This trick, as I calculate, is about all there is to Hon. Wm. McKinley as a reasoner. Deprive him of it, and he vanishes like a pricked bubble. The " home market " quibble. It is proved that the producer is favored, other things being equal, by having a market to which transportation is cheap. The proof is used as though it applied to something essentially differ- ent : a market under jurisdiction of our government (Chapter VII.). Another pitfall for the farmer. High duties on his own products are commended to him, because it is the effect of duties to increase the price. High duties on the THE CAsE PoR PROTECTION EXAMINED. \l products he buys, in the same commendation, because it is the effect of duties to lower the price by exciting competition. Such instances, as clearly appears in more than one of the specimens given, are not readily separable from those under my first head. The use of a proof as if it were a proof of something else, may be quite appropriately treated as an assumption of that something else as a con- clusion insufficiently supported ; and the contradictions in statement of fact or principle may be treated as assump- tions quite unsupported. The distinction between juggle and pretence is certainly narrow. EMOTIONAL APPEALS. The selfishness to which the protectionists appeal is appropriately distinguished as " short-sighted " ; political economy knows no tribunal higher than far-sighted self- ishness. Appeals of this kind contain some measure of argument, and some of an emotional element ; in criti- cising them, however, since one cannot reason with pure prejudice, one has to confine himself to the argumentative part — there seems to be no better treatment for them, therefore, than as conclusions without sufficient data. Instances coming under this head run parallel with the preceding, and we can show whether an appeal is of the short-sighted or of the far-sighted order only by testing the sufficiency of the reasoning on which it is supported. The same thing, in a general way, is to be said of the last group ; as may be shown by the sentiments to which the appeal is most effectively made. The sentiment of distrust against " Confederates " is successfully set to work against the whole planting interest, along with that of all agriculture and other exporting interests generally. That of gratitude to the Republican party for great 12 ECONOMIC AND INDUSTRIAL DELUSIONS. deeds done by it in the past, is used to enforce implicit submission to the party now bearing that name — to justify it and to disarm criticism when it does deeds of an entirely different kind in the present. That of repulsion toward the British tyranny of a century ago, is used to advance any measure that has the appearance of vexing our island kindred in these days. There are other instances besides, where an empty name receives the homage to which only an idea is entitled. May not all these be classed with conclusions whose support is inadequate — which must essentially change, when misleading because partial data are supplemented and corrected by the data in their entirety ? Certainly ; diverse as is the nature of the mul- titudinous elements of the protectionist case, all may be treated in the same way, when indeed they call for any- thing further than exposure. This treatment will be insufficient, doubtless, for two classes of people: those so prejudiced as to be beyond the reach of reasoning, and those so ignorant as to be unable to entertain it until prepared by the needed information. But those two classes are far from including all our opponents. Some conclusions of considerable plausibility, yet fatally incom- plete in some part of their support, I can appreciate the difficulty in satisfactorily exposing and refuting; these are too often able to mislead minds of a better order. Most of the blind sentiments, in appealing to which the protectionists find so much of their advantage, are forms of perverted party loyalty. From the tension and bitter- ness of partisan feeling, Protection gains its most power- ful— I feel justified in saying, its only powerful support. The strongest position deserves and invites the first attack. CHAPTER II. ABUSE OF PARTY ALLEGIANCE. PARTY allegiance has nearly the same relation to patri- otism, the sense of a country including all parties, that patriotism has to philanthropy, the sense of a human brotherhood covering all countries. It is usually stronger, and essentially narrower. It is a sentiment which must have, besides its object of affection, an object of repul- sion, a resistance to be overcome ; and it needs the stimu- lus of a contest to bring out its power. Are we to be persuaded by those teachers who exalt the cause of party into something ineffably sacred, worthy of man's unswerv- ing loyalty, engrossing devotion, and mightiest efforts ; or by those who seek altogether to dispense with party, who claim that states can be better governed without it, and have for its war-cries and enthusiasms nothing but cold disapproval? Neither should be followed always, or rejected always; and at times there is truth with both. Party loyalty has its uses and at the same time its abuses. It may sometimes be ranked even among the loftiest, most ennobling of human passions, its narrowness being lost in its fervid intensity. If our affections are estimable in proportion to their " altruism " — their carrying us out of ourselves — the narrower and more powerful affection may easily transcend the broader and feebler. Love of one's family is one of the narrow sentiments, yet little respect is felt for the man who professes a warmer affec- 13 14 ECONOMIC AND INDUSTRIAL DELlfStONS. tion for the world-full of fellow-men outside than for his own family. MUTABILITY OF PARTY ISSUES. About party in general, hardly a statement has ever been made that is not sometimes true, hardly a statement that is not often untrue. A party organization may yes- terday have been the means of advancing some important reform or of resisting some inveterate abuse, so that in then giving it all possible strength, we were using the only practical means of securing the reform or of overthrow- ing the abuse, — by standing aloof we would have allied ourselves with the abuse or " thing to be reformed " ; to- day may find that organization intrenched and arrogant in power, using the same battle-cries which then won it the victory, to win it victory in some very different con- test, eagerly identifying the opponents of its present aim with the opponents of yesterday's reform, relying on the resistance it once made to an abuse by which others prof- ited, to draw attention from the new abuse by which it is profiting ; the same organization may to-morrow become again valuable or even indispensable to the people as a bulwark against rash or unwise measures proposed by others. The mere horde of spoilsmen who dominated a party at last election time, may have given place, when the people come again to judge between parties, to sincere, wise, and patriotic leaders. To accuse the intelligent, public-spirited citizen of hold- ing exactly the same attitude toward parties while parties themselves are undergoing the changes I have described, would seem almost an insult ; and yet it is part of the history of our country that such changes have taken place, and that many of its best citizens have shown no consciousness of the fact. One presidential election is ABUSi, OP PARTY ALL&GIANC&. I J determined by the attitude of the opposing sides on some clearly marked, important question of policy ; when the next arrives that question has been set quite at rest, and the contestants themselves are not agreed what is at issue beyond the determining whether this or that set of men shall go into office. Before we have a third election some new point has come up for decision and the lists are formed on some other field ; and yet to thousands of conscientious, active minds each contest appears to turn on exactly the same principle, and a perfect consistency is seen in voting with the same party from first to last. Instead of a fleeting phantasmagoria of questions, for these minds there has never been but one political ques- tion. Their position I believe to be a wrong one, but from its nature a strong one. There are indeed some persistent threads running through this changing pattern, and the constancies may easily appear more significant than the mutations to many candid minds. Among those who are able to discover one leading motive, one domi- nant principle, involved in every political question which has ever come before the United States for settlement, even where it was totally invisible to the actors them- selves, — who are able to see their own party constantly guided by that motive, on guard over that principle, even where nobody appeared conscious of it, — there are many who have more closely studied and more thoroughly in- formed themselves upon our country's history than has been possible to me, and their sincerity is above suspicion. But in their arguments I can only see instances of misdi- rected ingenuity, of reading into history a meaning that it does not contain, of something that " admits no refuta* ,tion and produces no conviction." The great underlying constitutional question, whether our organic law shall in doubtful cases be construed as l6 ECONOMIC AND INDUSTRIAL DELUSIONS. reserving a power to the States or as committing it to the general government, has been of high importance in our past history, and is destined to come up again and again, in one form or another. But the attention I have been able to give to the political conflicts that have raged in this country, has not shown that even so fundamental a question as this was present in every one of those con- flicts. The vision always on the lookout for " strict con- struction " and " liberal construction " is acute, doubtless, but I trust it for discernment of the question's importance, more than I trust it for power to find that question wherever sought. CAREER OF THE REPUBLICAN PARTY. The Republican party of our generation was founded, as is well understood, on a liberal-construction basis, and cannot be said to have become a champion of strict con- struction at any time. But its consistency on this point is accompanied by these changes : its original extension of the sphere of governmental activity was on behalf of liberty, while its more recent projects are in the interest of repression ; its early steps toward centralization were forced upon it by the necessity of maintaining the " more perfect Union " won at such a cost by our fathers, while its later steps in the same direction appear to have been dictated very largely by a desire to saddle on the public the cost of repaying certain handsome and much-needed contributions to its campaign chest. Such a consistency is no glory to the party, for there can be no dispute that the merit of liberal construction depends altogether on the end to which it is applied. There is nothing of prin- ciple in it, save as it is associated and allied with principle. It furnishes, therefore, no good reason why those once in the Republican party should forever remain so. ABUSE OF PARTY ALLEGIANCE. 17 By the best approved definition of a political party, " a body of men associated for the promotion of the public good by some common principle on which all are agreed," the principle upheld by a party is made the vitally impor- tant point ; and so I have always considered it. To many of my fellow-citizens, the party name, the political machine, and the set of men who keep it running, seem to be points of far higher importance. Otherwise, their accusations of disloyalty and desertion, against those who formerly co-operated with them as Republicans, and are now unyieldingly opposed to what calls itself Republican- ism, are without force. Very little force belongs to such accusations at best, with men who have never considered name and machine and leaders as more than mere acces- sories, of account only as means to an end. When an appeal in behalf of the Republicanism of this day is based, as it usually is, on the character and exploits of the organization in other days, I am reminded of a certain stage-driver. A traveller, it seems, once found himself at a rural post-office where were two stage-coaches headed in opposite directions. One of the drivers thus hailed him : " You will go with me, I know. You travelled with me a year ago, and you see how much stouter my horses are and how much more elegantly my stage is fitted up." To the traveller's reply that he was not headed the right way, the driver returned the crush- ing rejoinder : " I took you just where you wanted to be taken, a year ago ! " It is quite probable, that if the traveller cared more how than whither he was carried, or more which stage had gone the right way the year before than which was going the right way now, he suffered him- self to be persuaded by the zealous coachman ; and for all who take up public questions in a similar spirit, these Republican arguments will doubtless be of telling force. 18 ECONOMIC AND INDUSTRIAL DELUSIONS. If Burke was right in the definition I have quoted from him, it seems to follow that complete success may be as destructive as complete failure to the life of a political party. No party in this country, not even excepting the first Republican led by Jefferson, has ever been crowned with more brilliant success than the later Republican party, formed in 1854 to resist the further spread of slavery. Although it was badly defeated in its first presidential contest ; although the advent of the adminis- tration which had triumphed over it was further signalized by the decision of the famous Dred Scott case in an elaborately prepared opinion, whose design and effect were to solidify and strengthen the slave power ; although the prevailing animus against it had lost nothing in inten- sity or bitterness ; yet the country very soon saw that its mission was destined to success, and that slavery had al- ready reached its furthest limit. The party soon won the Presidency, only to find thrown on it the fearful task of holding the Union together by war. Absurd as is the claim that the Union was saved by Republicans only, and well known as is the fact that but for Lincoln's sagacity in summoning to important positions in his council, and sending to important stations in the field, leading men of the party that had opposed him, the task would have proved too great for his strength ; notwithstanding this it may yet be allowed that, since the war was conducted under a Republican administration, that party has a right to include the final victory among the successes of its policy. Growing out of the war, the first contest the victors found on their hands, was over giving the freed- man a civil status, in which he could maintain his newly- acknowledged rights, and the second was over establishing the national credit, which had been pledged for the na- tion's preservation ; in both of these it was again success- ABUSE OF PARTY ALLEGIANCE. 10. ful. These great questions were not set entirely at rest until 1880; as late as that year a Republican victory appeared, to many cool business men, necessary for the maintenance of specie resumption. By electing Garfield and Arthur, with a Congress favor- able to their policy, the Republican party could fairly be looked on as having finished its work, and as ready to be dissolved. Many who had given it faithful allegiance believed its mission ended as soon as the life of the Union and the death of slavery were assured ; and many more after those results had been confirmed by the rati- fication and acceptance of the three Constitutional Amendments. These had entered the party as into a limited partnership, and reserved the privilege of with- drawing their stock when the business for which they had gone into it was done. With the rest of us, at those times, it was a case of reorganization. Our first co-part- nership ha,d terminated, but the opposition concern was able to hold out no more satisfactory inducements. The case became different after the battle over specie resump- tion had been fought and won, and the notes of the Treasury were brought fully to par in our own country and abroad. WHY THE PARTY BECAME A CHAMPION OF THE TARIFF. Besides the campaign-expense obligations already men- tioned, two motives seem to have been active in determin- ing the Republican party to undertake the office of maintaining public taxation for private gain, in the con- test over that policy to which the high war duties were certain sooner or later to lead. One of these grew out of its altogether honorable connection with the public debt, as the upholder of which it was obliged to take a position 20 ECONOMIC AND INDUSTRIAL DELUSIONS. favorable to large revenues and ample taxation. Of course it was one thing to advocate taxes for meeting the government's Indebtedness, and quite another to advo- cate them for the incidental gain they brought individ- uals — the former need by no means necessarily have Jed to the latter, yet it very easily did so. The other motive arose from a connection equally honorable to it, equally perverted. The victory in our civil conflict had been distinctively that of an industrial civilization over a feudal or patriarchal one ; the great industrial enterprises were all on the side under whose leadership the victory had been won ; and naturally when their influence came to be active in their own behalf, it was the party to which they had already attached themselves that most felt it. Of course it was one thing to champion the cause of mechanical industries as desirable in themselves and hon- orable to those engaged in them, and quite another to encourage them to become parasitic on th^eir fellows, drawing part of their profit from licensed plunder of industries equally desirable and honorable ; but it was very easy for events to take the course they did. It was perhaps equally easy for the great pecuniary interests that had succeeded in swinging the party around into this course, along with the leaders whom they had already persuaded, to join in calling upon every one who had ever borne the name of Republican to accept the strange doctrine as the original and genuine Republicanism. I am sorry to say how easy, how natural it proved for the great majority of the old Republicans to submit and help to convert the grand party of freedom into a party of restriction. All was easy enough to do, and is easy enough to explain, but it did not in the least have to be done — the irresistible force of logical necessity was not behind it. ABUSE OF PARTY ALLEGIANCE. 21 No less natural is it, that the degeneration from a Re- publicanism that meant earnestness for a moral cause — for what was believed and proved itself " a higher law than the Constitution " into a Republicanism that means advancement of personal interests, should be marked by a lower tone in the public utterance of Republicans, and a parallel degeneration of their moral fibre. True, echoes of the same voice are left, in the old oracles of the party — from which the heedless hearer might believe that the same ardor for humanity that once fired it was there un- extinguished ; but their ring, to any one who intently listens, is hollow enough. We are often told, in full- mouthed sentences, that the old zeal for the laborer which first actuated them in setting rigid bounds to the institution which degraded labor, and afterwards, in strik- ing the shackles from his limbs, actuates them unchanged in their alleged defence of him against foreign compe- tition ; but the pretence has been fully exposed, and its dupes are growing ever fewer. REPUBLICAN PLATFORM OF 1 888. Most striking among the evidences that can be brought to show moral degeneracy in this great party is the lead- ing " plank " in its last National Platform. A theme had been provided by the President in his December message ; the prominent issue of that campaign was well understood to be tariff revision ; and the preparation of the party declaration upon it was intrusted to a distinguished Con- gressman who had long made that theme a specialty. I remember that Tariff Plank as the crossing of the Rubicon — the fatal step which rendered finally impossible for me any further co-operation with the party of my early choice and affection ; for I could find in it little else than reckless 22 ECONOMIC AND INDUSTRIAL DELUSIONS. falsehood. On examining the nine sentences that form it I detected in every sentence, with one exception or pos- sibly two, at least one falsehood — one statement made or necessarily implied, whose untruth was susceptible of easy and irrefragable proof. Since the matter has for us a more than temporary interest, since the continued activity of the party which consented deliberately to adopt as its own that disgraceful platform is still one of the ugly facts of our political life, I will give my examination in detail : only indicating most of my proofs, which will be found more fully made out in later chapters. " We are uncompromisingly in favor of the American system of Protection ; we protest against its destruction, as proposed by the President and his party." (i) The first clause necessarily implies the existence of some " American system of Protection," whereas no such thing either ex- ists or ever has existed. The system which our country has hung about its neck is a copy of that which Spain has long found congenial, and which is the natural resource of half-civilized countries. It is nothing whatever but the system followed by the British before they learned better. I am well aware that when this servile imitation of Old- World paternalism was first recommended among us, it sought a factitious popularity by assuming the name "American," but that demagogue's trick was skilfully and easily exposed by Webster, whose altogether just observation that the system which the phrase-mongers would call " foreign " was one which the United States had followed from the first formation of their Union, while that vaunted as " American " was one directly transplanted from Europe, has only to be remembered to stamp every pretence of an "American system of Pro- tection " as shallow ignorance or mendacity. (2) It is untrue that " the President and his party " proposed to ABUSE OF PARTY ALLEGIANCE. 23 destroy protection. Possibly they ought to have done so, but they never did. What they proposed was, by the correction of certain of its grosser abuses, to let in a little daylight upon its real character. If it was indeed the opinion of the platform-makers that the system could not bear daylight, and that the people could not be trusted to see the effect of taking off a few duties for fear of the blind rush that would at once be made to strike down the rest, they were not without grounds for that opinion ; but even that could not justify misrepresentation of what their opponents proposed. " They serve the interests of Europe : we will support the interests of America." Here is a plain implication that the " interests of America " are not better off with- out such " support " than with it, which is of course false. Let us consider how we must reason to reach such a con- clusion. It is granted that the Democratic policy is to reduce import taxation. Granted also that that policy would increase our commerce with Europe. Now, in order that a commercial transaction between this country and Europe may " serve the interests of Europe," and leave our own in need of " support," Europe must gain something and we nothing by it. If that were true it would prove Europe more sagacious and better at a bargain than we. But it is not true. " We accept the issue, and confidently appeal to the people for their judgment." This claim might have been difficult to refute at the time it was made, but the conduct of their campaign and the result of the last congressional elections have effectually exposed it. The evidence that it was to something entirely different that the Republican managers " confidently appealed," consists of more than mere surmises. Testimony as to gross bribery in Indiana — unhappily implicating both sides, but more deeply the 24 ECONOMIC AND INDUSTRIAL DELUSIONS. one that was able to enter the contest with more money — is not entirely comprised in the letter believed to have been written by the treasurer of the National Campaign Committee, counselling that " floaters " be looked after to see that none get away, ' in blocks of five, with a reliable man in charge of each block "; nor does our conclusion that the Republican plurality obtained in New York came from other appeals than to the people's judgment depend altogether on the huge sum handed over to their astute Committee Chairman, toward the end of the campaign, by that Pennsylvania business man whom a surprised country was so soon to see hoisted into high government position. We remember the situation in that State. The Demo- cratic candidate for Governor, a declared ally of the liquor interest, with a limited but determined opposition in his own party ; the Republican candidate its declared enemy, and his canvass especially calculated to alarm it ; the politicians in both camps approved adepts in bargain and intrigue. The result showed a falling' off in the President's voT:e, compared with his opponent, from the Governor's vote similarly compared, of over twenty thou- sand in New York and Erie counties alone — those being the two in which the saloons were most numerous and powerful. As these two counties, casting together hardly over one fourth of the State's vote, showed more than sixty per cent, of the whole defection, so that an inter- change of their presidential and gubernatorial figures would have reversed both results, we need go no further — these facts are enough to assure us that the Republicans won New York State and the whole election by dickering with the liquor men. 1 But this is not all. If we are 1 " But in that contest, as people here well know, Hill succeeded only because he was able to sell a Presidency for a Governorship." — N. Y. Tri- 4«» -3 i/i , x So W SP Sen 1 \ *• en v - -1 to ' .5 d "0 5,0- Mi V i" ds e 5 — u a v x dg. me S X dg. wj S - 1 ' H -Si Op. .J»rt v ° u u V fa ft .2 ft I 1 1821 9.9 5-50 0.00 E 0.24 0.131 0.062 O.060 36.0 34-6 1822 I0.2 6.02 I 1. 81 E 0.72 O.129 0.061 0.057 31-7 30.2 1823 I0.5 6.50 I 0.40 E 0.12 0.128 0.059 0.057 32.7 30.9 1824 10.8 6.39 I 0.30 I 0.13 0. 129 0.059 O.059 37-5 35-4 1825 11. 1 8.17 E 0.04 E 0.24 0.128 0.058 0.060 37-1 35-1 1826 11. 5 6-34 I 0.45 I 0. 19 O.133 0.063 O.061 36.1 33-4 1827 11. 8 6.30 E0.26 I 0.02 O.I37 0.067 0.059 41.4 39-2 1828 12. 1 5.29 I 1.40 E0.06 O 144 0.070 0.063 39-4 37-o 1829 12.5 5-39 E 0.02 I 0.20 O.IOI 041 O.047 44-3 41.4 1830 12.9 5-56 E 0.70 I 0.47 0.092 0.040 O.042 48.9 45-3 1831 13-2 5-48 I 1.79 E0.13 0.096 0.041 O.041 40.8 38.2 1832 13-6 5-99 I 1. 00 I 0.01 0.106 0.048 0.045 33-8 30-9 1833 14.0 6.25 I 0.96 I 0.32 0.115 0.053 O.046 32-0 24.0 1834 14.4 7.10 I 0.44 I 1. 10 0.122 0.054 0.052 32.7 17-5 1835 14.8 7.78 I 1.46 I 0.45 O.I23 0.054 O.053 36.0 19.0 1836 15-2 8.18 I 3-44 I 0.60 O.I24 0.057 0.050 31-6 17.6 1837 15-7 7.10 I 1. 21 I 0.29 0.I2I 0.061 O.044 25-4 13.9 1838 16. 1 6.52 E0.56 I 0.88 O.I24 0.065 O.044 37-8 20.8 1839 16.6 6.77 I 2.66 E 0.19 O.I27 0.069 O.042 29.9 16.4 1840 17. 1 7-23 E 1.48 I 0.03 0.127 0.069 0.045 30.4 15-4 1841 17.6 6-35 I 0.64 E0.28 O.I2I 0.063 O.045 32.2 16.2 1842 18. 1 5. 52 E 0.21 E 0.04 0.II5 0.058 0.045 24.0 17.4 1843 18.7 4-43* E2.i6* I 1. 11" O.II6 0.058 0.046 25.7 17-7 1844 ig-3 5-48 E0.16 I 0.02 0.II8 0.057 0.047 35-i 28.6 1845 19.9 5-33 I 0.36 E 0.23 0.122 0.061 O.045 32.6 27.4 1846 20.5 5-35 I 0.40 0.00 0.125 0.064 0.046 3i-4 25.8 1847 21. 1 7 43 E1.63 I 1.05 0-135 0.071 0.050 26.9 23.0 1848 21.8 6-34 I 0.48 E0.43 0.144 0.076 O.054 25.0 22.2 1849 22.5 6.24 I 0.04 I 0.06 0.148 0.079 O.056 24.7 22.0 1850 23.2 6.22 I 1.26 E0.13 0.153 077 O.062 25.8 23.2 1851 24.0 7.87 I 0.91 E 1. 00 0.157 0.079 0.064 25-4 23.1 1852 24.8 6.73 I 1.63 E 1. 51 0.167 0.083 0.069 26.0 22.9 1853 25.6 7-95 I 2.35 E 0.91 0.172 0.083 0.075 25.9 23.4 1854 26.4 8.98 I 2.29 E 1.30 0.182 0.088 0.081 25.6 23.5 1855 1 27-3 8.02 I 1.42 E 1.92 0.191 0.093 0.086 26.8 23-4 * For nine months only. For a year at same rate : exports, $5.91 ; excess of exports, mdse.,$2.88 ; excess of imports, specie, $1.48. These values used in the calculations ; both sets plotted on the charts. BALANCE OF TRADE AND CURRENCY SUPPLY. 59 UNITED STATES (Continued). J A H u Merchant Marine in Rate of Duty on ■ "-3 O 0.2 P. -12 P.US «'0o p. ca u ■> in" Es P. & c » > 1 = *U « 1 SS I ?■" 1 y. P. P< v a 1 I H 1 ,2 p> 1/1 u .^S 4 t— < P i) s s . 2 WJ5 S we s ' H O p, 1? I 1 H 1 1856 28.1 10.01 I 1.04 E 1.48 0.173 O.080 0.082 26.0 21-7 1857 28.9 10.17 I 1.89 E 1.96 0.171 O.080 0.078 22.4 19. 1 I858 29.8 9-13 E 0.29 E 1. 12 0.169 O.08l 0.077 22.4 17-3 1859 30.6 9-57 I 1.26 E1.85 0.168 O.08I 0.076 19.6 15-4 i860 31-4 10.62 I 0.64 E 1.85 0.170 O.084 0.076 19.7 15 7 1861 32-1 6.84 I 2.17 I 0.52 0.173 O.084 0.078 18.8 14.2 1862 32.7 5-83 E 0.04 E0.63 0.156 O.080 0.066 36.2 26.1 1863 33-4 6. 11 I 1. 18 E 1.63 0.154 O.089 0.058 32.6 28.3 1864 34-0 4.67 I 4.64 E 2.72 O.147 O.O95 0.044 36.7 32.0 1865 34-7 4-79 I 2.09 E 1.66 0.147 O.O97 0.044 47.6 38.5' 1866 35-5 9-83 I 2.42 E 2.12 O.I22 0.077 0.039 48.3 41.8 1867 36.2 8.13 I 2.80 E 1.07 0.119 O.O76 0.042 46.7 44.6 1868 37-0 7.62 I 2.04 E 2.15 0.118 0.073 0.040 48.6 46.5 1869 37-8 7-57 I 3-48 E 0.99 O.IIO O.067 0.040 47.2 44.6 1870 38.6 10.18 I 1. 12 E0.82 O.IIO O.068 0.038 47-i 42.2 1871 39-6 11. 18 I 1.96 E1.95 0. 108 0.O7O 0.034 44.0 38.9 1872 40.6 10.94 I 4.49 E 1.63 0.109 0.072 0.033 41.4 37-0 1863 41.7 12-53 I 2.87 E 1. 51 0.113 0.076 0.033 38.1 27.0 1874 42.8 13.70 E 0.44 Eo 89 O.II2 O.077 0.032 38.5 26.9 1875 44.0 11.67 I 0.44 E 1.62 O.IIO O.O73 0.034 40.6 28.2 1876 45-1 11.98 E 1.76 E 0.90 O.O95 O.O58 0.034 44-7 30.2 1877 46.4 12.99 E 3.26 E0.33 O.Ogl 0.055 0.034 42.9 26.7 1878 47.6 14.60 E 5.42 E0.08 O.088 0.050 0.033 42.8 27.1 1879 48.9 14-53 E 5.41 E 0.10 O.085 O.O53 0.030 44-9 29.0 1880 50.2 16.65 E3-34 I 1. 51 O.081 O.O53 0.026 43-5 29 1 1881 51.5 17.52 E 5.04 I 1.77 O.079 O.O5I 0.025 43-2 29.8 1882 52.7 14.24 E 0.49 E0.13 O.079 O.O53 0.024 42.7 30.1 1883 54-0 15.26 E 1.87 E0.06 O.O78 0.053 0.024 42.4 29.9 1884 55-3 13-39 E1.32 E0.54 O.O77 0.052 0.023 41.6 28.4 1885 56.5 13.14 E 2.92 I 0.02 O.076 0.05I 0.022 45-9 30.6 1886 57-8 "•75 E0.76 E0.59 0.07I O.05I 0.019 45-6 30.1 1887 59-0 12.14 E 0.41 I 0.41 O.070 0.050 0.017 47.1 31.0 1888 60.2 11.56 I 0.47 I 0.21 O.070 0.053 0.015 45.6 30.0 1889 61.4 12.07 I 0.04 E 1.10 O.070 O.O52 0.016 45-1. 29.5 1890 62.6 13-68 E 1.09 E 0.29 O.071 O.O54 0.015 44-4 29.2 6o ECONOMIC AND INDUSTRIAL DELUSIONS. GREAT BRITAIN. u 8 > J £ A £ c Phis X O « & u « Pi £-3 1 U « w s 1 11 SS.J §cnl W 6 3 t— 1 ^"rt v v rt £& • « 1 1856 28.0 24.20 5-79 * 0.156 13.6 1857 28.2 25.23 7.19 * 0.162 12 •5 1858 28.4 23.95 4.25 I 1.69 0.164 14 .6 1859 28.6 26.49 4.00 I 0.23 0.163 13 .6 i860 28.8 27.80 7-78 E0.43 0.162 II .0 1861 29.0 26.79 9-71 E0.34 0.166 IO 9 1862 29.2 27.70 9.92 I 0.39 0.169 IO 7 1863 29.4 32.59 8.61 I 0.58 0.181 9 3 1864 29.6 34-96 10.25 I 0.76 0. 190 8 2 1865 29.9 35-62 8.50 I 1.04 O.I93 7 9 1866 30.1 38.63 9. II I 2.05 O.I92 7 6 1867 3°-3 36.27 7-93 I 1.52 O.igo 8 2 1868 30.6 36.23 10.64 I 0.74 O.189 7 6 1869 30.9 37-33 9.20 1 0.65 O.I85 7 3 1870 31-2 38.07 9-23 I 1.64 O.182 6 7 1871 31-5 43.81 7-33 I 0.68 O.181 6 1 1872 31.9 47-99 6.12 Eo.11 O.180 5 9 1873 32.2 47.00 9. 11 I 0.71 O.180 5 5 1874 32-5 44-57 10.85 I 1. 18 O. 184 5 2 1875 32-8 41.78 13.70 I O.83 O.187 5 4 1876 33-2 37 64 17-35 I I. II O.189 5 3 1877 33-6 36.55 20.58 E0.38 190 5 1 1878 33-9 35-24 17.70 I 0.82 0.194 5 5 1879 34-3 35-3Q 16.20 E0.63 0.192 5 3 1880 34-6 40.29 17.56 EO.37 LI. igO 4 7 1881 35-o 4I-3I 13.90 E0.78 O.lgl 4 9 1882 35-3 42.28 14.66 I O.36 O.I97 4 8 1883 35-6 41.76 16.60 I O.II 0.203 4 6 1884 36-0 40.01 12.71 E 0.22 0.206 5 3 1885 36.3 36.39 13-35 I 0.03 0.205 5 3 1886 36.7 35-63. 10.77 E0.08 0.20I 5 8 1887 37-1 36.83 10.69 I 0.08 O.I98 5. 4 1888 37-4 38.76 11.68 E 0.07 O.I99 5 2 1889 37-8 40.52 14-54 I 0.25 0.205 4 8 * Specie imports not reported in British " Statistical Abstract." Ratio used in conversion, £1 = 4^1 dollars. Population excludes army, navy, and merchant-seamen. BALANCE OF TRADE AMD CURRENCY SUPPLY. 6 1 22.o per cent., by the same tables ; a higher rate than for any three successive years before 1812. The tabular rates of duty are on total importations, and are therefore lower than had merchandise alone been considered. DESCRIPTION OF THE CHART — TARIFF RATES. The years run horizontally, and are numbered at top and bottom ; corresponding values run vertically. The lines denoting rate of duties are two near the bottom, shaded to distinguish them from the foreign-trade ship- ping line, which crosses them in a few places. The lowest line represents the rate of duty as obtained by dividing the total value of imported merchandise into the total customs-receipts ; for the one just above it, running nearly parallel, the divisor is the value of all dutiable imported merchandise. The zero for these is the bottom line. The proportion of dutiable to free importations at any time is seen in comparing the height of the lower line with the distance between the two ; it thus appears that the pro- portion of free importations was very small until 1833, and was not very large from 1844 to 1872, while under the Compromise Tariff, 1833 to '43, and again after 1872, it became considerable. For a few years, about 1840, nearly half the importations were free. The proportion has been of late years not far from one-third ; but the McKinley law will largely increase it, by its policy of removing the duties from sugar and piling them up on the products of Republican States. I am not able to show any effect upon our commercial development, arising from increase or decrease in the proportion of free importations, the data being too scanty. I therefore furnish both percentages, admitting no case of a rise or fall in rate of duty except where the two agree, and setting down as doubtful the cases in which there 62 ECONOMIC AND INDUSTRIAL. DELUSIONS. appears to be a rise by the one reckoning and a fall by the other. I have no preference to express, between these two ways of reckoning the duty ; for neither is at all satisfactory. I have already pointed out the absurdity into which the first way leads, by supposing a case in which bristles are admitted free and a prohibitive duty put on every thing else. Suppose on the other hand that every thing else comes in free, while bristles have to pay a duty, high enough to just escape being prohibitive. Our scanty importations of that article might show a high ratio of duties to dutiable imports, while we were in fact enjoying practical free trade. This way is therefore no surer than the other. Neither way, indeed, can tell us what it most concerns us to know : the intensity of the regulative effect exerted by tariff taxes, or the burden thrown by them on the productive industry of the coun- try. Neither is free from the grave fault of considering what is actually imported, and not what we are prevented by the action of the law from importing, in making up its average. In importations prevented are the regulative effect and the burden most felt, and of those the tabular rates and the curves here drawn can take no account. I therefore prefer not to rely on either of them as indicating precisely how heavy a burden the tariff really is, or to lay any stress on comparison of rates and commercial devel- opment between years far apart ; but to confine myself to estimates of the effects of raising or lowering the duty as manifested in short periods. For that purpose the curves will suffice ; for they tell us accurately enough whether the tendency of duties is upward or downward. The British ratio of customs to total imports shows a slow and nearly steady diminution between 1856 and 1873, afterward remaining practically constant at a little over five per cent. BALANCE OF TRADE AJSTD CURRENCY SUPPLY. 63 The four irregular lines above those just described, relate to the merchant-marine of the United States. They may be postponed for the present, as that branch of the subject is to come up in the fifth chapter. DESCRIPTION OF THE CHART EXPORTS AND BALANCE OF TRADE. The growth of commerce in the United States, per head of population, is shown in the lines near the top. Exports are counted upward, from a zero-line distin- guished by being drawn heavier ; the per-capita value of these seems to undergo little progressive change until 1850; to increase from that date till 1880, except for a huge falling off at the time of the Civil War; and to decline somewhat after 1880. The corresponding British values, of exported merchandise per head, would extend the chart too far ; they, are therefore replaced by half- values. It will be seen that for every year since 1855 the British line is higher than that for our country ; there was not a year, therefore, when they failed to export more than double our value of merchandise. The British curve rises pretty steadily till 1 872 ; then declines to a mean value of $39 — represented on the chart a little below $20 — about which it oscillates. Imports per capita are not directly shown ; they can be inferred, however, as the space between the export-line and that showing the trade-balance answers, of course, to the volume of imports. The merchandise balance of trade is of more interest in this inquiry ; it is shown in a heavy line, above the zero for an excess of exports and below for one of imports. The fainter line which accom- panies it, shows the total per-capita balance : account being taken of movements of specie in the space between the two. When an excess of coin and bullion is exported, 64 ECONOMIC AND INDUSTRIAL DELUSIONS. the fainter line is above; when imported, below. The two lines are often not distinguishable, the net transfer of specie being very small. The only points where this curve shows any specially noteworthy features are : (i) An excess of imported specie for seven years uninter- rupted, 1832 to 1838. This is not in settlement of a balance of trade, for there is a like uninterrupted suc- cession of excesses of imported merchandise, 1 831 to 1837, and the chart shows no way in which to account for it. (2) Thirty successive years, 1850 to 1879, show large excesses of exported specie; there is but one break, in 1861. Up to 1863, this excess practically neutralizes the excess of imported merchandise, and should be interpreted as evi- dence that we were simply finding a healthy and advan- tageous market for one of our surplus products, gold. After 1863, the gold export excess, though at first greatly increased in volume, fails to pay for our excess of im- ported merchandise until 1874: in the intervening ten years we are evidently incurring debts, which afterward require large export excesses to settle. (3) The import excess for the years 1880 and 1881 is noteworthy. This is probably an effect of the accumulation of a large fund in our Treasury, to sustain specie resumption. Returning to the consideration of the heavier, or mer- chandise-balance curve, we have to remark its usual preference for a position below the zero-line, and its long periods of generally downward tendency, alternating with shorter periods when it turns upward. For instance, its general direction is downward from 1825 to 1836, from 1843 to 1853, from 1858 to 1872, and since 1878 ; upward until 1825, from 1836 to 1843, from 1853 to 1858, and from 1872 to 1878. The time included in the former four periods is twice as long as in the latter four. The con- nection of our great panic years 1837 and 1873, with BALANCE OF TRADE AND CURRENCY SUPPLY. 65 two of the turning points from down to up, is very ob- servable ; but the intervening panic year, 1857, is not so plainly represented. The upward turn between 1853 and '58 appears to have come too early for it ; but that turn is after all so feebly marked that it might almost have been neglected, and the whole period, 1843 to 1 %7 2 j treated as one of general downward tendency. The fact is certainly an interesting one, that the process of contraction of our foreign purchases is so much more abrupt than that of expansion. The British balance-of-trade, shown in the dotted curve, is veiy interesting. During the whole thirty-five years it has been what we are taught to call "adverse," on the whole increasingly so ; though the increase was most strongly shown between 1872 and 1877, about the time our own balance was turning the other way. This excess of imports per capita — more than double what we could show for every year but one — greatly diminished after 1877, but it seems now to be increasing again. Will it be thought strange that there is no export-balance of specie to meet this huge import-balance of goods ? The British, from the year 1858, with which the finer dotted line starts out, actually imported a decided excess of spe- cie almost every year until 1878 ; there was then a small balance in the other direction, but that soon disappeared. Where is a trace to be seen of the frightful effects assumed to follow an " unfavorable " balance of trade ? Who can show wherein that busy and increasingly wealthy country has suffered in the least from such a balance ? EFFECT OF THE TARIFF ON OUR COMMERCE — INSTANCES OF MISLEADING TESTS. Fairly and satisfactorily to determine what influence is exerted by a state, or change in the rate of import duties 5 66 ECONOMIC AND INDUSTRIAL DELUSIONS. on the balance of trade and on the volume of exported merchandise, we ought to decide beforehand on some rule or criterion by which we are to infer influence ; for the same series of facts often wears one aspect to one observer, and a very different one to another. An exam- ple is suggested by the export-curve of this chart. The feature of it that will first attract many eyes, is that its highest point is attained in 1881, during the prevalence of high duties, which leads at once to the inference that high duties are favorable to export business. But let us see how the matter appears under more careful study. The general direction of the export curve for the whole seventy years is upward, even though the increase of" population has been allowed for; we continue to ex- port, that is to say, an increasing value of merchandise per head of population. This increase does not fairly begin until 1850 ; and the fact that it is shown alike under the low duties of date and (for a time, at least), under the very high duties prevailing after the Civil War, leads the impartial inquirer to search for its cause in some con- dition independent of tariff laws. The growth of our export business, in the fifteen years following the war, is not unfrequently ascribed to the stimulating effect of protection on our productive industries ; but the chart forbids us this explanation, for to entertain it we must leave out of view three facts : first, that the falling off from 1 88 1 to 1889, with high duties, was as marked as the advance up to ,1881 ; second, that the British export business for many years at about the same time, in the face of a constantly diminishing percentage of import duties, increased even more rapidly ; third, that our own increase was as marked from 1846 to 1861 when our tariff was lowest. There can be very little question that our foreign trade gained this noteworthy increase BALANCE OF TRADE AND CURRENCY SUPPLY. 6? per capita simply by becoming less costly ; for the in- crease began with the introduction of iron steamships, and other improvements in economical transportation attended its continuance. Vessels became larger and stouter ; their passages swifter. We need look no further for an explanation of the general upward direction of our export curve between 1850 and 1880 than to cheaper ocean carriage. Intelligent Protectionists do occasionally exist — the expression is not quite a contradiction in terms — and I feel sure that all such will admit that this economy in ocean transportation has really been attained, and that it is also adapted to promote international ex- changes. But when this is admitted no certainty remains that protection has had any stimulating effect at all, and we have found only another illustration of the danger of trusting too confidently to isolated facts. We are secure only when we can discover a group of facts which point in the same general direction. The case of one high point of the export-curve, reached under high duties, is of very little value unless we can show either that noth- ing else was at work that could lead to such a result, or else that the general effect of raising our import duties — a thing that we have done a good many times — has been to stimulate exportation. The importance of the inquiry we are now making is sufficient to justify a little further attention to the method that I believe to be erroneous, although often employed, before suggesting a better method of extracting from these data the instruction that they contain. Suppose we are trying to test the truth of the alleged connection be- tween high duties and " favorable " balance of trade. Such a balance has prevailed for the greater part of the last fifteen years, and most Protectionists are agreed in ascribing it to the high tariff. Hon. Mr. McKinley, for 68 ECONOMIC AND INDUSTRIAL DELUSIONS. instance, is invariably quite positive that the relation is one of cause and effect. To make that out, he skips airily from the period before the war to 1876, and conceals the fact so clearly shown in the chart, that the balance " against us " before the war was greatly increased under the enormous war duties. The very years 1864 to 1872, during every one of which the duties, compared with total importations, were higher than they have since been, showed the heaviest unfavorable balance that we have ever known, turning only after the rates had been some- what reduced. He conceals also a fact as plain : that the balance has grown very much less favorable since 1 881, though the duties have become on the whole heavier. I doubt if an argument from Mr. McKinley would be recognizable if it contained no distortion or suppression of facts. But this is a digression. To show whether high duties had any effect in giving us a favorable balance, I counted the number of instances of such a balance in the seventy years. There are twenty-six, with forty-three adverse, and one zero. There are just twenty-six years when the duty-rate on total importations is as high as thirty per cent., among these sixty-nine, and forty-three when lower. The number of instances when the high duty corresponds with the favorable balance is seen to be nine ; an exactly even-chance distribution would give us ten. Considering now the rate as compared with dutiable imports, and treating all rates above forty per cent, as high, we do find an apparent connection between high rates and " favorable " balance, for twenty-eight years of high duty give us sixteen such coincidences, where an exactly even chance would give but ten and a half. Does that fact have weight with any one ? Then let him con- fine his attention to the twenty-five years since the war closed in 1865, of which fourteen show a favorable balance. BALANCE OF TRADE AND CURRENCY SUPPLY. 69 Here, the general range of duties being higher, we should properly set our limit at forty-five per cent. There are thus ten years of high duty on dutiable imports, and of these only three show a favorable balance ; an even chance would give six. If these facts led to any con- clusion at all, it would naturally be that the so-called "favorable balance " required moderately high duties, but was incompatible with a very high scale. But it is not probable that any rational person would accept a con- clusion of that kind. It is much more reasonable to con- clude that this test does not really prove any connection at all between the two orders of facts. Moreover, for reasons already stated, little dependence can be placed upon any inference from such a test. I have now to set forth another, which I believe far more satisfactory. A BETTER TEST OF THE TARIFF EFFECT. There is evidently less risk of confusion between the effect of other circumstances and that of the cause we investigate, when we attend to the action of the latter through short periods of time ; and particularly when we are able to study the effects of opposite changes in it, under nearly the same circumstances otherwise. In few words, we may be deceived in comparing high and low duties at periods wide apart, when we would not be deceived in observing the transition of the one to the other and back again, in a space of time when other causes may be reasonably supposed uniform. Let us put our question in this form : What effect upon commerce is to be expected within a few years, after a change in the tariff ? Desiring to make the interval as short as possible, I have fixed it at two years only ; setting down opposite each year from 1822 to 1889 the difference of the year following from the year preceding, in rate of duty 70 ECONOMIC AND INDUSTRIAL DELUSIONS. according to both reckonings, in merchandise-balance per capita, and in value of exported merchandise per capita ; denoting by the sign -f- increases in duty or in exports, or decreases in an import balance, and by the sign — changes in the opposite direction. Thus for 1822 the record is: Exported Mdse. -f- $1.00, Mdse. Balance — $0.40, Duty on Dutiable Mdse. — 3.3 per cent., on Total Mdse. -. — 3.7 per cent., the differences being those of 1823 from 1 82 1 ; an agreement of sign in the "Bal- ance " column, and a " disagreement " in the " Exports " column, with the change in the " Duty " columns. The differences are 68 in number, but of these 13 are excluded because the change of duty was ambiguous, — in one direc- tion when the comparison is on total imports, and in the other on dutiable imports. I have divided the remaining 55 into five equal portions, to show whether and how far there is a regularity in the effect of the tariff. In the following table, the second column shows the number of years excluded, within the interval designated, for ambiguity of change in direction of the duty ; the fourth and fifth show the number of increases and of decreases within the interval ; the sixth and seventh the total extent of the changes of duty in the included years, according to both methods of reckoning, changes in both directions being added together indifferently ; the eighth and ninth the number of agreements and of disagreements of sign, between the change in the duty and that in the merchandise balance ; the tenth the total excess of the changes in this balance, on the side of agreement or of disagreement with the changes of duty, the two being added separately without regard to intrinsic sign, and the difference being distinguished by A or D according as it agrees or differs ; and the last three columns show a like treatment of the merchandise exports. BALANCE OF TRADE AND CURRENCY SUPPLY, fl u •a J3 73 X W 52 H a O 2 •a V *a =1 *o a e u d iZi Changes in Duty. Changes in Balance. Changes in Exp. McU. Dates. No. 3 OS d G O SB H No. 1 W m N E-i No. 1 U u + - A D A D 1822-32 I833-4S 1849-62 1863-74 1875-89 O 5 3 1 4 II II II II II 6 4 6 6 6 5 7 5 5 5 62.3 65.8 47-5 49.6 23.8 65.I 63-3 42.1 69.O 17.6 8 4 8 5 5 3 7 3 6 6 A6.31 D2.15 A 3. 16 D4-33 D5.00 4 3 6 1 5 7 8 5 10 6 D3.76 D5-52 D6.31 Dii.gg D6.52 1822-89 13 55 28 27 249.0 257.1 30 25 D2.01 19 36 D34.10 The inferences from this test appear to be that changes in the tariff lead to changes in agreement with them in the balance, more than half the time, while the aggregate effect of those changes is in disagreement, by something less than a cent per capita for every one per cent, that the duty is changed ; also that the resulting changes in the volume of exports are in disagreement (falling as the duty rises, rising as it falls) in about two thirds of the cases, and that the total effect is nearly fourteen cents per capita for every one per cent, change in the duty. In the examination above made, the interval of time for which changes in duty and in exports were compared was fixed at two years. Had I made it three years, my results would have been, as I have proved by actual trial, practi- cally the same ; and for reasons already given, the shorter interval appeared preferable to use in exhibiting the de- tailed results. In explanation of my rejecting as altogether untrustworthy the single year interval, or the succession of year to year, and the greatly diminished ratio of decre- ment of export to increment of duty given by it, I have 72 ECONOMIC AND INDUSTRIAL DELUSIONS. two or three points to offer, (i) International exchanges generally take several months for their completion ; the exportation made in one fiscal year may not be paid for by its corresponding importation till some time in the next, so that the tables will not show the dependence of the one on the other unless the time is sufficiently ex- tended to cover both transactions. (2) The effect of in- creased duties appears sometimes — strangely enough, I confess — to be felt in diminished exportations before it is shown in the customs collections. Three illustrations of this are shown in the figures for the years 1828, 1861, and 1884. Those three years were all distinguished by acts of Congress increasing the duties, the act in the last case having gone into effect as early as 1883. The tables furnished by the treasury give no sign of the increase in their columns of duty-rates until the years following, and yet those three years all show diminished exportations. If this is the inconsistency I consider it, it is one that the longer interval serves to reconcile. (3) No rejection, or even overthrow, of the reasoning just set forth can deprive of significance the well-established fact that when the in- terval is extended to two or more years the connection be- tween duties and exports is as stated. There is the fact, and how are we to account for it ? I cannot conceive the possibility that we can get a true law of association of two series of phenomena by comparing them one by one, and a false law by comparing them in twos or threes, though I can easily understand how the latter comparison may give us the real law of connection, which is disguised in the former by the introduction of an accidental element — which necessarily tends to diminish the effect of the law. Let me make my meaning clearer by another example. Statisticians show that the number of marriages dimin- ishes, other things equal, as the price of grain increases, BALANCE OF TRADE AND CURRENCY SUPPLY. 73 and it is naturally argued that the relation is one of cause and effect. Would the confidence of any one, either in the existence of the connection between the two orders of events, or in that of a law causing the connection, be lessened because he could find no satisfactory evidence of it in comparison of successive weeks, or even of successive months ? The price of grain might easily rise between May and June, for instance, and the number of marriages increase at the same time, without exciting our suspicions at all, while the same lack of correspondence between practice and theory in comparing years or groups of years would make us quite doubtful. It is right, of course, to place on record the fact that the higher duty appears less effective in repressing exportation when the changes are studied by successive years, but it is no less right to show that it appears less effective only because part of its real force is lost in such an examination. COMPARISON OF DUTIES AND COMMERCE, BY AVERAGES OF GROUPS OF YEARS. In the accompanying illustration the seventy years are divided into fourteen groups of varying extent, three being as short as two years, and two as long as ten. The divisions are marked by dotted perpendicular lines on the chart, and the design has been to include in each group as many years as showed a nearly uniform tariff rate, by one at least of the two reckonings. Exceptions to this rule are two transition periods, about 1832 and 1871 ; and the four years of the Civil War, which are excluded from che calculation — neither the sudden decline of exports with which these began, nor the sudden recovery with which they closed, being fairly to be regarded as an effect of the tariff. There was considerable fluctuation of the rate on dutiable imports during the period 1834 to 1843, 74 ECONOMIC AND INDUSTRIAL DELUSIONS. but it was too irregular to show any suitable point of division ; and since the falling off in exports which began with 1837 was probably due to the commercial crisis (although such an effect was hardly perceptible in later crises), it seemed to be fair to include several years before and after that date in the same period. The average duties and export values are indicated both in figures and graphically in the accompanying diagram ; the changes of sign are there explained and summarized, and here follow the differences, for the years of change from one period to the next. Agreements and disagreements are indicated, as in the table already given and explained. Change in Duty. 3 2 u s-i W3 ■»? II 01 4) > 1 . B 'l p. u- Eg Ml Condensed Tariff History. 1823 1826 1828 I83I 1833 1843 I846 l'856 l86l-65 1870 1872 1875 1884 + 3-4 + 3-3 +4-5 -11. 8 —2.2 + 2.3 -7.2 -5-2 + 27.0 -4.9 -3-6 + 4.1 + 2.4 + 2.7 + 3-5 + 3-5 —14.2 -10.5 + 10.4 -4-5 -6.5 + 27.6 -5-9 — 10.6 + 1-5 + 1.2 A 0.50 D0.33 A 0.21 A 0.62 D 0.42 A 0.36 A 0.78 A 0.15 D 1.24 A 0.86 D 2.27 A 4.06 D 2.32 A 0.96 D 1. 18 D 0.31 D0.64 D0.75 D 1.48 D 2.19 D 1.69 D0.60 D 2.39 Di-57 A 1.94 D 2.18 ) Tariff of 1824, some provisions of ) which were later going into effect. Duties raised by Act of 1828. Duties gradually lowered, 1830-32. Compromise Tariff, 1833. Higher duties, Act of 1842. Walkei Tariff, 1846. Walker Tariff further reduced, 1857. Morrill Tariff, 1861 ; duties raised, successive years. Small reductions in war duties, 1870. Free list enlarged and 10 per cent, taken off, 1872. Ten per cent, restored, 1875. Duties variously modified, 1883. Total 81.9 102.6 A 0.96 D 12.08 The inferences from this table appear to be that changes in the tariff lead to changes agreeing with them in the bal- ance, whose aggregate effect is about a cent per capita for VALUE OF EXPORTED MERCHANDISE AND MERCHANDISE BALANCE PER CAPITA, COMPARED WITH RATES OF IMPORT DUTY. frr-iss)* i \ INT. Joi \8AT£0r_ DUTY &ATCS\<">:Joo7m' to.im' thQp.c. 30fc. 2Qp.e. is ilO I" ■ ■ ■ , ■ ' . imp.TxK \'""*' OAT£i IB25 IB30 /83S /e+o /84-S I 850 less I860 1865 1670 J 67 5 1880 /8BS 1890 After Rate of Duty | * 4-Op.c 30*c. 20fl(.. denotes a rise, denotes a fall. A ft Ti" i + den° tes increased Exports or diminished Imports. Atter excess ^ _ denotes diminished Exports or increased Imports. „. -,-, » , , ( + shows increase. After Exp. Mdse. } _ shows decrease _ Between Excess and Rate of Duty, 8 agreements of sign and 5 disagreements j_ 1861-1865, period of Civil War, Between Exp. Mdse. and Rate of Duty, 2 agreements of sign and 11 disagreements f omitted. Rates of Duty and excesses of Imports laid off to the Left ; Export totals and excesses to the Right. Values of Imported Merchandise per capita denoted by space shaded. BALANCE OF TRADE AND CURRENCY SUPPLY. 75 every one per-cent. ad valorem change in the duty ; and to changes of opposite sign in the volume of exported merchandise, eleven out of thirteen in number, and in amount nearly fifteen cents for every one per-cent. change in duty on dutiable merchandise, or to nearly twelve cents for every one per-cent. change on total imported merchandise. EFFECTS STATED AS LAWS. This examination into the commercial history of the country seems to me sufficiently decisive of the two points chiefly involved, to permit the statement of its results in the form of laws, as follows : I. The effect of a change in the tariff on the total value of exported merchandise per head of population is to increase it if the tariff is lowered, to reduce it if raised ; this result may be expected about eleven times out of thirteen, where the change is significant in extent, and may be estimated at about thirteen cents for every one per- cent, by which the duties are changed. This ratio has nothing precise or invariable about it : it only represents the average of our experience for the last seventy years, and indicates what we may expect for the future, so far as other essential conditions remain unchanged. We can- not infer from it, for instance, exactly what effect the McKinley tariff of 1890 is going to have, until we have seen whether that tariff is more effective by its increases in the duty on dutiable imports, or by its increases in the number of free imports ; also, until the present revival of export-business from its lowest point, about 1886 (shown in the upward direction since that date of both United States and British Export curves) shall have spent its force ; or else until the McKinley changes shall have been reversed. No effects on trade can well be inferred from j6 ECONOMIC AND INDUSTRIAL DELUSIONS. one year's trial, as explained above ; the only thing we can say is that there will be occasion for surprise if we find any sign of a different kind of effect on the total volume of imports and that of exports. In general, the depressing influence of the tariff is the same on both, as follows from the law stated below. II. The effect of a change in the tariff on the balance of imports and exports is altogether uncertain ; in fact, so far as the experience of the last seventy years informs us, there is no evidence of any effect whatever. The money metals move in accordance with their demand and supply ; there is a greater outflow or inflow of valuables in accord- ance with the condition of credit and indebtedness ; higher or lower taxation does not affect their movement. The often-repeated claim, dating back to immemorial antiquity, that we can by high import duties turn the balance of trade "in our favor" is a mere pretence, without a molecule of fact to rest on. The charge that the terrible " Compromise Tariff " of Clay, in 1833, is responsible for the great excess of our importations about that date is readily disposed of by a glance at the chart, which shows that the excess began with 1 83 1. It is easy to mislead people about the history of the times leading up to the terrible date 1837, because so few of those then living were in a position to observe accurately what was going on about them ; but the fact is known to have been that those years were marked by an epidemic of speculation — and we bought more things than we sold, because we managed to live a good deal on credit. It is also charged that the "Walker Tariff" of 1846 led to the large excess of importations which set in a few years later. That charge we will of course con- fess, as soon as it is satisfactorily proved that the lower duties caused the discovery of gold in California. The BALANCE OF TRADE AND CURRENCY SUPPLY. J 1 / chart shows that no such effect followed them until 1850, after the discovery had made itself felt ; and it also shows that the effect continued, even in greater measure, after the duties had been enormously increased. The only remarkable turn of the trade balance, besides that of 1837 in one direction, and that following the gold discoveries in the other, was the one between 1874 and 1878; this was a greatly magnified copy of the turn in 1838 to 1840, or that in 1858, and its chief lesson for us is that years of scarcity succeed years of prodigality — a season of speculation has to be avenged by one of paying debts. Strangely enough, this turn, instead of following an increase of taxation as it ought, followed instead a slight relief from taxation, and it was not reversed until after the duties had been increased again. The fact is thus opposite to the requirement of the last-century school of economists. There is no mystery about the explanation of these facts ; it is not that a change of import-rates operates sometimes in one way and sometimes in another, but simply that, for this particular purpose, it does not operate at all. The obstruction that the tariff puts, and is intended to put, in the way of importation acts not only as an obstruction, but as an equally efficient obstruction in the way of exportation ; and that for the very simple but satisfactory reasons that people are not willing to send their goods abroad without receiving pay for them, and that the enactment of a tariff has no power to create any difference in the relative demand for specie between this and other countries. NEED OF DEMONSTRATING THE EXPORT LAW. The demonstration of the simple principle that any scheme for cutting off imports must, other conditions remaining unchanged, cut off exports in just the same 78 ECONOMIC AND INDUSTRIAL DELUSIONS. measure, has cost many precious pages ; but it is entitled to them, being a principle of vital significance. To my own mind it has always been a truism — an inevitable inference from a knowledge of what international trade is, and how money is set in motion between countries. But this matter-of-course, this necessary inference, is exactly the point which the uninstructed mind is most apt to overlook, and which the protection-advocate is most certain to ignore — it may even be set down as one of the distinguishing marks of the protective mind, that of look- ing at, as a matter of course, the exact reverse of this : assuming that its scheme of a valve opening outward and not inward could actually work in practice, and that its contrivance of free exports and restricted imports could give us a condition of things like that which surprised the exile of Erin when he failed to loosen the cobble-stone, " a country where they let the dogs run loose and chain down the pebbles." Perhaps a few of the quibbles by which it is sought to turn aside this death-blow to half the Protectionist case may be worth the trouble of exposing. It is pretended that the principle takes the form, imported must always equal exported merchandise, and that any run of successive years when specie is imported or exported is fatal to it. What it declares, however, is merely that the course of specie — which is determined like other commercial movements by supply and demand — is not changed by changing the scale of import duties. That course may be inward or outward under either kind of duty, and it will continue the same way until turned by some change in the demand for or supply of the money metals. Attention is called to changes in the importation of certain particular articles, which undoubtedly follow BALANCE OF TRADE AND CURRENCY SUPPLY. ?g changes in the duty. In these cases the balance is of course preserved by opposite changes in other articles. Stress is laid on the fluctuations in our trade with particular nations, which tariff changes may easily cause. A large import trade may easily spring up, or be cut off, between our own country and some other, without affect- ing our exports thereto. In these cases the balance is of course preserved by opposite changes in our trade with other countries. The favorite objection to this fundamental principle is its assumed dependence on a theoretical foundation. In the argument of this chapter, theory and experience have been kept separate : commerce and rates of duty have in these latter pages been treated simply as two series of phenomena, between which a connection was to be deter- mined experimentally. The result has been that induc- tion confirms deduction, and that the state of things originally inferred from the nature of commerce is found to exist in carefully tested experience. The principle thus demonstrated is the first requisite to an understanding of the Tariff Question. It is of in- dispensable importance to hold distinctly in mind as a conclusively demonstrated fact, that a retrenchment of any part of our import trade involves the sacrifice of an equivalent part of our export trade. With this principle alone as capital, we can enter at once upon a very ex- tended business in answering protective assumptions and appeals. EXAMPLES OF ASSUMPTIONS OVERTHROWN BY THE EXPORT LAW. Noticing that a large amount of some article, tinned plate for instance, is now imported, certain men who desire to meet the demand at higher prices than their 80 ECOXOMIC AXD rXDCSTJl/AL DELVSJOXS, countrymen are now paying, start a highly colored tale of great advantages to come to us from cutting off the importations, and " giving " our own citizens the work of producing the article. This is all well enough, as long as we regard only the true end of the plea, to enrich certain men through legislative favoritism ; but when we treat it as we are invited to treat it — as something in which the rest of us are interested, our fundamental principle re- quires us to consider whether something else of equal value, not now imported, is to be brought in in place of the tinned plate, and if so what else ; or whether something else of equal value now exported is to be retained — either thrown on an already supplied market or no longer pro- duced — and if so what else ; or whether some degree of both these effects is to follow, and if so in what way. Nor is that all, for then we have to weigh the relative ad- vantages of producing in this country the tinned plate, or other article supposed, and of producing whatever we may at present export in payment for that article, and could no longer export if the article were made here. I admit that the mental work which our legislators actually perform in deciding on a tariff schedule is very much easier than would be required for complete solution of problems like these ; but I must regard as evidence of hopeless incompetence their ignorance, or pretended ignorance, that justice can be done to any tariff ques- tion without solving them. Another instance : the question is asked whether we pro- pose to give our support to American labor or to foreign labor, in providing the things we need. There are many of us who can see that this is nonsense — that whenever Americans get anything worth getting, they must get it by American labor, or else by American stealing — nation and individual citizen being alike in respect to this alter- BALANCE OF TRADE AND CURRENCY SUPPLY. 8l native — who are yet unable to tell how it is proved to be nonsense. The demonstration depends upon the same principle : that the tariff law which changes the relative conditions of production of a particular article at home and abroad can make no change in the aggregate — in the conditions of all production, — so that what is gained on one product is lost on another. Stimulation or depression of any production is stimulation or depression of the demand for labor on that production ; and hence if the tariff, by favoring the production of one kind of goods, restricts that of another, it necessarily exerts the same opposite effects on the labor employed in the two. The subject will be considered more fully in a later chapter. The whole policy of new steamship lines to Southern American republics, as often stated, is made to depend on the notion that a little improvement in our communica- tion with those states will tend to put our exports to them more nearly on a par with our imports from them. Why such a result, rather than the exact reverse, is to be expected of the means recommended, no one ever ex- plains. But supposing it successfully attained, it would inevitably at the same time reduce our exports to Europe more nearly within the pattern of our imports thence. It plainly follows that the value of the policy must be decided by balancing against the advantage of the sup- posed increased sales to Southern America the resulting disadvantage of decreased sales to, or increased imports from, Europe — is therefore quite doubtful, leaving all out of view its first cost. What advocate of subsidies ever showed his capacity to grasp this principle, the very principle on which all such policies ought to stand or fall ? The application of the Export Law to the question of securing a large favorable trade-balance has sufficiently exposed the pretence that tariff rates have even a ten- 82 ECONOMIC AND INDUSTRIAL DELUSIONS. dency to discourage imports without discouraging ex- ports. That such a result should in the least be desired, in view of the fact that imports are additions to our pos- sessions, while exports are but the cost at which we gain those additions — and especially in view of recent British experience — I have always thought strange enough ; but its impossibility of attainment leaves nothing worth dis- cussion in the policy of seeking it. KEEPING MONEY IN THE COUNTRY. Closely connected with this " balance of trade " pre- tence is another ; that the duties are necessary for keeping gold in the country. Its advocates seek to make their position solid by bringing forward instances of the distress that has sometimes attended a deficiency of currency within our borders. This of course goes for nothing when we discover that high duties do not bring money to us, nor low duties send it from us ; but there is more to say. Even supposing that legislation of the sort could affect the supply of currency, is that a reason for adopting it ? The distress from exhaustion of currency could be but a trifle to what would follow exhaustion of cereals, and yet we never think of discouraging exportation of them — we prefer even to encourage it, — calculating with well-founded assurance that when the amount exported threatens to reach a dangerous point, the exportations will stop by the action of the ordinary laws of demand and supply. Just so is it with specie. It is adequately understood by few not personally engaged in international commerce, what a delicate apparatus exists, in the work- ing of Foreign Exchange, for the perfect regulation of its movements. Any amount of trade may take place with no movement of money, so long as imports and exports balance ; but as soon as the balance inclines far enough BALANCE OF TRADE AND CURRENCY SUPPLY. 83 one way to necessitate shipment of coin, the cost of ex- change tends at once to rise in the country that sends it, and to fall in the one that receives it, and it takes but little of this action to convert the movement of specie into a movement of goods. Local distress for want of currency, nevertheless, sometimes occurs ; it occurs under any condition of revenue laws ; and though regrettable, it is as unavoidable as the local distress for want of grain that sometimes appears, even in so great a grain-pro- ducing country as this — as recently in Dakota, for in- stance. People talk of the amount of currency needed in a country as though this amount were some definite thing, and could be calculated without taking account of foreign trade. But is that in any sense the fact ? Can any rea- son be given why, if a nation had no foreign trade, a small amount of currency would not serve it precisely as well as a larger ? If a man had only fifty cents for every dollar he now has, and the price of everything he wanted to buy fell one half, would he not be just as rich as now ? So of a community, or a country. It is only because it may come into business relations with some other community or country that has a greater supply of money and goods at higher prices, that it need take a thought for its own supply. When " money is tight " in any place it is not because the amount in general circulation is small, but be- cause calculations have been made on a greater amount than actually exists — which can happen, and does happen, whatever the amount. If we are to have foreign trade, the exchange-mechanism will adjust the supply better than legislators could ; if foreign trade is to be cut away, the question need never trouble us. It is a common error to ascribe to a large supply of currency the results that are due to an increasing supply. 84 ECONOMIC AND INDUSTRIAL DELUSIONS. People are so constituted, I admit, as to be stimulated while prices are increasing and " money easy "; depressed while prices are falling, even though cost of production falls equally. And so long as men are thus constituted, they get the same kind of benefit from an increasing sup- ply of money as if its imagined advantages were real, while any increase in the purchasing power of money is similarly a hardship. But even if we could grant the power of import duties to increase at first the money supply, we must see that when they have once done this, their function is over forever. Fixed duties cannot pos- sibly continue to increase it. No more can be done unless the duty is brought yet higher, and exports along with imports reduced in consequence. It seems, then, quite fair to say that this effect of tariff duties is either all imaginary or grossly overstated ; that the need of govern- ment regulation of the currency supply does not exist ; and that if any good effects in the money market attend the levying of a higher duty they are evanescent in their nature. TARIFFS AND PANICS. From this assumed effect of holding specie in the coun- try it is usually reasoned, by those who trouble themselves to support their assertions by any reasoning at all, that protective tariffs have the power to ward off commercial crises ; or, indeed, any effect on them except to make re- covery from them more difficult. There can be no ques- tion, however, that this belief in the power of high duties to prevent panics never originated in any rational study of cause and effect — it was merely inferred from a few circumstances that appeared to support it. Let us ex- amine those circumstances and discover, if possible, their true relations. They are : (i) Commercial crises have BALANCE OF TRADE AA 7 D CURRENCY SUPPLY. 85 been, in our country, preceded by considerable excesses of imported over exported goods — see balance-of-trade curve for a few years previous to 1837, 1857, and 1873. (2) For the last year or two preceding them the rates of import-duty show a diminution — see tariff curves for same dates. (3) They have sometimes occurred when the rates were low by the operation of statutory reductions. The first of these conditions, an excess of imports pre- ceding, and a great diminution of them succeeding the crisis, has been already noted. When it is remembered that the commercial crisis is essentially a malady of credit — a case where credit is stretched until it snaps — this change in the balance of trade is recognized as one way in which this stretching and snapping is naturally manifested. There is no reason why, since our general experience is that tariff rates are without influence on the trade-balance, we should credit them with such an in- fluence in these exceptional instances — should suppose the first of the conditions above recapitulated a result of the second rather than the second of the first. The evi- dence stands as follows : The adverse balance consider- ably preceded the duty reduction (see chart) before 1873 ; the reverse order seems to have obtained before 1857; and it is doubtful which came first before 1837. The ex- planation how the great increase of importations, in sea- sons of inflated credit, may be a cause — not an effect — of the decreased duty-rates reported for those years is not evident from any of the facts I have collected ; but I think I can suggest an explanation. When credit is strong in the country prices go up ; money is therefore worth less to us ; and hence it goes more largely abroad for imported goods. The increased demand for those goods increases their cost to the importer, and hence re- duces the ratio of all specific duties upon them to theii 86 ECONOMIC AND INDUSTRIAL DELUSIONS. declared value. The temporarily lower rate may there- fore be regarded as a sort of accident. If this hypothesis is correct, no such effect should be perceptible on ad va- lorem duties. The " Walker Tariff " consisted mainly of such duties, and the chart accordingly shows us no reduc- tion of rate, worth considering, for the few years just be- fore 1857. It is unnecessary to say, however, that the assertion of a connection between duties and panics is not based on the temporary accidental diminutions belonging to the second condition above mentioned, but rather on those that were deliberately contemplated in the " Compromise " and Walker tariffs, both of which reduced duties and were followed after some interval by panics. There is a great convenience about assertions of this kind — -treating two phenomena as cause and consequence because they occur together once or twice, without regard to whether they can be connected logically or not ; one allows himself such a generous margin in them. All that is necessary is to come across some reduction of duties, preceding a crisis, and there you have the cause of that crisis ready to hand, with no need of further information, or further thought on the subject. You have even two causes some- times. The business troubles beginning in the summer of 1857, Dr. R. E. Thompson is perfectly certain, are fully explained by the reduction of duties resolved on in March of that year. Mr. Secretary Blaine ascribes them with equal confidence to a reduction made in 1846, whose effect had meanwhile remained suspended in some mysterious miraculous manner. Those two authorities are both high, equally high, in the Protectionist congregation, and there is no reason why any choice need be made between them. In sober earnest, either explanation is so childish in its absurdity that one can excuse himself for noticing it only BALANCE OF TRADE AND CURRENCY SUPPLY. 87 on the ground that he is obliged to notice many other absurdities quite as childish, just as the clergyman who had to preach the funeral sermon over a very hard case could only plead : " Brethren, if the departed was rather mean in some things, we must remember that he was still meaner in others." This is said in no contempt for the facts. It is a fact, I admit, that the crash of 1857 occurred after duties had been put exceptionally low. But that crisis, though very severe in its onset, was far less extensive and lasting than the later one beginning in 1873, under a high tariff; while its effects disappeared after a year or two, we took six years to recover from the great crash of 1873. As there is no doubt that duties were enormously high during our last panic, Protectionists generally pass it over, and go back to that of 1837, claiming that the troubles of that day were due to the reductions made in import duties by the acts of 1832 and 1833. It should be remembered that the 1833 act, known as the " Compromise Tariff," which provided for general import rates of twenty per cent., was not to go into full effect until 1842, nine years after its passage. It was the result of an understanding between Clay and Calhoun, representing opposite opin- ions on the subject, Clay admitting that no industry was entitled to protection which could not make itself self- sustaining in nine years. At the time, the reduction was less considered as a source of financial difficulties than the great elevation of duties in 1828, whose instigators were put to it to satisfy their fellow-citizens that it was not their own measure that had caused the trouble. The notion that the panic was brought on by the Compromise Tariff seems to have been invented many years later by an amiable, ingenious, and undoubtedly cranky publisher of Philadelphia, Henry Charles Carey, whose writings. 88 ECONOMIC AND INDUSTRIAL DELUSIONS. " voluminous and vast," are far oftener talked of than read Carey was not the sort of person who would con- sciously misrepresent facts ; but the mind that could overlook the real causes, reckless speculation, and huge and rapidly increasing State and municipal debts incurred for internal improvements, to say nothing of the collapse of the banking system of the country under the well- meant but over-violent attacks of an impetuous chief magistrate, and could ascribe such an effect to the re- lief of the people from a few unendurably oppressive import taxes, is a mind too distorted and prejudiced to serve as a guide in any rational inquiry. The 1837 crisis, moreover, involved this country and Europe together. The Europeans had another severe crisis ten years later, in 1847, J ust after a large reduction of duties in this country. If Carey's invention was ever to have an application, then should have been the time. But of the 1847 crisis, in which we ought by his rules to have been fatally involved, our country felt not a trace, or far less disturbance, at all events, than it underwent in 1825, just after an increase of duties. A particularly severe crisis began with us in 1818, under circumstances very like those of 1873 ■ for the duties were then, diso- bligingly enough, decidedly higher than they had been before the war. Having seen how the facts really stand with regard to the first " low tariff " panic, need we be at a loss to account for that of 1857 ? To any one who remembers the " wild- cat " currency then in circulation, whose every note, usually made payable at some branch bank located in an inaccessible place, had to be carefully conned and gauged— perhaps discounted, too — before it could be accepted, and the shameful inadequacy and venality of the State banking laws under which the most of it was BALANCE OF TRADE AND CURRENCY SUPPLY. 89 issued, there is no occasion to look to national customs rates for an explanation. Credit was then an edifice on a shaky foundation, sure to collapse when built up high enough. The only surprising thing about the 1857 crisis, to my mind, was the ease and buoyancy with which we recovered from it. In that respect it was altogether exceptional. TESTIMONY OF HUGH MCCULLOCH. To supplement this fragmentary sketch of our panic history in the best way possible, I add a few paragraphs of testimony from the man who, of all men living, is most competent to speak on the subject, and whom it is least possible to look on as warped or hampered by prejudice. For years at the head of one of the very few creditable and successful State banking systems, afterward Comp- troller of the Currency at the most critical period of the war, and Secretary of the Treasury under three adminis- trations, Hon. Hugh McCulloch needs no recommendation to public confidence ; while his well-known standing as a Clay Whig, and afterwards an earnest Republican, would certainly acquit him of partisan bias, were it possible for any reader to bring any accusation of the sort against language so calm and courteous — so indicative of ripe knowledge, clear sagacity, and judicial spirit. The fol- lowing paragraphs are taken from his refutation of a Pro- tectionist tirade by Mr. Blaine, and first appeared in the New York Times, 3d of February, 1890. " THE REVERSES OF 1837. " Of these reverses and all subsequent ones I can speak advisedly, because I held positions of financial responsi- bility and had personal interests at stake. I was in 1837, and had been for a considerable time, the manager of the branch at Fort Wayne and a member of the Board of 90 ECONOMIC AND INDUSTRIAL DELUSIONS, Control of the State Bank of Indiana. Mr. Blaine's state- ment that 'the years 1834-5-6 were distinguished for all manner of business hazards,' but faintly describes them. They were years, especially 1836, of the wildest specula- tion. In the East it was varied in character, but its dan- gerous elements were excessive credits, and there were few things that could be bought or sold that were not affected by it. " In the West it was confined to wild lands and lands unimproved and town lots, many of which never had any existence except upon the recorded plats. It was specu- lation similar to that in the timber lands of Maine a few years before. Lands bought of the Government at $1.25 per acre were soon sold on credit at $4, $5, and in some cases $10. Hundreds of tracts were laid off in town lots where the original forests were still standing. What took place under my own observation seems now to be too absurd to have been real. On the Maumee River, from its mouth on Lake Erie, there was for miles a succession of towns. Some of them, like Maumee City, Perrysburg, Manhattan, and Toledo, were realities, but most of them existed upon paper only. In the spring of 1836 a young man whom- 1 met at Maumee City said to me that he had made a great deal of money in a few months. To my in- quiry how he had made it, he replied, by buying and selling lots. ' Maumee City,' said he, ' lies, as you know, at the foot of the Rapids, and is destined to be one of the great cities of the West ; property is rising rapidly in value, and I am buying and selling every day.' " ' How did you raise the money to commence with ? ' " ' Oh, very little money is required in this business. I pay when I buy, and I require when I sell a lot a few dollars to bind the bargain ; but nearly everything is done upon credit.' BALANCE OF TRADE AND CURRENCY SUPPLY. OJ " On my way from New York to Fort Wayne, in the same year, I stopped overnight at a hotel in Toledo. After dinner I noticed that there was a gathering of gen- tlemen in the parlor, and in the course of the evening I was waited upon by one whom I knew and invited to join it. ' Our rule,' said he, ' is to admit no one to these meet- ings who is not worth $100,000. As you are a banker, you must be worth at least that.' This was far from being the fact, but I accepted the invitation. The company con- sisted of gentlemen some of whom I knew personally and others by reputation. They were politicians, scholars, writers, and one or two of them were authors of consider- able renown, but not one was there whom I recognized as being engaged in regular business pursuits. It was a sort of private exchange, at which the members made them- selves rich by buying and selling to each other lands and town lots. There was at times a good deal of excite- ment, much like that which is witnessed in the New York Stock Exchange. When the meeting closed every one felt that he was richer than when it opened. In a few brief months there was not one of these hundred-thou- sand-dollar men who was worth a hundred thousand cents. "results of the speculative mania. " The same speculative mania prevailed to some extent all over the country. It originated in unwise extension of the credit system, which was mainly the result of the removal of the Government deposits from the United States Bank and the placing of them in State banks. When the deposits were removed there was among con- servative men great apprehension that the effect would be severe financial trouble. To prevent this it seemed to be the understanding between the Secretary of the Treasury, acting under the direction of the President and the banks 0,2 ECONOMIC AND INDUSTRIAL DELUSIONS. — pet banks as they were called — that as they had been fa- vored by the Government in the use of the public moneys, they should deal liberally with their customers. This they did, and, as their capitals were sufficient to supply the demands of healthy business, the loans of the Govern- ment deposits were made to men who were engaged in speculative enterprises. Then, too, many of the States were engaged in works of internal improvement, and were spending large amounts of money which they had obtained by sales of their bonds in Europe. " In addition to the large volumes of currency thus put into circulation, a bank under the name of the Pennsylvania Bank of the United States was chartered by Pennsylvania, as the successor to the United States Bank, with the same capital and mostly the same managers, which not only loaned its money in a manner which savored of reckless- ness, but bought large quantities of cotton on its own ac- count. Never were credits so easily obtained nor so unwisely used ; never to the superficial observer had the country been so prosperous. " In the meantime, however, industry was declining and all kinds of agricultural productions were command- ing exorbitant prices. Wheat went up from |i to $2 a bushel, and cotton from 7 to 15 cents a pound. A speculative fever everywhere prevailed, similar in char- acter, and as much more disastrous in consequences as it was wider in extent, to the South Sea bubble in England. Conservative men, strangely enough, as well as adven- turers, were its abettors and its victims. Banking institu- tions, and especially the Government depositories, were in a great measure responsible for it, and not a few were ruined. " I call to mind one case which interested me greatly. In the spring of 1836 I went to a city in a State adjoining BALANCE OF TRADE AND CURRENCY SUPPLY. 93 Indiana to make with its leading bank exchanges of New York and New England bank-notes for its notes, which were receivable at the Government land offices. As I knew the President personally, I called upon him at the bank after banking hours. I was kindly received, but I noticed that he was in bad humor, which he did not try to conceal, the cause of which he explained. ' I have,' said he, ' for the first time since I became President of the bank, been squarely overruled in a matter of great importance. I do not like,' he went on to say, ' the business outlook. The people seem to me to have gone mad, and if I am not greatly mistaken, they will soon find out that the prosperity of the country is unreal. We owe the Government a large amount of money, and as we have enough and something more in the banks of New York to pay it, at the meeting of the board this afternoon I introduced a resolution in favor of paying the debt and dissolving our connection with the Government. In offering the resolution, I explained as fully as I was able to do, my reasons for doing so. I was listened to atten- tively, but when the vote was taken, there was but one vote (my own) in its favor. Not only was the resolution voted down, but I was instructed to use the money to our credit in New York in current business at home. To my directors the idea of giving up the use of a large amount of money on which we pay nothing, when it might be loaned at high rates of interest, seemed to be absurd. I hope they are right ; time will show.' Time, and short time at that, did show. In little more than one year, this great bank, which up to the time of its connection with the Government had been conservatively and profitably managed, was ruinously, hopelessly broken, and some of the directors who were its borrowers went down with it. 94 ECONOMIC AND INDUSTRIAL DELUSIONS. "after the panic of 1837. " Of the reverses of 1837 I made the following remarks in my report as Secretary of the Treasury in 1865 : "'The great expansion of 1835 and 1836, ending with the terrible financial collapse of 1837, from the effects of which the country did not rally for years, was the consequence of ex- cessive bank circulation and discounts, and an abuse of the credit system, stimulated in the first place by Government deposits with the State banks, and swelled by currency and credits, until, under the wild spirit of speculation which per- vaded the country, labor and production decreased to such an extent that the country which should have been the great food-producing country of the world became an importer of breadstuffs. " ' The balance of trade had been for a long time favorable to Europe and against the United States, and also in favor of the commercial cities of the seaboard and against the interior, but a vicious system of credits prevented the prompt settle- ment of balances. The importers established large credits abroad, by means of which they were enabled to give favora- ble terms to the jobbers. The jobbers in turn were thus, and by liberal accommodations from the banks, able to give their own time to country merchants, who in turn sold to their cus- tomers on indefinite credit. It then seemed to be more reputable to borrow money than to earn it, and pleasanter and apparently more profitable to speculate than to work. And so the people ran headlong into debt, labor decreased, production fell off, and ruin followed.' " This was, of course, a panic sharp and terrific, but it was of short duration. It was soon followed by a lethargy under which all the springs of enterprise and hopefulness were dried up. To prevent the sacrifice of property under judicial decrees, stay laws and appraisement laws were enacted by many of the States, which only aggra- vated the trouble. For long weary years the lethargy continued. There was no demand for anything except the necessaries of life, and all these, except clothing, were sold for scarcely enough, and. in some cases not enough, BALANCE OF TRADE AND CURRENCY SUPPLY. Q$ to pay the expenses of taking them to market. I wit- nessed a sale in 1839 to tne keeper of a hotel in Indian- apolis of oats at ten cents a bushel and fine chickens at fifty cents a dozen. The same year I saw thousands of barrels of flour under the sheds of Suydam, Sage & Co. in New York which they were offering' at $3.50 a barrel. Fat cattle were selling at so low a price — $10 and $12 a head — that my brother thought that he would pack a few barrels of beef at Fort Wayne for the New-York market. He did so, and was drawn upon by his con- signees for a part of the expenses of transportation not covered by the sales. From 1837 to 1841 there was nothing to break the stagnation but the political cam- paign of 1840, in which everybody became enlisted for want of something else to do. In the fall of 1841 a reaction began to appear. This became decided in 1842, before the tariff of that year went into operation, and in 1845 the country, chastened by adversity, was in the full tide of healthy and wealth-producing industry and enter- prise. This continued until credits became again un- wisely expanded and speculation became rife. "the panic qf 1857. " In 1857 I was the President of the bank in the State of Indiana, and this is a part of what I said about the financial troubles of that year in the report from which I have quoted : "' The financial crisis of 1857 was the result of a similar cause to that of 1837, namely, the unhealthy extension of the various forms of credit. But as in this case the evil had not been long at work, and productive industry had not been seriously diminished, the reaction, though sharp and destruc- tive, was not general, nor were the embarrassments resulting from it protracted. Now, in both instances the expansion occurred while the business of the country was upon a specie 96 ECONOMIC AND INDUSTRIAL DELUSIONS. basis, but it was only nominally so. A false system of credits had intervened, under which payments were deferred, and specie as a measure of value and a regulator of trade was practically ignored. Everything moved smoothly and appar- ently prosperously as long as credits could be established and continued, but as soon as payments were demanded and specie was in requisition distrust commenced and collapse ensued. In these instances the expansions preceded and contraction followed the suspension, but it will be recollected that while the waves were rising, specie ceased to be a regulator by reason of a credit-system which prevented the use of it.' " Now, with all due respect to Mr. Blaine, I express the opinion that the apparent prosperity which preceded the revulsion of 1837, and the real prosperity which pre- ceded the crisis of 1857 were not caused by the tariff, and that the reverses which followed were not attributable to its reduction. If the tariff was in any measure instru- mental in producing the changes, it was in stimulating the expansion which terminated in disaster. In 1857 I was a believer in the tariff, and it never entered my head to attribute the financial troubles of that year to the changes to which it had been subjected. " THE FINANCIAL TROUBLES OF 1873. " The most pressing duty which I had to perform when I became Secretary of the Treasury in 1865, was to pro- vide the means to pay the soldiers, and to meet other pressing demands upon the Treasury. This was done in the only way it could be done, by the sale of temporary obligations which had proved to be attractive to investors. After this had been accomplished the work of funding these obligations was commenced and carried successfully on until the whole amount — some thirteen hundred millions of dollars — was converted into bonds. While this work was going on I was under constant apprehension of a financial crisis before it could be completed. My apprehension was unfounded, but only as to time. The crisis was postponed, and for so long a period that the BALANCE OF TRADE AND CURRENCY SUPPLY. 97 opinion generally prevailed that the vitality and pro- ductive power of the country were so great that the most expensive war that had ever been waged could be con- cluded, and great expansion of credit could be checked and abridged without financial disturbances. I have to confess that this was my own opinion, but the same causes which produced the crisis of 1857 were a t work, and, as had always been the case, the revulsion came when least expected. "When I left London in September, 1873, to come to the United States, the financial skies, if not cloudless, were not threatening. The letters which were received by the London firm from its New York partners were encouraging ; and I had no reason to expect anything but a pleasant visit to my old home, and a return to Lon- don under auspicious circumstances. But on the arrival of the steamship in the outer harbor, I was met by the stunning intelligence that my American partners and the correspondents of the Fort Wayne banking house in which I was interested had failed ; that all the banks ex- cept the Chemical Bank, which had weathered all storms, had suspended, and that one of the wildest panics which had ever occurred was raging throughout the country. The crisis was a terrible one. Although it came unex- pectedly, it was only the consummation of influences which had been long at work beneath the financial hori- zon. In extent, in fierceness, and disaster it resembled the revulsion of 1857. It was not, as Mr. Blaine states, brought about by the losses sustained in the civil war, which had been terminated eight years before, nor by the destructive fires in Chicago and Boston. Great losses may bring about what are called hard times — not panics. It was produced by an expansion of currency and of credits, which fostered speculation, which rarely fails to terminate in financial trouble." CHAPTER IV. PATERNAL GOVERNMENT AND INDUSTRIAL PROGRESS. The claim that import duties are capable of exerting any favorable influence on the quantity of our industrial activity was examined in last chapter, and, I venture to believe, conclusively refuted. The next inquiry before us is into the quality of that activity — whether our industrial system is better developed, or better in any way for the pains that have been taken to give it direction. There is no self-contradiction in admitting that governmental reg- ulation cannot increase the amount of a nation's industry, and in insisting at the same time that some regulation is needed to insure the nation a greater variety or a more desirable kind of industry. I do not care to deny that a government might be imagined, whose wisdom in devising suitable industries for its people should surpass the people's wisdom in deciding for themselves ; I admit that such a position involves no glaring absurdity. But I by no means admit that the benefits theoretically possible to the regulations of some imaginable government, are now ours by the regulations of the government we actually have. It is the effects flowing from legislation practically enacted that we have to consider ; and if we find these undesirable in the concrete, it need concern us very little whether sim- ilar effects may or may not be desirable in the abstract. ENCOURAGEMENT OF IRON AND STEEL MANUFACTURING. The assumption that encouragement must necessarily encourage, as applied to tariff duties in behalf of home 98 PATERNAL GOVERNMENT. 99 industries, is one that is heedlessly made and admitted. I can give several instances in which it certainly does not, and a great many similar ones might be given. On the whole, it might be more truly said that the kind of encour- agement granted to manufactures is in effect discouraging. Chief among the industries depressed by our protective policy are those in which iron and steel are used ; and none will deny that these industries are numerous and vitally important. It is a matter of cold statistical fact, compiled from tables of prices actually paid, that until the last year or two pig-iron has averaged $10 a ton, and Bessemer steel about $14 a ton, higher here than in England. It is a matter of plain common-sense that but for our import duties no difference above cost of transpor- tation, insurance, etc. — perhaps $3 per ton — could have existed. From these figures the burden by which the American manufacturer is handicapped in all lines of export trade can be readily computed. Detailed consid- eration of these points will appear in a later chapter — the iron and steel question is too important to be dismissed with a paragraph. One example must here suffice, and I have not far to look for one. INSTANCE FROM THE AGRICULTURAL-IMPLEMENT BUSINESS. ■ Experience in my own business enables me to furnish considerable testimony as to the evil effects of govern- ment "encouragement." We manufacture machinery on which, to protect us within the^ IJiiited States, a heavy duty is set. But this duty is like that allowed on im- ported wheat, of no assistance whatever to the producer. For we send a large portion of our manufactures abroad ; in the markets of South America,- South Africa; and Australia we are compelled, arid owing, to advantages in labor and machinery, are able to compete' with all other IOO ECONOMIC AND INDUSTRIAL DELUSIONS. producers in the world without protection. I do not need to prove that since we can trade in those markets without special favors we have no need of them to keep our place in this. If we were circumstanced like the owners of copper mines, for instance, with a supply so firmly held in few hands that consumers were completely at our mercy, and able to sell our product year after year to our com- patriots at about what is received for it in London plus the duty on it, we might get some advantage from protec- tion. But we could get none without engaging in such a legalized pillage of our fellow-citizens as this ; while the cost to us of this merely nominal guerdon of legislation, is higher prices on the raw material of every machine or implement we put on the market — hence fewer and smaller sales. The duty on pig-iron, $6.72 a ton, must be mainly paid by the consumer; the furnace owners, in turn, are obliged to pay more for their ore, owing to a duty of seventy-five cents per ton. Similarly with bar-iron, duty about $18, and with sheet-, duty $60 on some forms. The price of lumber is guarded by a duty against any reduction through importation, and all who use it thus mulcted for tribute to the lumber lords. The price of bituminous coal and coke is advanced by a duty, while the cost of anthracite, though not depending directly upon import taxes (since there is none to be obtained from abroad), is necessarily affected by that of other fuel. More than this : our interests are closely dependent on those of the agricultural calling generally, whose welfare is necessary to our welfare, and whose misfortunes must be ours also. High tariff duties bring nothing to growers of corn, wheat, cattle, and cotton, while increasing the cost of most of the things they have to' buy, and so reducing their power to purchase the tools they ought to have. Thus is our PATERNAL GOVERNMENT. IOI business affected, and what is true of us is true of all manufacturers who are able to produce goods for regular export ; those of clocks, organs, and sewing-machines, for instance. It is true also, to some degree, of the still larger number who do not export, but would be enabled to do so were they allowed the same advantages that their for- eign rivals have, of getting raw materials where they can get the best choice of them. There will be no question that, with this liberty permitted us, we could establish our business in many parts of the world where we are now at a hopeless disadvantage, and make a greater number of sales at home by being able to offer our wares cheaper. Which way our interests point is therefore plain enough. I have no occasion to deny that my zeal for tariff reform in a larger sense is strengthened by this consideration ; for when one's own interest is identical with that of the great mass of his fellow-countrymen, enlightened selfishness becomes truest patriotism. EXAMPLES OF ENCOURAGING OTHER PRODUCTS. The story has often been told, how, for the sake of making a gratuitous present of the people's money to the owners of copper mines, we granted them in 1869 the power to run up the cost of all our copper and brass ware, and also how the practical prohibition of foreign copper ore operated to break up the smelting establishments along the Atlantic seaboard, and turn all their workmen adrift ; the lesson is now emphasized by the complaints of that industry, every year more important to civilization, of constructing and using electrical apparatus, against the inflated prices with which this bounty to the mine-owners burdens it. The "encouragement" in this case does not encourage the copper-smelting industry ; it does not en- courage the widely ramified and growing electrical in- 102 ECONOMIC AND INDUSTRIAL DELUSIONS. dustry ; it only encourages in paying huge dividends and supporting an influential lobby, an industry entitled on public grounds to far less consideration. Encouragement is ceasing to encourage woollen indus- tries, with accelerated speed. Failures among these manu- facturers and the dealers in wool, serious enough for some years past, were three times as heavy in 1889 as in 1888, while the Mills Bill was under discussion ; and now we find many of the sufferers beginning a revolt against a system which adds so hugely to the cost of their raw materials and their machinery. I wish them courage to keep up the fight. The whole effect of the system of duties on wool and woollens has been to encourage the production of shoddy substitutes and of cotton goods. One wonders if that may not have been the object of it. As is well known, it has set many and many a citizen of the United States to wearing cotton or shoddy garments, who would otherwise wear wool; to say nothing of the suffering from insufficient clothing. 1 The duties are no great encourage- ment to the wool-grower, for when the factories close his market is lost to him ; little wonder, then, at the con- tinued slaughtering of the flocks in the older States, 1 A striking confirmation of this view is furnished by an analysis recently published in the Dry Goods Economist. Nine samples of heavy woollens from five mills, controlled by members of an organization which had been active in promoting the wool increase in the McKinley Act, were compared with a like number from mills whose owners had favored free wool. The latter samples showed an average of 3 per cent, cotton ; the former, of more than half. These figures may not prove that every manufacturer who con- sents to high duties on wool is one of those who use more cotton than wool, but they expose clearly enough the motive power behind McKinley's increase. No more effectual encouragement of cotton mixture, than is furnished by our present tariff, could be contrived by the wit of man. So far as they in- troduce cotton, the manufacturers enjoy free raw material ; while their protection, since this cotton is all reckoned as wool in the ' ' compensatory duty," sometimes approaches 200 per cent. PATERNAL GOVERNMENT. 103 which this " encouragement " fails to arrest. Are the growers serving as cat's paws for the shoddy factories ? If they have been so used, it may be predicted that they will not be much longer available : for the courtship of them in which politicians have been so untiring has not brought a reward equal to their wishes, of late years, in Republi- can votes. Witness the sheep-growing counties of Ohio in the fall elections of 1889 and 1890. GROWTH OF MANUFACTURING INDUSTRY, BY THE CENSUS. Turning our view from particular manufactures, let us look over the general field. The census reports give us the value of the manufactured goods of all kinds in the United States for every tenth year, beginning with 1850, when the amount was ten hundred and nineteen millions ; in i860 it was eighteen hundred and eighty-six millions ; in 1870 forty-two hundred and thirty-two, or in gold valuation thirty-three hundred and seventy-eight millions ; and in 1880 fifty-three hundred and seventy millions. The pro- portion of increase for the ten-year interval from 1850 to i860 is 85 per cent. ; from i860 to 1870, on a gold basis, 79 per cent.; and from 1870 to 1880, 59 per cent. If I had not corrected the 1870 figures (dividing them by 1.253, the average currency value of a gold dollar for that year, and thus putting them on the same basis with the others), this last percentage would have been but 27, which is less than the increase of population ; but the gold rate is significant enough. When we remember that the period 1850 to i860 was one of particularly low tariffs, and that we had from 1870 to 1880 higher tariffs than for any pre- vious decade, the fact that the former period showed a rate of increase so decidedly higher is worth taking into account before we admit that such encouragement en- courages. If we take account of the increase of popula- 104 ECONOMIC AND INDUSTRIAL DELUSTONS. tion, and compare values of manufactured products per head, all estimated in gold, we have for 1850 $44, for i860 $60, for 1870 $88, and for 1880 $107; our percentage of increase during the low-tariff decade was therefore 37, and during the high decade 22. The percentage 46, for the middle decade, shows some effect of stimulation conse- quent on war prices ; but this figure, it should be observed, exceeds the 37 per cent, far less than the 22 percent, falls short. The excess is partly due to the acknowledged in- completeness of the 1870 census. If one asks the Protectionist for his historical proof of the advantages of protection, he will glibly recount two or three cases where duties were lowered, causing Snooks & Sons to suspend, and will then dilate on the miseries of the few dozen hands thrown out of employment ; just as any one who cared to post himself could detail the history of selected instances among the fifty-three failures in the wool- len business that were precipitated upon us during the first eight months of the year 1889 by our foolish tariff policy. Without disparaging Messrs. Snooks & Sons, the effect of the tariff on the whole Union is immensely more impor- tant than that on their firm ; and how manufacturing on the whole was " ruined " by lower duties, the census fig- ures show. It is just that sort of " ruin," and nothing worse, that the tariff reformer proposes to bring upon them now. WHY THE MANUFACTURERS HANG TOGETHER. If it be true, as I have tried to prove, and as I firmly believe, that protection costs the manufacturers them- selves, as a class, more than it brings to them, it is worth while to consider why so few of them admit the fact. That there are but few is undeniable. But before taking at their face value the claims of that greater number of PATERNAL GOVERNMENT. 105 manufacturers who protest that the policy which " pro- duces scarcity " (as Hamilton confessed,) is essential to keep them going, let us consider the case of a business whose false position towards society will be universally ad- mitted. Consider a crew of counterfeiters, or smugglers, or burglars for instance. It is so unquestionably true that the energy, courage, and ingenuity exercised in one of these callings would bring in, in the long run and allowing for all risks, a much better return to the possessor in a calling not so obnoxious to the popular taste, that we may easily imagine one of the crew, who recognizes this truth, debating with himself whether he would not better take his part for the future with society, and against his pres- ent associates, its enemies. Is it not certain that his decision will be very much influenced by the fact that while his overtures may be doubtfully received by society, which will be slow to lay its resources open to him, the first step that he takes in opposition to his former com- panions must convert friends into mortal enemies, whose vengeance will be whetted by desperation ? He may be quite confident as to the principle, and yet see in its practi- cal application only doubtful advantage to himsel r with imminent risk of losing everything. I have no disposition to class the protection-seeding manufacturers with such criminals in point of wickedness ; neither would I so class the representative in Congress who dare not content himself with the applause of the country at large — which will come to him in too mild a form to be of much personal benefit — and face the wrath of a few noisy constituents — which will be certain to direct itself against him with deadly effect — in voting according to his convictions and his conscience on some river-and-harbor job, or some pension scheme, for pil- laging the Treasury. I simply use the illustration to 106 ECONOMIC AND INDUSTRIAL DELUSIONS. point a general caution against accepting the statement of any man, be he never so well informed, until it has been shown by what trammels he is bound, and allowance has been made for them. But if I chose to go further — if I said that those who clamor for continued protection have more than this in common with vulgar outlaws, and that they are consciously banded for the plunder of their fellows — I could find a justification in the language they use among themselves. I will give an example. As I have already stated, some of the woollen manu- facturers have just waked up to the discovery that they cannot work over and sell to advantage materials on which protection has forced them to pay 30 to 80 per cent, advance ; and are now asking for free wool. For this the New York Tribune has taken upon itself to discipline them, and it goes promptly to the point. All pretence that the duty on woollens was imposed in the public interest, and is cherished by the people because every class is blessed by it, drops away as swiftly and totally as the Fiend's disguise under the spear of Ithuriel. Protection's oracle reminds these manufacturers that the wool-raisers have votes, many more votes than they them- selves can muster, and intimates quite distinctly that their own protective bounty is likely to become the first victim, if it be brought into the lists with the wool tariff. Here is a perfectly clear announcement that, though the pretext of a public aim is all well enough for steering in victims, it has no force within the ring — among the protected themselves. The confession is complete. To the manufacturer entirely dependent upon sales at home the threat to remove the tariff on the goods he makes, while maintaining that on his material, is simply a menace of utter destruction. He might argue with per- fect truth that all the ends proposed by advocates of pro- PATERNAL GOVERNMENT. to? tection on principle, would be better gained by preferring of the two the tariff on his finished goods : that he employs more labor, of a higher grade ; that his business is directly of service in furnishing a home market for the raw material ; that he has more at stake, more in- vested : but to no purpose, for he well knows that it is not in such a way that tariffs are made and maintained. He knows also that his profits may depend, in important measure, on special terms allowed for machinery and sup- plies by other protected manufacturers. Knowing these stern facts, with the margin between failure and success so narrow that almost any change of present conditions seems likely to imperil all — knowing as he does the strength of his fetters, his unwillingness to make a mighty effort to burst them is scarcely surprising. Now, as in 1863, the establishment of freedom will bring with it the blessing of free speech. DIVERSIFYING OUR INDUSTRIES. An important part is ascribed to tariff legislation in diversifying industrial pursuits, and fostering useful enter- prises that could not succeed without it. Here, as in many other cases, the thoughtful seeker after truth is in danger of missing the slender kernel of substance in this claim for the cumbrous husk of exaggeration, misstate- ment, and reckless pretence in which it is hidden. With- out denying that some small part of the diversity of our industries may be due to artificial fostering in a few special cases, the thing most important to notice in this connec- tion is that by far the greater part comes from no such source. The productions, such as gold and silver, that are not even nominally protected, with those of the farm and exportable manufactures, whose nominal protection brings them no real benefit, and the long list of other Io8 ECONOMIC AND INDUSTRIAL DELUSIONS. productions whose real protection is more than offset by increased cost of raw material, make up an extensive and quite sufficient diversity, and no timid heart need faint with apprehension that, even were commerce completely unshackled, our lines of business would be seriously cur- tailed. There was a considerable degree of diversity in our industries before we set about protecting them at all. Alexander Hamilton, first head of the Treasury Depart- ment, in a long and careful report to Congress advocating National encouragement of manufactures, says signifi- cantly that " to all the arguments which are brought to evince the impracticability of success in manufacturing establishments in the United States, it might have been a sufficient answer to have referred to the experience of what has already been done " ; and follows this with a good-sized catalogue of the industrial enterprises that had grown up into quite creditable activity under com- plete free trade, or duties of 5 to 7^ per cent. The notion that the achievements of a very poor nation of some four millions, as we were then, could not be sur- passed by the very rich one of over sixty millions that we are now, scarcely calls for discussion. ESTABLISHING NEW INDUSTRIES. The beneficial influence claimed for tariffs in giving a necessary start to valuable industries I shall undertake to put in the very strongest light it will bear. Some years ago the saws and axes used in this country came mostly from Sheffield. Now they are chiefly made here. More- over, they are decidedly better in style and quality, and decidedly lower in price than they used to be. As the American saws and axes not only completely command the market at home, but are sold abroad in large quanti- ties, they have no occasion for protection, and want only PATERNAL GOVERNMENT. IOO, cheaper steel ; but we are told that things were very different with them at first. The expense of starting the manufacture was so heavy, it is stated, that it would not have been possible had competition been free. Be it so. I am quite ready to admit an occasional instance of the kind, for the sake of argument. It is not of the working of the tariff in these instances that I complain, but in so many others where no such result is reached — iron and steel for instance, heavily protected for many generations and still, if we are to believe their producers, helplessly unable to stand alone, — which these scattering successes serve as excuse for continuing. It is the policy of every lottery to conspicuously parade the prizes it pays. After every drawing it blazons the newspapers with the lucky numbers, particulars as to where they were sold, who the holders are, what delight was given by so large a return from so inconsiderable an outlay, and whatever else may be calculated to inflame the reader's imagination, and incite him to try his own fortune. To the ninety and nine who draw no prize, and have simply lost the ticket's cost, no attention is called, and they are themselves willing enough to aid the lottery promoters in covering them with a kindly veil of oblivion. But the economist must remember the losers along with the winners, and that the expense of the institution to the whole body of ticket-buyers amounts to a good deal more than the prizes paid to a few of their number ; the heavy operating charges of the concern, the profits its promoters draw out of it over and above these, and whatever time may be taken from regular honest work in procuring the ticket or awaiting the result. There can be no shadow of doubt, therefore, that, as a general rule, lottery invest- ments do not pay. The substantial gains made through protective tariffs must be of the same nature as those IIO ECONOMIC AMD INDUSTRIAL DELUSIONS. drawn in a lottery. The risk of loss must be large in comparison with the chance of gain. Necessarily so, for otherwise the interference of government would be super- fluous ; since sufficient capital could be obtained from private sources to give the enterprise a start. In therase of the saw and axe works, for example, if the prospect of success had at first appeared encouraging to men of fair foresight and judgment, those men would not less readily, and much more properly, have been found among capi- talists than Congressmen, and money to insure it have come from these private investors than from the public. But people will of course vote away the money of their fellow-citizens more willingly than money from their per- sonal pockets. The severity of the risk in the great tariff lottery, however, appears in the general result ; for every dollar that is saved to the community in saws and axes cheapened and improved, ten, twenty or more are paid on account of inflated cost of iron, wool, et caetera. Nor is this all. Even were the eventual gain a high probability, instead of a precarious possibility, there seems something repugnant to justice in using the strong arm of government to force the purchaser of a saw or axe into a business partnership with the man that makes it, on the principle of tails he loses, heads the manufacturer wins. We take the citizen's money for a private enterprise not his own ; and if ever a benefit comes of it to any one but the protected manufacturer, it comes to other persons altogether — the purchasers a generation hence. I will not appeal for sympathy on account of these assaults upon liberty and common justice, grave although I believe the evil to be. I recognize the fact that the citizens of my country unfortunately seem to be quite willing to overlook all, if sufficient material gain can be shown them. It is necessary, therefore, if we expect a hearing, that the PATERNAL GOVERNMENT. Ill data from which the tariff beneficiaries would cipher out a gain for the public be closely scrutinized ; and especially important to show whether anybody is cheated in the way these data are manipulated. I have spoken of the ad- vantage gained by lotteries in throwing a brilliant light upon the prizes drawn, and hiding from sight the many blanks that go for every prize. If, now, a lottery had the additional power allowed it of passing off its blanks as prizes on possible investors, it would be favored indeed. The exceptional success of the tariff lottery is due to the exercise of precisely that power by its managers, as I shall show by a conspicuous example. INSTANCE OF STEEL RAILS. Among instances of the reduction of price brought about by the home competition which it is the pretended intention of protection to incite, steel rails are sure to figure. Here are the facts : A high protective duty on these rails all through, $28 per ton until 1883, afterward reduced to $17, and accompanied by a striking diminution in the price, which ranged between $90 and $100 per ton from 1870 to 1873, and has not since been above $70. For several years past it has averaged little above $30. Production and use of these rails both very largely increased ; they are now laid exclusively, iron being abandoned. The public has been greatly benefited by these results, and is instructed by the Protectionist that it owes this benefit to his device for stimulating home competition. If we knew no other facts, the case would certainly have that look ; and so long as we depend on the Protectionists, we are allowed to know no other. But somebody, whose suspicions were excited by observing how very few of our trials of protection on many hundred 112 ECONOMIC AND INDUSTRIAL DELUSIONS. articles for a hundred years had been followed by effects analogous, and how loath the rail manufacturers were to part with the $17 duty, once took it into his head to look up the average prices of steel rails in London, and give them in a table side by side with those at the same dates here. The English price shows the same diminution : $60 to $70 between 1870 and 1873, sinking to barely $20 in recent years. They are now advancing in England as on this side. The difference between the two columns is always in the same direction, varying from $30, the whole duty, with something added for cost of carriage — then there were, of course, very large importations — for the years just before the panic and those of the revival (1880 and 1881), down to $5 only in 1885, $4 in 1889, and almost nothing for a few weeks of 1890, when, owing to a peculiar stress of demand, the English price had a sharp temporary advance. These facts put the matter in an altogether different light. What caused the reduction of price in England ? Not protection, certainly, for the English scorn protection. Not apprehension of competition from us, for since prices in our markets were always above theirs, our mills had no more influence over English sales than if they were in the moon. Now, we see in London figures undisguisedly and unmistakably, the effect of improvements in the Bessemer process, by which the cost of making steel rails was re- duced. When prices fell off more than two thirds with them, what else could they possibly do on this side — unless, indeed, we " protected " ourselves from this bless- ing by getting Congress to increase the duty ? Our pro- ducers could not maintain a scale of prices much higher than the London prices with duty added, and the table shows that they have not gone, on the average, much lower. Instead of the vaunted effect of protection in PA TERN 'A r. GOVERNMENT. 1 1 3 lowering prices, we see its real effect in simply preventing them from being lowered, for us in the United States, as far as they would have been without it. Knowing the whole case, we see that the alleged prize was in reality but an additional blank. INSTANCES OF GROWTH DESPITE DISCOURAGEMENT. How superfluous is that craven dependence on govern- mental pampering into which so many productive indus- tries have fallen, is strikingly shown when we inquire how it fares with one of our industries which government not only endows with no advantage — thus burdening it, like gold mining, wheat growing, etc., with the support of pre- ferred industries — but actually discriminates against, by specially favoring the sale of foreign products. Many a student of protection does not seem aware that, in all our apparent anxiety to foster everything, there is any indus- try treated in so step-motherly a manner. And yet this is exactly what our laws do for literary composition. The author-industry in our country depends of course upon copyright for support ; and when its products are thrown upon the market, they find themselves in competition with foreign products whose expense has been not only not enhanced by a duty, but greatly reduced through being spared the charge of contributing to the support of the author. That is to say, our literary productions are deliberately handicapped in the competition. "And what is the result ? Has composition entirely deserted us and settled irrevocably in England ? On the contrary, as our publishers' announcements and monthly magazines show, no industry in the country has so secure a future. Nor is this a solitary case. Every manufacturer of capacity and enterprise could give instances only a little less striking, from his own experience, of the stimulating 114 ECONOMIC AND INDUSTRIAL DELUSIONS. effect of similar obstacles on his faculties and productive powers. Hawthorne has vividly shown the difference in his own case between finding a livelihood in a government office, where all was routine and certainty, and in the world outside, where his mind was tasked to discover work as well as to accomplish it when discovered ; and he has given us to understand that, but for the necessity that first threw him on his own resources, the world might never have known that brilliant series of romances which gave him a place in the front rank of our national literature. 1 Even such a brain as Hawthorne's was found incapable of its best service until forced to it by stress from outside. In further testimony on the same point, I may be per- mitted to add a brief passage from the history of my own business. On first beginning to manufacture implements for export we found, as have so many others in similar lines, the margin of profit so narrow that unremitting vigilance, close and grinding study, were indispensably necessary to keep us in the business at all, compelled as American manufacturers are to compete with makers abroad under no extra charges for raw materials, and to depend on their competitors for the carriage of their goods. But we con- tinued to export, and now find the conditions no easier — competition no less pressing — far harder and severer rather. Foreign rivals still hold, thanks to our govern- ment, their advantage in cost of transportation and raw materials ; and they have also made improvements in 1 " Oh, such assistance is the devil's wages. For it I bartered courage, confidence and self-reliant manhood. While resting in the arms of Uncle Sam I made no progress, and would not have produced the Scarlet Letter during the terms of ten Presidencies— although the data were in my hands and the plot in my brain, as I idly wandered through the corridors of the Custom House, relying for support upon the little pile of bright gold that came to me at the end of each month."— The Scarlet Letter : Preface. PATERNAL GOVERNMENT. Ilg their manufacturing facilities. The prices at which we now have to sell, I should ten years ago have thought ruinous — in fact, quite impracticable. The measures forced upon us, the only ones by which it was possible to keep a place in the trade, were a saving of a few cents at this point and a few at that ; here an improved machine for increasing production, there an arrangement for a more effective division of labor — " evolution by integra- tions and differentiations," in short — with the same con- tinued close personal attention to every point. I cannot profess to have enjoyed this discipline. People do not always enjoy what is good for them. But experience has helped me to realize how impossible it is to make a strong man by feeding him like a baby from a spoon. An occa- sional test of this kind, I grant, may not prove as a general principle that production thrives best under positive discouragement, but it annihilates the cowardly pretence that to a vigorous, keenly inventive people the nursing-bottle must be forever an absolute necessity. Industries can be saved without it. SUPPOSED CAUSE OF OUR INDUSTRIAL PROGRESS. We are now ready to rate at its just value the assump- tion that the progress of our country and its present pros- perity are in any degree due to restrictions on trade. I believe the exact opposite to be true, so far as the ques- tion enters at all ; our progress and prosperity are owing to, dependent on, an exemplification of, and an argu- ment for, free trade in its most unrestricted form. Over a region as large as all Europe, this is guaranteed by our national Constitution ; and our leading difference from the Old World is in having so large an area within which trade is absolutely free. As if to furnish the most con- clusive refutation of the theories of the Protectionists, Il6 ECONOMIC AND INDUSTRIAL DELUSIONS. their pet maxim, that trade may be safely permitted along the meridians but must be jealously watched and re- strained around the parallels, is met by the fact that not only is the greatest extent of our country from east to west, but by far the greatest portion of our trade, that for which our trunk lines of railway are built, is carried on in those directions. Their silly notion that a nation must be economically favored for all kinds of production when it pays low prices for labor, meets its death-blow in the com- parison of wages and products throughout the United States. Indeed, there is hardly a " principle " that these wiseacres lay down with owl-like gravity for the regulation of trade between countries, that is not refuted by the ex- perience of trade within our own country. Nor do the most of them in these days seriously contest this. They cheerfully admit the breaking down of their principles, as applied to commerce between our States. But once across an imaginary line, find bunting-strips of a different color and pattern waving over public buildings, and presto ! all the laws of business dealing receive a radical change in character. The same devices that before were folly, now become wisdom. That our progress and prosperity are advanced by the large measure of free trade permitted us, rather than by the contrivances of legislation to keep that measure incom- plete, is a view so firmly founded in common-sense and supported by experience that no doubt would be felt about it except for the vehemence of assertions made to the contrary. But since it is often doubted, and even denied, it should of course be put to the fairest trial we can devise. What facts have we to help us in deciding whether we would be better or worse off, if the methods that work so successfully within and across State lines were extended to trade beyond our national borders ? PATERNAL GOVERNMENT. II J We evidently cannot depend for an answer exclusively on our own country. Though, as I have already shown, its progress in manufacturing enterprises was proportion- ately greater during a decade of lower tariffs than during a decade of higher, it may not unreasonably be argued that this test is not conclusive, seeing that the country grows into different conditions from decade to decade. Let us then take two different countries for the same period of time, circumstanced as nearly as possible alike, and like our country, one following the high-tariff prin- ciple and the other that of low tariffs for revenue only, and let us examine and estimate their relative prosperity. MEXICO AND NEW SOUTH WALES. If any country on the globe ought to rejoice in the most luxuriant industrial progress, with manufacturing establishments springing up thick on every hand, and happy laborers drawing ample wages, that country is assuredly Mexico. For an inspection of the statistics from several of its ports of entry, given in our consular reports, shows that the duties paid foot up to at least half, on an average, of the value of the goods imported. Leaving out of view the privilege exercised by the sepa- rate States of that republic to pile on their little addi- tional freight of duty to all goods crossing their confines, . we see in the federal customs alone a perfection which even our own country has not reached ; the average ratio of duties paid at our ports to the value imported is less than one third. Mexico ought then, as I have said, to surpass us in industrial development. Does it ? If any country on the globe ought to be steeped in the slough of hop.eless penury and ruin, with a laboring class but a step above beggary, that country is assuredly the great colony of New South Wales, on the South Pacific Ocean. 118 ECONOMIC AND INDUSTRIAL DELUSIONS. For its whole tariff list consists of barely eighty articles ; everything else is free, and the world challenged to " inun- date " it with a deluge of goods, as cheap as ever they can be made. Further to show its sufferings under this fear- ful calamity, the same consular reports give a value of the customs receipts only about a twelfth of the total imports ; and if we leave out the principal sources of revenue, from spirits, wines, beer, tobacco, and tea (where the duty is manifestly without thought of any sort of protection) the customs fall off one half, and the ratio to the remaining imports becomes less than a twentieth. And where is the woe and disaster brought on New South Wales by this policy ? The reports show not a trace of it. That colony is not only the most progressive of the whole Australian system, in manufacturing as in other enterprises, but it is almost unrivalled in the whole world, in its rate of wages and development for the last twenty years. Parts of our country — notably the new States opened to us by the Northern Pacific Railway — may surpass it, but no region as a whole, under a single revenue system, bears any com- parison. Mexico and New South Wales have many points of resemblance ; both are rich in mineral store, both have some fields of luxuriant fertility and some arid districts hardly better than deserts, both are comparatively new and sparsely inhabited. Mexico indeed has the advan- tage in geographical position, variety of climate and prod- ucts. It cannot be denied that the resulting difference is in a direction exactly opposite to that required by the fancies of the Protectionists. But Protectionists never try to meet points of this kind, and it is difficult indeed to imagine how they could meet them. There is a great difference in character of population, to be sure, between the two, but stress could hardly be laid by our protective PATERNAL GOVERNMENT. J 1 9 friends upon that particular ; for I should at once chal- lenge them to point out in what respect they think the character of the people inhabiting the United States in- ferior to that of their Australian kindred, that the former would have scored a failure with the fiscal policy under which the latter have attained so splendid a success. NEW SOUTH WALES AND VICTORIA. I am quite content, though, to abide by the result of a fair comparison between free-trade New South Wales and the protected country most closely akin to it: its next neighbor, the colony Victoria, part of itself until 1 85 1 . The latter territory, in the days of its first independence, was the world's pocket. Its mountains poured out gold in streams so rich that the uncouth names of Bendigo and Ballarat suddenly replaced as symbols of vast wealth the older Ormus and Golconda. Under this stimulus the colony bounded forward like a restive steed ; with less than a third the population of New South Wales when they separated, it soon pushed far ahead, and had still by the last enumeration a slight excess of inhabitants. But as early as 1881, in its volume of imports and of exports, it was overtaken by its sister, as it will be before long in population also. The proud pre-eminence given Victoria by the unparalleled richness of her gold-mines passed from her when these became more difficult to work, and the system of high tariffs that she adopted — high as com- pared with other Australian colonies, that is, extending to a thousand articles, with ad valorem duties mounting as as high as 25 per cent, (it would be called stark free trade if proposed in this country) — has not improved her relative condition. I have just been looking over a table of the import and export trade of these two colonies, beginning with 1873. The low duties of New South Wales were 120 ECONOMIC AND INDUSTRIAL DELUSIONS. adopted in 1871, and the high scale of Victoria a few- years earlier. Each figure, for the latter colony, stands steadily at about fifteen millions sterling, oscillating to a few millions above and below, but not on the whole in- creasing, down to the year 1886, at least. In the sister colony the amounts rise from eleven or twelve millions for 1873 and 1874, to seventeen millions for 1881, and about nineteen for 1882, and I find from other sources that there has been no backset since. Here we have the facts. Are they not decisive as to the influence of high and low duties ? Our own race and kindred, in a country to a great extent like our own, have been experimenting for our benefit, quite as if that were their declared object ; making it unnecessary, if we only keep our eyes open to what they have found out, for us to be at the vast expense of trying the experiments for ourselves. And the result of this practical test being so unmistakably in favor of free trade, why should we not let it satisfy us that our progress is due rather to the large measure of unrestricted trade that we enjoy than to our not having it larger ? Before leaving the theme, I ought perhaps to mention two matters of minor detail : first, that New South Wales has more than three times the area, and gives, therefore, much more room for growth ; second, that in grazing territory, and in all kinds of mineral wealth, except the one important metal, gold, it is far richer. But no true Protectionist would pay any attention to matters of this kind, for if he did he would be obliged to allow for the the analogous state of things in the United States, and could not ascribe our favorable condition entirely to our scheme of taxation. I see no resource for him except to bolster up his theory by some other equally fanciful; that the course of trade, for instance, like that of the sea- PATERNAL GOVERNMENT. 121 sons, in some way reverses itself on crossing the equator. Do not understand me, though, as saying that protection actually has recourse to this hypothesis to explain the facts with regard to New South Wales. In truth, protec- tion never explains them at all. It keeps mouse-quiet about these, the best, if not the only, tests by actual fact to which its theory has been put; it hopes that people will know nothing of them, and will accept its harsh brayings as a perfect substitute for information. In many years' reading of the New York Tribune, I have happened upon but one allusion to the economic history of that colony ; it was very brief, and little more than a shallow misstatement. In the federation of Australian commonwealths now forming, it is quite probable that the adopted revenue system will be more like that of the majority of them than that of New South Wales. No friend of the latter colony would advise it to remain out of the federation on that account; there, as with us in 1861, union is more important than small taxation and large commerce. But even though this prediction should be carried out, and that flourishing colony should abandon for a time the truer economic policy, its present example will none the less remain ; nor will its temporary defection throw any more doubt upon its present guiding principle than did that of the children of Israel in the wilderness. THE REAL CAUSE. Economic principles are far more than negations, and yet the discussion of Economic Delusions has necessarily a negative tendency. It has led me to fill many pages in considering the spurious causes alleged for our industrial progress, and to dismiss the true cause with a single sen- tence. But no more is needed. The good seed fails not 122 ECONOMIC AND INDUSTRIAL DELUSIONS. to sprout, and grow, and thrive, without further care from the husbandman, when false growths are uprooted in pre- paring the soil. The whole prospect is seen at once when the fog is blown away. In the first place, nature has done much for us, and people can always grow richer in a rich country than a poor one ; in the second, the fact that the colonies of Australasia, with those of South Africa and along our northern border, are sharers in the same progress, admits only the explanation that it has a predilection for nations of Anglo-Saxon stock. CHAPTER V. FOREIGN COUNTRIES AS COMMERCIAL RIVALS. POWERFUL as are the reasons in favor of peace among the nations which make up the human family, it cannot be denied that commercial rivalry may and must exist. There is no thought of arousing between different na- tions any higher degree of the altruistic or self-denying spirit, than the inhabitants of any one of them are capable of maintaining toward one another ; and complete do- mestic peace has for centuries been found compatible with a very keen business rivalry. The man of business whose first aim in life is to keep abreast, or if possible ahead, of all competitors, has no hostility toward them on that account, and does not busy himself in seeking means to harass or disable them ; but each is conscious, even in his eagerness to be first at the goal, of the important inter- ests that all have in common, which amicable co-operation is needed to secure, and which embittered enmity must sacrifice. Every business rival is for certain purposes an ally. Exactly what those purposes are, and at what point competition should give place to co-operation, is some- thing for experience and enlightened judgment to deter- mine. It is enough here to note the significant fact that, in spite of the activity of competition in our day, the field of co-operation has been growing wider with advan- cing civilization ; and that it has already begun to spread beyond national frontiers. 123 124 ECONOMIC AND INDUSTRIAL DELUSIONS. There are more ways than one of confronting our foreign competitors. We may study their methods, for instance ; find how far their success or their failure is due thereto, by the test of comparison between countries em- ploying and countries not employing such methods, and be prepared to guide our own course accordingly. This way is not without practical difficulties ; for the deter- mination which method has contributed to the success or failure, and which has been practically inert, when many, as is usually the case, have been in operation at the same time, presents often a quite difficult problem. Far plainer and easier is a second plan : simply to do the thing that our rival does not want us to do ; keep out of every combination that he wants us to enter, and assume that every recommendation he makes to us is precisely op- posed to our interest. Every one will confess the superior simplicity of this procedure ; it requires almost no reflec- tion in the carrying out, and the data on which it depends are very readily ascertainable. GOVERNING OUR POLICY BY '' WHAT ENGLAND DOES NOT WANT." It is reason enough for not opening our ports, we are often told, that England wants us to do so. In warfare, when a combatant on the defensive finds out what his enemy wants him to do, he naturally does the opposite, and a state of warfare in the industrial field is assumed by Protectionists as the normal condition of nations. My prepossessions would be all against this view, even if I had made no study of the facts ; for I have seen so plainly the workings of the rival principles of Enmity and Amity in other fields. Can any one try to picture the condition of things when private war and the ven- detta, now left to remote and semi-barbarous regions, FOREIGN COUNTRIES AS COMMERCIAL RIVALS. 12$ were the rule throughout Christendom, and feel any doubt as to the effect of the Protectionists' assumed nor- mal state of warfare, among citizens within the state ? Human nature is not so different in lesser aggregates and in larger, that the kind of treatment found totally un- suited to dealing with men a few dozen or hundred miles off, could gain a new character and become the best kind for people a few thousand miles off. That such an as- sumption and such a practice are hopelessly in conflict with the Golden Rule, is a matter of course, but I need lay little stress on this. A method of warfare that dam- ages those conducting it twice as badly as the foe, a weapon that gives twice as severe a wound in kicking back as its missiles give to those they hit, is one whose use we should regard as folly, though we gave no thought to the precepts of Christianity. Let us consider how much importance should be allowed to England's wishes about our policy, before raising any question as to what those wishes are. Is there after all any good reason why we need pay them any practical attention ? Suppose that Doe and Roe are two village storekeepers, and that Roe is able, having either more enterprise or easier access to the supply, to sell his customers a certain line of goods 20 per cent, cheaper than Doe. Further suppose that Doe has the village boys on his side, and succeeds in persuading them to pelt, hoot at, and otherwise make it uncomfortable for those dealing at Roe's store, with the view of forcing purchasers to his own ; that he obtains " protection," in other words. Roe will be altogether likely to complain, and manifest quite a strong desire that his customers shall have as good a chance as those of Doe. The question is, should that desire of Roe's, however powerful, be taken as an indication that the annoyances to his cus- 126 ECONOMIC AND INDUSTRIAL DELUSIONS. tomers are a public service, and ought to continue? How much practical difference would it make if the two storekeepers were separated by water instead of land, and how much more if the water happened to be salt ? All have observed the efforts of large mercantile con- cerns to drum up custom, but who accepts the fact that they thus show a strong desire for his trade, as a proof that he would find his interest in trading with some one nearer by ? People are more apt to act the opposite way. They prefer to deal with those anxious to sell to them, believing that the keener the anxiety the better the terms to be had. Free trade between this country and England could not possibly be more advantageous to her than to us unless her dealers were sharper at a bargain than ours, so that we failed to get as much money's worth as we gave. That we labor under this disadvantage, I will not admit. I am quite ready to trust my countrymen in any contest of the kind to which the English may summon them. A sort of hierarchy or aristocracy among industries, under which those now followed in England have a merit en- tirely out of proportion to the pecuniary return they bring, seems to have been conjured up by the protective imagination. The fancy is not an altogether harmless one, seeing that we cannot discriminate in favor of one kind of labor without oppressing those who live by some other. CONTRAST BETWEEN THE REAL AND THE FANCIED ENGLAND. Unaffected as any rational mind need be by the strength or feebleness of England's desire for free trade with us, it seems nevertheless worth while to expose the exaggeration with which that desire is popularly distorted. It is an interesting contrast, that between the England of FOREIGN COUNTRIES AS COMMERCIAL RIVALS. 127 the Protectionist teaching and the England of sober fact. The former is consumed with a feverish solicitude over our tariff legislation, and breathlessly awaits the result of every general election in our country ; the latter knows so little of the affairs of her kindred here that few of her inhabitants are free from serious misinformation on im- portant points, and her newspapers give ten or twelve paragraphs to any leading European nation for every one given to ours — even while we are holding elections. The first is so zealous for the removal of our import duties that she pours out untold gold every year to promote it, the agent of its distribution being a knot of insidious plotters known as the " Cobden Club " ; the second — if we confine our attention to that fiftieth part of its number that knows or cares anything about our tariff laws — in- cludes all shades of opinion from satisfaction with them as they stand, as the strongest guaranty of their own commercial supremacy, to disgust at the multifarious annoyances they cause, while her Cobden Club is only an association for publishing as widely as possible the truth that made her free, named after one of the most earnest, self-sacrificing, and admirable practical philanthro- pists of the century, and not in command of much money from any source. The one is unremitting in her efforts — always hectoring weak countries, when she is not bribing strong ones, with the ever-present object of securing the admission of her manufactures ; the other has, freely and without a struggle, granted to her colonies the privilege of putting as high duties as they please on merchandise from her own ports. It may not be pleaded that this privi- lege was forced from her in any way, for the high-tariff party has never been strong enough to throw any of her colo- nies into rebellion, even when it formed a large majority. Notwithstanding the general practice in those colonies of 128 ECONOMIC AND INDUSTRIAL DEI.VSIONS. supporting local governments by duties on imports, there is a strong party for freer trade in all of them, which party, had loyalty to the mother country been thrown into the balance on its side, would certainly have prevailed everywhere. When we contrast this liberal treatment of her dependencies, entered upon after she had declared for free trade, with her course before the year 1846 — the op- pression of industries this side the Atlantic that formed no inconsiderable motive in driving our own people into revolution, the repression in Ireland whose penalty she has since been sharing with that ill-starred isle, and finally the disgraceful triumph in the Chinese Opium War, which has the one redeeming trait of mitigating our own morti- fication at the equally disgraceful triumph which our country won from an unprovoked raid on a weaker, at near the same time — in this light it begins to seem as though the reform that her corn-law-repeal movement brought her was less a modification in fiscal policy than a radical regeneration. To forget that England has out- grown their own narrow and shortsighted maxims, and to suspect her of following them still in her national policy to-day, is a misconception quite worthy of Pro- tectionists. I have not denied that the prevailing sentiment among our kin beyond sea is in favor of increased commercial intercourse with our country, and I may not undertake to deny it. I very willingly concede the sentiment ; it is strongest in the best and wisest Englishmen, and the nature of it, as held by Cobden and Bright, Gladstone and Morley, is precisely that of the satisfaction felt by all classes in our country at emancipation in Brazil — equally magnanimous and unselfish. Business reasons are not wanting, in addition to the natural wish of generous people to see others free of the toils from which they so FOREIGN COUNTRIES AS COMMERCIAL RIVALS. 120. lately achieved their own deliverance, but in these a care- ful examination finds no comfort for Protection. Remem- bering that it is impossible to protect an industry of our own against other nations without at the same time and in just the same measure protecting some foreign industry against ourselves ; remembering that, as a rule, every sale which the English are enabled by lower duties to make in our country must be balanced by the sale of one of our products outside in competition with an English product, we can discover in their desire to see our ports opened only a firm conviction, supported by experience, that there is more profit in increased facilities for trade, gener- ally speaking, than can be lost through a little additional competition. If English desires are worth our attention at all, this is the lesson we ought to read in them. SOME FOREIGN COMMERCE NECESSARY. If the alpha and omega of wisdom, in dealing with foreigners as commercial rivals, is after all not found in doing the things they want us not to do, and if we are to profit by their example in using the methods by which they have attained their successes, it will be necessary to study which method has been the most important con- tributor to success. Some countries have found a consid- erable sale for their products abroad, after concluding commercial treaties especially providing for such sales with the countries where they are made. Some have used, for the same end, the device of encouraging the development of the means of transportation in their pos- session by subsidies to merchant vessels. Some have thought the end best attained by a general removal of restrictions upon their commerce. Which is the method best adapted to success ? 130 ECONOMIC AND INDUSTRIAL DELUSIONS. The success here spoken of is that indicated in sales of our industrial products abroad, and, incidentally thereto, in the development of that portion of our mercantile marine used in foreign trade. It requires some effort in overcoming a natural hesitancy, to set down any improve- ment of commerce as likely to approve itself to the pro- tected mind. The view naturally to be expected of all Protectionists is that expressed by a veteran of their per- suasion : " When it takes the wheat, the flesh, the corn, and the cotton to a distant manufacturing centre, a loco- motive is an exhauster ; its smoke is a black flag, and its whistle is the scream of an evil genius " ; or by another : " The interests of the United States — material and moral — would be greatly benefited if the Atlantic could be con- verted into an impassable ocean of fire." Greeley and Carey are now dead, however, and since we find high Protectionist authority in our day going actually so far as to class it as a meritorious act to " open the market for another bushel of wheat or another barrel of pork," we may perhaps be justified in regarding the older and purer protectionism as by this time repudiated, and some mod- erate sale of our products in foreign lands as admitted to be no bad thing. On that point then the country is generally agreed. The difference creeps in when some of us affirm that the greater the freedom allowed to export enterprise the better ; that the proper extent to which we shall use articles produced at home, and articles which we are to procure from abroad by exchanging articles pro- duced at home, is best decided by leaving producers and exchangers free to deal as pays them best ; and when others strenuously insist that the matter needs regulation ; that exports must be carefully kept down to the measure that can be paid for by imports adjudged as " non-competing." The question, What exports are, strictly speaking, non- FOREIGN COUNTRIES AS COMMERCIAL RIVALS. I3I competing ? is one which may be full of difficulties to the theorist, but it presents no embarrassment to the practical man. Needless to puzzle ourselves why coarse wools are to be set down as competing products, when a century's experience has proved that we can get them to best ad- vantage by international exchange, and tropical fruits not so, though we might raise them in great quantities under glass. The answer that the one can, and the other can not, retain a lobby to advance its claims is fully sufficing. COMMERCIAL TREATIES. Aware that the task is something of an up-hill one, to convince those who produce more than can be con- sumed in this country that their interest lies in cutting down their production for a while, and waiting for the home demand to grow up to them, the tariff champions occasion- ally take a grand plunge, as we have seen, and come up as advocates of foreign trade — in fact, as the original and genuine advocates of it, beside whom we who seek to relieve it of taxation are mere triflers. Among their devices for accomplishing this, concessions to freedom are not included. Never — their programme offers us only more governmental meddling ; by commercial treaties, namely, and subsidies to ships. The treaties aim to do in a limited way what general free trade would do com- pletely, and would be entitled, doubtless, to the praise of being good as far as they go, but for the vexatious official prescription which limits them. The theory underlying them, that when a country permits its citizens to buy, unpunished and untrammelled, such of the produce of another country as they can buy profitably, it is doing the second country a favor for which that country owes it something in payment, need not necessarily annoy us, for it is not by theories that we are confronted. The reason 132 ECONOMIC AND INDUSTRIAL DELUSIONS. why none of the treaties that have been or are likely to be made can ever do us any considerable good, is that vested interests prevent us from making any with nations able to furnish us largely with raw materials for manufac- ture, such as would enable us to make goods cheap as they must be for foreign trade. A pleasant little party, chiefly of Spanish-Americans, recently made a junketing-tour to all the seven wonders of these United States, ending with John Wanamaker's store as a grand climax. These visitors were cordially received everywhere, and had, I believe, the best wishes of all our citizens for a perfectly delightful stay among us. From a better acquaintance with other countries, it is difficult to see how harm could come to any country. Only when it was claimed that the presence of these agreeable strangers, through the treaties and commercial arrangements that they were to be convinced or cajoled into recommending, could work a wondrous change in our habits, a wide extension in our foreign trade, did our natural hospitality give place to sentiments less gracious — did we become conscious of something ridiculous in this theatrical promenade. The stage-setting for it was suffi- ciently elaborate ; the nations of Europe were ostenta- tiously advised of it, and we bidden to stand off and watch the agonies of solicitude and trepidation that were about to seize them on beholding our preparations to wrest from them their commerce. Of course we were afterwards advised that the aforementioned solicitude and trepidation had duly made their appearance as billed, but the evidences thereof were for several weeks vague, im- personal, and without specification, exactly in form as though prepared beforehand ; no man was exhibited as entertaining said solicitude and trepidation, nor were we treated to a sight of the words in which he had ex- FOREIGN COUNTRIES AS COMMERCIAL RIVALS. I33 pressed it. When at last we were permitted to behold the proofs, all that could be furnished us seemed to be a few paragraphs from one or two newspapers in Paris, and another in Belgium, or perhaps Germany. But how about the great commercial nation, which we were most con- cerned to supplant, the one whose predominance, if left undisturbed, must defeat all our efforts at controlling Spanish-American trade ? Precisely nothing. On the English our Pan-American scheme would appear to have fallen absolutely flat. Was it that their envy and vexa- tion were too deep for words ? Or shall we believe it to be because they knew that a country which maintained high prices for raw material was handicapped in com- peting with them, too heavily to be helped by taking off a few duties on unessential articles ? I had no other view, after seeing how this Pan-American junket was to be managed, than that its main object was to keep the peo- ple amused, and to draw off their attention from topics that might prove inconvenient. The confession made in the Tribune, for instance, that " it is not to be expected that this Conference will have the power to give us a large trade with Spanish America all at once," would have settled this, if there had been a doubt. RECIPROCITY. Few words have been oftener on men's lips, in discus- sing our last-enacted tariff, than the word " reciprocity." Its usual meaning, which people naturally attached to it when they heard that the Act was to contain a reciprocity provision, is a mutual grant of favor for favor ; as when one country agrees to admit free or under special condi- tions certain products of another in return for like conces- sions. As now interpreted, it means a grant to an officer of our government, of power to impose an import tax of 134 ECONOMIC AND INDUSTRIAL DELUSIONS. his own motion or to obtain concessions by threatening to do so. The President is empowered, by the provision made a part of the McKinley law, to tell the foreign coun- try that sends us hides, or coffee, or sugar, that the provi- sions of our tariff admitting those free were enacted with a special view to concessions by them, although he and all intelligent foreign observers of our legislation know better — for hides remain free only because the important State of Massachusetts would probably vote with the Democrats otherwise ; sugar has just been made so because the only State that grows it in considerable quantity is already unchangeably Democratic, and coffee was freed of duty chiefly to prevent reduction on the things whose price our capitalists are solicitous to keep high in their own interests. By means of that statement he is to extort what terms he can. He is not empowered to offer any other concessions than these — but perhaps even less than these, if backed by a show of superior force, might be enough to win very favorable terms indeed from weaker countries. A leading object in undertaking the negotiations repre- sented as " reciprocity " was to divert the American farmer. That " the farmer may be benefited — primarily, undeniably, richly benefited "—was the avowed motive of the Secretary of State in starting the discussion ; he was to be blest, it was explicitly declared, by opening new markets for his wheat and pork. So much for the motive as avowed ; the real motive we must judge from observation of what has actually been done. The nego- tiations so far, in the first place, have been made with countries mainly agricultural, whose demand for agricul- tural imports is naturally small. In the second place, the State Department has been very careful to include in its stipulations a great many things besides wheat and pork, FOREIGN COUNTRIES AS COMMERCIAL RIVALS. 13$ the most prominent of them being manufactures of vari- ous kinds. It may seem ungrateful in the manufacturer to complain of what is done in the interest of his own calling ; but really I cannot consent to see the farmers of this country beguiled into support of a policy of which we are to reap the only considerable benefits, and raise no word of warning. The game is altogether too much like that of persuading our farmer fellow-citizens to tax the goods of their own consumption with the view of hiring for them- selves a "home market," to be quite agreeable to watch. SUBSIDIES TO MERCHANT VESSELS. I cannot consider the project of increasing our foreign commerce by subsidies as very much more serious than the commercial-treaty scheme — merely another device for distracting people's attention from the operations of protection on them, if it be not rather to send them off on a false scent. The absurdity of laying on taxes to cut off foreign trade, and then laying on more taxes to counteract the others by stimulating foreign trade, has been pointed out often enough to be familiar to every one ; it is very thoroughly exposed in the admirable essay of Mr. Wells on " Our Merchant Marine." But there is a point of view in which it is not quite so absurd. Any new expensive enter- prises undertaken by government contribute to strengthen the demand for high taxation and to postpone the day of relief. And it will be very serviceable indeed in stifling those clamors that are so fearfully difficult to quiet when once raised, from the victims of their policy, if the notion can be spread that this additional burden is the very thing to which the oppressed ought to look for deliverance. There is a pleasant appearance of compensation, too, about it ; and it is a high condescension on the part of the " beneficent American policy of protection " when it ap- I36 ECONOMIC AND INDUSTRIAL DELUSIONS. pears to embarrass our merchant marine in one way to heap prosperity on it with a lavish hand in another. Tax farmer and merchant to benefit the manufacturer, and then tax farmer and manufacturer to benefit the merchant — this equalizes matters beautifully, does it not ? It will not be difficult to submit the question of subsi- dies to the test .of figures. Since our disadvantage in foreign markets arises essentially from our inability to furnish our consumers with goods as cheaply as can our competitors, let us suppose our annual subsidy entirely devoted to removing this inability ; the means necessary for starting new steamship lines being furnished from another fund, let us say. The proposition of the subsidy- advocates, I believe, is to begin with about a million a year, to be paid for carrying the mails. Let us suppose, for our purpose, that over and above the expense of carrying the mails we pay four millions yearly, this being a little beyond the total amount given for mail contracts by the nation which is said to be the most liberal, because it has most commerce and therefore most mail to carry. Eng- land does not grant subsidies, properly speaking ; it is easy to call her payments for mail carriage by the nick- name of subsidy, but in fact no other country gets so much service for an equal outlay. Now, I find the value of British exports to that newest addition to our family of republics, Brazil, set down at not far from $30,000,000 per annum, " chiefly cotton, iron, woollen, and linen goods." If we wish to displace the Briton in Brazilian markets, what we need to do is to supply this quantity of cotton, iron, woollen, and linen goods more cheaply than he. Well, let us see. We can compete in cotton cloths, un- bleached, because we get the raw materials for them on easier terms than anybody ; but when we come to prints, lawns, ginghams, and the like, the contest is harder for us, FOREIGN COUNTRIES AS COMMERCIAL RIVALS. 1 37 because the machinery for making them and the dyes and other chemicals are " protected." The retail prices of woollen goods in our stores are about double what similar goods cost in England, though probably our dealers might find themselves able to furnish them in quantities, for export, at a somewhat less disparaging rate. The case is similar with linen goods, and for manufactures of iron the differences run from nothing (for we have always been able to compete in many of them, by skill and enterprise, notwithstanding higher cost of material) up to double price. On the whole, it is within bounds to say that we could not afford to send the Brazilians such goods as the British send them, even at an advance of 1 5 per cent. ; 20 per cent., I think, would be a fairer estimate. But 15 per cent, on $30,000,000 already exceeds $4,000,000, and we now see to what conclusion our calculation leads us. If we paid a subsidy higher than the highest so-called subsidy (in the form of mail contracts) paid by any other country, if we made other provision for starting the lines of ships and for carrying mails, spending the whole of this allowance in reducing the cost of our goods to our con- sumers — thus not only carrying them for nothing, but paying the exporter a bounty — the sum would not yet be sufficient to drive our British rivals out of the single country Brazil. On these figures I may rest. They may be neither " so deep as a well nor so wide as a church- door," but they are enough. SECRETARY WINDOM'S REPORTS. The first report of Secretary Windom devoted a gener- ous deal of space to the advocacy of subsidies for United States steamship lines, which advocacy was repeated in his second report and in his last speech. More ships might be owned by our own citizens, he assured us ; which 138 ECONOMIC AND INDUSTRIAL DELUSIONS. would reduce our " annual tax of $150,000,000 for freights and fares," and also, what was of more importance, give us direct instead of roundabout lines to our foreign custom- ers. As it is perfectly understood on all sides that we could go into the ocean transportation business any day if it paid us, and that it does not pay us because other nations do it cheaper owing to our restrictive navigation laws, and other business therefore pays us better, there is little to say on the " annual tax " question ; and in his complaint over the roundabout steamship lines, the Secre- tary put cart in place of horse. The indirect lines of transportation between this country and South America are a result of our disadvantage in those markets, not a cause as he represents them. Far am I from indifference as to whether or not steamships are owned in this country ; but since we can own as many of them as we care to own, as soon as we reform the mediaeval navigation laws by which we are hampered, and since our decline in number of vessels used for foreign shipping is a direct consequence of Protection's work in preventing our use of necessary material when iron began to be substituted for wood in construction, and in depreciating the reward of the Ameri- can navigator's enterprise by taxation, while Great Britain enjoys and uses every advantage of free trade, we need not be at a loss how to bring it about. i I have not failed to notice that the Secretary follows other pleaders in claiming that " the difficulty is not so much in the cost of building ships as in running them in competition with cheap foreign labor supplemented by immense foreign bounties," but the value of this observa- tion is fatally impaired by his neglect to explain these four facts : 1, that he himself, in accounting for the decline in our foreign shipping (which, as his tables show, really dates from 1861, the first year of high tariffs), lays FOREIGN COUNTRIES AS COMMERCIAL RIVALS. 1 39 great stress on the introduction of iron in ship-building ; 2, that the difference in wages of labor was as marked before the decline as after ; 3, that British mail allowances to oceanic lines were not only larger j;han ours before 1861, but were actually larger then than they now are ; 4, that the liberal subsidies paid by the protected nations of Europe (he gives the amounts paid by Spain, France, and Italy) have not disturbed the supremacy of Britain (which pays no subsidies and much higher wages to seamen) a particle. It is curious to see him ascribe this decline, which dates from an increase in our protective duties, and has been accelerated by the further increases made since, " to the system of Free Trade, which has wrought such sweeping destruction in our foreign shipping interests." What can he have meant ? One naturally thinks that it might have been the free trade of Great Britain, which has undoubtedly worked in that direction, until he reads, lower down, how, " listening to the voice of free trade, Congress on the 24th of May, 1 828, [save the mark ! That was the very Congress that gave us what Rev. Dr. R. E. Thompson extols as ' the highest tariff ever enacted in this country ! '] passed an act withdrawing all protection from our shipping interest," and so on. Oh, the "sweep- ing destruction " of free trade, as enacted by a fanatically protective Congress ! It lies in a dead sleep, or (so far as it works at all, as our authority himself confesses) works to foster and not destroy for 33 years, and then requires a stringent high tariff to set it at last in operation ! There was, as a matter of fact, a sharp decrease in the tonnage of our mercantile marine between 1828 and 1829, it is admitted. The records of the Bureau of Navigation show this; and their table also shows, quite as plainly, two or three other facts which deprive this fact of any such significance as Mr. Windom attached to it. Since it I40 ECONOMIC AND INDUSTRIAL DELUSIONS. is about " our foreign shipping interests " that we have to inquire, we will consider only the tonnage occupied in foreign trade, in which the decline from 1828 to 1829 was 22 per cent. But then we find, in going farther up the column, another decline of 22 per cent, between 1810 and 181 1, and one of nearly 27 per cent, from 1817 to 1818. Is it better than quibbling to lay stress on the repeal of differential tonnage dues in 1828, and call the ensuing de- crease in foreign-trade tonnage " sweeping destruction," while no attention is paid to the greater decrease occur- ring in the absence of all legislation of the kind? The table shows that the loss following 1828 was recovered by 1834, while the tonnage figure of 1810 was not regained until 1847 — after the adoption of the Walker tariff. An- other point : the number of vessels built in this country, which had been increasing for several years, began to fall off in 1827. Yet another: the exceptional decrease in total tonnage, during the year mentioned, is due to the fact that the tonnage in coastwise-trade then declined, even more than that in foreign trade — by almost 40 per cent, indeed, — while no decline in this item occurred in 181 1 or 18 1 8. Is it pretended that the Act of May 24, 1828, was more injurious to the trade which it left wholly in American hands than to that whose opportunities it divided with others ? Or that, if the coastwise-shipping decline was due to some other cause, that cause had no influence whatever on the rest of our shipping ? It is delightfully easy work, tearing to shreds an argu- ment for subsidies as means of putting our foreign com- merce on its feet ; but I must not linger too long at it. I wished to show, and have shown, that such subsidies, on a far more liberal scale than any one has yet dared to propose, are wretchedly insufficient for their avowed pur- pose — sufficient though they confessedly are for certain FOREIGN COUNTRIES AS COMMERCIAL RIVALS. 141 purposes not avowed. The expedient is that of bailing out our ship with a pint-cup, instead of stopping the leak. AMERICAN EXPERIENCE WITH SUBSIDIES. It would readily be believed, from the form in which the appeal for subsidies to United States shipping is put, not only that the plan had done the mighty works which it is well known not to have done for English shipping, but that it had never once occurred to the other European countries, whose inferiority to England in this respect is so glaring and so hopeless, and that, moreover, it was something quite novel and unheard-of in our own coun- try. This last impression is as unfounded as the other two. Subsidy schemes have been more than once before our Congress ; and, in point of fact, we have actually tried them in several instances. Two or three subsidized steam- ship lines, of which the Collins line to Liverpool was the most famous and most liberally endowed, tried and failed before the war. The favorite reason for their failure has always been that they were helpless without governmen- tal assistance, in competition with English lines that received it. Those who are satisfied with this explana- tion find it very easy to forget that, at the very time when the Collins line gave up the contest, Mr. Inman was running steamers regularly over the same course without help from any source ; and that within a few years of its demise, other lines were pressing forward in the same competition, without artificial advantages. It was British unsubsidized lines, not British subsidized lines, whose rivalry was finally fatal to Collins. A Brazilian line and a Pacific Mail line received legislative largesses after the war, and their failure to receive more of them was not owing to a lack of gratitude on their part ; for a legislative 142 ECONOMIC AND INDUSTRIAL DELUSIONS. investigation developed the fact that steamship lines had been quite as active in subsidizing congressional lobbies as Congress in subsidizing them. These subsidy-jobs died and even putrefied while Grant was at the helm, and they left behind them a fragrance that was for years effective in warning off the wary statesman. Our Pacific and Brazil subsidies failed to turn the course of international commerce, as would any possible future subsidy. They failed to arrest the decline of our merchant marine, as would any future subsidy. They succeeded only in enriching a few schemers, as would any future experiment in the same line. In the cry for sub- sidies, no note of recognition for these illustrations of their practical working is ever heard. Is it unjust to ascribe this silence to an ardent desire on the part of those who crave them, that our experience of them should be forgotten? Surely, if the effect of this policy had been as salutary in the past as we are taught to see it in the future, it would be commended by more testimony from history and less from conjecture. HISTORY OF OUR MERCANTILE MARINE FOR SEVENTY YEARS. It is the fashion of the tariff-men, since they forsook the teachings of Greeley and Carey, as we have seen, to advertise the welfare of our merchant marine as in their own peculiar keeping, and to set down those of us who do not regard as the best and most fitting cure for the ills that they themselves have induced upon it, the nostrum of their prescribing, as its assailants. The wolf has turned shepherd, and those who mistrust him are foes of the flock. We are to insure the safety of our city by admit- ting the Wooden Horse its besiegers have prepared, and the serpents they have called up to crush out the life of him who would close our gates against it are already hiss- FOREIGN COUNTRIES AS COMMERCIAL RIVALS. 143 ing. But before we rush headlong to carry out the coun- sels of those under whose management our merchant marine has been sacrificed, as to the best means of undo- ing their deliberate work, might we not just as well make an examination of its rise and fall, as shown in the Treasury tables of vessels " registered " and vessels " enrolled," so that we may see by the evidence of actual trial what has helped and what has hindered it in the past? Three curves, illustrating these points, appear in the Chart showing our Commercial Development. The upper- most of these indicates the total tonnage per inhabitant ; the lighter curve below it, that belonging to the " enrolled " class, employed in the coastwise trade, while the " regis- tered " or foreign-trade tonnage per inhabitant is indicated by the heavier curve. The figures from which the upper curve is drawn are a little in excess of the sum of the other two sets ; for they include a class of " licensed " vessels, of which no separate account is taken. Those vessels, employed in the fisheries, made up, for a few years about 1830, more than an eighth part of our whole ton- nage ; but their proportion has not for some years past exceeded one fortieth. The three curves agree in the abrupt decline for the year 1829, already discussed; after that, their general direction is upward until near the time of the civil war, after which they all turn downward, and are still declining. The decline is far more conspicuous for vessels in the foreign trade, being nearly steady with them, from 1856 on ; for the " coastwise " vessels the 1856 decline was afterward temporarily recovered, owing to the peculiar exigencies of the war. Possibly some of those withdrawn from the foreign trade while the Ala- bama was afloat were added to their number. The years when the coastwise marine fell off most were 1866 144 ECONOMIC AND INDUSTRIAL DELUSIONS. and 1876, and these reverses differed from those that had preceded the war by remaining without recovery. What caused the transition, beginning in 1856, from the full tide of prosperity to disaster and decadence ? In the first place, the year 1856 marked the close of the Crimean War, when the energies of the English — our chief rivals in the shipping industry, until we concluded to resign the field to them altogether— were recalled from Destruction to Commerce. Our gain during the years 1854 and 1855, like that of the English during our war (see the dotted curve), was made at our rival's expense; nor would a loss have followed it, but for a second and more important factor. Iron had been tried, and proved successful in construction of ocean vessels ; so that by 1855 the reign of the wooden ship was over. Protectionist orators and philosophers have not neglected to notice the coincidence, and their inveterate predilection for mares' nests has given them much to say about the " high cost of labor " in building iron vessels — which confessedly exists. What they do not explain, are a few points equally obvious, and of closer relevancy : first, why, if the greater cost of produc- tion is not fully compensated by the greater value of the product, iron ships are ever built by anybody ; second, the fact that the wages of the laborer — for that is what they seem to mean by their " cost of labor " — have always been higher on this side the Atlantic, even while he was employed on wooden ships ; third, whether or not we are handicapped by the higher price at which we insist on keeping iron in this country. The third question, proba- bly the most embarrassing, is certainly the most import- ant. We cannot say that the change from wood to iron was attended by any appreciable change in the relative wages of labor here and in Europe ; and we can certainly FOREIGN COUNTRIES AS COMMERCIAL RIVALS. 145 say that that change was one from raw material which we could procure as cheaply as anybody, to material which it has always been our commercial policy to prevent our citizens from obtaining on the same easy terms that are permitted most European nations. Even under the low tariffs from 1857 to 1861, crude iron was taxed 24 per cent. ; the effect of which was to throw gratuitously into the hands of our British rivals a great advantage in ship construction. How effectively they have used that advantage, the course of the two curves of merchant- marine tonnage plainly shows. DEVELOPMENT OF THE BRITISH MERCANTILE MARINE. The tonnage curve for Great Britain presents several points of interest. It has three directions : one of rapid increase, i8$6-'6$ — most rapid, it must be noted, during the years of the war, while our registered tonnage was suffering its severest losses ; another of slow decrease, i865-'72 ; followed by a third, of slow increase, since 1872. The change in 1872 corresponds curiously with that shown by British exported merchandise at the same time ; and it indicates a change in the direction, rather than in the amount, of their commercial energy. Their balance-of- trade curve also took a turn in 1872 ; and the natural inference is that the English began after that year to pay for their imported goods by less production for export, and more ocean carriage — the total volume of importa- tions being very little altered, and the movement of specie substantially unaffected by the changing merchandise balance. When one remembers that of ten steamship lines flying the British flag, and regularly plying between this country and Europe, only three receive allowances of any kind from the national treasury, the remainder of them, with 146 ECONOMIC AND INDUSTRIAL DELUSIONS. 64 per cent, of the tonnage, being passed completely over in the distribution ; that of these three the Cunard line alone, with barely one twelfth of the total tonnage, ever received one penny before its complete success with- out such allowance had been unimpeachably established ; that the British payments called " subsidies " go in all cases to the very lines that have most satisfactorily proved their ability to succeed without any ; and that these allowances, being extended under open competi- tion, have again and again been accorded to German lines ; with these facts in mind, little argument is needed to dispose of the subsidy question in this con- nection. I have but a single fact to add, and one is enough effectually to annihilate the pretence that Great Britain owes her commercial dominance to any such device. Absurd though it is to class as " subsidies " the payments for mail transportation by the British govern- ment, I shall do so for the instant, and ruthlessly exclude from the reckoning all vessels that receive any govern- ment money for any purpose. The proportion of the total British tonnage in such receipt is about 13 per cent. A recent writer in the New York Tribune puts it at 16 per cent., and that higher figure I am ready to accept. Re- garding, then, only the remaining 84 per cent, of the British mercantile fleet, vessels which receive no govern- ment aid in any form, which have to meet the competition of the others without more favor than is shown to foreign ships, — how has it fared with them ? That can easily be seen. Great Britain's mercantile tonnage in 1889 was 0.205 per inhabitant, and 84 per cent, of that is 0.172, the value indicated by a star on the chart. We thus see how the totally unsubsidized portion of the British merchant marine has been growing. It is now not only greater, but greater per inhabitant than the entire marine was until FOREIGN COUNTRIES AS COMMERCIAL RIVALS. 147 1863. We constantly hear that it is useless to compete with British subsidized ships unless we pay subsidies. Here we see the mighty growth of a fleet in constant competition with those ships — of the British unsubsidized ships. In sober candor, is that pretence worthy of a further word ? INFLUENCE OF TARIFF RATES TESTED. It has been well said that the counterfeit proves the genuine. With such zealous persistence have quack remedies — " reciprocity treaties " with a few poor and backward countries to enrich our export trade, with a few exclusively agricultural countries to provide for our agri- cultural products a better market, and subsidies to do something that subsidies are practically incapable of doing, to rescue and build up our shipping — been adver- tised and prescribed, that we may beat a loss to recognize the real character of our ailment. When recognition comes, the proposed remedies will be seen to be but aggravations of the disorder. To sufferers from the undue complexity and intricacy of our financial system they only bring further complexity and intricacy, and on sufferers from high taxation they only pile taxation higher. For light to devise a measure that can bring real relief, we must undertake a further study of the facts of our commercial history. I have now to present some evidence as to the effect of our scale of import duties upon our mercantile marine. The results of the test by changes during two-year intervals need be given in no such detail as was found advisable in considering effects on our export business, the interval being obviously too short for this purpose, Ownership of vessels cannot be adjusted to accommodate changes in tariff rates so readily as exportations and I48 ECONOMIC AND INDUSTRIAL DELUSIONS. importations of goods ; and thus the continued growth of both classes of our merchant vessels, between 1 849 and 1855, of which one of the causes was very probably the reduction of duties by the Walker tariff, has here to be credited to higher duties, because the rates were increasing about this time at the rate of one per cent., or a fraction of one, during each two-year interval. Similarly the con- tinued decline in our tonnage through the years 1869 to 1873, which I have little hesitation in ascribing in great part to the war duties, has to be laid to the charge of a diminution which then occurred in those duties. By this test the tariff-effect on the total tonnage of vessels em- ployed in foreign trade becomes completely imperceptible. In its changes of sign, the number of agreements and of disagreements with the change in the duty are substantially equal, being 28 and 26 ; and though the net amount of those changes is in disagreement — shows, that is to say, that the amount of increase for decreasing duties, plus decrease for increasing duties, exceeds that of simul- taneous increase or decrease — by 0.069 in all, this amount altogether disappears when I exclude the years 1861 to 1865. While the Alabama and other enemies of our foreign commerce were afloat, our losses in this part of our merchant marine were not all to be ascribed to the tariff. The changes in the volume of our marine in the coast- wise trade, strangely enough, meet this two-year-interval test very differently. Here we find the agreements of sign, with changes in the duties, to be 17 and the dis- agreements 36 ; and the net amount of disagreement is 0.121. As the sum of the duty-changes, added without distinction of increases and decreases (see discussion in Chapter III.) was 249 per cent, on dutiable imports, and 257 per cent, on total imports, we have to infer from this FOREIGN COUNTRIES AS COMMERCIAL RIVALS. I49 test that the effect of a change in the duty is, as a rule, to leave the foreign-trade tonnage unchanged, and to reduce the coastwise-trade tonnage by about one two-thousandth of a ton per capita for every one per cent, by which the duty is raised. For the reasons given, this test is not depended on except as furnishing some sort of corroboration for the results furnished by the better test, in which the changes are observed between one and another longer or shorter interval of time, distinguished by general uniformity of duties. The accompanying illustration shows on the left of the zero line our import duty by the two reckonings, just as in the illustration to the third chapter ; and on the right the amount of our merchant marine in foreign and in domestic trade. The distance of each tonnage line from the zero shows, of course, the average value for the period, as deduced from the table used in constructing the chart ; and its increases and diminutions will be seen to correspond sufficiently well with those of the duty lines, to afford to the eye a very clear indication whether or not the tariff influences our shipping. Coming now to the figures, the foreign-trade tonnage shows quite dis- tinct evidence of the unfavorable influence of high tariffs, for its net total of change is in " disagreement " by 0.096, or about a thousandth of a ton per inhabitant for every one per cent, change in the duty ; and this net total is reduced no lower than 0.059 (which, as the divisor is also greatly reduced, results in very nearly the same proportion as before) when we exclude the two heavy " disagreeing " changes in 1861 and 1865. The net dis- agreement would still be as great as 0.041, giving about 0.0007 for every one per cent, of change in the duty, if the reduction of 1828 were also excluded — as Secretary Windom would doubtless have advised, having in view I$0 ECONOMIC AND INDUSTRIAL DELUSIONS. only the repeal of differential tonnage dues (which might conceivably have affected our foreign-trade tonnage), and not the other circumstances I have adduced. THE TARIFF UNFAVORABLE TO OUR COASTWISE TRADE. Alike in both tests, the tariff effect comes out more dis- tinctly and strongly for coastwise than for foreign tonnage. Out of fourteen changes in the tariff, only three were accompanied by " agreeing " changes in this quantity, with ten " disagreeing," and one zero. The net total disagreement, 0.097, fully one thousandth of a ton for every one per cent, duty-change, is subject to no deductions for " Confederate pirates," or " Act of 24th May, 1828," which could have troubled the foreign trade alone. There appears, therefore, to be no reasonable doubt that increased duties are unfavorable and reduced duties' favorable to the growth of our merchant marine, as estimated by number of vessels registered and enrolled,, per unit of population ; that the tariff is especially discouraging in the coastwise trade ; that the effect of a change in it, other circum- stances remaining unchanged, is on an average to reduce or increase the per-capita tonnage by about a thousandth of a ton for every one per cent, by which the duties are raised or lowered; and that the change may be expected to take this direction about ten times in thirteen. The revelation from this inquiry, that our merchant marine in domestic trade is as unfavorably influenced by the tariff and is decidedly more sensitive to its changes than that in foreign trade, is one which I was quite unprepared to expect ; for I had believed, until I found the facts otherwise, that its discouraging effects would be far more pronounced in the foreign trade, whose repres- sion is the guiding motive of protection. That some discouragement of the domestic shipping business should RATES OF IMPORT DUTY AND TONNAGE PER CAPITA OF VESSELS IN FOREIGN AND IN COASTWISE TRADE. T0NHA6C CMAN CC Az t .03' o*- r jm t .Q6 r or r os T oa^T on coast, year TAIHtf CMANCC — *-3»«. ♦ant, aorc.lo'e. /OP.e. ■Z.tKO :0I T iazs /830 /B3S /84-0 /8+S l&SQ /ass I860 /86S ; /870 1875 I860 /88S 1890 Tariff Changes : Number 14. Total Extent, on Dutiable Imp. 81.9 p.c, on Total Imp. 102.6 p.c. (Excl. those in 1861 and 18.65.) " 12. " " " '< 54,0 " " " -. << Changes in Foreign Trade Tonnage per cap. No. agreeing, 4. No. disagreeing, 8. Nett amount, disagreeing, 0.096T. (Excl. those in 1861 and 1865.) " " 4. " " 0- <■ <■ <> Changes in Coastwise Trade Tonnage per cap. " " 3. " " 10. " " N.B. Changes "agree" when they show an increase with an increase of duty, and vice versa; when in the opposite direction, they " disagree.'' The full black line on the right side of the Zero denotes Foreign Trade Tonnage ; the lighter shaded lines denotes Coastwise. t._j» t™„o,,o . i^rt, „„,. hea,} f population. FOREIGN COUNTRIES AS COMMERCIAL RIVALS. I$I result from a policy which increases the cost of building and rigging the ships, and along with these the prices of the goods to be interchanged, is natural enough ; and this branch is more sensitive, doubtless, because the same effect becomes more speedily manifest on smaller vessels and shorter voyages. But the fact, however it be ex- plained, is assuredly of high importance. There is no room for the pretence that cutting off our foreign market " builds up the home market," when we see that under the same influences both increase or decrease together. There is no room for the pretence that the reason we cannot succeed in getting any business for our vessels in foreign trade is because of some supposed encouragement bestowed upon our competitors — or because of anything else whatever but our own protective folly — when we have here the proof of what protection does for a business from which every competitor is rigorously excluded by law. The wealth of the- nation per capita has been greatly increasing ; shipbuilding and navigation have im- proved, along with other arts ; and yet our part in these enterprises, even where we insist on keeping the whole business in our own hands, has been retrograding. Is it not time to " face the other way," and try to win back what we have lost ? DIFFERENCE FROM GREAT BRITAIN IN ECONOMIC CONDITIONS. We have remaining for consideration, as a condition of success in this international rivalry, greater freedom of trade. The fact that the very idea of a commercial rival at once suggests Great Britain as the one most redoubta- ble, has its significance. If any nation is going to come in ahead of us, in the competition of industrial and com- mercial enterprise, — if any one must be guarded against, and withstood at every point, it is always the great free- 152 ECONOMIC AND INDUSTRIAL DELUSIONS. trade nation. In face of the copious resources, the un- consumed enterprise, the splendid prosperity of the British, the Protectionist is perpetually brought as in face of a granite wall. Is it surprising, the eagerness with which he seeks to dodge the encounter — darts and plunges anywhere, everywhere, so it be out of the way? Since these efforts are less systematic than spasmodic, they would call for little notice, perhaps, but that we cannot afford to overlook any obstacle in existence, petty and even despicable though it may at first sight appear, in the way of our country's highest industrial progress. Drop- ping figures of speech, I propose now to consider a few of the differences found between Great Britain and our own country, which are presented as reasons why the one would miserably fail with the economic policy by which the other is so brilliantly successful. A plea that used to be very common is that England kept on with protection until she got her industries established, and that we cannot afford to give it up until we have brought ours to the same stage. Of the " estab- lishing " power of protection I have already said sufficient. It is certain that if the English themselves believed in it — and also believed that industries so established were worth having — they would never have been persuaded to relinquish it. But more than that : if protection could be limited in this country to such lines as in England were "established" in before 1846, to which alone the argu- ment applies, then would we have a protection which few beneficiaries would care to advocate, and few free-traders would contest. Think of a protective system which did nothing for steel rails, or any steel made by the Bessemer or Siemens-Martin process, or any apparatus employed in telegraphing, or anything belonging to a steamship or a railway train of the present construction ! It is in those FOREIGN COUNTRIES AS COMMERCIAL RIVALS. 1 53 things precisely that British rivalry is most redoubtable. As a matter of plain fact, England has done more at establishing such industries as we would wish to have, under free trade than ever before. It is sometimes urged that in consequence of the den- sity of her population Great Britain is unable to provide sufficient food for all, and is therefore under the necessity of doing more or less trading abroad to secure a supply ; that her national policy is decided by her necessity ; hence the inference is drawn that for us, not under simi- lar necessity, national policy must be different. But why? That is never explained. If there is any principle of sound policy more certain than another, it is that those to whom an exchange is necessary are the very best ones to deal with ; their demand is surest and most constant, and they are readiest to give us favorable terms. The difference so often insisted on, in wages of labor, is of course a direct consequence of the one just treated. It is assumed, in defiance of all observation and expe- rience, that hampering international trade gives us some occult mysterious power to prevent wages from equalizing themselves, that we could not exert if trade were free. That assumption will be examined at length in the next chapter ; the labor question is too important to be com- prehended in a paragraph. A kindred objection to our adoption of free trade is based on the fact that the rate of interest on loans is higher in this country than in the Old World. Our manu- facturers must pay more for capital, it is urged, and therefore " cannot compete." This is another objection that is based less on reason than on desperation. Rate of interest may be high from either of two causes : uncer- tainty about repayment, or abundance of good paying investments. I shall decline to consider the former cause, 154 ECONOMIC AND INDUSTRIAL DELUSIONS. as the view that we are nationally dishonest, or lacking in business judgment, needs not to be controverted ; while the fact that some kinds of investment bring a large return in this country, is not in itself a good reason why taxation should be levied to increase the return from other kinds of investment — for this is exactly what pro- tection on account of high interest amounts to, unless we take the other tack, and suppose ourselves a fraudulent or unbusiness-like nation. No one who has propounded this objection has ever deigned to explain why protection is not necessary between the Atlantic slope and the Rocky Mountain region, which differs more from it in rate of interest than does England. When that point is satisfac- torily cleared up, we may perhaps treat the matter more solemnly. A higher rate of interest, being a sign that investments pay better, is to be taken as a favor of fortune ; so is our ability to pay higher wages, and to provide more food for our population. It is very interesting to observe this trait in common about the conditions so eagerly seized upon as justification for a protective policy : that, when examined, they turn out to be points of strength in our own country, and corresponding weakness in our competi- tor. Does it appear strange to find strength assumed as needing protection, while weakness is denied such need ? Strange it would assuredly be, if protection were some- thing that gave strength instead of exhausting it. What our protective system gives us, only giant strength could sustain. Being essentially injurious, it is less injurious to robust nations, just as a course of dissipation has less effect on vigorous constitutions ; that degree of plausi- bility may be allowed to the points just considered. But in points made by the process of pitching on any differ- ence discoverable, no matter of what nature (I have not FOkF.lGX COUN-JktES AS COMMERCIAL RIVALS. t^g yet heard the fact that they talk less through their noses than we, so adduced, but I am looking for it every day), as a reason why one system is suitable for us and another for Great Britain, there is little after all that is entitled to serious treatment. In the straws at which drowning men clutch, the amount of substance has no necessary relation to the vigor of the clutching. INDUSTRIAL INDEPENDENCE. Nothing is ever said on behalf of protection that is more plausible in appearance, more seductive or sonorous, than the claim that it promotes independence. " Inde- pendence be our boast." And why not, forsooth ? What more important than that we should keep ourselves independent of other countries? If peaceful relations should be broken between us and a nation on which we depended for necessaries, would not this leave us at her mercy ? Would not the knowledge that she had us at this disadvantage tell against us and in her favor, in the settlement of international misunderstandings ? The pur- poses to which this plea might be put were early recog- nized. Alexander Hamilton looked, in his " Report on Manufactures," " particularly to the means of promoting such as will tend to render the United States indepen- dent on foreign nations, for military and essential sup- plies." A great many things will be very different, we are permitted to hope, when the millennium arrives ; but meanwhile we must look to our defences. Our race is so much slower in reaching the same stage of progress in the larger aggregates known as nations, than in the smaller aggregates, communities and families, that it need never surprise us to encounter an aphorism applied with serene confidence to the one which is well known to be false for the other. Precisely the same reason- 156 ECONOMIC AND INDUSTRIAL DELUSIONS. ing would lead, and once led, families to keep themselves independent on other families for essential supplies ; for behold, there are sometimes lawsuits and other forms of neighborly difference that make dependence inconven- ient. But no one now applies the principle in these cases, or thinks of it. Refusing to maintain in his own family the industries necessary for his support, -the citizen gives them over with prodigal hand (all but the one he feels best able to conduct) and takes no thought of the risk he is running. As a matter of experience he finds his family not only better maintained by this course, but, strangely enough, actually safer in life and property. If we doubt this, let us remember the feudal barons who used to culti- vate such an independence, who succeeded in maintaining a degree of it quite unsurpassed at this day, and who gained no security by it. The irrationality of this plea for independence appears in its exclusive attention to one side of a transaction, and obstinate disregard of the other side. Suppose that, guided by economy and nothing else, we form a habit of buying some article in some foreign market. This makes us, according to the accepted way of putting things, " de- pendent " on the foreign source of supply, to the extent of our demand for the article. But, as we have seen again and again, it is impossible for us to form such a habit without forming at the same time the habit of send- ing abroad to foreign consumers something that we would not send otherwise ; nor can the nation of which we buy possibly get into the habit of supplying us without get- ting at the same time into the habit of buying abroad something of the same value, which it would otherwise produce at home. Such is the rule, ample proof of which, in reason and in experience, I have already given ; a rule which must necessarily be obeyed, if transactions FOREIGN COUNTRIES AS COMMERCIAL RIVALS. 1 57 between different countries are not to lead to monetary disturbances. So that even if we admit for the moment that buying clothes in Great Britain renders us " depen- dent " to that extent on Great Britain, we must include in the same view our rendering some foreign nation (Great Britain herself, perhaps) dependent on us to the same ex- tent for something imported from us, and rendering Great Britain dependent on some other nation (ourselves, when this act is the same as the one last mentioned) for some- thing she needs — say breadstuffs. To those who take superficial views of the matter, this^may wear the appear- ance of substituting an uncertainty for a certainty. But it is not ; no such doubt rests upon our law of trade. As soon as foreign markets fail for our surplus products, pur- chases must fall off to the same extent ; or, if the form be preferred, the same cause that loses us the power of making some foreign nation dependent on us, emanci- pates us equally from dependence on some foreign nation. Any assurance of our own independence, on the contrary, must at the same time free some of our dependents. Losses and gains balance, as trade itself balances. Hence it is plain that the alternative to the indepen- dence sought by Hamilton is not a one-sided dependence, but an interdependence. Which should we choose ? The soundest wisdom makes the same choice when dealing with fellow-men of other nationalities as with fellow-men under our own flag, and for the same reasons ; to inde- pendence, isolation, and hostility it prefers interdepen- dence, commerce, and peace. PROTECTION A FOE TO TRUE INDEPENDENCE. Having shown that the kind of independence to which the system of protection would guide us is not worth its heavy cost — nor even worth having at any cost, — I might 158 ECONOMIC AND INDUSTRIAL DELUSIONS. be content to let the question rest. But independence has a moral aspect which concerns us more deeply ; there is a moral independence which protection is notoriously- helpless to win for us. It is especially important, then, to show how and why that system has in fact a tendency directly opposite : to restrict the independence and en- feeble the self-reliance of the people under its dominion. As proof that such a tendency exists, one or two out of the many facts that might be adduced will suffice. No attentive observer has failed to remark, for instance, the great difference between partisans and opponents of pro- tection, in the stress they lay on the views and wishes of other countries as factors that should influence our own course. To those advocating lower duties, the opinion or desire that people across the Atlantic may happen to have upon the subject never suggests itself as a determining motive, pro or contra. Whatever advice, whether friendly or hostile, they may be disposed to give us, we are aware that they are not in a position to understand all that is involved in our problem ; so that, ready though we should always be to profit by their experience under similar con- ditions, we are unable to make advantageous use of their advice, and may therefore give it little heed in fixing on a national policy. The protective school, on the contrary, seems to be chronically nervous on the subject. To that very advice from the foreigners (more particularly, it may be added, from such foreigners as may be qualified by lack of reflective power and insular narrowness to give advice that is really serviceable) it is perpetually calling attention, as though by it the wise citizen should govern his judgment. We are not more truly dependent on others when we blindly follow than when we doggedly shun the course into which they would direct us : in being persuaded than in being deterred by them. Whatever FOREIGN COUNTRIES AS COMMERCIAL RIVALS. 1 59 the increases it might bring in foreign purchases of woollen goods or pig-iron, there is more genuine independence and self-reliance in the policy that trusts to reason and values the experience above the sentiments of foreign countries, than in the one that is based on intimidation of the thoughtless by heaping up great masses of supposed European sentiment, buttressed with garbled extracts from the English press. A word as to those garbled extracts, before going fur- ther. We have not simply to consider, in applying the epithet, passages whose meaning has been distorted through suppression of explanatory clauses — leaving alto- gether out of view such brazen forgeries as those exposed during the presidential campaign, and their like that have not yet ceased to appear, in diminished numbers, — but along with them the multitude of whose correctness as reprinted no question has been raised. To garble a quo- tation is to present it so that it will leave a false impres- sion ; and that is exactly what is done when an occasional paragraph, painfully unearthed from its concealment be- neath a heavy mass of overlying matter, is exploited as indicating the present deliberate policy of a whole nation. Truth requires a more vivid realization, displeasing though it be to our national self-consciousness, of the stern fact that our kin beyond sea are, as a rule all but universal, profoundly uninterested in our great and glorious republic. This fact impresses itself upon any one who turns over the pages of an English daily or weekly paper. Columns of detail are always conspicuous, about the concerns of half-barbarous hordes among the Balkans, or wretched fellahin on the Nile, or a dozen or two crowned or titled nonentities, while our own pro- gressive and important land is put off with a few para- l6o ECONOMIC AND INDUSTRIAL DELUSIONS. graphs in a back column — hardly that, except when some such incident as the Sackville trouble involves their own government or titled class at the same time. Tourists will remember the diet from which they have sometimes had to draw what nourishment they could, while in a foreign land and hungering for news of their own. When, not very long ago, the Tribune became jubilant over its verification of a challenged citation - from the London Times, the fact that was really most significant was that it had had to search " in the thirty-sixth line of the fourth column " of an issue more than ten years old. The Times has since then published a half dozen columns of heavy editorial, in more than three thousand issues ; and yet the Protectionist has to go behind or under it all, to grub out the sentence which he thrusts before the American voter as displaying and embodying the dearest desire of the British heart to-day ! He is glib enough with his explanation that their failure to make more frequent mention of this dearest desire of theirs, proves not that it is no longer entertained, but that they have only grown more diplomatic with it — an explanation which, ridiculous though it is with such as have any knowledge of British papers, has doubtless some weight with such as know them only by misrepresentation — but a diplomacy which hides its morsel of treasure under such a .mountain of detritus is hard indeed to distinguish from indifference. Such quotations from the London Times, unaccompanied by information how often their purport is to be found in the Times, and how prominent a place is there allowed them, are intended to create false impressions, and are therefore garbled, no matter how accurately the original words may be reproduced. Another and a very forcible illustration is seen in the attitude toward our own precious McKinley act on the FOREIGN COUNTRIES AS COMMERCIAL RIVALS. l6l Continent, compared with that in Great Britain. Pro- tected Vienna is said by cable dispatches to be greatly disturbed by it ; protected Paris is feverish, and ready for measures of retaliation ; protected Ottawa joins the growling chorus ; free-trade London remains placid and unmoved. At a meeting in Sheffield, said act is reported to have been discourteously handled, and this report is to all Protection " as the shadow of a great rock in a weary land " ; but in the same breath with which it is insisted that those unnamed Sheffield citizens were endowed with more sagacity in forecasting the effect to be expected from our latest protective accession than are most American statesmen, we hear the confession that said citizens must have been little better than simpletons for dreaming that their criticisms could possibly have any practical effect. This latter position is, I dare say, an impregnable one ; but how can it and the other be occu- pied at the same time ? The stress laid upon this supposed Sheffield meeting is good evidence that Protection has nothing more momentous to offer us, and that England views the terrific stroke aimed by McKinley at her as a blow in the air — effective only on the arm that deals it. The Pan-American Conference has already been dis- cussed, but a stronger emphasis ought to be laid on the attitude of England with regard to it. Consider the situation : the trade with Latin America almost wholly in English hands, a few German vessels serving barely to call attention to England's superiority, and France hardly enough in the race, so to speak, to come in for a share of the gate-money ; another nation steps into the arena with a device advertised as certain to win every time, and threat- ens to sweep this great prize of a continent's commerce into its own net ; and behold, the country with least at stake — being a protected country — takes alarm, while the 1 62 ECONOMIC AND INDUSTRIAL DELUSIONS. one with most at stake — being delivered from the pro- tective incubus — looks on indifferent ! Is this insensi- bility ? The proverbial British stolidity? Never; no nation so instantly sensitive as the British, when any question arises that really involves its commercial inter- ests. If any one has a more reasonable solution of this significant calm in the British mind than the conscious- ness of the nation commercially most successful in all human history, that her success was not to be disturbed by violent plunges in false directions, or in any other way than by following the path of free trade, which had led her to the front — certainly no one has yet promulgated it. On this point, as on others, moral independence belongs not to the protected nation. It purchases security against imaginary perils, and the price it pays is a life weighed down by unrespited apprehension of other nations. Dependence on a foreign country is as truly illustrated by bumptiousness as by subserviency toward it, as H. C. Lodge recently pointed out in an essay on " The Colonial Spirit." The protective superstition, ascribing to gov- ernment a wizard's magic power, and expecting of the means at its command an increased prosperity for favored classes at no cost to other classes, may very possibly have descended to an otherwise sane and sensible people from a time when government was something beyond the great seas, superb and unapproachably puissant, and the fear which meant reverence in one century has become modi- fied into the fear which meant abhorrence in the next. I do not insist on this explanation ; but I do insist that only in emancipation from the protective superstition can there be deliverance from the bondage of foolish appre- hensions. " And ye shall know the truth, and the truth shall make you free." CHAPTER VI. PRICES I'S. WAGES. No position is held more stoutly, or with greater assur- ance of impregnable strength, than the one we are now to approach. It has long been taught, and is yet widely believed, that the interests of the manual laborer are in some way bound up with high taxation of imported goods ; so that any reduction in the tariff would despoil him of all he most values, as effectually, naturally, and inevitably as the hero of old was shorn of his surpassing powers when his locks were cut. Political leaders have not neglected to spread a belief so convenient for their purposes ; and one of the most conspicuous among them, in his speeches during the presidential campaign, forced the issue to the very front : " It is from skin to core and from core to skin again, a question of labor," he told us. Was he not unduly lavish of words, seeing that the rela- tion of tariff to labor is completely described in simply saying, " it is skin and skin again " ? However that may be, I willingly admit that no interests in the question are more deeply involved or more important than those of the working man. I even admit that the true welfare of our working classes as a whole ought to decide it without appeal. Influenced by protectionist fulminations from the stump, one might see in these admissions a complete abandonment of my case ; but any one who carefully sifts the evidence will be able to find a quite substantial deal 163 164 ECONOMIC AND INDUSTRIAL DELUSIONS. of the case remaining. Let us first consider why the protectionist appeal is particularly addressed to the laboring man, and then test that appeal by fact and PROTECTIONIST EFFORTS TO PERSUADE THE WORKING MAN. Those who live by daily toil have always looked like easy game to the demagogue who deals out mystification to all who will accept it for argument and finds in inven- tion a ready supply of defects in his array of facts ; and that has always been sufficient to ensure them his obse- quious attention. The day-laborer — if we are to believe such oracles as this — is the man whose prosperity and happiness are considered before all other men's, in devis- ing and upholding a high scale of import duties. How the mining or manufacturing capitalist is affected we might be permitted to doubt — he may gain by them or he may not,— but the laborers he employs would die a dozen deaths without them. When his agents flock about our Congress, as they never fail to do when a tariff bill is under discussion, they always keep uppermost the thought of the laborer, in whose behalf they unselfishly strike two blows for every one in behalf of him who pays their expenses there and directs their efforts. In the legislation they procure from our statesmen, the laboring class is of course the favorite beneficiary. So is the farm- ing class. If our country contained some other class as rich in votes and as low in the estimation of the political managers — -on whose stupidity they as confidently counted — that other class would also be the favorite. All that is asked of any class of our citizens is that it shall not know enough of political economy to see its interests for itself ; the managers will step eagerly forward to supply all deficiencies, by proving that the tariff is the one particular PRICES VS. WAGES. 1 65 thing to it most precious, that the tariff's choicest bless- ings are poured into its individual lap, and that each was made for the other. The first step in the persuasion of the laborer is usually to call attention to the difference between the rate of daily wages here and in some other countries — this is of course grotesquely exaggerated, by the selection of in- stances calculated to be striking rather than fair, — and the next step is to draw the conclusion : " If trade with those other countries is made free, wages here must sink to the level of those paid there." Before that conclusion the poor working men are expected to submit, meekly and unquestioningly : " Theirs not to make reply, theirs not to reason why " — particularly above all things not to " reason," for awkward results might follow their asking by what necessity wages " must sink." They might show many an instance of continued free trading, which has not been followed by closer resemblance between the social conditions among the purchasers and those among the sellers. Men have bought freely, for years, of their Jewish fellow-citizens without losing their taste for bacon. Or, to take an instance more to the point, they might show that the labor given to the production of tea is miserably paid — beyond almost any in the world, — and then ask their protectionist adviser to tell them how much wages have fallen in this country since we put tea on the free list. If the laborer is found tractable to Protectionist persuasions, it is only because he has not learned how to question them. DOES FREE TRADE EQUALIZE WAGES ? From the easy confidence with which it is assumed that increasing the volume of trade between two countries tends to equalize the wages paid in them, it might be be- 166 ECONOMIC AND INDUSTRIAL DELUSIONS. lieved that there was some evidence in history or in reason to support this hypothesis. There is not a shred. 1 It is assumption unmixed. i . Trade has been free between our States for a century. Had the hypothesis any truth in it, all difference in wages among them should long ago have disappeared. In fact, the difference between different parts of our country — California, or New England, for instance, and the Carolinas — is as striking as can be found anywhere, and such differ- ence has been constantly springing up, and even largely increasing, since the Constitution went into operation. 2. The British have admitted the great majority of products free of duty for forty years. Had the hypothe- sis any truth in it, the condition of their laborers should have been growing steadily worse all this time, and should now rank with the lowest of those whose products they admit. The facts are that higher wages, by far, are paid in Great Britain than in any other European country, hours of labor are shorter than anywhere else, and the ratio of improvement in the condition of the poorer classes is more remarkable than can be found in the whole world besides — than history has ever shown. The degra- dation and suffering prevailing in England before she threw off the shackles of "corn-law" protection in 1846 have been vividly portrayed for us, and sung in " dolorous pitch " ; echoes of the song — " stitch, stitch, stitch, in poverty, hunger, and dirt," " it is not linen you 're wear- ing out, but human creatures' lives " — -are still ringing in every ear. But we must be careful not to argue very con- fidently from the distress of individuals, for of this every age and every land can furnish only too many pathetic pictures. Let me supply a few figures, which, even though less graphic, will give a far more trustworthy idea of how Britain has been progressing. Mr. Giffen, the distinguished PRICES VS. WAGES. 1 67 statistician, tells us that wages have advanced 50 to 100 per cent, in England during the last fifty years ; while the hours of labor have been reduced full}- 20 per cent., being now in few trades over ten hours — in most of them nine, and in many but eight hours. More than that, the same wages go farther in procuring necessaries, bread having become 20 per cent., sugar 60 per cent., and clothing on an average 50 per cent, cheaper there. House furniture is also much lower ; and the working man pays far less for far better light and for far more satisfactory means of locomotion, than the cost of the inadequate accommoda- tions of those days. The best index of the improved condition of the masses in England is perhaps shown in the consumption of certain articles of food. They use 4 times the weight of sugar, 6 times the number of eggs, 16 times the rice, 3^ times the tea, per head, that they used fifty years ago. The improvement in their dwellings has not lagged behind that in their food, for the effect of better sanitary conditions is shown in a marked diminu- tion of their death-rate. The increase in their savings- bank investments, and those in co-operative and building societies, is noteworthy. Two items relating to pauperism have a special interest for us. The fraction of the popu- lation receiving poor-law relief was 4.42 per cent, in 1844, and but 2.44 per cent, in 1888 — that is to say, after cen- turies of rigorous protection they had one pauper in 23, while, when these had given place to twoscore years of trade emancipated, they had but one in 41. The propor- tion of people receiving relief has meantime increased in our highly protected country. This beneficent change in the condition of the English masses is studiously concealed, as a rule, by protectionist speakers and writers. They have much to say of the similar changes among ourselves, and then this reticence 168 ECONOMIC AND INDUSTRIAL DELUSIONS. of theirs permits them to claim — I quote literally : " All this comfort and general improvement are the result of the development of our home industries by protection, and of the consequent cheapening by home competition." As a matter of fact, the "general improvement " has been greater in the free-trade country, although, I hasten to confess, the difference has not yet been sufficient to balance the greater difference in the relative condition of the two countries when they first began to diverge in their commercial policy. The masses in our own land are still at some advantage over those in the mother country ; the superiority due to ampler territory and better popular education has not yet yielded to the assaults of protection upon it. I shall not imitate the folly of the Protectionist by ascribing English progress entirely, or even as its most important factor, to better revenue laws. It is undoubt- edly due rather to the agency of steam and electricity and modern inventions applying them, in cheapening produc- tion and especially transportation ; a blessing which has fallen to some degree on all countries, but most particu- larly on those that do most to facilitate commerce. The undeniable fact that England has received more benefit from this improvement than any other land, and that so great a share in that benefit has come to her poorer classes, she certainly owes to her enlightened policy of free trade, and this fact is precisely opposite to the pro- tectionist hypothesis. 3. Of the low tariff of New South Wales I have already spoken. If the hypothesis we are examining were worth a button, the condition of the laboring man should there be particularly debased. The testimony is all to the contrary. To quote one of many witnesses : the Govern- ment Printer of the colony, in an account of its general condition chiefly compiled from official documents, claims PRICES VS. WAGES. 1 69 that, whatever other countries may boast, " there is none where those who live by the sweat of their brow can real- ize so nearly as in New South Wales the paradise of their class — namely, the union of high wages with short hours, good living, and a fine healthful climate"; and the figures substantiate his claim. The tables of ordinary wages that he furnishes show rates decidedly higher than those paid south of Mason and Dixon's line, little short of the high- est paid in this country, and fully equal to ours, on the average, the country through ; while the prices of supplies show no important differences— cheaper there, perhaps, but very slightly. We have no difficulty in finding, there- fore, a country where import duties are reduced almost to the British scale, with a condition of the working man on the average superior to that of which we boast. 4. Duties on imports, levied in this country, were very small until the present century. Were the hypothesis entitled to any credit whatever, there should at first have ' been little difference between the condition of laborers here and in Europe. The fact is that the differ- ence was quite as striking then as now. Secretary Hamil- ton, in his great " Report on Manufactures," treats it as a well-known fact (see page 221 of his third volume). He is an unwilling witness, who has every disposition to de- preciate a circumstance to him so inconvenient, and would evidently leave it unnoticed if he could. He pleads that " while a careful comparison shows that there is, in this particular, much exaggeration, it is also evident that the effect of the degree of disparity, which does truly exist, is diminished in proportion to the use which can be made of machinery." After showing how a machine may enable five men to do the work of ten or more, he argues that this " diminishes immensely one of the objections most strenuously urged against the success of manufactures in I70 ECONOMIC AND INDUSTRIAL DELUSIONS. the United States." Could Hamilton have been told that the " disparity " he found so greatly in his way would come in time to be viewed as the effect of changes brought about long after his day (for protection was not made a national policy in our legislation before 1816), would he not have been astounded ? The doctrine that high duties have any part whatever in keeping up the wages of labor is unknown where people have easy access to other countries by travel ; and our history shows that it was unknown here in our relatively isolated country, until the nuisance had been of so long standing that there were none to remember how we fared while free of it. Thus does the hypothesis that free trade between countries has the effect of equalizing the wages they pay, utterly fail under every practical test to which it can be subjected. But as this doctrine is needed to support Protection's bid for the laboring man's vote, a vote that must be had by one means or another, it will continue to be taught. It is one of the doctrines that do not need any reasoning to support them ; quite enough, that they bring money to some man's pocket HOW WAGES ARE FIXED. Protectionists, I have found, rarely profess to be guided by experience on this point, but lean usually on assump- tion. An instance of this is seen when they put a manu- facturer on the stand, and have him depose as follows: " I confess, I am selling my wares for higher prices than English makers ask. If I had to compete with the Eng- lish unprotected, it would be necessary for me to pay my hands less than I am now paying. Otherwise I must close, and leave them without employment." All this is gravely set before the guileless laboring man and gaping rustic, who are expected to take it in at face value, without any PRICES VS. WAGES. I7I allowance for the facts that even practical men are often deluded, and that almost any man is prone to put power- fully the side of a question on which he sees his own interests ; so that his testimony may after all mean noth- ing more than that the manufacturers do not know all they think they know, or else that they are getting a pretty good thing by making their customers pay more than the worth of their goods, and hate to give it up. It is defective in another way ; for the reduction of expenses, that freer trade would be certain to bring about, is not sug- gested. I have already shown that many manufacturers would save more in reduced cost of raw materials, were import duties abolished, than they would lose in reduced price or reduced sale of product. Nor is any attention called to the fact that the manufacturer is now paying his hands, as a rule, the smallest price that will prevent them from seeking other employment. Competition exerts its full force on him in that way, under present conditions. It may happen, in rare instances, that philanthropy, or the liberality that sometimes comes with prosperity, in- duces the employer to pay some of his men more than he is obliged to pay ; but workmen usually know very much better than to believe in the real existence of the state of things represented : that the manufacturer is paying them something extra because he can afford to. Patrick replied to his employer, we remember, when advised to vote with the Republicans if he wanted better wages : " And if you thought the Republicans were after raising my wages, you would be voting for the Dimmicrats yourself." The theory of wages based on the testimony of interested capitalists is chiefly remarkable, therefore, for its glaring omissions. The wages in one trade depend on what is paid in others ; and that wages could not be lowered generally by 172 ECONOMIC AND INDUSTRIAL DELUSIONS. free trade across the frontier, becomes very clear when we remember the laws by which such trade is necessarily governed. Commerce between nations is interchange of product for product. As already shown, if any specie passes in these transactions, it goes in obedience to a law of supply and demand that custom-houses cannot control, from the country in which it can at the time be procured with less effort than can some bulky commodity, to one where the difference is the other way. Specie thus distributes itself exactly as do other products of labor, and its function in settling balances does not affect the general truth that International Commerce is Barter. Since every purchase of a foreign product is therefore a sale of one of our own products, since the interchange takes place only because we find the same labor more effective when put on the product sold than it would be if applied directly to the product bought, the action that foreign trade has upon labor is, in a general way, to in- crease its productive capacity. If a difference in the wages paid to laborers in two countries can be maintained with a small volume of trade between them, what change, in the name of common sense, could be brought about by making the volume larger ? Labor would thus becom'e somewhat more productive in each of the two, the supply of it not increased, and the demand certainly not dimin- ished in either. It would of course be diverted in direc- tion ; for all the labor before spent on the product less advantageously prepared would now be wanted on the product which has to be sent in exchange for the other. The demand for labor is thus inseparable from the de- mand for the commodity — it occurs where the commodity is demanded. What then could possibly lower its price, in either country? Free trade, in fact, by insuring the greatest productiveness of labor, the greatest possible PRICES VS. WAGES. 1 73 utility in its employment, naturally calls out a greater, not a less, demand for it, and thus improves its condition. Thus does sound theory, as it inevitably must, confirm experience and illuminate it. WAGES IN OTHER COUNTRIES. The criticism of " much exaggeration," applied to the differences represented to exist between the laborer's con- dition here and in some other countries, is even better founded now than in Hamilton's time. We must now allow for the reduced purchasing power of money in the United States, which we owe to the protective system. Statesmen are so eager for legislation to bring 25 per cent, more specie into the country that they overlook the fact that this accumulation, were there any possibility of obtaining it, would only reduce the purchasing power of every dollar we hold, making it do just what eighty cents before did ; so that all the effort spent in producing the goods whose sale brought us the additional 25 per cent, would remain as good as wasted, until our bars were thrown down again. Protection undoubtedly decreases the real value of money, so far as it is effective at all. The money price of things — their value in gold or silver — is of significance only to purchasers of jewelry and plate, a category in which manual laborers are not in- cluded. For them the only question that has any signifi- cance at all is how much their day's toil will bring them in the articles of food, and clothing, and house furniture, for which alone they undergo it. The statistical tables which put the wages of common laborers in England (with skilled laborers there is less difference) on a level with the lowest in our States, and but half those prevailing in New England or the newer States, would present a quite different appearance if they showed, instead of money, the 174 ECONOMIC AND INDUSTRIAL DELUSIONS. items of ordinary consumption for which the money goes. As the retail cost of woollen goods and crockery, of knives, workmen's tools, stoves, and other iron-ware is in Eng- land very much less than is here exacted for them, the reward of labor there, reckoned in these necessaries, ranks with the highest here allowed it. Calculating the number of days' work that have to be given in England for the clothing of the workman and his family, we will find very few parts of this country in which the number averages smaller. So for house-rent, and local taxes, and a few kinds of food. In other food-stuffs, as meats and flour, the advantage is with us, as our prices for these are not higher. It would have to be with all other articles of daily consumption as with these, to make the money rates of wages a fair subject of comparison. A good deal has been said about the distress of working people in the older countries, and the New York Tribune a few years ago sent over a special commissioner to Great Britain for the purpose of hunting up as much of such distress as he could find. It is very well known that the privations among the laboring classes of the protected nations of Europe — Germany, Spain, Italy, Russia — far exceed those discoverable in Great Britain ; but the Tribune man was not sent to look into those, and accord- ingly never mentioned them, allowing all the ugly par- ticulars that he found to pass as the natural state of affairs in a free-trade country. I do not dispute the facts adduced by this traveller — he was Robert P. Porter, now chief of the Census Bureau — in the least. Very similar facts, quite as indisputable, have been set forth by Henry George in a series of papers on the mining districts of my own State, Pennsylvania. Distress among the poor has only to be looked for to be found ; and though some of this may be chargeable to the exactions of grinding task- PRICES VS. WAGES. 175 masters, and more of it to unequal and unjust taxation, it is too often the inevitable doom of ignorance, improvi- dence, and inebriety. Could the British working man's self-respect be aroused by giving him more knowledge, and, more than all, could he be kept a stranger to the baleful fascinations of the gin-bottle, future roving com- missioners would have a far harder search for sombre material to fill their letters. LABOR AND " TRUSTS." One condition that places the working man at a disad- vantage wherever it exists, is the combination of produ- cers into associations, " trusts," etc., to keep up prices by limiting the output. The visitor to the anthracite coun- ties will often find the mines altogether idle, their owners being bound by an association to stop production until it can be resumed without danger of carrying the price of the coal below the figure desired. The miners have no other employers to whom they can go, and accordingly receive nothing while the stoppage lasts. A similar limiting of production by shutting down of works and locking out of men is occasionally heard of in other trades, such as sugar-refining, coke-burning, etc., the close combination of producers permitting this wherever it is found to their interest. There is more than one way of bringing this about ; sometimes a " strike " is forced on their men for the purpose. Where competition is free the workmen are less at the mercy of their employers, and employment is more constant. No legislation can be in the interest of labor, then, which facilitates these combinations. And this is pre- cisely what protection does. Protection may not be responsible for the anthracite monopoly, the petroleum combine, and some others ; but since its essence and de- 176 ECONOMIC AND INDUSTRIAL DELUSIONS. clared object is to restrict competition, and since restric- tion of competition is just what is needed to give the as- sociations and " trusts " a chance, protection has certainly brought into being a great many of these agencies — thus encouraging their mission of running up prices to con- sumers on the one hand and holding the laborer in duress on the other. The producers' combinations in existence a few months ago, some known as trusts, others as associa- tions, unions, etc., but all having the same general object, formed a list extending to several dozen names ; each trust, or what not, depending on the complaisant ser- vices .of government for the exclusion of foreign competi- tion and for its undisturbed enjoyment of us as its natural prey ; each being intrenched behind its appropriate ram- part of protective duty, and thus enabled to make its product more costly to Americans than to Europeans. Protection, as an incident of its avowed object, must encourage trusts ; the fields in which it works are clearly seen to be thick-grown with trusts ; and yet it is again and again maintained that between it and trusts there is no connection. After striving awhile to stifle the com- plaints which these industrial excrescences were provok- ing, that singularly cogent logician, J. G. Blaine, not long ago, made a brilliant speech in which he cleared protec- tion of all responsibility for them by proving that the " Standard Oil " did not depend on any tariff, and that trusts existed in England. I am told that one of his hearers rode away from the meeting in deep thought, and was not aroused from the spell of the orator's witching eloquence till he passed the door of a humble cabin, built close beside a foul and noisome morass. The rider paused in his course, for he saw a duty before him. Drawing a few breaths of the malaria-laden atmosphere, he asked the cabin's occupant why the marsh had not been drained PXICES VS. WAGES. 177 and its disease-producing activity abated. " Disease, you say, stranger?" rejoined the rustic, his teeth chattering with the ague : " My daughter had the measles last month — a bad case. You don't say the marsh gave her- that ? My hired man died about the same time from lockjaw — he ran a sharp rusty nail in his foot. What had the marsh to do with that ? And say, stranger ! They have diseases over in town, don't they, where there aint no marshes? " The stranger could not reply. He would have liked to talk with the poor peasant on the political situation, but he needed no assurance that his disproof of the effect of tariff on trusts would here find a ready convert ; and he was in a hurry to get away. THE IMMIGRATION TEST. We often hear a cheap and flashy attempted proof of the blessedness of the protective system to the laboring man, in the number of immigrants received by this coun- try from Great Britain, compared with those it returns thither. Those who have any difficulty in comprehending this phenomenon should turn their attention to the still greater influx that we receive, despite the bar of differ- ence in speech, from protected Germany and protected Italy ; to the large volume of emigration westward, from New England and other older States ; to the goodly throng who are seeking homes every year in New South Wales. In none of these cases is the emigrant in search of more protection ; and no one able to account for them has any trouble over the large immigration to this country. Many come to us because they wish to live under free in- stitutions, and hate kings and aristocracies and recruiting- officers. Another very easy explanation is found in the natural preference of people who depend for food and clothing on the produce of the land, for places where 178 ECONOMIC AND INDUSTRIAL DELUSIONS. there is more land to be had to places where there is less ; and in this same explanation we account for all the supe- riority that there really is in the condition of the laborer here over that in the mother-country. The most ardent Protectionist could hardly insist that this fact is irrelevant, when once his attention is called to it — however long he may refuse it notice. The island of Great Britain contains 90,000 square miles, and its popu- lation, allowing five persons to a family, is a little over six million families. That gives an average of ten acres to the support of each family. If the United States (excluding Alaska) contain 3,000,000 square miles and 13,000,000 families, that gives us 150 acres to a family. Suppose that, instead of bewildering our minds by trying to grasp whole nations in a thought, we simply consider two farmers, one of whom has 10 acres of land and the other 1 50 ; and ask which of them, other things being equal, will be able to support his household more liberally, to keep up the steadier demand for labor, to attract unat- tached workmen. Not even a Protectionist could hesi- tate for an answer. He would agree with me that even though the land of the small farmer were proportionately two or three times as productive, and he had two or three times more money to spend on each acre, he could not raise so much food, and could not be expected to offer so good a maintenance to his dependants. The larger far- mer might make many mistakes in management ; might even follow very wasteful methods of husbandry, without altogether sacrificing the advantages his broader acres give him. But I now make a change in my problem, which will hopelessly separate my protectionist friends from me. I suppose that the larger farmer has a custom of docking the pay of those of his hands who buy at any but his favorite store ; protection being an extension of the prices vs wages. 179 " pluck-me store " system. This little supposition at once changes everything. Vanished from the protective sight are all the effects of larger fields, larger crops — nothing is visible but this custom of the farmer's, which now becomes the sole source of his better condition, the better condi- tion of his hands, and his ability to employ more of them. That I believe a fair statement of the view which Protec- tionists profess to hold ; in my own, this farmer's petty exaction is but one of those grievances which, however vexatious and needless, may yet be endured because not quite oppressive enough to counterbalance the benefit his employes enjoy in the greater productiveness of his farm. Which view appears more reasonable ? I have every wish, I am sure, to do full justice to this immigration argument. I am well aware that it has great force with many worthy people, who exult in it as " practi- cal," and seem unable to see it in its true character, of a contrivance for stifling the voice of common-sense. The same character belongs to a large proportion of the so- called " practical " tests. Is there anything more in it than this : " Working men are all the time leaving Great Britain, a free-trade country, and coming to this, a pro- tected country, while very few go in the opposite direc- tion : therefore, experience proves protection advan- tageous to working men " ? It would not change the nature of the argument a particle, if we changed its terms as follows : " People are all the time leaving the Eastern, or the Northern States, where the ' blizzard ' is all but unknown and the grasshopper innocuous, or where alligators and black snakes and scorpions and tarantulas are strangers, and going to Kansas, land of the blizzard and the grasshopper plague, or to Florida, home of those other amiable creatures, while comparatively few remove in the reversed direction : therefore experience proves l8o ECONOMIC AND INDUSTRIAL DELUSIONS. the circumstances I have mentioned advantageous to the settler, and not the tribulations which they are represented to be." There is something " practical " for you ! In fact, it is not necessary to make so radical a change. We need only call attention to some other blessing which our country enjoys in common with protective tariffs — its plenteous gift of mosquitoes, for example. No reason can be discovered by human ingenuity, why this immi- gration test should prove import taxes advantageous and not be equally effective in proving the same thing for mosquitoes — why it shows that one kind of petty blood- sucking attracts immigrants to these shores rather than the other. The conclusion I draw is that common-sense cannot be dispensed with, however " practical " we under- take to be; and as soon as we use that — as we start to inquire whether the only important difference between this country and England is that in tariff rates, or, whether there may not be other differences which enter the problem — we are on the track I have just marked out. We discover, as a matter of fact, that there was quite as remarkable a disproportion between immigrants and emigrants before the country ever began to " protect." THE WAGES QUESTION FROM ANOTHER STANDPOINT. The argument addressed to the laborer himself, is always : high wages are a result of high tariffs. The argument used in other quarters is : high tariffs are made necessary by high wages. An identical conclusion is thus reached from conflicting premises: we must increase duties so that manufacturers shall pay high wages, and increase them still further, because manufacturers have high wages to pay. The tariff is made, according to the exigencies of the case, to pose as cause and as cure for the same condition. Its claims to be accounted a cause PKICES VS. WAGES. l8l of the working man's welfare having been examined, and proved worthless, its suitability as a remedy has next to be considered. Before taking up the question of a remedy, it is well to make sure that the disorder to be treated has a real existence. We want to know, in the first place, whether the country is really at a commercial disadvantage be- cause its laborers are well paid, and then, the precise nature of that disadvantage. No protective reasoner ever admits a doubt on this point. He seems always perfectly assured that the country with scantily paid labor has necessarily the best in any free competition, and that it must succeed in drawing to itself every kind of industry, unless defensive legislation makes mighty efforts to prevent it. He assumes without question that well-paid labor is dear, and poorly paid labor cheap, as though such assumptions were self-evidently true instead of gen- erally false. CONTROL OF MARKETS BY CHEAP LABOR. I have already anticipated my response to the cry that the community paying higher daily rates for labor is in danger of losing the market for all its productions, but, feeble and hollow though it sounds, it can yet lead the wayfarer astray, if not completely silenced. No notion so inherently silly could be held for a moment, did it not bear a superficial resemblance to some prop- osition containing truth : that proposition being in the present case, that if two producers were circumstanced exactly alike in every other particular, with materials, tools, and other necessaries costing just equal, and if each hour of hired labor had precisely the same efficiency, the one that paid lower wages for that labor would have the advantage. But other things, as a matter l82 ECONOMIC AND INDUSTRIAL DELUSIONS. of fact, never are identically equal, as supposed. Access to power-supply and cheapness of material are always factors of more vital importance than smallness of daily wages per hand, and the effectiveness of a day's labor varies so widely in different places, that the proposition is for any practical purpose worthless. If we are guided by experience rather than guesswork, we shall discover, possibly to our great surprise, that if a difference in rate of wages establishes itself in a manufacture, between two places allowed to trade freely, the business is more likely to go to the one paying higher wages than to leave it for the one paying lower. Let him who doubts this invest his capital in factories where lowest wages are paid (in Mexico, for instance, where they are from 10 to 1 5 cents a day), and see what profits it brings him. He can no more draw business away from New England, where wages are high, than he can break up the min- ing industries of California, in which they are higher yet. England holds fast to her manufacturing industries, not- withstanding her high scale of wages (as compared with countries near by) and her free trade ; and so secure is her predominance, that it is not unusual for the Germans to protest that they are obliged to protect themselves against a country whose more liberal payments attest and insure its advantage. There is no mystery about the matter at all. If there are degrees in utter absurdity, the German delusion is a little less absurd than that propa- gated in this country, for there can be no doubt of the general principle that if better wages are paid in any place, it is because that place is so circumstanced that the same time spent by the laborer can there turn out a greater quantity of product. This general principle is very largely true, even in comparison of individuals. When a manufacturer has a piece of work on which his profit is PRICES VS. WAGES. 1 83 to be particularly low, he always finds the best economy in assigning it to his best-paid hand — for that hand's high wages are paid in acknowledgment of a skill and energy that are needed in turning out the work fast enough to pay. Mr. Shearman, the lawyer, has repeatedly said that the only competitors against whom he asked for protection were those receiving the highest retainers — he would willingly protect himself against the cheaper ones. Would not other professional men say the same thing ? LABOR NOT OVERPAID IN THE UNITED STATES. That the wages paid to laborers in the United States are only proportioned to their greater productive capacity, is evident from several considerations. First, direct comparison in efficiency. A scientific gentleman in government service, who had lived many years in Germany, testified that wages were much lower in the Eastern part of that empire, but that " four men there would do no more in a given time than two in Western Germany, or than one in the United States." The same inferiority, though less marked, has been found in England — as compared with this country, but not as compared with Germany. A comparison of American, English, and Swiss cotton mills shows that in the first a single workman generally runs six or eight looms, in the second three or four, and in the third but two ; conse- quently, while the United States stand first in order of daily wages, they are so far ahead in efficiency that the order of labor-cost is exactly reversed — highest in Switzer- land, lowest here. Second, our more extended use of machinery, and greater skill with it. I have seen it proved that nail- makers in Germany receive one fourth the daily wages paid 184 ECONOMIC AND INDUSTRIAL DELUSIONS. their craft in this country ; but it is evident that, as our works turn out habitually much more than four times the number of nails to each workman, labor on nails should properly be said to be cheaper with us. Third, the greater purchasing power of money in other countries, already spoken of. Fourth, even if we knew nothing of the foregoing con- siderations, the fact would yet be conclusively proved by this: that we succeed in selling some of our products abroad, constantly, notwithstanding our protective sys- tem, in the teeth of the world's competition. This would not be possible, were the cost of our labor on those products greater in comparison with its productiveness. Nor could we maintain a greater relative labor-cost on other products, or they a less cost, for any tendency to set up such a state of things would be met by a transfer of capital and labor from the less to the more productive enterprise. To illustrate: notwithstanding the higher cost of transportation (so much of it being overland) wheat from Dakota is sold in English markets in competi- tion with the India product. It is perfectly certain, then, that the labor-cost of producing a bushel of wheat to the Dakota grower must be smaller, despite his payment of ten times the daily rate of wages ; to any one who seriously inquires into the methods of production in Dakota and India, and the comparative efficiency of a workman in the two regions, this is not at all a paradox. It is plain that in this industry higher wages continue to be paid without any protection, and that the reason is the greater effectiveness of the labor. Now my present point is that the same must be true in other industries as well ; for if the making of tools, clothes, etc., here cost more for labor than the product is worth, by the wheat-growing standard, more people would leave the business and set PRICES VS. WAGES. 1 85 at raising wheat in Dakota ; while if labor on wheat-grow- ing were exceptionally unproductive in India, people there would forsake it for industries that paid better. The difference, that is to say, is in the character of the labor employed, and not in the character of the employ- ment given it. I must give a little more space to this last point, be- cause it appears to me of the highest importance, and is usually overlooked. How it might be with us if we had no foreign commerce whatever, it is useless to speculate, because we do export goods, and shall assuredly con- tinue to do so. As long as one line of exports is steadily kept up, we can be certain that on labor here is thrown, whatever the degree of protection given to production in other lines, the full force of the competition of labor abroad ; just as a hole kept open through a dam-wall as effectually insures the same level on both sides as though the whole dam were removed. As long as we export wheat, labor on wheat-growing cannot rise above the free-trade level ; and labor on other things cannot rise above the level made by competition with labor on wheat- growing, being thus brought to the same standard in- directly that would be forced on it directly, if it were itself naked to foreign competition. If, by free trade, we should limit production in other lines and at the same time stimulate it in wheat-growing (it must never be forgotten that these are inseparable parts of one and the same process), we should, of course, have decreased productive- ness in the former, balanced by increased productiveness in the latter ; a change in the kind of labor demanded, but no possible falling off in the general demand for it. Competition is not increased or diminished, against the individual laborer; only differently directed. This is one of the truths to whose understanding some 1 86 ECONOMIC AND INDUSTRIAL DELUSIONS. reflection is indispensable, and there is therefore no room for surprise that it has been so slow in winning recog- nition. It is easy enough to treat the subject in a way that demands no reflection, that succeeds best without reflection, that is an affront and an insult to reflection. It is easy, for instance, to confuse the labor-cost of the article produced, which is an addition to its price, and which does put its producer at a disadvantage, with the daily earning of the laborer, which — except for the feeble in- fluence it may have on the other — does nothing of the kind ; or (if you choose) to assume that the part of an article's price paid for labor is directly proportional to daily wages, without inquiry, and in face of glaring facts incompatible with any such relation. It is easy to assume, without a word of proof, that protection adds to what is paid for labor in some trades without taking off as much from what is paid in others, and- that free trade could reduce at one point without increasing at another. It is only necessary for some manipulators to stir up water and oil, import taxes and high wages, to boast them blended into one. TWO WAYS OF EXPRESSING THE SAME IDEA. No sincere — is it not the same thing to say unthinking ? — Protectionist ever troubled himself to define precisely what he meant in repeating his well-conned formula that we in the United States " cannot compete " with some other country in the markets of the world, or even in our own markets, without some artificial support. He might per- haps go far enough to explain that since the same amount of woollen cloth, say, exchanges for a smaller amount of money in England than here, our purchasers would no longer buy here if trade were free. But he is certain not PRICES VS. WAGES. 1 87 to go far enough to draw this necessary conclusion : that, since it is just the same thing to say that a roll of cloth requires a smaller weight of gold to buy it, as that an ounce of gold sells for a larger roll of cloth, his facts would not be changed a particle if he said that gold was cheaper, reckoned in cloth, in the United States ; or, since he prefers the expression, that England would be unable to " compete " with us in furnishing gold, if we allowed those of our citizens who had it to sell to put it where they could get cloth for it on as favorable terms as English sellers of gold for cloth. This is plain enough ; a moment's thought, and it is self-evident ; but what, in this light, be- comes of the contention that this " competing " is a result of ill-paid labor? No manual labor on this round globe; probably, is so highly paid as that given to the production of gold in this country ; and if, by the very terms of Pro- tection's own statement, we can nevertheless produce it more cheaply and control the market for it, we need not let the other products bother us much. Each country will produce what it can produce best, if not interfered with ; and differences in wages will survive high taxation, for the simple reason that low taxation, or even free trade, has no tendency to disturb them. THE LABOR THAT " NEEDS " PROTECTION. That the withdrawal of protection from many of our industries, especially those occupied in furnishing the raw material of other industries, would result in their tempo- rary contraction or partial abandonment, is altogether probable ; though every loss that the country could suffer in that way would be more than made up to it by the increased activity and prosperity of the industries which would be thereby enabled to provide themselves with l88 ECONOMIC AND INDUSTRIAL DELUSIONS. better, cheaper, and more abundant raw material. This partial sacrifice of the cruder industries, I am bound to say, outrages the sense of justice in many worthy people, who have nevertheless been able to contemplate some sacrifices in the opposite direction — as that of the copper- smelters for protection to the mine-owners, or that of the canning industry for protection to tin-plate — with a fair degree of equanimity. "The raw material manufac- turers," they often remind us, with an air befitting dis- coverers of some new and important principle, " are entitled to just as much favor from government as any manufacturers. If the intervention of legislation is needed to make their industry self-sustaining, they ought to have it granted them." I accept the first of these propositions with all my heart ; but the second by no means follows. It is a mere truism that all manufacturers have an equal title to government aid, seeing that no one, on his per- sonal account, has any title whatever. The government is properly concerned only with the well-being of its citi- zens as a whole ; and the question whether the great body of citizens are better off with raw materials, and conse- quently everything that is made from them, dear or cheap — whether there is more general benefit in scarcity or abundance — is one that none need hesitate in deciding. Labor " needs " protecting in exact proportion to its use- lessness. A liberal share of our protection goes to sustain such work as hauling iron ore at high cost from Lake Superior to the vicinity of the coke-ovens, when it might be shipped from Spain to our seaboard at lower cost ; or as raising wool on land well adapted for more profitable production, when it might be brought in ample quantities from land which has no better use, in the Argentine and Australia. On enterprises of those kinds a good deal of labor is employed, doubtless ; but the effort to " put it on PRICES VS. WAGES. 1 89 an equal footing" with labor more judiciously expended, by hanging a burden upon every one who makes use of the latter, is exactly as if we tried to equalize the profits of the farmer who gets out his potatoes with a shovel- plow and the one who persists in pulling them out with a hoe, by hobbling the first with some special tax. The two farmers are entitled to equal regard from the law as citizens, of course ; but what shall be said of an attempt to " equalize " them which tramples under foot the rights of those in whose service they both dig : the consumers of their product ? Pulling out potatoes with a hoe is a type of the kind of labor that protection protects ; the kind that has to be favored by crippling the power of the citizen to serve his own interest and that of his customers by the use of some better kind. Such " Protection of American Labor " has as its object an increase in the demand for labor where it will serve the community worse, at the expense of the demand for it where it will serve the com- munity better. One of the measures enacting it was very suitably described by a leading Republican Congressman, in the days before the party's degradation became hope- less, while yet Republican Congressmen dared so to talk : " A bill to prevent the diffused blessings of Divine Provi- dence from being enjoyed by the people of the United States." INTEREST OF THE LABORING CLASS IN MECHANICAL IM- PROVEMENTS. We have seen the laboring man presented as the great beneficiary of the tariff, in pure generosity to whom his employers are taking all the trouble they do, to influence statesmen in the lobbies of the Capitol or to buy elections. When we strip off the veil of humbug and false reasoning 190 ECONOMIC AND INDUSTRIAL DELUSIONS. we find that his alleged gains from it have no existence, while he pays his full share of the cost in increased price of necessaries, and is in reality, his ability to stand the charge considered, the chief of its victims. But there is one more, a wider, aspect in which the question should be viewed before we leave it. Our examination has already brought out one unexpected result ; that dear labor, reckoned in cost per day of a man's service, is more apt than not to be cheap labor, reckoned in cost per dol- lar's worth of product. Another unexpected result awaits us : that the general effect of appliances for economizing labor, for making it go further, and getting the same thing with less of it, is beneficial not only to society at large, but most of all to the laboring class itself. Nothing could be more contrary to one's crude first impressions, and so strange a doctrine would find none to credit it, did ex- perience confirm it less unmistakably. The invention of a new machine, by whose use three men will do the work before done by ten — must it not throw the other seven out of employment ? Even though the need of making the machine calls for some additional labor, will it be nearly enough to keep seven men occupied, and will the displaced men be fitted to perform it ? Is it not a hard- ship to force them to change their occupation, when advanced in years no doubt, even though we suppose a new post awaiting every one ? How natural these ques- tions is shown by the working-men's riots, that used to take place half a century ago, against the introduction of labor-saving machinery. But the machinery came in, nevertheless, and we know the result. Here and in Great Britain and British colonies, most where most machinery has come into use, the great body of working people are enjoying in daily consumption things that two generations ago were luxuries for the wealthy, or were not to be had PRICES VS. WAGES. I9I for any money. Why is this? Why is it that the laborer is worse off in Japan and India, where he is employed for all kinds of draught, even for carrying people from place to place, than in countries where this work is taken from him and given to the horse ? The way to understand it is of course to consider the ninety and nine laborers who are not displaced by the horse or new machine. On them the effect is simply that of supplying them some article they want on easier terms. This at once advances their comfort, and is followed by a sharpened demand for the article. Where this results in increasing the production of it until the amount of labor needed becomes the same as before, there the gain is unmixed; but there is found to be more than enough gain to balance all losses in every case. As has often been pointed out, all the capital saved by the rich becomes a new demand for labor, since the saving is of no use to them until spent in some way that calls labor into opera- tion. But I have no concern to lay stress on these or any explanations of this very significant fact of observation. Enough that the united testimony of experience proves it to be a fact, and that Protectionists invariably, when addressing the laboring man, speak as though they knew it not, and as though the crude notions that have been disproved by it were matters of course. TYPES OF PAUPER LABOR. The poor dupe of protection, who is taught to tremble in terror at the spectre of competition with scantily paid, low-fed, and ill-sheltered labor in foreign countries, would see in his own country, if he but looked, American men every day all around him thrown out of work, of a kind well within their power to perform, but which is given to 192 ECONOMIC AND INDUSTRIAL DELUSIONS. laborers worse paid, fed, clothed, and housed than the most degraded among the working people of Europe. If they are outraged by seeing their own labor displaced by pauper labor, such an outrage they suffer every hour. This is precisely what is done wherever a horse is put in a tread-mill or hitched to a plow. The most elementary acquaintance with countries in which men are not de- prived of this employment, by the preference of their " poor relations," could convince him that they are no better, but far worse off for having their labor so " en- couraged." Then, if he were able to put two ideas to- gether, he would see at a glance that the " encouragement " given to labor by the protective system is, as far as it goes, of precisely the kind that is so lavishly bestowed in the countries mentioned ; that if the " competition of cheaper labor " were going to be an injury to him instead of, on the whole, a great benefit, the competition of beasts must be far more degrading and dangerous than that of foreign men ; and that, altogether, his fears are the creation of those who would use his ignorance for their own advan- tage. I might go on to speak of competition with dead machinery, which is not fed at all, and which is capable of exerting a power that would require hundreds of laborers to replace it, were further illustration necessary. But I have said quite enough on this point. Am I wrong in thinking that facts so plain as these would be acknowl- edged on every hand, but that people have been carefully taught to hate their brothers across the water, and have not been taught to hate the horse or engine ? Love is called blind, but blinder yet is hatred. " INVASION " OF OUR MARKETS BY CHEAP GOODS. No very extended space need be given to the appre- hended irruption of cheap goods which would follow, or PRICES VS. WAGES. 193 which it is said would follow, letting down the tariff bars. We are taught that we must guard against a flooding of our markets with them, that we must always be on the alert to fight an enemy which it is in some quarters fashionable to call a " raid on our markets," and so on, any lack of reality in the evil or of probability in its occurrence being compensated by luridity and fervor in the figurative language by which it is characterized. Un- fortunately, there is not very much of that flooding, etc., that could be hoped for, as a matter of fact. Indus- tries do not easily change their direction, and when we remember that each new import, however cheap, must be attended with the production of something that we pre- viously did not produce, to pay for it, or at least the ex- portation of something for which we previously found a use at home, it appears that we have to reckon on a change in our habits of life, whose full effect must be slow in making itself felt. But however this may be, the main point about any such irruption is that it would be a good and not an evil to the mass of our citizens, and formidable to monopolists only. If cheap goods were an evil, it would be a greater evil to have goods for nothing ; if it should rain cheap goods from the skies on any part of the country, we ought to leave that part, fence ourselves out from it, and care- fully " protect " our inhabitants from the curse that blighted it. We ought even to reject the work of Nature in saving labor for us, and use instead, as far as possible, only appliances created by human labor. A brilliant French economist once circulated a mock petition pray- ing that the legislative authority should decree the shut- ting off of heaven's sunlight from all dwellings, so that the makers of candles might be encouraged, and with them a great number of other industrials, named in ample detail, 13 194 ECONOMIC AND INDUSTRIAL DELUSIONS. whose trade would be increased by their prosperity. It is difficult to see why his position was not an impregnable one, on the theory that an invasion of unlimited cheap foreign goods is disastrous. If we see in it any absurdity, we should remember that it has been very closely imitated by actual legislation, in the protective interest. During the Middle Ages it was enacted in England — not a device is possible to protection, whose folly that country has not proved by actual trial — that the dead should be buried in woollen shrouds, to encourage the manufacture of wool. And in these very days, our own Congress has attached to the wretchedly inadequate bill, which it felt compelled to throw as a sop to the growing international-copyright sentiment, the condition that no book could receive any benefit unless printed from type set within this country. From legislation of this kind to such as would shut off sunlight for the gain it would bring the candle-makers, is no " far cry," certainly. Only those have the right to find wisdom in such measures who continue the use of spin- ning-wheels in their houses to encourage the labor of the family. DANGER OF INCREASED PRICES, WITH FOREIGN CONTROL OF OUR MARKETS. I have not forgotten the difference that many good people think they see between shutting off sunlight and shutting off foreign-made goods. In their view, when a foreigner supplies things cheaply it is always as a prelude to running up the prices higher than ever, as soon as he gets control of the market. It is a sufficient answer to this that the danger exists in their imagination alone. It has its origin in conjecture, rather than experience; and the only mite of experience ever brought to support PRICES VS. WAGES. 1 95 that vast superstructure of conjecture, the great revival of our import trade in 181 5, came to us under circum- stances too exceptional to furnish any guide for the future. I do not say that the manufacturers of Great Britain, in sending us the large quantity of their goods that they then sent us, were combined in any such con- spiracy as this view supposes. By all the light I can gather, such a hypothesis is absurd. But I do say, un- hesitatingly, that, even supposing they were trying any such experiment at that remote date, the results from it — leaving out of view anything that we may ourselves have done by retaliatory legislation — were not such as to encourage them to repeat it. At present no intelligent business man has any real belief — whatever he may pre- tend — that such an experiment is likely to be made, or could be made. So low are ocean freights that it would not be possible, but for tariff duties, to maintain any considerable difference in price between goods sold in Europe and goods sold here ; hence the same changes of prices — first down, then up — would have to be applied at the same time at home and everywhere else. No combination can charge a price for goods, higher than the lowest that will bring a reasonable profit, except on condition of keeping a close watch out for competitors. Those who realize how ticklish a business holding up prices by combinations is, here in a country where the laws give it every help by cutting off the larger part of the world from the competition, easily see that the difficulties of the task must multiply until insuperable when there is the whole world to be watched. It requires only one little item of information, that combinations are far easier in a country where there are special laws en- couraging them than in the world outside where no such legal favor is to be had, to understand why this apprehen- 196 ECONOMIC AND INDUSTRIAL DELUSIONS. sion that prices can be made so promptly and submissively to obey a foreign ring of producers is not one that is held by our better-informed manufacturers themselves. They are sore afraid of something, it is true, but that something is that prices will come down and stay down. When they start a cry of alarm against conjectural combinations of foreign producers for our oppression, it is on the same principle that the thief shouts " Stop thief," to mislead those who might attack the real present combination at home. Their reliance is on people's ignorance of the laws of trade, under which advantages and disadvantages in the market are necessarily balanced, and in the narrow fear of foreigners, with which ignorance of all kinds naturally associates. To excuse those legislators who, in imposing a duty on any competing foreign-made fabric, profess to fear that without such a precaution the foreigners will first get " control of the market " and then run up the price beyond what is now paid by consumers in this country, they ought to be able to add that in so doing the foreigners will take every capitalist in the country unawares. Sup- pose, for argument's sake, that some one of our own moneyed men is able to anticipate the game through which the legislator says he sees so clearly ; what power is to prevent him from blocking it? No one pretends, remember, that the foreigner is going to undertake his game out of pure spite, or for any other reason than because he sees profit in it— sees that enough can be made on future sales at the advanced price to reimburse him for present sales at a sacrifice. But if he is going to be able to see that, what is going to prevent investors within our borders from seeing it also, and participating in any profit that is to come from the enterprise ? If the legislators who profess such a fear really entertain it, they PRICES VS. WAGES. 1 97 are ascribing to our lynx-eyed capitalists a blindness with which nobody else in the world will credit them. If they do not entertain it, they are ascribing to our citizens no moderate degree of blindness in supposing them capable of it. Unhappily, however, the ascription of blindness to the rulers of this many-headed republic is not the affront that we would wish to regard it — that it would really be if they were as enlightened on national as on domestic economy. All the appeals and assumptions and argu- ments which it has been the object of this chapter to ex- pose and answer, agree in supposing a blindness to the teachings of common-sense and of our national history on the part of those to whom they are addressed. There is a negative blindness : a mere absence of light, to which the eye is nevertheless open, and by which it" is ready at any time to be penetrated and illumined. There is also a positive blindness, harder far to cure : a closing of the eye against light, by the power of fear or hatred or prejudice or avarice. Progress in enlightenment can at best be slow, where this exists ; and the evidence that so much success has already been attained, in spite of it, in spreading throughout the country an understanding of the truths of political economy, could not be otherwise than gratifying to the public-spirited citizen. CHAPTER VII. THE HOME MARKET. SINCE imports are paid for by exports, product for product, except where the product is a payment for serv- ice rendered — as in ocean transportation — or for interest on a loan, it is as plain as any truth can be that no pro- tective system could benefit all productive industries in the same way. If it is needed to shield some of them from competition by keeping imported goods out of the market, this need must arise from the fact that, if un- protected, those goods would be purchased by sending abroad others ; and is of itself a conclusive proof that the other goods, whatever such goods may be, have no use for a protecting shield. For example, the very fact that we have to devise protective laws to prevent hardware and woollens from coming into the country, taken in con- nection with the fact that they could only come in because an increased quantity of something else — and what so likely as wheat ? — is sent out, is proof conclusive that the wheat is not in need of protection, and that the twenty- five cents a bushel upon it is either utterly purposeless, or imposed with intent to beguile somebody. But Protection does not depend upon beguiling its victims with anything so transparent as twenty-five cents a bushel on a product of which we export a large excess. It has another arrow in its quiver, with which it does far more deadly execu- tion. At those for whom it can gain nothing immedi- 198 THE HOME MARKET. 1 99 ately, and who might on that account be disposed to throw it off as a needless burden, it is always ready to fire the Home Market. The system that provides a Home Market undertakes to crown us with three blessings at once ; " one sure, if all the others fail." First, it keeps out our competitors. Second, it brings us customers. Third, it makes custom- ers of those who would otherwise be competitors, and prevents those who now buy of us from becoming rivals in the markets where we must sell. Is not that lovely, entirely ? What could be more desirable than a system which does these three things for us ? And yet, if we but trust the word of its advocates, the beatific system of protection does them all. It is only when we become ex- acting, and require something more in the way of testi- mony than the unsupported assertion of those advocates, that a doubt arises. And I may add, the more exacting we are, and the more testimony we examine, the less sub- stantial will these three claims appear ; the less service for the system will they be capable of doing. To establish this fact, is the object of the present chapter. Illustrations of the points here raised or controverted will naturally be taken from the farmer's calling ; for to that is the Home Market most applied. There are other industries whose products can be exported, to be sure ; but they differ essentially from farming by having their control in fewer hands. No combination of farmers to set prices, except for a short time, in a single market, is practicable ; to them, therefore, the privilege enjoyed by other industrials of exacting a higher price on articles sold within the country, than they can obtain from for- eigners for the same articles, is unattainable. It follows, then, by the strictest logic, from the uncontested principle that protection must be credited with bringing some im- 200 ECONOMIC AND INDUSTRIAL DELUSIONS. portant benefit to everybody whose votes are necessary to sustain it, that the Home Market must be the particular sort of benefit it brings the farmers. IN WHAT WAY FOREIGN COMPETITORS ARE KEPT OUT. High importance has been claimed for the work of the system in repressing competition in agricultural products. Farmers are themselves " protected." How thoroughly protected is shown in our latest tariff law, which not only continues on every product of the farm the liberal rate of tax allowed by previous laws, but on most products in- creases it ; is not that all that farmers could ask ? As the most important of these products belong either to the class of hay, requiring comparatively few miles of trans- portation to swallow up their entire value to the producer, or to that of cotton, meats, and wheat, largely exported and therefore safe in our markets without a duty, only the most zealous of Protectionists undertake to mislead the farmer with regard to the duties upon these — unless he lives along the Canadian border. The work of protection has to be cried up with redoubled emphasis on products less important ; but since the liberty is allowed, and always used, of proclaiming in trumpet-tones the tribute received by the farmer who raises these products, when he is present, and keeping silent as the grave about any such tribute when none is present but people who help to pay it, a good many votes, first and last, are scraped into the party fob in that way. Wool is chief among these lesser articles. The tariff increases the price of wool to the grower, by an amount which the wearer of woollen clothes, slumberer under woollen blankets, treader on woollen carpets, has to pay. For proof of this proposition, read that passage from any THE HOME MARKET. 201 speech advocating it, in which the " compensatory " duties on woollen fabrics are explained and defended. The cost to the consumer is in this case a good deal more than the producer receives ; but pass over that point for the present. Every farmer whose clip of wool is not larger than the whole consumption of his family, in the ways above mentioned and in others, must gain less than he loses by this tax alone. Of course when he considers the effect of the whole system of tariff taxation, in raising the price of his stoves, tools, railway-freights, and what not, he will find that he must own a very large flock indeed to make the account balance. That is to say, only the rich ones can possibly score a net gain, the poor ones are made poorer — truly a beautiful example of republican equality and fraternity ! I need not dwell longer on this theme, for the farmers most interested are beginning to see the facts as plainly as I do. The wool-tariff sensation is proving a failure, as I have already pointed out, in the one and only object of its being — to keep wool-growing States " solid for the party " ; and yet its contrivers dare not drop it, and fall in at the tail of the Cleveland proces- sion, for that would be confessing the incapacity of all the experienced statesmen whom they honor, to take a view so true, so broad, so patriotic, as one chosen, early and easily, by the " Buffalo sheriff " whom they scorn. The creature they have caught can be neither held nor released. Flax is naturally associated with wool. I have heard of great exploits in the culture of this plant, that were to be accomplished when it had adequate protection. If flax would not be raised here under trade absolutely free, the reason must be because a better and more profitable expenditure of our energy, a way by which we get more linen, is found in producing something else and sending it 202 ECONOMIC AND INDUSTRIAL DELUSIONS. abroad in exchange. I grant that legislation could make the alternative plan less profitable by such taxation as would prevent the producer from getting by it so much linen for the same work, just as a horse in a pasture-field could be made easier to catch by crippling him a little. Is protective taxation anything better than such another crippling of our own resources ? Then there are onions. Onions may be thought unim- portant, perhaps — but hear and heed. One of the recent master-strokes of the New York Tribune was to send out inquiries to several hundred farmers — searching inquiries, calculated to evoke the most candid of responses — as to the working of the tariff system in their behalf. I say unhesitatingly, sent them out ; far be it from me to insin- uate that it sent them from one editorial room to another, on no better ground than merely that such of the answers as found their way to the light looked as though they had been so obtained. The responses from this battalion of horny-handed followers of the plow (names and ad- dresses not furnished) were duly submitted to a com- mittee of staunch Protectionists — Warner Miller, I believe, was one, — and when reported on showed a unanimous conviction of the loveliness of tariff duties for the country generally and their own calling particularly. This piece of news our good Tribune (which would have been ready to announce a contrary state of things, we know with what faithful accuracy !) must have found welcome indeed. But there are spots even on the glorious sun, and this chorus of cultivating countrymen discovered one. Just one thing was needed to make our adorable tariff a thought more perfect, and that thing was a little higher protection on onions. Our own heedless eyes may have overlooked the momentous fact that there are onions, but there was an eye within whose sweeping vision no slighted vegetable THE HOME MARKET. 203 could rear its signal of distress in vain. McKinley saw, and acted. Imported onions must now pay forty cents a bushel, six or eight times the former duty. And yet, for some reason, the farmers have not been flocking under McKinley's banner quite as they should have flocked. Is the race irredeemably ungrateful ? Or can it be that their happiness was not after all so essentially bound up with onions as every reader of the Tribune believed ? I have known a few worthy farmers who were thrown into spasms of terror by the thought of free potatoes. It seems that while these edibles were under a protection of fifteen cents a bushel, our imports of them nevertheless, oftener than not, exceeded our exports. The statistics of this subject are easily accessible in government publica- tions. During an average of four years out of ten, im- ports and exports are about equal and both small, neither rising so high as one half per cent, of the year's crop, which is then a full one. For about four more years out of the ten the yield falls off, being then from 75 to 90 per cent, of a crop ; importations are then in excess, by an amount equal to about one per cent., or in rare cases as high as two per cent, of our consumption. Two seasons out of ten, perhaps, are peculiarly bad for potatoes ; in 1 88 1, for instance, there was barely 60 per cent, of a full yield, and not quite 70 per cent, in 1887. Following these reverses, importations rose to 8 per cent, and 6 per cent, respectively of the crops raised, or something above 4 per cent, of a full yield. The tariff of 1890 raised the duty to 25 per cent. ; but that also was an unfavorable year for potatoes, so that importations, far from ceasing, at once greatly increased under the new rate. But pota- toes, as we know, became scarcer and dearer. The Agri- cultural Department's figures go no farther than 1888, unfortunately. But the facts appear sufficient to justify 204 ECONOMIC AND INDUSTRIAL DELUSIONS. one or two general statements. We export about as much as we import during the full years, so that the duty is then without effect on the price. There are no importa- tions of potatoes worth speaking of, except when there is a scarcity with us, and the duty then protects by obstruct- ing the relief of this scarcity. So plain is this from the figures, that the amount of importation during a fiscal year can be calculated pretty closely when we know by how much the crop fell short of the full crop, being equal under the old duty to something like one twelfth of the deficiency. The effect of taking off the duty would probably be to make this fraction greater than one twelfth ; so that a scarcity of the potato crop would then be less distressing to the public. It is worth while to remember that the importations for full years are chiefly of a prod- uct that is strictly " non-competing " ; new potatoes from Bermuda, at a season when only the last year's yield is to be bought in this country. But the important points to bear in mind are that the duty on potatoes, as a general rule, only helps the potato-raisers when few of them have any to sell, and they, as a class, are consequently in a po- sition to get little help from it ; also, that the only way it can help them is by maintaining scarcity in the country, by depriving their fellow-citizens of a due share of food. I can think of few ways of making money that are meaner and more disgraceful than through a conspiracy to cut down the supply of food in the land, especially when I remember who it is that suffers by this — on what class the Irish potato-famines have fallen most heavily — and that no kind of food-supply has more importance to the very poor than potatoes. Any gain that comes from it is won by making the hungry hungrier. But a device that, like this protective machine, half the time brings the farmer exactly nothing in return for all it costs him, and when it THE HOME MARKET. 20$ raises the price of his product for him contrives to do so just when he has none to sell — may even, as has sometimes happened, be himself a buyer — is, in the words of the French philosopher, "worse than a crime ; it is ablunder." SCARCITY, SURPLUS, AND PRICES OF STAPLES. In the reports of the Agricultural Department, where the facts with regard to the production of our principal staples are to be sought, the " total production " and the " total value of crop " occupy adjoining columns. One of the most interesting observations to be made, in compar- ing the two sets of figures, is that they show no regular tendency to vary in the same direction ; when the yield increases, the total value of the crop not only does not increase, as a rule, but is very apt to fall off — the dimin- ished rate per bushel having more effect to depreciate than the larger crop to advance the value. The corn crop of 1889, for example, is set down as less valuable than any since 1879, and yet it was the largest ever raised in the country. The price of wheat is much less sensitive, so that in that staple we are much less likely to see greatly increased yields accompanied by reduced total values ; and yet we can note such facts as that the yield of 1889 was one of our largest — being 18 per cent, advance on the year preceding, — while its total value was 1 1 per cent. less. We can say, in a general way, that although the country produces about double the corn, and double the wheat that it produced twenty years ago, the total value of the corn crop is the same that it was then, and that of the wheat crop has increased by less than 30 per cent. If the earlier figures give, as is altogether proba- ble, values in 80-cent dollars, we should acknowledge an increase of 25 per cent, in the value of the corn crop, and 206 ECONOMIC AND INDUSTRIAL DELUSIONS. 60 per cent, in that of wheat ; showing a falling off in value per bushel, even on gold prices. The decreased value accompanying increased yield, which is shown in some degree by other staples, is espe- cially notable in potatoes. The coincidence is so remark- 31 1.5 CO O rt ■§•§ Per Unit of Population. « V > 1 O . «a go 8 2 n « u i U u S " 1 „• 0. en X 3 MS " V Pttf] E 3 £m 1 WOT 1 % V in M U K • c p. "3 > O W M (J 1867 36.6 2.44 2.67 1868 37-4 2.25 —0.19 D 2.84 +0.17 — — 1869 38.2 1.88 —0.37 D 3-5i +0.67 — — 1870 39- 1 2.12 + 0.24 D 2.94 -0.57 — — — 1871 40.1 1.79 —0.33 D 3.00 +0.06 — — — 1872 41.2 1.65 —0.14 A 2.75 —0.25 — — — 1873 42.3 1-77 + 0.12 D 2.51 —0.24 — — — 1874 43-4 1.65 —0.12 A 2.44 —0.07 — — 1875 44.6 1.46 —0.19 D 3-74 + 1.30 — — 1876 45-8 1.83 + 0.37 D 2.72 — 1.02 O.OI3 0.070 + 0.057 + 0.068 1877 47.0 1.62 —0.21 D 3.62 + 0.90 O.OI6 O.OII —O.O05 —0.007 1878 48.3 1. 51 —0.1 1 A 2.57 -1.05 O.OI3 0.054 + 0.04I + 0.080 1879 49-5 1.60 +0.09 A 3-67 + 1.10 O.OI4 0.014 O.OOO —0.012 1880 50.8 1.60 0.00 3- 30 -0.37 O.OI3 0.043 + 0.030 + 0.019 1881 52.1 1.91 + 0.31 D 2.09 — 1. 21 O.OO8 0.169 + 0.l6l + 0.120 1882 53-4 1.78 —0.13 D 3.20 + I.II O.OO8 0.044 + O.O36 +0.028 1883 54-6 1. 61 —0.17 D 3.8l + 0.6I O.OIO 0.008 — O.0O2 —0.023 1884 55-9 1.35 —0.26 A 3-41 —O.4O 0.007 0.012 + 0.005 + O.OIO 1885 57-1 1-37 + 0.02 D 3-°6 -0.35 0.009 O.O34 + 0.025 + O.O39 1886 58.4 1-34 —0.03 A 2.88 —O.18 0.007 O.024 + O.OI7 + O.054 1887 59-6 1-54 + 0.20 D 2.25 —O.63 0.007 O.I39 + O.I32 + 0.I07 1888 60.8 1-34 —0.20 D 3-33 + I.08 0.008 O.OI5 + 0.007 + O.OI7 able that it has seemed worth while to prepare a table to show it in some detail. I have added also some account of the importations during the years for which I have collected the figures. The second column gives the population, approximately, as calculated for December; THE HOME MARKET. 207 in the tables accompanying Chapter III. it was given for June. The value of the potato crop, and the total annual product, are given on a per capita basis in the third and fifth columns ; so many dollars and so many bushels to each inhabitant. The fourth and sixth columns give differences from the year preceding ; increases being marked -f- and decreases — . Those for the value of the crop are followed by A or D, according as their sign agrees or disagrees with that of the corresponding product-differ- ences. The seventh and eighth columns show the frac- tion of a bushel exported and imported for each inhabitant. As the figures apply to " fiscal years " — latter half of one year and former half of the next following — and as it is evidently desirable to place opposite each annual yield its effect on the amount of imports, I have here denoted each fiscal year by its beginning rather than its close ; so that the importation here set down opposite 1881 will be found in the Report as for the "fiscal year 1882." In the last column, to compare with the excess of importations shown in the ninth, I have given one twelfth of the deficiency, the "' full crop " of potatoes being for this purpose esti- mated at 3.53 bushels per head. For example: in 1876, the crop was 2.72 bushels per head, or 0.81 short. One twelfth of this deficiency, or 0.068, is the amount set down. The resemblance between the last column and the one preceding it is sufficiently close to be quite suggestive. The letters added to the fourth column give us six agreements and fourteen disagreements, and thus indicate that, fourteen times out of twenty, an increased crop is fol- lowed by a diminished total value, and vice versa. The amount of this change of total value is approximately 16 cents per capita for every bushel per capita by which the year's crop is larger or smaller. In another calculation I 208 ECONOMIC AND INDUSTRIAL DELUSIONS. noted the percentage by which product and value respec- tively increased or lessened, in proceeding from year to year : and I thus found that for every one per cent, by which the crop varied, the total value varied about three tenths of one per cent, in the opposite direction. The price of a bushel therefore varied 1.3 per cent. Taking the increases and decreases as given directly by the official tables, two more changes between total values, 1879-80 and 1885-86, appeared as " disagreements," thus making sixteen out of twenty-one. It was preferred, however, in this as in other statistical calculations that have preceded it, to allow for the growth of the country in population before deducing anything from the figures. PRICES AS INFLUENCED BY THE EXCLUSIVE HOME MARKET. What is the use of the inquiry that has just been made, and what bearing has it on the question of Home Mar- kets? In the first place, it is well to have practical proof, clearly before the eye, of a principle which has received considerable attention from economists : that the price of a necessary article, in a limited market, not only increases as the supply diminishes, but increases more rapidly than the supply diminishes, so that diminution of the supply increases its total value in exchange. This principle is always used in practice by those who are able to form " Trusts " to control production. The advantage to them of limiting the product, and so gaining a larger return from less effort, is sufficiently obvious to make that their first endeavor ; and it is quite as obvious that everything that they thus gain is at the cost of the consumers, who have to pay higher for a smaller quantity. Is there not a suggestion in this of the expediency, from the consumer's point of view, of such legislation as will make less prac- THE HOME MARKET. 209 ticable the formation of these Trusts, and of repealing the legislation which promotes it? Is there not also an ex- planation of the fervid intensity of those who do not take the consumer's point of view, in advocacy of acts which so well serve their purpose, and their readiness " to make the worse appear the better reason " in enlisting other advocates ? In the second place, these statistics give a forcible indi- cation, to one who reflects upon them, of the necessity to him who produces a surplus, of an access to something beyond the home market. When the market is con- tracted, a product which is ten per cent, in excess of the ordinary figure will bring down prices decidedly more than ten per cent. When the market is enlarged, the sur- plus has a chance to flow off elsewhere — the stream can- not rise so high when there is no barrier. This is a fact which is now so well understood that even a Republican Administration dares not withstand it. But while the device of this Administration is to silence the over-pro- ducer by pretending to find him markets through treaties with countries which furnish little or no demand for his products, there are others who regard a fact which it stu- diously neglects, that no increased outflow of goods is to be had without arranging in some way for an increased inflow — that the laws which bar the one bar the other equally. I need not enlarge upon a point to which I have already given so much space. , The reason why there was so much difference in the sensitiveness shown by the values of the three staples we have considered, to the increased or diminished yield, is not far to seek. Of potatoes, as already shown, our ex- portations are small, and usually exceeded by our impor- tations. Of corn, we import practically none, and export about three per cent, of the crop. Of wheat the imports 14 2IO ECONOMIC AND INDUSTRIAL DELUSIONS. axe also inconsiderable, while the exports (including flour) amount to twenty-five per cent., more or less. The larger the part of a crop which finds a foreign market, the less its value fluctuates. We find greater constancy of price according as we approach free-trade conditions. ARE LAWS NEEDED TO SEND THE PRODUCER TO HIS BEST MARKET ? In the typical home-market plea, it is always elabo- rately .demonstrated to the farmer that the expense of transporting his products is a tax on their value of which he ought to be freed if possible, and that every additional sale he can make of them to neighbors is therefore so much clear gain. Here, as in a good many other parts of the protectionist case, we have a proposition that is sub- stantially true when other things are equal, assumed as true when other things are very far from equal. It is not denied that the producer does better for himself by selling in a market near by than in one at a remote distance, when there is no other difference between the two. But that case is exactly the one for which no legislation is necessary. The Long Island truck-farmer does not need legal interference to prevent him from taking his supplies past New York City to Newark or Trenton for market. But if our Solons were to step in and prevent his going beyond Brooklyn — not by disturbing his passage across, we will say, but by stopping him at the East River slips on his way back, and fining him one third of the value of what he brought in payment for his produce — would he be expected to thank them for their kind services in keeping him to a market on his own island, and saving him the expense of ferriage? Yet that is what Protection's " home market " does for the farmer. It provides him no additional purchasers, and only punishes him for selling THE HOME MARKET. 211 beyond the country's borders — thus enabling home dealers to punish him similarly when he sells within them. It is the custom, the policy, and the purpose of protec- tion to use phrases loosely ; hence it is necessary to stop awhile and consider what is really meant by a home market, considered as something advantageous to the producer. It is not an affair, as is heedlessly assumed, of political boundaries. The market that the producer wants, supposing the demand equally active everywhere, is the one he can reach over fewest obstacles ; or, as the obsta- cles are all measured by money, the one to which trans- portation is cheapest. To prove that establishing a manufacture in this country, which but for protection might have to be carried on in Liverpool or Glasgow, would be any economic advantage to the farmer, it would have to be shown that the cost of transporting his grain and other produce to the proposed site in this country is less than that of shipping it across the ocean ; and that, in the majority of cases, cannot be done. Ocean freights are low ; and when we consider the places where new manufactures must be planted, and their inaccessibility to the most of our farms, it is easy to see that there is gain for very few of our farmers in locating consumers there rather than in a British seaport. If the manufacture has to be started by general contribution, as by means of pro- tective taxation, the great bulk of our farmers have less interest in seeing it started by a New England riverside or near a Pennsylvania coal-field than in Liverpool. Some few farmers, of course, will have to furnish sup- plies for the new factory. But they are those living in the neighborhood, or connected therewith by some direct line of transportation ; the great body are ruled out of the competition precisely as if they were out of the country. 212 ECONOMIC AND INDUSTRIAL DELUSIONS. INSTANCE OF A COUNTRY NEIGHBORHOOD IN MARYLAND. The approved protectionist doctrine that, in balancing the welfare of different classes of our people, a part is weightier than the whole, is conspicuous in this home- market discussion. That the establishment of a factory in a farming neighborhood is capable of advancing the interest of the farmers close around it, in so far as it fur- nishes new demand for the food they produce, and of thus raising the selling value of farms, is a matter of frequent observation. That such establishment is promoted by protective duties, those who profit by the assumption always assume, but I have already proved that that as- sumption has no such basis in fact as they claim for it. Farmers are quite as much benefited by the establishment near them of manufactures to which our protective sys- tem is an oppression and a nuisance, as of those which are encouraged by it. But this is not the most important point, clear and cogent as it is. I must now show how small must be the number that could possibly profit in this way, even though we strained our conscience and gave the credit of it to protection. As an illustration, I take the country neighborhood with whose case I am especially familiar, Sandy Spring, in Maryland. It has fairly good farming land, but no mineral wealth, very scanty water-power, and no easy connection with any important market. The produce it sells is, therefore, necessarily from the farm — hay, wheat, corn, cattle, and some potatoes. So in the days while yet the tariff burden rested lightly on it, it is equally so now. Not that manufactures have never been tried in that neighborhood. There have been several such trials, but nothing has lasted except a few grist-mills and a bone- beating mill ; the success of the former being due of THE HOME MARKET. 213 course to the fact that their material is produced and their product consumed close around them, and that of the latter almost solely to the preference of the neigh- borhood farmers for a dealer on whose probity they could depend ; sad experience having taught them that there are others beside protectionist politicians who are ready to prey upon their profession, and that the fertilizers bought and brought from distant dealers are a fatally frail reed to lean on. Nor is there any deficiency in business enterprise or capacity, as the permanent success in the community of a fire-insurance company, a bank, and three turnpike-roads, in addition to many well-tilled farms, assures us. More than one of the sons of Sandy Spring, in Baltimore and other places not under the same stress of conditions as the old home, have made their names known in the business world. The fact is that whatever may be done by tariff laws for settlements dif- ferently situated, it is out of their power to bring any industry to Sandy Spring. Say what you please about their stimulating effect ; this all goes to the places ap- pointed for the industry by natural conditions. If the tariff were made yet more stringent, the protected indus- try would not diffuse itself. Raise it as high as possible, so high as completely to cut off foreign demand, and throw the producer of food-stuffs back entirely on the overstocked market in his own country ; still no place situated like Sandy Spring can get any " home market " ( out of it. There may perhaps be some additional fac- tories along the swift New England streams, in the heart of the coal districts, or in large cities ; some smelting- furnaces in the mountains of Pennsylvania or Alabama ; but nothing within its own reach. This country neighborhood demands our attention here, not on account of my warm individual interest 214 ECONOMIC AND INDUSTRIAL DELUSIONS. in it, but because it is in this respect a type of country neighborhoods generally. At least nineteen out of twenty of them are under similar conditions. In the midst of wide fiat prairies, in clearings of the primeval forest, in rich river-bottoms the farms are found, and the pro- tected industries are not. To those nineteen twentieths the account with the protective system is all debit, and there is no home market to offset it. But because to the remaining twentieth consumers are brought nearer and farms increased in value by the establishment of fac- tories (to which protection is sometimes a stimulus and sometimes an obstacle), all twenty twentieths are asked to burden themselves with the cost of the system. Revolt- ing as is the injustice of this, is not its absurdity even more glaring ? NONE BUT THE FARMER BENEFITED BY HOME MARKETS. It is to be noticed that this home-market sauce always appears as something intended strictly for geese, having no application to ganders. Whatever advantage the pro- ducer may be supposed to draw from consumers alleged to have been provided for him within the country, that advantage, it would naturally be inferred, belongs to miners of coal and ores, and growers of wool, equally with growers of wheat and beef ; but this natural inference ap- pears to be unfounded. Like the beast that has once tasted blood, and cares no more for food that has not cost a life, those that have been feeding on their fellow-citizens seem unwilling to consider other sources of gain ; and notwithstanding the demand for their coal and their ore or pig-iron, which by the accepted protectionist theory that system creates for them at their door, they cry out lustily that they are ruined by foreign cheap labor (in its THE HOME MARKET. 21 5 own country, of course), and refuse to be torn from the prey. We may go further yet. We are told that the farmer has an interest in the prosperity of those in other callings about him, on whom he depends for purchasers ; but so in an even greater degree has the manufacturer. A family needs nearly the same amount of farm produce, whether it is growing richer or poorer ; but with the man- ufactured goods that are not absolute necessities, there are greater fluctuations — a demand much keener when customers are prospering, much slacker when they are losing. If advancing the prosperity of manufacturers is good policy, would it not be even better policy to relieve the farmer of all his needless burdens, advance his pros- perity by bounties paid out of general taxation, and invite manufacturers and others to find their prosperity in his ; and if not, why not ? It has again and again been told us, from the days of Hamilton down, that this drawing of distinctions between one calling and another was all wrong, and that the interest of farmer and manufacturer was one; but when has it been proved that the latter, any more than the former, ought to be the one ? CUSTOMERS PREVENTED FROM BECOMING COMPETITORS. Besides shutting out foreign goods and bringing in new customers, protection is credited with relieving the farmer of ruinous competition from many of the customers he now has. Many laborers who are, with our industries diversified as at present, occupied at other things, would under free trade — so. we hear — be forced to take to the farms ; against such a multitude of competitors he could not sustain himself, and his lot would be worse than ever. This argument is usually joined with the preceding, and an alluring contrast drawn between the army of workmen 2l6 ECONOMIC AND INDUSTRIAL DELUSIONS. who are now purchasers of his products and the same army turned into rivals with him for the custom of a re- duced number of purchasers. Great rhetorical effects can be produced when the rhetorician is under no restrictions in stating his case. If we would have data to start with, there are two very distinct ways of arriving at a conclu- sion as to the effect of this increased competition. The first is to take somebody's guess for it ; the guess will be made by an interested party and will of course be as highly colored as the most eager lover of sensations could wish. The other is to throw on it all the light that expe- rience can give us, and square our conclusion with that. This way involves far more trouble and time, and its re- sults are far less sensational ; which sufficiently accounts for its unpopularity as compared with the first way. Nev- ertheless, I am unwilling altogether to disregard it. In 1880, of all industrially occupied in the United States, about 22 per cent, were engaged in manufactures and mining; farming, professional and personal services, trade and transportation, claiming the rest. But how many of our working population are employed in indus- tries that are really dependent on protection ? There have been various estimates, depending on the sustaining power ascribed to protection by those who make them. Some put the proportion as high as 1 5 per cent., others at about 5. In my view, the latter estimate is too high. To put at any such figure, nearly one fourth of the whole number at work in manufactures and mining, the number of workers that would be displaced by throwing their business open to free trade, is certainly a monstrous over- statement. Let us examine the matter a little more closely. Taking up the bulky volume which gives the census figures for population in 1880 (nothing more recent being yet available), we find, about the 750th page, some THE HOME MARKET. 2\J 130 occupations set down under the head of "manufac- turing, mechanical, and mining." The most numerously followed of these, by far, is that of carpenters ; the next, milliners and dressmakers. These employments are not protected ; neither the carpenter nor the dressmaker could be displaced by foreign competition. Adding to these, the boot- and shoe-makers, blacksmiths, tailors, painters and varnishers, masons and bricklayers, enginemen and firemen, butchers, printers and engravers, we have ten descriptions of workmen who could suffer little or nothing from free foreign competition. These ten occupations alone make up 9 per cent, of all industrials ; and when I add twenty or thirty others like them^or like my own, producing goods for export — I obtain a total of 12 per cent, to be deducted. Looking now at the remaining occupations, nearly ninety in number, employing 10 per cent, of the industrial population, which I have provision- ally set down as protected, the four most numerously followed are these : miners, cotton manufacturing, " iron and steel " machinists. Mining for the precious metals has no protection, for coal practically none ; we export considerable quantities of unbleached cottons, so that that branch of industry must be struck off from the dependent list ; and so many machinists would be needed among us, even if we imported all our machinery, that that occupation might quite as properly have been ex- cluded altogether. I have not gone further into details — so much here depends upon conjecture that it would be difficult to satisfy others of my results, even if I could satisfy myself. But I feel safe in saying that no candid examiner of the evidence, however protectively disposed, could put the class of employes in dependent occupa- tions — those who would run any serious risk of being thrown out if free trade were proclaimed to-morrow — at 218 ECONOMIC AND INDUSTRIAL DELUSIONS. any higher figure than one half of this last group of 10 per cent. I can imagine the possibility, of course, that a reasoning being might speak of any and every occupation as dependent on protection, if he has been dreaming of an industrial collapse to follow its abandonment, under which no work could be done or hired ; but I confine my- self for the present to people who do not take hysterical views. Accepting the last estimate, for the sake of argument, and rating our working population in 1891 at about 22,- 000,000, 5 per cent, would be 1,100,000. This will seem like a large number to be thrown upon our industrial sys- tem, in competition with farmers, carriers, the larger body of manufacturers who gain nothing from protection, and all the rest ; it would be easy, if we allowed ourselves to be swayed by guesswork, to picture all manner of fright- ful consequences. But if we stop to remember that this number is about that of two years' immigration to our shores from foreign lands — was decidedly surpassed in the years 1881 and 1882 — we can infer from actual experience how it would probably affect us. The same difficulties that we find in disposing of two years' supply of immi- grants we might reasonably expect to find in placing the laborers who would be thrown out by the abolition of protection, even adopting this inflated estimate : no greater. But that is not all. We must not neglect to consider, in its effect on this question, the stimulus that would be given to all our industries that produce goods for export, by increasing the purchasing power of their products sent abroad. For every laborer thrown out in the way spoken of a new one would be demanded in the industries thus rendered more profitable. Yet another point. No laborer is displaced by the mere fact that the product on which he is THE HOME MARKET. 219 engaged might be more advantageously purchased abroad. Before he can be disturbed, such purchase must be actu- ally made. To make it, there must have been sent or pledged some product of our country whose production would not otherwise have been called for — to provide which the displaced labor is needed. The question, there- fore, what is to become of the labor&rs thrown out of em- ployment is really no question at all. It is answered in the very conditions supposed to give rise to it, and I feel some surprise that any difficulty should ever have been found in so plain a matter. The demand for American labor is inherent in the American demand for products of labor, and cannot slacken unless we take to wanting fewer things — as we are certain not to do if we are going to get them cheaper. It is as idle to talk as though the nation of us had any choice between getting what we want by American and by foreign labor, as it is for each individual of us to debate whether it shall be his own work or some one's else that supports him. 1 What Americans use they 1 This is as suitable a. place as any to meet Dr. V. B. Denslow's claim " that the making of the article sought, in this country, employs, as com- pared with its importation from abroad, two domestic capitals and two sets of domestic laborers, instead of only one. . . . Supposing that, in both cases, we get the worth of our corn in iron, in the case of the imported iron we give employment only to the American labor that produces the corn, while in the case of the American iron, we give employment to the same amount of American labor in producing the corn, and to an equal amount in addition, in producing the iron " (pages 560, 572). This fallacy deserves a handsome refutation, because it is widespread, as well as time- worn ; but that is not difficult. 1. If it were the blessing Dr. Denslow regards it, for the government to " give employment" by restrictive legisla- tion, instead of leaving employment free, ought not his " Economic Philos- ophy " to vindicate compulsory labor on roads, ' ' pressed " seamen and drafted armies ? 2. He forgets that exchange has two sides. Taking his supposed alternative of American and foreign iron, to be procured by producing American corn, he fails to see that the foreign iron-producer, who is in the one case a purchaser of American corn, must in the other obtain his com 220 ECONOMIC AND INDUSTRIAL DELUSIONS. must get, directly or indirectly, from American labor — or, as I have already suggested, from American stealing. The invention, therefore, of a stress on the labor market, to follow from any cause not involving the consumption of fewer things here, is a simple bugbear. It can alarm the unreflecting only. POLICY OF HIRING PEOPLE NOT TO COMPETE. As a practical question, the form in which we ought to consider the appeal to keep other producers from becoming competitors by "protecting" them in a different business, is that very aptly given it by Professor Sumner : " How much can a business man afford to pay people for not competing with him ? " " There you have it, plain and fiat." The loss that the farmer will suffer by having others come into competition with him, if a real thing, is something capable of expression in definite dollars and cents : if somebody will so express it, now, we can answer Professor Sumner's question, and can also calculate whether the amount balances the cost of protection's home market to the farmer. Hiring people not to compete, I admit, is a thing that is sometimes done. One of the courses a Trust is most likely to follow, after it has got the whole, country's pro- duction of an article in its grip, is to pay some of its members for lying idle, so that the price may not be brought down by an over-supply. Our Wood-Screw elsewhere. 3. He fails also to see that the supposed second American must have corn, and must have it from American labor, wherever the first gets his iron. If the iron is purchased abroad, " an equal amount in addition " of home labor must be expended to meet this additional demand. Dr. Denslow's policy, therefore, calls merely for a diversion of so much American industry from corn-producing to iron-producing, and no real addition. Does he affect to doubt that home demand plus foreign demand gives more employment in corn-producing than home demand alone ? THE HOME MARKET. 221 Trust, we are assured, has for some time paid an allow- ance to large producers in Birmingham, in order to keep them from entering the United States market. This Trust has always had a high duty to protect it (from which Major McKinley felt himself compelled, by the complaints it had aroused, to pare off a ludicrously thin shaving in his new tariff), and that, in spite of the disad- vantage thus thrown upon the British, they were able to threaten our Trust so far as to bring it to terms of that kind, is not very easy to believe ; nor would I believe it, but that our Trusts actually do things of very nearly that sort, and yet make money. When a dealer is bought out of business his "good-will" is usually included in the purchase; so that he, too, is paid not to compete. But please take note of the trait in common that these cases have. The man who is induced to refrain has in each of them some special advantage in the competition — a better market to buy his material in, or skill and long experience. No man of business would think of making such an invest- ment as to buy off a man who was not equipped with some advantage of that kind. The competitors whose abstinence the farmer is recom- mended to purchase by the payment of high protective du- ties, are of quite another description. They are hands that, however highly skilled at the business they have learned, are necessarily green at his ; and against them he would himself enjoy every advantage in competition. Does not that very circumstance insure him the probability— the certainty, in fact — that the manufacturers and workmen who might here and there be driven from an employment made unprofitable by free trade, would not come to trouble him as rivals ? Never ; they would seek uses for their mechanical skill in other directions — and, as I have already shown, could not fail to find them. 222 ECONOMIC AND INDUSTRIAL DELUSIONS. If hiring men not to become our competitors is in most cases a poor investment, what shall be said of hiring men to compete with us ? Our wheat-growing farmer may be doing just that when he maintains a tariff on raw wool. One of my correspondents writes to me from Paraguay that the wool-growers of that region, who would have re- mained wool-growers if our country had consented to buy their product, are now turning their attention and capital to wheat, and preparing to compete with our own wheat- raisers for the English trade. Is it for such a result as that that we bend beneath the burden of costly clothing ? TRUST TO COMMON-SENSE. In meeting these three home-market arguments, I think I have disposed of the whole case for protection, so far as it touches agricultural interests, and thrown back the question upon the principles set forth in the fore- going chapters ; where I am well content to leave it. The one word of caution that has to be addressed to the farmer, as to the day-laborer, and to every one whom pro- tection's agents flatter with the pretence that he is the bright particular object of their unflagging solicitude, is the same that is needed by those in danger of falling a prey to confidence-operators in other lines : hold fast to plain sound common-sense. Is it in the least likely that the operators, seeing a way in which money can be made by their scheme, would really give it away to others in- stead of grasping it for their own? If they are able to confuse you on this tariff question — as in a " bunco " or "green-goods" speculation — it is for the purpose of defrauding you. If they know more about it than you do, their knowledge is not going to bring you any benefit that they can possibly keep for themselves. CHAPTER VIII. THE IDEAL " REVENUE WITH INCIDENTAL PROTECTION." NOT infrequently we find champions of our tariff laws who are contemplating, not something in real tangible existence, but some airy creation of their own minds, and they appear to argue from the fact that there is no jar in the running of the machinery their fancy has con- trived, all being orderly and harmonious there, that some such desirable state of things must exist in reality. One of my most valued friends used to show this bent. He was a man of strong intelligence, broad views, high princi- ple, keen interest in public affairs ; yet his leading argu- ment for protective duties (next to the association of them in his mind with his political paragon, Clay) ran about as follows : " The government must collect the greater part of its necessary revenues indirectly ; there is no use in advocating any other plan, for the people would not submit to it — would certainly feel it more of a burden, whatever the truth might be. Now, in levying this indirect tax, is it not better to adjust it in such a way as to encourage some domestic enterprise, than to make it a tax and nothing else ? " Where a piece of machinery that could do but one kind of work at once, is advertised to do two kinds, somebody is likely to be cheated in it. The man who expects to support the gov- ernment by a tax that has any real efficiency for protec- tion, and the one who looks for effective protection to a 223 224 ECONOMIC AND INDUSTRIAL DELUSIONS. tax that brings in any considerable revenue, are alike destined to disappointment, because the proposed ends are incompatible. 1 It is needless to explain that the chief use of arguments of this kind is in the hands of the people who propose a duty, and seek votes in its favor from each of two very different groups — of those want- ing a tariff for revenue, and of those wanting a tariff for protection — each being led to find in the proposed duty the effect it especially wants. Nor need I repeat the proof that encouragements of this kind usually do less to advance than to repress domestic enterprise. The 1 Again I am conscious of having stated a principle which Dr. V. B. Denslow has " demolished." But Dr. Denslow must not be discouraged if he encounters considerable vitality in the principles of political economy, even after his demolition of them — his proofs that Astronomy is misled, and " the Sun do move." He appears to infer that a revenue duty may be also protective, from the fact that large revenues have been collected under tariffs intended to protect, and from his discovery that ' ' the foreign producer pays." That discovery is established, it seems, by its author's ability (i) to sow strife among his adversaries, showing that according to some the whole duty is paid by farmers, and to others 97 per cent, of it by manufacturers ; (2) to speak of "the same product" as being exported and imported, wherever the Treasury reports show exports and imports under the same heading. For example, he infers from our large export of breadstuffs that the Canadians must pay all the duty on the barley we import — edible grains generally being counted in his statistics as breadstuffs. Similarly, our export of cotton and iron manufactures seems to convince him that our producers fix the price of all such manufactures, and that any foreign maker of any cotton or iron product must pay our duty if he sends it to us. What induces a foreigner to sell to us at such a sacrifice, when he might get the same price as we in the country to which we export, this "economic philosopher" fails to show. For such irrelevancies a mere statement is surely sufficient. I shall consider the question " Who pays?" in my next chapter. The point that is here significant is that no protection to home production could come from any duty the foreigner might pay, any more than from that paid by ourselves. Protection arises from the duty that is not paid at all, as a duty. So far as importations take place, whoever bears the cost of them, so far the duty fails to be protective. "revenue with incidental protection." 225 point I wish here to bring out is that such arguments relate to a fancied tariff which works just as it is planned to work, and which can be made surpassingly effective by simply making the plan sufficiently comprehensive ; to things which some conceivable tariff might do, rather than those which any actual tariff is likely to do. This argument, which had so much weight with my friend, but which is, after all, more suggestive of an ex- hortation to dull the edges of our chisels, in order to make them serve at the same time as screw-drivers, than of a clear comprehension of the problem of Ways and Means — this argument, in some form, is constantly com- ing up in tariff discussion. It is at the bottom, I believe, of the declaration which the straddling phrasemongers who concoct our platforms have made so familiar : " We desire a tariff for Revenue with Incidental Protection." DISTINCTION BETWEEN REVENUE AND PROTECTIVE TARIFFS. A defence of protection is often based on the value to our government of the income from import duties ; that is to say, simply commends getting hold of a large amount of money by taxation with only accidental refer- ence to the mode of getting ; and, so far as it bears on tariffs, tends to favor their revenue rather than their pro- tective uses. Such are the pleas for a scheme of coast defences, for a large navy, for liberal harbor and river expenditure, for national aid to education in illiterate States, for profuse pensions. It forms no necessary part of the present study of tariffs to give an opinion as to the propriety or impropriety of these various ends. They agree, certainly, in demanding a great deal of money to carry them out, which in turn necessitates high taxation of some kind. Direct taxes, or stamp duties, or income 15 226 ECONOMIC AND INDUSTRIAL DELUSIONS. rates, or internal taxes, could supply the need as well as import duties; but so far as we depend on the last source we have to provide against keeping goods out, aiming rather to bring in as many as possible, so as to have a large revenue. The promoters of high taxation are always very ready to sing the praises of the incidental protection which their impost brings with it, but that protection marks its failure, not its efficiency, as a revenue instrument. It is often carelessly said, for instance, that our protec- . tive tariff gave credit and strength to the nation when credit and strength were so much needed, thirty years ago. I am in no way concerned to deny the use — even the absolute necessity — pf the war duties while the war continued. They were advocated, were voted, were maintained by many who had been staunch free-traders before the necessity for high taxation arose ; by many who have been most vigorous in demanding a mitiga- tion of their abuses now that the necessity has passed. Most conspicuous among these we find Lincoln's first and his last choice for head of the national Treasury. The fact is that the duties gave support to the govern- ment, only so far as they failed to protect domestic industries. The two objects for which imports are taxed, to bring revenue to the taxing power and to dis- courage importation, are either incompatible or always in interference with each other. For the former purpose large importations are demanded, while these defeat the latter. Perfect protection gives the domestic producer complete control of the market by the stoppage of all importation of the duty-protected product ; but this brings no income, and hence no strength of any kind, to the government. The distinction is such a plain one, that it would have seemed superfluous to mention, but for the fact that the high-tariff advocates have made •'REVENUE WITB INCIDENTAL PROTECTION." 22? this necessary, by. ascribing to protective duties such service as could only have been done by duties not protective, and ceased when the duties became protec- tive ; as, after the lowering of prices through abatement of extravagant war-expenses, accession of an army of workers to the productive industries, establishment of new transportation lines, and improvement of methods by new inventions, could not fail to occur. A duty of twenty cents, for example, on an article costing a dol- lar to produce, may amount to less than the home manufacturer requires to balance his dearer materials, and be therefore a revenue duty ; while the same duty, when cost of production has fallen to thirty cents, gives the home producers a monopoly. It may be pointed out in passing, that instances of this kind, of which there are many in our business history since the first Morrill tariff — particularly in the iron-ware trade — form an objection to large import duties as means of raising revenue which has no small weight with thoughtful minds. The same rate on which gov- ernment to-day depends for support, and which brings in an ample revenue, may to-morrow fail to yield anything, thus compelling it to levy some new tax. However care- fully tariff rates are adjusted to the conditions now obtain- ing, the changes of a few years will inevitably derange the adjustment, and necessitate another overhauling of the schedules. What an unsettling this gives to all business — how unfavorable the comparison with taxes under which " incidental protection " is not sought — I need not stop to show. NECESSITY FOR A REVENUE TARIFF. So far ahead as we can now see, the support of our government must continue to depend principally on im- port duties, in any event. The income tax, so much used 228 ECONOMIC AND INDUSTRIAL DELUSIONS. in England, has not proved successful here. Its inquisi- torial character makes it objectionable to some ; the facility and frequency with which it can be evaded, to others. No tax which gives impunity to dishonesty, and redoubled burdens to the honest, can ever be generally acceptable. The excise, or tax on domestic productions, has proved an uncertain reliance with us ; it has already been shorn from everything but alcoholic liquors and tobacco, every revision of the tariff has made another cut in it, and a further reduction seems, in the absence of any decided movement to sustain it, much more probable than any increase. Stamp imposts are apt to be more productive of annoyances than of revenue. Direct taxa- tion is not forbidden, but is certainly gravely discouraged, by the provision of the Constitution which requires that it be levied on the States in proportion to population. No one would believe such an apportionment equitable, and this objection — were there no others — would suffice to defeat it. A direct tax, levied on some kind of property that could not escape the assessor, proportioned to the net productive capacity of that property and not to the num- ber of inhabitants, might be secured by the cumbrous process of Constitutional amendment, and would have manifest advantages. Direct taxes are less wasteful, because less easily shirked, and partly because those of whom they are collected are usually the ones who finally sustain them ; the indirect class diminish sales of articles by increasing the price, and so force the dealer to exact higher profits, in order to give him the percentage neces- sary to keep him in business. Direct taxes are fairer ; taxes on consumption bear proportionally more heavily on the poor. The amount of clothes a family needs is not at all in proportion to its wealth. The case is made "REVENUE WITH INCIDENTAL PROTECTION." 220, worse by the practice of levying duties on a specific rather than an ad valorem basis ; for thus the buyer of lower-priced goods is made to pay a larger proportion of their value than the buyer of costly goods. The very objections most often made against direct taxes, that the payer is more keenly conscious of them, and that his convenience is not consulted in the time of paying, as when the tax is lumped with the cost of his purchased supplies, are not objections unmixed ; for constituents are thus led to hold the legislator to stricter account, and to restrain him more effectively from squandering their resources. All these considerations have been ably urged by my friend Henry George, with the earnestness, tact, good sense, and sterling patriotism that he carries into everything he takes hold of ; and although too conscious of the difficulties attend- ing the practical introduction of his measures for direct taxation, to anticipate their speedy adoption, I cannot deny the force of his argument. Facts being as facts are, however, I can only look, with the great majority of my countrymen, to duties on im- ports as the source from which our general government is to draw its chief supplies, at all events for many years to come. The point where a difference from many of my fellow-countrymen arises, is that they look upon it as a triumph of legislative contrivance if the duties fail to yield revenue in consequence of a production in this country, under economic disadvantages, of the articles on which they are levied, so that the imposition of a greater number of such duties is necessitated ; while in my view every additional tax is an additional evil, and no interfer- ence by government with the normal course of business can bring a net balance of benefit. By choosing luxuries for taxation, so far as we can, and fixing the rates so low that they will not defeat their object by putting a stop to 23O ECONOMIC AND INDUSTRIAL DELUSIONS. importations, we may reduce to a minimum the neces- sary evils of this mode of collecting a revenue. MINOR MOTIVES FOR HIGH TAXATION. As I have said, the question of the desirability of the various expenditures of money, which may be advocated on account of the high taxation they require, is not one which necessarily comes up in a discussion of the case for protection. But neither is it altogether to be avoided, and I have no disposition to step out of its way. Op- posed as are the interests of revenue and protection, it is not always easy to decide, in regard to a particular duty, which interest it was imposed to advance ; it may often happen, then, that it is advocated for one purpose and really serves the other. This uncertainty is a " sweet boon " to those statesmen who seek either protection to influential constituents in the guise of revenue duties, or else access to a great deal of money under cover of pro- tection to home industries. Certain it is, whatever the explanation, that the same men are usually advocates of liberal expenditures and of protective taxation. It seems therefore worth while to look briefly into the undertakings chiefly advised, and see whether or not their claims to huge appropriations of money are well founded. i. Coast Defences and War Vessels. — Because we should be compelled, if in danger of an immediate attack, to turn our energies with great vigor into these directions, I do not conclude that it is advisable to make such prepara- tions now. In the first place, the risk from their neglect is much exaggerated. The rapid growth of an efficient navy in our civil war, out of very promiscuous material, was observed by other nations, and our ability to get up a similar one again will be a factor in the problem which ''REVENUE WITH INCIDENTAL PROTECTION." 23I none of them, however mettlesome or hostile, will venture to neglect. Even if it be true that any one of many European powers could " lay under contribution " one of our coast cities before we could prepare to drive away its fleet, it does not follow that it will avail itself of the opportunity, knowing as it would what a reckoning it would have to meet — how certain we should be to retali- ate, after we had set to work to provide ourselves with the means of enforcing our claims. Those to whom this view will appear fanciful are the unreflecting ones who have not discovered that the security of the individual citizen who puts himself in the power of a foreign coun- try by crossing its borders, is of exactly the kind I have described. In the second place, as has often been shown, improvement in war ships and means of defence is so rapid in these days of invention, that the preparation quite suitable for repelling an attack made this year would be sure to be antiquated a few years hence. So that the proposed defence is confessedly insufficient, against any but the most imminent perils. More important reasons for declining to arm ourselves with a view to hostilities, I have already given, in declaring my firm belief that if we wish peace we ought to prepare for peace. 2. Subsidies to Merchant Vessels.— Expenditures in this way, I am willing to admit, might under certain imagina- ble circumstances be expedient. But their small power to advance any end more important than the personal comfort of the individuals to whom they are paid, has already been amply shown, and the absurdity of using such feeble means for restoring a carrying trade that we have so long used and continue to use such vigorous means for repressing, scarcely needs further exposure. . 3. Harbor and River Improvements. — The battle over the principle of these has lasted long, and no sign of a 232 ECONOMIC AND INDUSTRIAL DELUSIONS. truce is in sight. The strongest plea for them, supposing their eventual utility conceded, appears to be that the preponderance of gain over cost is often — if not usually — too far in the future to tempt private capital, though cer- tain enough to warrant investment by somebody, and too important to be overlooked or neglected. Theoretical decisions on such points are perhaps difficult for us to reach, in perfect security, but it is not difficult to judge such " river and harbor bills " as have passed our Congress in the last twenty years. A few enterprises of the char- acter just set forth — important to the commerce of the country generally, and destined after some years to pay more than their cost, but involving so much expense in proportion to immediate gain that no private company could be induced to undertake them — along with a great many schemes bearing a superficial resemblance to these, but intended for no better purpose than, by spending public money in some particular Congressman's district, to secure the aid of such of his constituents as are to be influenced by petty bribes of the kind, in promoting the return to our great council of a member so " useful." With regard to these expenditures, since we have not alone to consider what they might theoretically be if studied out and resolved on impartially, but what shape they are to assume in passing through our Houses of Congress, our conclusion should be, I think, that they have not such importance as to call for high taxation to provide for them. 4. National Aids to Education. — Public schools through- out our territory, supported from a general fund, are one of the institutions of which our republic is proudest. They are not something that was " struck off at one time by the brain and purpose of man," but have grown up out of conditions very different from those now obtaining. "REVENUE WITH INCIDENTAL PROTECTION." 233 The Hebrews have always been zealous educators. The central feature of their faith being a Sacred Book, instead of a living priesthood, missionary effort was naturally spent in breaking down barriers between believer and Book, and the knowledge of letters acquired a religious character far transcending mere utility. The Protestant Reformation was in many ways a turning back to the Hebrew ideal, from one that had become widely different. Those who first settled and stamped their character upon the New England colonies, Protestants of the Protestants, were noted in many ways for the attraction by which they were drawn to Hebrew models ; and the system of common schools which they devised, after which those of our whole country have been patterned, was thus un- doubtedly in its origin a feature of the theocracy in which they sought their ideal government. The State school was a necessary part of the State religion. At present, although the religious character and mission of school education are no longer insisted on, and must under a government based on our Federal Constitution be even disavowed, there is a great deal of the early crusader spirit in the measures chosen for advancing it, and this zeal has certainly need to be tempered with a little cal- culation. The universally admitted value of schools planned, founded, supported, and governed by the com- munities that receive benefit from them, does not attach to schools under patronage of a remote power, supported by money which the people among whom it is spent have had no especial part in raising, responsible to an authority far outside the community itself. Little progress is pos- sible where no grievance can be corrected, no improve- ment made in a public building even, without a special mission from Eastern Siberia to St. Petersburg and back. So, though the lover of his country rejoices in every new 234 ECONOMIC AND INDUSTRIAL DELUSIONS. evidence that reaches him, of the popularity of common schools on the New England plan, the project of scatter- ing $77,000,000 of our money to promote them in places that the spontaneous movement has not reached, is less suggestive of blessings than of " river and harbor bill " abuses. THE NATION'S DEBT TO THE SOLDIER.' Most important among the uses for which a large revenue is desired, are pensions to our veterans and their representatives. After giving us a reconstructed Union, no more sacred duty was thrown upon our legislators than to provide for the disabled among those who had preserved it ; " to bind the nation's wounds, to care for him who shall have borne the battle, and for his widow and orphan." Not that a government has gratitude, or can be expected to be swayed by such considerations as give rise to gratitude in its individual citizens, but from the necessary conditions of its existence. There can be no question, the first duty of a government is to survive, whatever functions, narrow or extensive, it exercises after its survival is assured ; and if, in order for this, it becomes necessary to call on a citizen to risk limb and life in its behalf, that citizen ought to be insured against what would be the bitterest part of his sacrifice, the feeling that his patriotic service may make him a helpless burden on charitable neighbors, or deprive his family of all sup- 1 After the few paragraphs under this head had been given to the printer, the author had the pleasure of reading an essay on ' ' Pensions and Social- ism, " by W. M . Sloane, Professor in Princeton. In that essay he found, not only his own argument anticipated — almost to the very details — but a weighty warning added : that every plea for pensions, when logically followed up, led straight to Socialism. Perfectly true, and ably proved ; but of what piece of protective legislation could not the same truth be shown ? "REVENUE WITH INCIDENTAL PROTECTION." 235 port. Such an insurance the government constructively undertakes for every volunteer in its defence. Govern- ments can be bound only by contracts, the nature of which should be clearly borne in mind by all concerned. Whatever feeling of gratitude toward our veterans may be felt by private citizens who are capable of gratitude, the governmental machine incurs no obligations except under such implied contract ; none until the one seeking benefit from it has undertaken to prove that a disability exists, and was incurred in the government's service. The reason for the existence of any obligation at all, lies in the necessity of assuring the government that it shall find defenders in future emergencies, by guaranties of security against the most grievous consequences of suffer- ing in its service. To my mind there is grave error, and even real danger, in the belief that the government owes any citizen anything, except under terms of a contract, express or plainly implied. It is unfortunate in its effect on the beneficiaries them- selves. There are few indeed among mortals to whom the prospect or possibility of getting some good thing on any terms except explicitly earning it, proves otherwise than demoralizing. All exemplifications of this trait of human nature may not be so disgraceful as the scenes at the " opening " of a new tract of land under the provi- sions of the Homestead Law, or those at the Washington Department buildings after the installation of a new Administration, but it is clear that even the best of us are not to be trusted with the hope of receiving a gratuity by Executive favor or Congressional vote. There is no disrespect toward pur veteran soldiers, therefore, in declining to expose them to the temptation. It is yet worse in its effect on the legislator. When no limit is set on his expenditure of public money, he is too 236 ECONOMIC AND INDUSTRIAL DELUSIONS. often led to make it a matter of favoritism, and regulate the bestowal of his favors by the effect he foresees in them, on his prospect of re-election. The chase after the " soldier vote " that our Congress has almost every ses- sion indulged in — one party striving to go farther than the other would dare to accompany it, in spending the money of which all were trustees, the other terrified into joining in every extravagance by the dread of being left behind, is one of the least gratifying pages of our recent history. Our last President did what he could to moder- ate that scandal ; and though he lost his own re-election by it, it will hereafter be acknowledged that he was in nothing more conscientious, in nothing did he better earn the gratitude of his country, and, I hesitate not to add, of the disabled soldiers themselves, than by his careful scrutiny and criticism of pension bills. It is subversive of the proper functions of a government. We should not, I am willing to admit, be too dogmatic as to what those proper functions are. Many able thinkers have held the belief that government has no right to any other function than that of seeing that the equal rights of the citizen are nowhere transgressed, and " whatsoever is more than this cometh of evil." I have not space to set forth the ways wherein I find the assumed grounds of their belief to be supposititious and unsound ; but I am as ready as any one can be to maintain that where we have no light from experience as to the practical working of a measure the activity of government should be limited rather than amplified. Again to quote from Grover Cleveland, " The people should support the government,but the government should not support the people." If any other ways are open for the expression of the pity, generosity, and gratitude of the citizen, he should not have recourse to so clumsy and wasteful an agency for the purpose as government. "REVENUE WITH INCIDENTAL PROTECTION." 2tf Very many points have been omitted from this hasty survey of the subject. I am unwilling to deal otherwise than very gently with the old soldier, however wild the din in my ears about some huge sum that the taxpayers are alleged yet to owe him for his work of three decades ago ; for I cannot deny that a pension list of a hundred millions a year, even though it be kept up for fifty years, were no extravagant price to pay for the blessings of an assured Union and emancipated labor. But he can hardly expect me to give him that unapproached and altogether exceptional rank among those deserving well of the com- munity, implied in the speeches of those who are active in promoting pension bills ; there are others who, without the stimulus of so exciting a motive, have served it faith- fully, and even risked safety and life in its behalf. In their measure, firemen, police-officers, enginemen, and employes on the life-saving service might prefer a modest though securely founded claim to a similar largess. Perhaps, if they had a " vote " known by the name of their class, they might receive one ; who knows ? Nor can I be expected to see what I have seen of the petty frauds with which the working of our pension system is pervaded, without feeling a little disgust at the whole business — outside of the clear cases where the pensioner has been undeniably maimed in the nation's service. It is when there is no room for suspicion or misrepresenta- tion or any form of swindling that the pension it pays is a credit to the government — that its list of pensioners becomes truly a " Roll of Honor." GRATUITIES TO OWNERS OF SILVER MINES. As experience has shown, our national resources can be very acceptably squandered in serving the silver " com- bine." This coterie of exploiters of " American industry " 238 ECONOMIC AND INDUSTRIAL DELUSIONS. is not in any situation to get a bounty out of the custom- ary work of our legislators in providing larger profits for our capitalists ; were an import duty levied on silver or silver ore it would help them not a whit, for we normally export, after satisfying the entire home demand, a large excess of that metal. If, therefore, these capitalists are to have equal opportunities with others for receiving more than they earn, it must be through the more precarious channel of specially allotted bounties ; and since it is nec- essary for all who would use the aid of our laws to increase the prices of their products to win the privilege by misrepresentations, these beneficiaries of legislative partiality must surpass all in the vigor and boldness with which they pervert the truth if they would succeed in wheedling their bounty from their victims. They are quite equal to their task, as their past success and the impudence of propositions they are now making plainly show. Particularly when a secretary of the nation's treasury is not ashamed to lend his official influence to their service, a discussion of avoidable government expenditure which takes no account of these worthies is indeed incomplete. If there exists an enterprise that should be permitted to stand on its own bottom, one would naturally believe it to be that of production of the so-called precious metals. Those so engaged are apt to be persons of large resources, to whom payments in the way of charity are inappro- priate. Their earnings are usually sufficient to support them, and they are not persons who have deserved extra- ordinarily of their fellow-citizens by any public service. Nor is their work one that has any special claim for encourage- ment at the expense of otherproductive industries ; not only is our production — of silver, at all events — in considerable excess of home demands, but this industry is of a kind espe- "REVENUE WITH INCIDENTAL PROTECTION." 239 cially attractive for those prone to speculation, who form a number large enough to insure it ample attention. No rea- son can be given for especially favoring them with bounties at the public charge, and yet that purpose holds its conspicuous place among those for which taxes are kept high and living kept dear. For many readers, the fact that the Compulsory Coin- age Act of 1878 and its successor of 1890 are essentially provisions granting a bounty to silver-mine owners by artificially increasing the demand for their metal, were originally passed, and are still kept on the statute-book for that object, may yet stand in need of proof. As part of the proof I have, I may mention first, the well-known greedy eagerness of all of the silver men, and those associated with them as dependents or attorneys, in push- ing this kind of legislation. Next, the undeniable fact that no such legislation was proposed until some capital- ist was in a position to make a handsome profit out of it. But principally, the hopeless collapse of all other explanations. The subject will be more fully examined in another chapter, where the ills to be anticipated from the " free coinage " job, and the injury that our insane pandering to this worst and most demoralizing form of protection-grabbing has already done us, can have more nearly the degree of attention their importance demands. But there is another point Worth noting in this connec- tion : for the sake of enabling the mine owners to lay by (or support a lobby with) more money than they earn. the cost of fifty-four million ounces of silver per year is not the only burden thrown upon our people. As has been well shown, it is in a great degree because we insist on paying this gratuity without sacrificing to it our national credit, that the large surplus in our treasury is required. As long as the gratuity is exacted and paid, 240 ECONOMIC AND INDUSTRIAL DELUSIONS. no financier can fail to see in it an insidious undermining of the public credit, and this credit is only assured against the cruel and unusual strain by the collection of a large sum in taxes otherwise unnecessary. Recourse is thus had to one abuse in order to maintain another. No cure can be found for this unhealthy state of the national finances until our people adopt the obvious ex- pedient of choosing representatives who will not put the interests of the silver beggars above those of their own constituents. In the meantime the Treasury might do some little toward the establishment of sound ideas by the statement of truth in place of fiction in its reports. The fancy of many who ought to have learned better is tickled by the statement that when so many dollars cost- ing seventy-five cents each have been coined, there have been so many times twenty-five cents " profits of coin- age." They argue that it is a right shrewd thing to make so much profits, and that we should be shrewder if we made more. In simple truth, the government not only makes no profit whatever, but can make none except through a partial repudiation — certainly none while gold continues to be money in this country. By recognizing the indu- bitable fact that the coin circulates as a dollar only because the remaining twenty-five cents are accepted as a note for which the government has pledged payment— has guar- anteed gold value — the Treasury reports would become sources of light rather than of deeper darkness. The government has in reality lost, and lost heavily, by its coinage of silver dollars since 1878. To bring it in any profit, its dollars ought to be worth more now than they were when bought. In fact, the value of silver has been steadily falling ; and the defect of value in each coin, which the government is bound to make up or go for so much into bankruptcy, has been as steadily growing. "REVENUE WITH INCIDENTAL PROTECTION." 24 1 A COMMON INJUSTICE IN ALL UNNECESSARY EXPENDITURE. These six ways of spending the public money are not equally bad. Strong as are my individual prepossessions against the first of them, only the last, perhaps, is com- pletely indefensible ; while that preceding it (in liberal pensions to disabled veterans) has always proved particu- larly attractive to the most generous of nations. There is this resemblance about the whole group, however, in addition to the essential feature of calling for high taxa- tion, that all agree in stretching the functions of the national government to a doubtful extent. As already said, I am not disposed to draw hard-and-fast lines as to the proper functions of government ; it simply seems to me advisable to be very cautious about stretching them. Another point of agreement about the various schemes has even higher importance. There is a radical, inherent injustice in levying taxes on a part of the community, the benefits of which taxes are to go to some other part ; and the claims of justice in the matter deserve far more attention than is usually allowed them. If the burden of the tariff were distrib- uted equally, then an expenditure that brought equal benefit to all might be equitably based on it ; but the expenditures advocated are wofully partial in their dis- tribution of benefits, while certainly the burdens are most unequally distributed. Everybody consumes the protected article, to be sure ; but since only a part can receive any benefit in increased prices for their wares, the weight of protection is really thrown on the remain- ing part. The question to the practical legislator is there- fore : Will the proposed expenditures confer such a pecul- iar benefit on the part of the community whose income is fixed — or whose product is exportable, and not increased in price by the imposition of import duties — that you are 16 242 ECONOMIC AND INDUSTRIAL DELUSIONS. justified in saddling them distinctively upon it ? What sort of a reply could be made to this question, on behalf of any of the schemes just considered ? OTHER QUALITIES OF THE IDEAL TARIFF. The vision of a tariff law which shall gently wean the American consumer from his predilection for foreign- made goods, and by the very same means afford the gov- ernment all needed support, is not the only fruit of that impulse to seek in the ideal realm for the mode of opera- tion of a favorite political device, to which protection owes the loyalty of its disinterested adherents. It is but the most important among many. The ability to imagine a revenue scheme as working with perfect smoothness in two opposite ways at the same time, arising from a confused observation how similar schemes work, some in one of the ways, some in the other — very much as our friends in the olden time came to imagine the centaur — is fully equal to flights as lofty in other directions. With the inspiriting ring of a beloved party's war-cry, or of a trusted leader's voice, in their bewitched ears, few men can constrain their eyes from seeing an Olympian glory hanging over each individual plank of one political platform, as well as a Stygian blackness over the other. It is to just such an idealizing impulse that those appeal, who lay stress on what they are pleased to call our " sys- tem " of protection. It is perfectly possible, I grant, to weave devices for artificially forcing industries into a real system. Such a system Colbert planned under the " Grand Monarque," and with such a system did Alex- ander Hamilton aim to endow our country. For this purpose the resources of statesmanship are brought into play ; inquiry is made as to the kinds of industry whose presence in the country may be thought on any account "REVENUE WITH INCIDENTAL PROTECTION." 243 advisable, and the amount of stimulus suitable to set it into the desired activity is apportioned to each ; the social forces which nature and natural freedom leave too wild, spontaneous, and uncontrolled, receive sagacious guidance and restraint ; and all are happy to acknowledge the gov- ernment's superior if not unerring knowledge of every citizen's business interests. Whether a system of this kind, granted practicable, would be good or bad for us, might undoubtedly be an interesting subject to discuss ; but it is enough for practical men to see, clearly, not only that the country has no system of the kind at present, but that such a system is necessarily impossible to congres- sional legislation. The construction of a tariff act is determined by influences of an altogether different charac- ter. The statesman who moves that the country be saddled with a duty is very rarely one who has considered the remoter effects of it, but far more generally one who is driven by the pressure of some scheming and pushing constituent ; and the whole of every tariff act is made up of elements of this kind. A representative from the Canada border wants duties on ordinary farm products, and votes to maintain others in order that these may be allowed him ; one from Northern Michigan will work the same way for protected ores ; one from Florida or Cali- fornia for oranges ; one from Pennsylvania for a great many things. The demonstration that any general national interest depends upon the duties they advocate, would be so far-fetched and difficult that it is hardly ever attempted in cases like these ; the only reason for desiring the duty is that it will help some constituent to make money faster, and that reason, embellished a little in the expression of it, is apt to be the one given. The tariff act as passed through our legislature is made up essentially of private schemes massed together 244 ECONOMIC AND INDUSTRIAL DELUSIONS. with a view of commanding votes in Congress by a sort of " cohesive power of public plunder " ; the same tariff act in its ideal aspect presented for the admiration of the people who are to vote in a President and House of Rep- resentatives, is one of the kind I have sketched, based primarily on the ascertained needs and interests of the people as a whole. As easy a refutation of this pretty theory as can be found, is given in one fact already pointed out, the change of attitude taken by the great custodians of the protected interests, the Tribune et al., when an in- dustry enjoying their favor turns its back on the cause of indiscriminate protection, and seeks its prosperity in the direction of cheaper raw materials. Then the power which was ready yesterday to advocate its cause before the people as an enterprise in which all were vitally interested, brandishes to-day the vengeance of that very people as a rod over it, compelling it to give that it may receive. It is the ideal protective system, wherein the wise and far- seeing statesman provides for the general welfare by salu- tary regulation of industries, which the protected interests parade before the public ; it is the practical protective system which those interests illustrate in their appeals one to another : " If you button up the people's pocket against my hands I shall see that you cannot get into it either." The ideal tariff " gives " employment, and those who portray it for us are vivid enough in their contrasts of the multitude who must be reduced to idleness and thus to beggary when some one or two industries are prosecuted abroad, with the multitude who are rescued from such ills by the establishment of such industries in our own country. What influence this picture ought to have on the reasoning mind, I have already sufficiently considered, but I ought to set over against it a sketch or two drawn from the working of the tariff in reality — ought to depict "REVENUE WITH INCIDENTAL PROTECTION." 245 with equal vividness the workmen who are, as a matter of historical fact, turned remorselessly adrift by those com- binations to limit production and thus hold up prices, which high protective duties are so perfectly adapted to facilitate. Among the first effects of the McKinley law, we are told, was the advantage taken of its sharp increase in the duty on carpets, by Philadelphia dealers : as soon as the enhanced expense of importing the competing article assured them of impunity, they at once shut up half the factories in the city, and their workmen were allowed a luscious taste of the bounty of protection in "giving" employment. The career of every Trust has been marked by achievements of this kind : the public is forced by it to pay as high a price as the producer dares to ask, and the laborer's employment taken from him whenever a restriction of production is necessary for that end. The essence of the Trust being control of the whole supply in few hands, and the essence of protection being a restriction of competition to the inhabitants of one limited area, the two can be unfailingly relied on to work har- moniously together ; so that, in place of the ideal increase of industry through stimulation, the tariff gives us its practical repression through Trusts. The laborer's means of subsistence, as illustrated by experience under the same McKinley law, can be taken from him without resort to a formal Trust to limit production : for the increased cost of their raw material has enforced a suspension in some manufactures and a limited production in others, more than sufficient to counteract the stimulation of works to which protection brought a net balance of profit — for even these have been disappointed of gains to the meas- ure of their hopes, by a falling off in the demand, due to the increased price. Since manufacturing industry as a whole appears to have been more embarrassed than 246 ECONOMIC AND INDUSTRIAL DELUSIONS. encouraged by the new legislation, there is no sign- of that stimulated demand for labor which is so well known a mark of the tariff of the ideal. AN APPEAL FROM FANCY TO REASON. But why multiply illustrations, when every form of delusion which these pages were written to expose is but an instance of the contrast between ideal and practical ? What is it but a substitution of a dream-fabric for actual experience, to expect of a tariff that it will exert any influence whatever in giving wares of our production a better place in foreign markets than are allowed foreign wares in our own ? That it will have any effect in main- taining a specie supply, or in guarding against a commer- cial crisis ? That in one of our elaborately devised schemes of duties the protection afforded any product will always encourage it, to an extent beyond that to which it is discouraged by taxation upon the materials used ? That the laborer will be benefited at all by protection of the product on which he is employed, at the expense of other production ? That a home mar- ket will or can be provided by such agency, or that whatever it is that is provided will be worth paying its cost for ? Experience, the appointed cure for delusions, may be trusted to set these to rights, wherever the true interpretation of experience is found : the inquirer need only be on his guard against accepting a partial presenta- tion of its facts for a complete one ; since the inference from one or two facts cunningly selected may be quite opposite to that fairly derivable from an examination of all the facts of experience — I have called attention to such instances as the fall in the price of steel rails, and the rate of daily wages prevailing in the United States and in England. For all who neglect to observe the li REVENUE WITH INCIDENTAL PROTECTION." 2tf omission of the price of the rails elsewhere, and to remember that our own and England, important though they are, are not the only countries in existence, the few facts presented by the Protectionist have all the effect of a complete whole, and over their minds delusion holds its sway undisputed. Fancy continues to guide them, while the lessons of fact pass by them unheeded. It might not be worth while to lay stress on such points as these, were it not a favorite device of many Protectionists, particularly those of the shallower sort, to brand the student of political economy and all who listen to him, as " theorists " whose conclusions are entitled to no weight in the practical concerns of life. The conceit of ignorance when it parades itself as knowledge, or when it exults in its nature as ignorance, and values itself above knowledge, is often anything but amusing. It is worth while, therefore, to be often at the trouble of explaining that to use the intellect that God gave us in the practical affairs of life, without the application of theory, is as im- possible as walking without legs ; that the word means " a general view," a perception of what there is in com- mon about any class of facts, that no theory is more distinctly theoretical, for instance, than the one by which we foretell rain when the sky looks threatening, or than the other one that ascribes to a substance which has the marks of beef a nutritive value. As I have often discov- ered, theory in some other man is principle in ourselves ; and there can be no doubt that the exalted perfection of dispensing with all theory — doing without general princi- ples, that is to say, in mental operations — is one attained only by those gifted individuals we know as idiots. No one could set a higher value than I on practical reasoning and practical men ; but I cannot extol as practical what is really nothing better than short-sighted : or fail to see 248 ECONOMIC AND INDUSTRIAL DELUSIONS. that in broad questions of national policy, the most truly practical man and the most perfect theorist are one and the same. It is a curious illustration of inability to understand the language one uses when one says that " free exchanges will work very well in theory but will not in practice," without observing that his general state- ment of what will work in practice is itself the statement of a theory — of a theory, it is worth while to add, whose merit is not at all enhanced by its propounder's pro- pensity to use catch-phrase as a substitute for thought. That the theoretical reasoning fashionable among Pro- tectionists is not free from the vices and weaknesses too often attaching to theoretical reasoning, the instances given in this chapter have sufficiently shown. There is a yet more important justification for the ex- amination we have just made. It is exactly from the many worthy people who would look in the picturesque region of their imaginings to learn the working of a tariff act, would estimate its real by its professed effect, and would assume that it will work just as its active pro- moters said it was going to work, that those schemers derive their power to shackle our country with so oppres- sive a burden of legislation. To the pure are many im- pure things pure ; and so long as these good souls are contented not to inquire into the sources from which such 1 acts come, and the manner of their construction ; not to look behind the veil of patriotism thrown about any one of their multifarious provisions, for the grasping greed which really dictated it ; not to discover, in their cum- brous complexity, the barter and bargain which are every- where cropping out through a superficial solicitude for the country's varied interests ; so long is the country in danger of falling a prey to some new "tariff of abomina- tions." So long as our estimable friends keep their eyes "REVENUE WITH INCIDENTAL PROTECTION." 249 open to the pretty picture of industries so stimulated by the beneficent intervention of government that a few years will render them self-supporting, and closed to the ugly fact that the demand for protection has never known any limit, in time or amount, but the willingness of the governing power to accord it — that one hundred years of it have sharpened and not in the smallest degree satisfied that demand, and have best succeeded in establishing a craven dependence instead of the self-reliance we ought to find among our productive industries — as their exac- tion of us, after all the burdens we have already borne for their presumed benefit, of this McKinley monstrosity dis- tinctly proves, — so long will our emancipation remain more difficult, our chains heavier. When these dreamers wake, the country is free again. The legislator will then look for light no longer to the lobby — will no longer plead the pressure of private inter- ests that might be advanced by a tax, as an excuse for levying that tax ; but will remember that his duty is to the people at whose expense it is proposed to advance the interest, and feel such pressure only as a warning of the attacks which the people need to be protected against. Investors in business will no longer look to legislative bounty for opportunity to make profit on their capital, but will depend entirely on the rewards legitimately earned by service. Troubles will arise — it is not in the power of even so beneficent a reform as the liberation of our commerce to bring about a millennium, — but the darkest and most threatening cloud in our political sky will have been dispelled, when our people begin to be guided, through the obscurities and intricacies of the tariff, by facts of experience rather than by visions of flattering fancy. CHAPTER IX. PROTECTION AND AGRICULTURE. American farmers are addressed in the two following open letters. The first of them, on the McKinley Bill at its intro- duction in the House of Representatives, was published in the Philadelphia Record of May 17, 1890 ; was reprinted in some of the Western papers, and was quoted at length by Hon. Levi Maish of Pennsylvania, in his speech against the bill in the House, October 1st. It contains considerable repetition of points already discussed in the foregoing chapters, and may be accepted as being in the main a summary of those chapters in more popular form, with special application to the farmer's calling, and to the tariff of 1890. The Record in alluding to it editorially said : " No other newspaper in Pennsylvania approaches The Record in the extent of its circulation, but, large as it is, it is a very imperfect agency for reaching the eyes of the farmers of the United States, and it is a matter of great regret that a copy of this morning's issue, containing an article by Mr. A. B. Farquhar on ' Protection and Agriculture,' should not go into the hand of every one of them. It is not a partisan argument. Mr. Farquhar during a greater part of the time since the birth of the Republican party has acted with that party. He is one of the foremost manufacturers in Pennsylvania whose business intercourse with farmers is close and constant. His prosperity is dependent upon the prosperity of agriculture. The views he has presented are based upon an understanding of accepted opinion among farmers on the tariff question, growing out of years of personal contact and continuous correspondence. As he shows, the tillers of the soil have borne the brunt of pro- tective taxation from the outstart, under the delusion that they were sharers in the bounty paid into the pockets of manufac- turers. Their votes have kept the Protectionists in power. 250 PROTECTION AND AGRICULTURE. 1%\ But, after long and persistent experiment, they find them- selves impoverished, the value of their lands lessened, and the prices of their products decreased. It is no news in any part of the country that the farmers are profoundly disturbed, dis- pleased, and disheartened. " The trade of the world is barter. To prevent barter by taxing it is chiefly to hurt the farmer, who, producing beyond the capacity of home consumption, must look to the foreign market for the sale of his surplus, and accept for his whole product the price paid in the foreign market. Buying in a market artificially rigged against him, and selling in competi- tion with the whole world, the farmer, after thirty years of this one-sided trading, finds himself on the edge of insolvency. Mr. Farquhar shows how the farmer has fallen into the pro- tectionist trap, and how he may get out. It will make excel- lent reading for to-day or to-morrow or the next day." Open Letter to American Farmers, No. i. Will you allow me, my farmer fellow-citizens, charged with the most important industry in a great republic, an hour of your serious attention ? You are not suffering for lack of advisers on this question of protection, I am well aware. Indeed, you have never been more surfeited than now with pretended sympathy. In the elaborate tariff bill reported by Hon. William McKinley from the Ways and Means Committee of the present House of Repre- sentatives your interests (or rather what he expected to pass off as your interests) have been very deeply consid- ered. The majority report accompanying the bill is espe- cially eloquent over your condition and your claims. A long letter has been written by the head of the Agricul- tural Department, which pledges to the support of this new measure the whole weight of Secretary Rusk's official position, past services, and popularity. These are but specimens of what is done and said every day. An exhaustless torrent of speeches, editorials, mag- azine articles and pamphlets has been unceasingly poured 252 ECONOMIC AND INDUSTRIAL DELUSIONS. forth upon you with the design of overwhelming your reason, persuading you that the policy of imposing high duties on imports is particularly beneficial to you, and thus engaging your votes for men who are trying to raise them higher. In the face of this mass of argument, I shall undertake to show that those same high duties are really working you a grievous injury ; that they are largely the cause of the lamentable depression in farming interests now ac- knowledged on every hand ; that you have at this hour no more urgent demand upon your legislators than for their abatement, and that there is nothing but evil for you in the increase proposed by the bill. I shall not merely set assertions of my own in opposition to the assertions of the distinguished gentlemen I have cited. I hope to succeed in proving my points by facts and rea- soning so clear that they need only be understood to carry conviction — and only be examined to be under- stood. I unhesitatingly take up the gage of battle they have thrown before me ; you shall be judges of the con- test, according me nothing more than fair treatment. On a question which so closely concerns yourselves, you may be worse losers than I if you dismiss me without a patient hearing. FARMER AND FARM-IMPLEMENT MAKER UNITED IN INTEREST. The burdensome duty of declaring the truth as I see it is one from which I would gladly be excused if I could. But a special responsibility is thrown upon me by two circumstances : I happen to have attained some degree of business success, and may therefore expect people to listen to me who would not listen otherwise ; and my interests as a manufacturer are known to be in every way identical with those of the agriculturist. I can make no PROTECTION AND AGRICULTURE. 253 pretensions to the chair of the instructor. I never studied political economy under the professors, nor has the book and closet side of the subject ever had so much attraction for me as the practical side, in which I am vitally con- cerned ; and whatever importance may attach to my views is due to their origin in business experience — in the many years of arduous toil, close application, vicissitudes of prosperity and disaster that have impressed them upon me. Since there is no escape, in a tariff discussion, from the suspicion that judgment is warped by private interests, it is well to bear in mind that, on this point, I have not an interest in the world that is not yours also. The better your condition, the more of my tools and machinery you can buy ; and when prosperity fails you, it cannot abide long with me. If I want cheaper raw materials for my manufacture (and except for these I have never had any interest in the importing business) it is not because I hope to keep the benefit all to myself ; competition looks after that, and my customers must share it with me, whether I will or no. My feelings are with you, and no less than my business interests. I have always loved country life, and can never forget that I was born a farmer's boy. My opinion of protection, it is worth while to state, is not regulated by political predilections. I was an earnest Republican from the foundation of the party until long after the war issues were settled and its mission was finished. My place has always been on the side of freedom. In the earlier and better days of the party that side was with the Republicans. I never turned my back on the party till the party turned its back on freedom — and your welfare in the same act. Do you believe that it is any wiser to travel with a party merely because it was going in the right direction a few years ago than to travel on a stage-coach for the same reason ? 254 ECONOMIC AND INDUSTRIAL DELUSIONS. CAN WE ACCUMULATE MONEY BY TAXING IMPORTS? Questions of national economy are not in reality so in- tricate as many suppose. They are determined by the same principles of clear common-sense which you apply to questions of private economy, and no mind able to meet all the demands for foresight and contrivance, that have to be met by the successful farmer, need fear in the least to trust itself with the larger questions when the necessary facts are before it. You must not, then, give ready credence to the man who is able only to bewilder you ; and you cannot be too careful to have all the facts that bear upon a question before yielding your decision. Mr. McKinley, in one of his speeches during the presi- dential campaign, claimed for his party in hindering the importation of goods the same merit that we allow to the head of a household when he prudently resolves not to buy too much from others, but save up his capital ; argu- ing that to the nation, as to the family, more saving brought more strength. This passage looks at first sight like the very appeal to plain, practical common-sense that I have been commending ; and the reason it is not is be- cause of the importance of one or two facts its conceals. If Mr. McKinley had called attention to one vital differ- ence between the private citizen's storing up money in his own strong-box by skill in selling and economy in buying, and the nation's trying to do the same thing — the fact, namely, that additions to money saved have no tendency in the one case to lessen the relative value of previous savings, while they have in the other — he could not have drawn the same conclusion. Perhaps I would better explain my meaning more clearly. If one of your neighbors were to save up some money, or have it left to him, no effect would be pro- duced on the purchasing power of what you and other PROTECTION AND AGRICULTURE. 255 people held — you could do as much with it, and prices would not change. That is because he is only one in a multitude. Suppose every man in your community — your whole township — should make a sudden gain in wealth, say by the discovery of a mine, you would notice little difference in the value of money even then, for you would continue to trade with outsiders. If your trade should by any cause be confined to your own neighbor- hood you could not fail to feel it. Let us suppose again that the supply of additional money were to be distributed over a whole State, and that trade with other States were somehow cut off. Can there be any doubt whatever that the value of a dollar would become very much smaller ? You may say that prices would become higher, if you choose — the two expressions mean exactly the same thing. If you feel any doubt, have a talk with some one who was in California within the first few years after the rich gold discoveries in 1848, when it was practically an isolated State. The precious metal was to be had in abundance by almost any one with strength to get it out ; but a clay pipe cost twenty-five cents, a drink of vile whiskey a dollar, and other things in proportion ; so that for every practical purpose one dollar in our Eastern States had the same value as twenty or more in the region where so many of them were to be had. Do you see how, if Mr. McKinley's policy really succeeded in bringing a good deal of money to this country, the same results could fail to follow ? The last dollar brought here in return for the produce of our hard labor, while it cost us quite as much as the first one, would be certain to be worth less to us. Having to spend it within the country we should find ourselves confronted with advanced prices. If this result — cheap money and high prices — does not in fact follow the enactment of laws of the kind Mr. 256 ECONOMIC AND INDUSTRIAL DELUSIONS. McKinley advocates (laws that hinder importation by collecting duties on imported goods with a view of encouraging sales of our products for money), you cannot be at a loss to tell the reason. It is because those laws do in fact little or nothing to bring money to the country. That state of things ought not in any way to surprise you. Suppose, in consequence of this legislative discouragement of importation, the foreign country to which we sent our goods should send us a large sum of gold in payment. Before we did any trading with that country again we should find that two changes had occurred : First, in con- sequence of the increased supply of money with us, the value of a dollar had fallen off — that is to say, prices had risen ; and as the cost of producing our goods rose we could worse afford to sell at the same price. For the second change, money having become scarcer in the coun- try with which we traded, its people could worse afford to buy our goods at the same price. Is it not perfectly plain that this state of things could not go on very long without putting a stop to trade of this kind altogether ? As a matter of practical experience it does not go on long. However high our tariffs are put, very little of our trading is done for money. To yourselves, of course, when you deliver wheat to a merchant who is going to ship it to Liver- pool, and are paid for it, or when you buy a garment of imported wool, foreign commerce appears as a cash trans- action ; but the money given you has not crossed the ocean, nor will that paid by yourselves make the voyage. Could you see how the great importing and exporting houses manage the actual business of exchange — the great bulk of it by paper representing credit, only enough specie being sent across to pay the small balance, or differ- ence between one side and the other, usually less than one fifteenth of the whole amount — the transaction would PROTECTION AND AGRICULTURE. 2$? wear a different appearance. Even the fact that the West Indies and South American republics send us from three to seven times as much merchandise as we send them, does not make large shipments of money necessary ; for we pay the difference by drafts on London, where we have a large credit from exportations of cotton, beef, and breadstuffs, while the English square matters by sending their wares to the countries of which we buy. As a mat- ter of practical experience, Mr. McKinley's favorite legis- lative devices have no such effect as he claimed for them in his speech, and a very little study of the subject has shown us why they could not have. The facts concealed by him — I can hardly suppose him ignorant of them — are fatal to his claim. Two circumstances may sometimes cause a difference between the total value of merchandise exported and im- ported by a country ; while they operate it will not do to set down as a firm and fixed law that the two values must necessarily be equal. Both are illustrated in the recent history of our own country. The effect of the California gold discoveries made itself felt after 1849 i anc ^ the tables of our total imports and exports show that while there was very little difference between the sums up to that date — first one being greater, then the other, without any long continuance of either condition — the value of im- ported goods began then to be in excess, and continued so for a quarter-century, through the civil war and all its changes, with scarcely an interruption. That is just what we ought to have expected ; silver and gold are subject like other commodities to the law of demand and supply, by which, when we began to produce a relative excess of them, they flowed to countries producing less, and were replaced by goods which we found it easier to get in that way than to make by our own efforts. 17 258 ECONOMIC AND INDUSTRIAL DELUSIONS. After 1874 the balance turned, and down to 1888 our exports of merchandise exceeded imports in value ; the. movement of specie, which had in the preceding twenty- five years been prevailing outward, then sinking (except during the year or two when we were making large im- portations for a fund to maintain resumption) to an even balance. The change, like all financial changes, had its reason ; it appears to be owing to increased investments of British capital here, and the interest we have to pay on them. The entire interest is now estimated as high as $100,000,000 a year, and Great Britain prefers to take it (together with as much more which we have to pay her for transporting our goods) in merchandise. That coun- try steadily imports a great deal more than it exports, and its prosperity is an abiding refutation of the " balance-of- trade " superstition. Not until the hard times following bur war had forced us to give more of our energies to pay- ment of debts already incurred than to piling up new ones, was this effect of foreign investments with us perceptibly felt. Will you please notice, before quitting these figures, that there is no shadow of justification for connecting the changes in them with the changes in our tariff policy? Imports began to be considerably in excess in 1850, four years after the last preceding change of the kind ; this ceased and exports ran ahead in 1875 with no change in duties ; the excess of exports seems just now to have ceased again with no change ; if you remember that the years when the tariff was changed were 1842, 1861-69, when its rates were increased ; 1846, 1857, '872, when they were reduced, and 1883, when the changes were am- biguous, you see how totally unfounded are the claims that high tariffs strengthened us by bringing money into the country. PROTECTION AND AGRICULTURE. 259 And yet those claims are plausible at the first view. Tariffs look as though constructed for that very purpose, since they stop goods and let money come in free. The case is evidently one of those in which a contrivance does not work as it was professedly intended to work. And, that being the case, telling people that it is working ex- actly that way does not make it work so. You have been detained a good while on this point, be- cause it is a very important one. A great many glib and persuasive speakers found huge piles of argument on the pretence that high import duties in some way keep money flowing into the country, when it would not come under low duties. They support by this pretence the fanciful connection which they have conjured up between the re- duction of duties and the great financial distresses in 1837 and 1857. As there are not many people living who can clearly remember how those startling disasters really came about, and as there are a great many people who have not learned about the cause of them from reading, these quacks can safely and easily pass off any explanation of their own inventing. Since the best refutation of their inventions is found in a careful study of the history of the times when the panics broke upon us, and since the more thorough the study the more ridiculous such inventions are found, I need only say that those panics, like all others — including the ones that attended the great " South Sea " and " Mississippi " schemes nearly two centuries ago, before there was a tariff question, and the terrible one be- ginning in 1873, while we were under a very high tariff — had all a single cause — extravagant speculation ; and there is good reason for the belief that the speculative spirit which received such a fearful rebuke in the disas- trous crisis of 1837 had been to some extent stimulated by the twist given to our industrial enterprises by the 260 ECONOMIC AND INDUSTRIAL DELUSIONS. high import duties enacted nine years before. Of course, the only reason anybody could have for supposing that high duties could prevent commercial crises must be their assumed tendency to bring in money, and it is therefore very proper for you to know that they do not bring in money, to any extent worth considering. You may often hear it claimed that the tariff does great things in the way of giving employment to working men and increasing our industrial establishment, — claims which you can dispose of in the same way. You can point to .the results of actual trial, too. You could not find any time when our country enjoyed free trade, to be sure, but you could go back to a time when our import duties were upon a revenue basis, and very much lower than they now are. Just before the war, when duties were lowest, and when agriculture was enjoying its most rapid development, there was not only no lack of industrial enterprise, but manufactures were fast increasing ; faster proportionately than they now are. The laboring man was not forgotten ; the superiority in his condition (in the free States) over what Europe could show, was more marked than it has since been. Although this country has progressed, along with all the rest of the world, in the improvements of the last thirty years ; although we offer, even now, a better home for the workingman than any European country, it cannot be denied that the change for the better has been more visible within the past thirty years in England than here. We have made progress, I dare say, and yet I cannot help pointing out that it is within that time that we have become accustomed to the unwelcome visitation of tramps, not known among us before ; and that England can point, as one of the accompaniments of her forty years of a free-trade policy, to a proportion of her inhabitants obtaining relief as paupers, of one to twenty-three at the beginning, to one PROTECTION AND AGRICULTURE. 261 to forty-one at the end. Our States can show no such change for the better in forty years. The change in many of them is the other way. EXPORTATIONS DIMINISH ALONG WITH IMPORTATIONS. The principle to which I have tried to call your atten- tion, that there is very little movement in gold and silver when different countries trade with each other, except in obedience to a special demand for gold or silver (from a country that produces more of them, for instance, to one that produces less), and that the great bulk of goods sent out are paid for by the goods sent in, is invariably disre- garded by the Protectionists, despite its importance. The practical proof of this principle you have seen in the small proportion which specie bears to merchandise in total import and export valuation, as shown by the tables of the Statistical Bureau of our National Treasury. Please attend, now, to a new point. If this principle is true, another one must be just as true. Whatever checks or interferes with the importation of goods must to the same extent check or interfere with exportation. This is by no means evident at first glance. We let goods go out freely — even encourage them to go, — and block their coming in with taxes. Suppose we reversed this policy, and admitted foreign goods free, while taxing our exports. It seems a little strange to say that the effect of two policies so very different must be in a general way the same, and yet there can be no rational doubt of the fact. Prices would be lower in the country taxing its exports ; the same piece of money would buy more there ; but there need be no other perceptible and no practical differ- ence. In either case the value of exports would bear about the same proportion to that of imports ; something near equality, but neither so large as it would be with trade unimpeded. The effect is a good deal that of the 262 ECONOMIC AND INDUSTRIAL DELUSIONS. rubber or brake on your wagon wheel ; it makes no differ- ence whether you apply it to the side of the wheel that is going down or to the side that is coming up ; what is done in either case is only to clog the wheel. You know that our tariff checks and interferes with importations ; it is imposed with that very object. You know, too, that agricultural productions are by far our most important exports, and depend for a considerable part of their total sale on consumption abroad. Is it not well worth while to think a little and see how your access to your market abroad is checked and interfered with by the same agency that checks and interferes with importations ? That such interference exists there can be no question. There are two possible causes from which it could come : your foreign customers might be made less disposed to buy, or you less disposed to sell to them. I do not see how our tariff could deter the foreigner from buying ; and if it discourages you from selling, it must be by increasing the cost of production, by decreasing the price- you get, or, perhaps, by furnishing a new consumer in place of the one lost. It is plain that while either of the first two effects must be injurious to your business, the last-named effect is not ; and for that reason you hear nothing from protectionist orators of any effect but the last, which is always inflated and exaggerated past all recognition, not- withstanding the fact that we are without proof that it has any real existence, and have a good deal of proof of the other effects. Have patience, now, while I set before you as many as I can of my reasons for making so bold a statement. DO IMPORT DUTIES GIVE US A HOME MARKET ? Do high taxes on imported goods have the effect of pro- viding new customers at home who replace the foreigners PROTECTION AND AGRICULTURE. 263 to whom you would sell otherwise ? Many people believe so, and that is what is meant by the " home-market " cry that is so loudly dinned in your ears before every election. It is perfectly true that, where other things are exactly equal, you can more profitably provide for customers close by than for customers across the ocean ; and it is true that any device for bringing customers close to you, if it does not at the same time injure you in some other way, works in your interest ; but it is quite untrue that these facts have any bearing upon the tariff question. For it is untrue that other things are exactly equal — that you are suffering no injuries from the protective system — and it is untrue that that system has any considerable effect in bringing customers of farm products close to your farms. In the first place, it has no such power to stimulate manufacturing as people claim for it. I am not denying that if there were but one duty levied, on one particular article of manufacture, the production of that article might be very much increased in this country, or that the production of some articles may be stimulated as things are now ; but I am claiming that, in the enormous multi- plicity of our protective duties, so many of them operate to harass, obstruct, and injure other manufacturing enter- prises while advancing a few favored ones, that the whole effect of the system is less beneficial than detri- mental ; to manufacturers along with the rest of the coun- try. This may sound strange to you who have so long been accustomed to hearing this huge and complicated scheme of duties spoken of as though absolutely essential to the carrying on of manufacturing ; but I think you will be ready to see, on examining it, the reason for it. Many manufacturers — myself among the number — every year export large amounts of goods, in the face 264 ECONOMIC AND INDUSTRIAL DELUSIONS. of the world's competition ; and no sophist, I think, is quite clever enough to persuade you that we can com- pete with foreign manufacturers abroad without any point in our favor, and yet cannot compete at home unprotected, where we have all the advantages of near- ness to the consumer, ability to study his wants, and lower freights to pay. So that none of us making goods for export needs any help from the tariff; and, more than that, there is not one of us to whom it is not a great deal in the way. To find how much of our manu- facturing is in that condition, see the number of manu- factured articles on which there is a steady export trade. Besides agricultural implements, there are sewing-ma- chines and clocks, engines and dredging machinery, and saws and axes ; flour and vegetable oils, of course, and some boots and shoes, and unbleached cotton goods. That makes a considerable list (which might be greatly extended) of manufacturing enterprises that are more hurt than helped by protection ; so that when you come to count up the aggregate effect the balance leans to the unfavorable side. If you wish a test by figures, compare the growth of our manufactures between 1850 and i860, ten years of low tariffs, during which the value nearly doubled, with that between 1870 and 1880, ten years of very high tariffs, when the total value produced (allowance being made for the fact that all the values of the 1870 census were given in 80-cent dollars) increased hardly 60 per cent. I need not tell you that if the duties were as necessary to success in manufacturing as their advocates pretend, our rate of growth ought to have been greater, instead of less, when those duties were higher. If, there- fore, you are benefited by having manufactures estab- lished in this country, it does not at all follow that you ought to keep the tariff high. You get quite as much PROTECTION AND AGRICULTURE. 26$ benefit from the prosperity of those manufactures to which it is a drag and a nuisance as from those which are helped by it. Why, then, you will ask, are so many manufacturers of the very goods I have been speaking of — farm im- plements and other exportable goods — among the loud- est clamorers for protection ? For two reasons, neither, I am sorry to say, very creditable to them. One is an application of the homely but uncontested principle that " No calf ever weaned itself." They have been taught so to depend on legislative milk that they do not them- selves see that growth is possible on other food. It costs something, moreover, as I know from my personal experience, for a manufacturer to turn, or to look as though he were turning, against his profession. The other reason is that the duties enable and encourage manufacturers, by combining, to extort higher prices from home than from foreign customers. In the case of wood- screws, of sewing-machines, and some other goods, the abuse is a quite flagrant one, the price charged you being nearly that paid by the foreigner for the same goods, with the large duty added. In that of most agricultural im- plements the difference is small, ten per cent, or less. Some combination is necessary to enable manufacturers to play this game ; but it need not be anything so elabo- rate as a Trust, when a simple trade understanding will in most cases suffice. For my part I abhor this parasitic plan for deriving profits ; and I cannot believe that you will continue, now that your attention is turned to the matter, to encourage any manufacturers in pursuing a course at the same time so disastrous to you and so de- moralizing to them. The point I have just made would be quite sufficient to settle the home-market question, but there is an- 266 ECONOMIC AND INDUSTRIAL DELUSIONS. • other one quite as strong. The easy assumption of the Protectionists that — supposing for a moment we grant their unfounded claims about the manufactures "estab- lished " by their invention — they thus bring customers close to you, is altogether false. I might safely ask nine- teen out of twenty of you — perhaps forty-nine out of fifty — what chance there is of building a factory within easy hauling distance of your own farms, however great the stimulation given to manufacturing in this country ? How many of you live near the great lines of commerce, indispensable to manufacturing success ? Could not a great many of you tell the old but ever-new story of some capitalist, of more enterprise than shrewdness, who has tried to start some kind of factory in your neighbor- hood, but has failed because he found the location un- suitable ? You may be very certain that a stimulus to manufactures can stimulate them only where they exist — may start a new mill or two along the New England streams, or near the Pennsylvania coal-fields ; but, though protection were piled up to 200 per cent., and exports cut off along with imports, they would not penetrate the farming regions of Nebraska and Iowa and Kansas. What good, then, is the system to farmers there located ? They probably share in the general patriotic satisfaction that our country has the manufactures, but not sufficiently to have the cost thrown upon them ; for, as a matter of simple business, a factory in New England or one of the less accessible parts of Pennsylvania is no more to them than one in Glasgow or Liverpool. In fact, so cheap are ocean freights that Liverpool mght easily be the more advantageous to the Western farmer as a place to have his customer, because the cheaper place to ship grain to. Since it costs less to take a parcel from a New York dock and land it ten thousand miles away in Calcutta or PROTECTION AND AGRICULTURE. 267 Melbourne, than it costs to haul the same parcel twenty miles over a country road, you see that mere distance does not make a dear market. So much for the home-market argument, which you will own that I have treated with great forbearance, when you realize that it is essentially a juggler's trick and nothing more. The trick consists in proving it ad- vantageous to the producer to sell at the market he can most easily reach — the one to which transportation is cheapest, that is — and then pretending that it has been proved advantageous to sell in a market over which our national flag waves, rather than one that happens to be under another government. This trick requires nothing further to expose it than the simple consideration : No legislation is needed to hurry you from a worse market to a better one. What is sought from compulsory legislation can only be to drive you from the better to the worse. The market which such legislation provides, I think I have proved, would not be worth keeping up a protec- tive system for, even if it cost you nothing. As I shall now try to prove, its cost is far indeed from being negli- gible as an airy trifle. HOW FOREIGN SALES ARE RESTRICTED. Your sales to foreign buyers might be cut down, I reminded you a little while ago, in three ways ; and I have considered the only one of those ways in which that cutting down would not be injurious to you. The other ways, you remember, were by increasing tlie cost of production and by diminishing the price your produce brought you. It is not worth while to separate these. To save discussion I will admit at once that the price which agricultural produce brings in English markets would not be sensibly increased in money by the removal 268 ECONOMIC AND INDUSTRIAL DELUSIONS. of our restrictions on trade ; but that is not the most im- portant thing you have to consider. A dollar in a place where everything costs double is worth no more than 50 cents to its possessor ; and you will easily see that if pro- tection raises all prices above the level they would other- wise maintain, it effects a practical lowering of your price by decreasing the amount that you can do with the same money. So that this question, along with that of the cost of your tools and supplies, depends on this other : are prices of necessaries higher because of the protective tariff? How this question can be any question at all, I find it difficult to see. You cannot yourselves do very much at travelling, I am afraid ; but to few of you can it be unknown that people never make large purchases of clothing before sailing for Europe, while they are pretty sure to bring a great many new clothes back with them. The difference in price does not extend to all necessaries ; such provisions as are raised upon your own farms are nowhere, I dare say, to be had at lower prices than those you must be content with. But cutlery and other iron- ware, as well as silk goods, are very much lower in Eng- land, while almost anything of wool is, quality considered, hardly above half price. I have the best reason and the strongest desire to uphold the credit of American manu- facturing, and I know that many of our products — agricul- tural machinery particularly — are better than can be made anywhere on the globe ; but when I look at woollens I am a little mortified. It is not pleasant to contemplate the worsted or shoddy fabrics that are made here and compare them with the fine durable articles at a lower price that are to be had in England and France. That there would be no such difference in prices were it not for our tariff I need hardly assure you. Ocean carriage of such goods as PROTECTION AND AGRICULTURE. 269 clothing is not expensive, and there is nothing else that could keep our price and theirs apart. Whenever, there- fore, you are purchasers of woollen goods, you feel your profits diminished by our tariff laws — by the duties on woollens and raw wool. You must now take 100 bushels of corn to buy your suit of Sunday clothes, while 50 bushels would buy as good a suit had we no tariff. Whenever you buy a tool of any sort you feel your cost of production increased by the higher price we are obliged to put upon it — higher because of the duties on iron, iron ore, timber, paint and other items. And it is pre- cisely by producing these effects that the tariff system operates to discourage the production of goods for ex- portation ; in this way is the balance of trade held even, and thus does the repression of imports throw a burden on every producer of goods that can be sold abroad. PRETENCE THAT THE DUTY IS PAID BY THE FOREIGNER. It is one of the inevitables that there should be strenu- ous efforts to break the force of these conclusions ; an- other, that those efforts should meet with some success. For it is a well-known fact that a theory has only to bring in some money to some class of men in order to find earnest defenders, however opposed it may be to common knowledge and to common sense ; and another, that a doc- trine needs only to be taught confidently and emphatically enough in order to find adherents. Let us see, then, what the tariff advocates have to say for themselves. Accordingly, we find them one and all insisting, as though it were an established and certain truth, on the view that the duty is something paid by the foreign producer, in order to secure for his goods admission into our markets. This being assumed, a great deal else very easily follows. 270 ECONOMIC AND INDUSTRIAL DELUSIONS. Mr. McKinley, for instance, in the campaign speech I have already noticed, dwelt longer on this point than any other. His opponents were " in the service of foreigners," seeking to have them relieved of this payment ; he him- self, like the ardent patriot he was, insisted that the for- eigners must pay it. " How absurd in us to pay our taxes when here was a way in which the foreigner could be made to pay them for us." " How unjust, too, to take a loyal citizenof our country, who has borne all the obligations of a citizen, and leave him only the same show in the market that was allowed an alien who bore none of those obligations." And so on, and so on. It is easy to build up a towering edifice when the foundation is granted ; but the whole structure collapses when once the foundation is knocked from under — when once it is settled that the import tax is a charge on the goods, and that if the foreigner pays it to get them admitted he always takes the best of care to get it back out of the user of his goods. The fact that the great mass of articles protected in this country are more costly here than they are in Great Britain, is one proof of this. Second, the fact that the explanation so comforting to Mr. McKinley was one that never occurred to any one in the earlier days of tariff agitation, is quite suggestive. The invention of this ex- planation (that it was the foreigner who finally paid the duty) evidently awaited the day when people had for- gotten what prices used to' be before the duty was imposed. A third proof is in the common sense of the thing. Suppose that some foreigner pays $1 duty on an article and sells it here for $4, is it probable that he would sell it for $4 or for $3 if there were no duty ? His profits on sales here cannot be very different from what they are at home, either higher or lower (as a general PROTECTION AND AGRICULTURE. 2"]\ rule), for he has competitors, and the one who got hold of the more profitable trade would finally drive the others out ; so that $3 must be his price at home. Again, but for the duty he could not charge a much higher price here than at home, for fear that you might take to buying of his home customers instead of himself directly. Mani- festly, then, the same $3 would be his price to you if there were no duty, and it is hardly worth while to bother about who it is that pays the duty at first, so long as we know that it is lumped with the price of the article in the end. I know very well that this reasoning does not apply when the producer holds a monopoly, or when this country contains the only consumers, or when the demand elsewhere, or the supply, is very limited, but it does apply to the great mass of articles. If a fourth proof is desired, you have it in the necessary conditions of protection. The producer in this country is only protected when the sales of competing foreign articles are diminished. For this purpose either buyer or foreign seller must be obstructed. Now, if the foreign producer pays the tax our buyers are certainly not at all obstructed ; and if he finds profit in selling a few articles and paying the duty on them, he would certainly find no less in a greater number of sales. In fact, as any manufacturer will tell you, it is only by very largely increasing his sales that he can pay his way at all when profits are low. Do you not plainly see, then, that if the duty is paid by the foreigner there is nothing to make him sell, or us buy, fewer articles — no protection possible ? Put the rate high enough to stop all importations, and of course you have protection complete. Short of that, it is only because the charge is thrown on the buyer, because it is he that is obstructed from making the purchase, that protection protects. 272 ECONOMIC AND INDUSTRIAL DELUSIONS. My favorite demonstration that the final cost of a duty is thrown in the end on the consumer of the taxed article is found, I confess, in the course of the Protectionist legis- lators themselves. A disaster occurs sometimes ; Portland or Chicago is swept by fire, or some prairie town succumbs to a tornado. As a measure of relief it is proposed and carried through a Protectionist Congress that materials for the rebuilding of the unfortunate town shall be admitted free of duty. Why is that ? Why does not the states- man in Congress send word back that the proposed re- mission will have no effect except to relieve foreign lum- ber-men of what they have to pay to gain admission to our markets ? Would he not say so if he dared — if he did not know that at such times the people are not to be deluded ? Every revenue bill that has been introduced — certainly since the era of war tariffs — has contained provisions for what are known as " compensating duties." Examples of these are seen in woollen goods, which are protected by the curious rate of so much per cent, ad valorem, and so much per pound in addition. The reason assigned for this provision — and no other explanation, be assured, has ever been given for it — is that the first part is the suitable protection for the goods, and the second is the " compen- sation " for the duty on raw wool. This is only one ' among many duties of this " compensating " class ; the manufacturer has always insisted on higher rates because of the duties levied on his raw materials. The facts about these duties have been often set before the public, and this explanation has never, I believe, been contradicted. Did you ever ask the question why it is that those manu- facturers need " compensation " ? They do not need it because of anything that the foreigner has to pay for get- ting his goods into our markets, you may be very certain. PROTECTION AND AGRICULTURE. 273 Every Congressman who votes for such a compensating duty, as all Protectionist Congressmen always do, ac- knowledges by that very vote that the duty is a charge on the purchaser of the goods, the price of which is made higher by the amount of the duty. The way Protectionists hang together is itself a demon- stration. The statesman who is interested in getting one article taxed is bound by the strongest incentives to vote for taxing a great many other articles in which other mem- bers are interested, and tariff bills are always carried by log-rolling — each representative voting for the favorite jobs of the others in order to carry through his own. It is well known to every Congressman in charge of a job to benefit some influential constituent at your expense, that he will fail to carry it if he does not stand in with the other fellows. Have you any idea that he would feel this apprehension, if he believed that his scheme would throw no additional burden on the country ? If the bit of pro- tection he seeks is going to be a general benefit without general cost, he could have it without buying it. I have not space to consider all of the reasons brought to prove that the burden of protection is thrown upon the foreigners. Here are two that are used as often as any. First, certain manufactured articles, steel rails for instance, have been highly protected, and have greatly fallen in price. It is claimed that protection did this, but if those who make the claim would only furnish, along with their list of prices in this country, the prices in England at the same time, and thus show that every fall in price here was preceded by a fall to an even lower point there, the fact that they would bring out would be merely that protec- tion prevented the price from falling as fast here as it otherwise would. The true causes of the fall — improve- ments in the process of making steel and the expiration 274 ECONOMIC AND INDUSTRIAL DELUSIONS. of patents guarding it — are, of course, never alluded to by the faithful Protectionist. Second, the English must be those who suffer from our high duties, because they are so anxious to have us lower them. Let me assure you, they are not anywhere nearly so anxious for us to lower our duties as people pretend. What is told you about large disbursements by their Cobden Club is 3 per cent, exaggeration and 97 per cent, sheer invention. A great many lines of export trade, including most of that to South and Central America, Japan, and Australia, the English now have a " soft thing " of, owing to our persist- ence in running up the cost of our raw materials and machinery for manufacturing, and in preventing our citi- zens from owning ships to send there. Were we to adopt a commercial policy like their own we might become for- midable rivals in this business, as we promised to become before the Civil War. Notwithstanding this state of things, of which observant Englishmen are perfectly aware, I do not deny that if the question of our tariffs were to be left to them, they would probably think more of gaining custom with us than of losing it with remoter countries, and vote a reduction by a large majority. But the laughable part of the business is that that fact, if it be a fact, should make any difference to you. Let me put to you a test question. One of you, we will suppose, lives across the river from a large town. You raise, we will also suppose, better oats, or turnips, or something than Jones, just over the bridge, and can afford to sell them at a lower price. Now if Jones mounted guard over the bridge so as to keep you from getting across with your produce, would you object to it, or not ? And what would you think if the townspeople, hearing your complaints, should set them down as a proof that you were the only sufferer by the closing of the bridge, PROTECTION AND AGRICULTURE. 2?$ and that they were just as well off in putting up with the inferior and more costly goods of Jones ? There has been so much loose talk on this question of "Who pays the tax?" that I ought to take special pains to make my own meaning clear. I have not denied, and do not wish to deny, that there are articles (those whose production is monopolized, namely, or controlled by a combination) upon which the larger part of any tax we impose may fall on the producer. Certain drugs, and tropical fruits, and other articles produced within limited areas, may be taken as examples. To include with these such products of widely sundered regions, as wool and crude metals, is hardly better -than an affront to common- sense. I have not denied, and do not wish to deny, that to answer the question completely, to show precisely what charges each man has to bear or what profits he misses in consequence of the tax, it would be necessary to know just how matters would stand if there were no tax ; which is hardly possible to human wisdom, in ad- vance of actual trial. One can use his best judgment, and give his reasons — that is all. I have not denied, and do not wish to deny, that if, in consequence of this tax, the foreign producer is not allowed an extension of his business which he would be willing to pay money to insure, or is subjected to any inconvenience which he would be willing to pay money to escape, he is as truly taxed to that extent as if he personally handed the sum to Uncle Sam's collectors. But no conclusion could be more puerile than that, because the duty taxes him by such an amount, it therefore saves as much to you. The tariff is a tax of which the foreigner pays a portion, while you pay more than the whole in addition ; this is true, because what the government receives is but a part of what is lost in the passage between producer and con- 276 ECONOMIC AND INDUSTRIAL DELUSIONS. sumer. The obstacles which hold the two apart are a charge on both ; transportation more costly because of taxed ships and scantier trade — choice of goods and of markets restricted by the barrier — profits to middle-men levied on the extra cost as well as on what is paid the producer — all these must be reckoned along with the duty. To estimate the foreigner's cost as equal on the average to this extra charge, so that the consumer here is left with merely the entire duty as his cost, is estima- ting quite too liberally. POINTS TO BE TESTED AND PITFALLS TO BE ESCAPED. Now permit me to go over the points I have undertaken to make : 1. That there is never any great movement of gold and silver in trade between nations unless there is somewhere an unusual demand for them. 2. That in con- sequence revenue devices cannot change, and, in fact, never do change, the relative proportions of imported and exported goods. 3. That if duties cause a reduction in imports they must inevitably bring about an equal reduc- tion in exports. 4. That this can only be done by preventing those who have exportable goods — particularly farmers — from exporting them. 5. That the pretence of increased home consumption, alleged to account for this, is baseless. 6. That the prevention of exportation of farm produce must therefore be brought about by increas- ing cost of production and lowering the effective reward of the farmer's labor. 7. That every pretence that the system acts otherwise — that it somehow throws the cost of protection upon the foreigner — is opposed to reason and to experience. Of all these points I gave as much proof as there was room for ; and I earnestly hope, as my aim is more than anything else to have you see the matter PROTECTION AND AGRICULTURE. 2JJ as it truly is, that you will take all possible pains to test my argument both by reflection and searching of facts. Do not be misled, in making the test, by plausible irrel- evancies. Do not be persuaded into forgetting that American labor can be protected only by or at the expense of American labor, and that whatever one trade gains others have to stand the charge of. Do not be cajoled into the delusion that you need " protection " in this market when you know that you are able to meet competitors in foreign markets. Do not let people throw obstacles in the way of your reaching foreign markets under the plea that these are "uncertain" and "un- reliable." If they really are so exports will fall of them- selves, and " protection of home industries " will there- fore be quite unnecessary. Do not let them frighten you with the prospect of competition in your own field of labor, with workmen thrown out of factories, when the highest reasonable estimate of the number of workmen that absolute free trade could throw out of employment is less than that of our able-bodied immigrants in three years. Do not let them ascribe the general prosperity of our people — not so high, you very well know, as it ought to be — to taxation, until allowance is made for the fact that this country (leaving out Alaska) has about thirty acres to each inhabitant, while England has less than two. Any man who conceals this fact in comparing industrial conditions in the two countries thereby proves his blind- ness or his dishonesty. Do not give protection credit for the progress of our country until you have seen what great forward strides have been made by England and New South Wales without protection. Treat with just contempt all insinuations that those who are engaged in the endeavor to reduce the burdens upon you are " agents of foreign manufacturers," or " enemies of the working 278 ECONOMIC AND INDUSTRIAL DELUSIONS, man," or "enemies of the old soldier," or "Confederates." It is true, possibly, that people of all these classes desire lower duties, as it is that sheep and hyenas are animals ; but it no more follows that all others who desire lower duties belong to these classes than it follows that, because they are animals, they are therefore sheep or hyenas. So much is made of the fact that the tariff-reform movement draws a large part of its strength from the South, and so strenuous are the efforts made to enlist all that remains of the old war feeling, all your zeal for the Union of our fathers and for human rights, in the service of mine and factory owners and other banded boodlers — to put the noblest of sentiments to the most debased of uses — that I could not elude the subject if I would. It is not possible for any of you to be more earnest in behalf of the Union, or of the liberation of .our colored fellow- men than I was and am. But I never dreamed that I was so committing myself to the policy of making the farmer a perpetual sacrifice to the interests that are now preying upon him. I never saw either justice or sense in using alleged wrongs of the colored citizen as a cloak to cover real wrongs against you. The hypocrisy of the Republi- cans of to-day is shown by the fact that they are united on no legislative measure for the benefit of the freedmen, and that the one practical use to which they propose to turn the uproar they are raising in his behalf is — what? Great heavens — a scheme for counting in a few more high-tariff representatives from Southern States ! You ought to look at the position of the Southerners thoughtfully and dispassionately. If they oppose protec- tion it is because they know what will advance agricul- ture, the great interest of the South ; and, on this point, their interest is your interest. Have you any doubt of that? If the protective system is good for your industry, PROTECTION AND AGRICULTURE. 2JC) why not for the same industry in the Southern States? And if it is really to their interest to support it, why do they oppose it ? The agriculturists of the Southern States are not more intelligent than those of my own section, I willingly grant. But they are reasoning men, neverthe- less ; and no result of the Civil War will be endangered in the least if you stop and study out a candid answer to these questions. PRESENT AGRICULTURAL DEPRESSION. That the farming interests of the country are not pros- pering as they should must be well known to all of you. You raised in 1889 greater crops than ever before, but the increase was prevented, somehow, from working in your favor. Prices have fallen more than your production has risen. The census of 1880 already showed, in its comparative tables of property located and property owned, that a considerable portion of the land of the great agricultural West was owned in the East ; that of 1890, if fairly taken, will show the same thing in stronger colors. The amount of your land held under mortgages to non-residents every one knows to be huge, and it is hoped that the next census will furnish particulars. Farms in the older States are deserted by the hundred and begging for purchasers at prices less than the cost of the buildings on them. Farm values have fallen even where the farms are all occupied. An increased value of real estate is reported only in the cities and their suburbs. The farmer's boy does not take to his father's calling as he used to. The amount of wealth held by farmers is, pro- portionally to the total wealth of the community, far smaller now than thirty years ago. That was, by com- parison, a golden age for American agriculture. Can you 280 ECONOMIC AND INDUSTRIAL DELUSIONS. fail to recognize the cause to which, in great degree at least, this state of things is owing ? Can you allow your- selves to be misled in regard to it, because you happen to be unable to tell exactly where your money goes, and how you fail of getting the return to which you are entitled ? For me it is enough to know that a gun was fired in your direction, and that you have been struck by something ; I do not feel obliged to trace the bullet through every inch of its passage from muzzle to mark. Evidence of exactly the same kind that the protective- system is the cause of your injury, is in your hands. You cannot make the injury less by blinding your eyes to the evidence. DUTIES ON FARM PRODUCE IN THE McKINLEY BILL. The subject proposed for this letter was the McKinley bill and the arguments made in behalf of it. Instead of examining these at once, I have given five sixths of my space to a preliminary discussion ; but this course is not unwise, I think, because we must have some groundwork of general principles to stand on before we can see how to judge the bill at all. If we have prepared our ground- work rightly, the judgment follows as a matter of course. That the statesman who framed this bill has labored zealously for your approbation, is very clear. If it is passed, most of the things raised on farms will be dearer to every one who undertakes to import them. The gain to you (measured exactly by the loss to possible im- porters) you can easily estimate when you have found how much of the articles to be protected is now imported. Animals of all domestic kinds are among the items largely increased. But we do not import many of them ; on the PROTECTION AND AGRICULTURE. 28 1 contrary, we more than supply our own market, and have such animals for export. Wheat, corn, and oats: ditto, ditto. The best that can be said of these provisions is that they are a dead letter, and were designed so to be — that is to say, a conscious humbug. Such practical opera- tion as they can have will be to prevent you from improv- ing your fields by the importation of seed grains, or your stock by bringing in any animal that you cannot prove to be "for breeding purposes." Barley is increased. Weren't you just suffering for that? Potatoes are advanced from 15 to 25 cents. At present rates we some years im- port fewer potatoes than we export, and only half the time does the amount reach one per cent, of the crop raised in this country. In but two years of the last thirteen, 1882 and 1888, did the importation of them rise as high as three per cent., and those years followed very poor yields the preceding fall ; two thirds of a crop, made to cost the consumers more than do many full crops. Is it not plain that the only aid the duty can bring you is in making scarcer a food that is particularly the resource of the poor, at times when nature has been least kind to them — at times, I should add, when you have least to sell ? To my mind, the idea of coining money by procuring legislation to help in starving my fellow-beings is something little less than infamous ; but the cruelty of this blow at the defenceless is not more conspicuous than the stupidity of upholding an expensive protective system for the sake of gains that only come in exceptional years, when the potatoes are not in your hands to sell, and the same farmers who usually have a surplus may be compelled to buy for their own use. Hay is increased. How far could imported hay be car- ried, even though free, do you calculate, before losing its whole value in cost of carriage ? 282 ECONOMIC AND INDUSTRIAL DELUSIONS. THE OTHER SIDE OF THE ACCOUNT. So much for what this bill proposes to do for you. Now let us examine what there is on the other side. I know that such an examination is considered irregular; that those who have charge of measures of this kind call no attention to any other provisions but those for pre- venting the importation of the goods that you produce, and represent those provisions as being the whole measure. Only those proposing to manufacture tin plates (a firm of Pittsburg capitalists in the present case) by this reasoning need be interested in the duty on tin plates. But we are not to be manipulated in this way. We are interested in this duty as well as others, you and I, and we propose to see how it will affect us. We know that the proposed increase is and can only be for the purpose of increasing the cost of plates, since government can help to increase the profits of domestic producers of them in no other possible way; we know that these plates are necessary for buckets and pans and cans of all kinds, and form a considerable item in the cost of agri- culture, in the meat and fruit preserving and dairying industries ; we know that any increase in the expense of the tins must be passed down to the consumer — to all of us, that is, — and it may so embarrass the trade as to drive out many private canners doing a small business in the back country districts ; we know also that our exports of canned goods raised by farmers give markets and added value to surplus fruits, vegetables, and meats, and that this trade would be crippled if not totally ruined by the proposed duty. Does that not interest us ? Consider the proposed increase on lead ore, and the smelting establishments now using ore from Mexico that would be broken up by it. The retaliatory duty Mexico proposes putting on imports of our corn will still further PROTECTION AND AGRICULTURE. 283 injure the farmer. Consider also the increase on wool. What our wool tariff does for us I have already tried to show you. Some of you may, perhaps, make something tw the increase if it ever goes into effect, but not many. 1 do not think that our factories will pay much higher prices for your wool — they cannot afford to and remain in business. The most significant increase is in the kind of wool that you do not grow — the coarse fibres used for carpets. The one certain thing about it is that it must make your carpets dearer (a well-known manufacturer tells me that the material in a plain ingrain carpet, such as is used by most of you, will cost more after the passage of the McKinley bill than the finished carpet does now), and compel you to go without, or else be content with poorer quality. One provision that was left out of the bill is quite as instructive as anything contained in it. As originally prepared it provided for a duty on hides. This was all" for you, of course ; notwithstanding the fact that few of you have hides to sell in such quantities that you could make much by the duty, and that all of you wear the boots and shoes, and drive with the harness, whose cost would be increased by it. Mr. McKinley's committee loved you (or Armour & Co., of Chicago, I should rather say) so much that it was ready to sacrifice our trade in shoes with Canada, which could not bear any increase in the cost of leather. It yielded the provision, though — and why ? Only because the consummation of the deal with Armour would have left it without votes enough to pass its bill. SECRETARY RUSK'S BID. The letter of Mr. Rusk does not call for much of our attention. He gives you a good deal of advice about 284 ECONOMIC AND INDUSTRIAL DELUSIONS. private economy, railroads, speculative combinations, and other matters, with which I have no fault to find. His professed opinion that " the present agricultural depres- sion " is due to "our imports of agricultural products" will be easy to weigh when we have considered the remedy he proposes : that of making scarcer and dearer such products as we import, so that you may be forced into raising them yourselves. Accepting his figures (al- though misleading in the exaggerated idea they give of the competition you have to withstand), we seem to im- port $250,000,000 of agricultural products that might possibly be raised here. Well, how do we pay for them? What industries now supported by sending produce abroad to buy them does he propose to sacrifice ? Or what else worth $250,000,000 does he propose to have us import? A practical man, making a recommendation in good faith, would have looked carefully into these questions. Mr. Rusk makes no allusion to them. For anything that ap- pears in his letter he might be as ignorant as a baby that there were any such questions to consider. Or he might perhaps fancy that we paid for this yearly importation out of the $30,000,000 of gold and $60,000,000 of silver that our mines annually yield. (I should be delighted if we could.) For Secretary Rusk personally I have none but the kindliest of feelings, and I cordially hope for him the happiest thing possible — that he will resign the dis- cussion of political economy to people better equipped for it. A CONFIDENCE GAME. Are you not convinced that Mr. McKinley's new " far- mers' tariff " and committee report are only a little confi- dence game — that his party is making a great clatter about the increase of duties on your products in order to draw attention away from the increases that truly PROTECTION AND AGRICULTURE. 285 count for something, those of the products of the " cam- paign boodler," about which nothing is said to you — on the principle of the adroit juggler who always has some by-play to distract your eye and your attention while he is performing his trick? I can see in it nothing else. When you have studied the mazes and dark corners of the tariffs a little longer, you will be able to see duplicity almost everywhere. Nowhere are their promoters so ready to make victims as in your own calling. They know the power of your mighty numbers, against whose opposition their ablest efforts would be hopeless, and they seek to enlist you by inflaming your unworthiest prejudices, be- fogging the issue, and beguiling you with misrepresenta- tions. Some of their tricks — for example, besides those I have exposed, there is that one of pretending that the duty on manufactures is for the purpose of making them cheaper, and that on your products it is at the same time for the purpose of increasing the price ; or that other one of pointing at a few " trusts " not built up by the tariff, and pretending that they thus prove that the tariff does not build up " trusts," just as they might pretend that exposed cesspools do not cause disease, because they do not cause hydrophobia — are really so shallow that I am quite sure they cannot long mislead you. You are be- ginning to reflect, to think for yourselves, and when you have once learned to do that the victory is won. United, you are irresistible. 1 The case is now in your hands. Your decision is more important to yourselves than to anybody else in the world ; and the issue of welfare or disaster is one that comes so closely home to you that no words of mine are needed to lay stress upon it. Its gravity is such, more- over, that all the light you can possibly gather will be none too bright to pierce the dust and the fogs that have 286 ECONOMIC AND INDUSTRIAL DELUSIONS. been thrown about it. If I have brought you a little new light, if I have made any point clearer, or ex- posed any stumbling-block in your path, by this essay, I shall be well repaid for the trouble it has cost me. Again I remind you, your interests are my interests, and I am far less anxious that you should agree with me than that you should know the truth, wherever the truth is to be discovered. The second letter, dated July, 1891, and adapted to the newer questions before the farmer for his verdict, was pre- pared for the present volume. Open Letter to American Farmers, No. 2. A year ago the important legislation of the Fifty-first Congress had not yet been enacted. The public revenues were under active discussion ; the tariff bill, which de- clared the policy of the party in power, had just been hurried through the popular House, and was about to enter upon its three months' overhauling in the Senate. This tariff of 1890, with an amendment providing for something announced as " reciprocity," went into effect in October ; elections for a new Congress immediately followed ; conventions of a zealous and influential section of your own number, well known as the " Farmers' Al- liance," were held in different cities of the Union, and demands for important new legislation were enthusiasti- cally resolved on. Within the year, also, a liberal exten- sion of the pension list has been made, a law providing for greatly increased silver purchases has gone into execution, and a few treaties embodying the so-called " reciprocity " have been promulgated. In all these changes your own interests have been involved, one way PROTECTION AND AGRICULTURE. 287 or another ; and the question I now invite you to con- sider with me is whether you have had any substantial benefit, or may reasonably expect any benefit, from them. How much has been gained or lost for your calling by the legislative measures of the past year, and what have you to hope from the projects of the Alliance that assumes to represent you ? WHAT IS CLAIMED FOR THE McKINLEY TARIFF. Dealing first with Major McKinley's tariff, you hear it claimed to have increased the value of your crops, and to have reduced the price of some of your necessaries, while not sensibly increasing that of the others. Very few words are needed for the consideration of the first of these claims ; for the prices of the principal agricultural staples are not in the least affected by foreign competi- tion. Not a year — certainly none since 1880 — have we exported less than one hundred times the wheat, and one thousand times the corn, that we imported ; and not a year has the price in our markets, thus completely at the command of the home products, failed to show by falling or rising the effect of larger or scantier crops. The price of these staples increased last winter, because the yield of the preceding season was less ; but it was far exceeded by the price ten years ago, under the old rates of duty. You will call to mind that those who advocate reduction of the tariff in your interest have not laid their chief stress on the higher prices at which you would sell, but the lower prices at which you would buy ; for while your principal crops must bring you nearly the same return in money, whether the duty be zero or a hundred per cent., with your purchases it is very different. We will now see how these are affected by the new tariff. 288 ECONOMIC AND INDUSTRIAL DELUSIONS. The duties on a few iron and steel products, in which our tariff beneficiaries were believed to be secure of their monopoly, have been reduced by a hair's breadth or two. The very reason which induced the gallant Major to make these trifling reductions — that they could not appreciably hurt the iron men — will effectually prevent them from being of any use to you. Cutlery, however, in which you would find a reduction of use, has an enormous increase of duties. On an obscure item here and there, in several other parts of the act, there has been a decrease ; but the one significant achievement in this direction has been in the item of raw sugar. The duty on this has been re- moved, and the price of all sugars has immediately felt the influence. Cause and effect were never more dis- tinctly manifested. It is a remarkable fact that we owe this clear, striking, and unmistakable proof of the effect of a duty on a price to Protectionist legislation. It was not intentional on the part of Major McKinley and his friends to show you so plainly how their protective policy was burdening you. But when you consider that their great object was to prevent your other burdens from growing lighter ; that if they could attain that object in some degree by the inven- tion of manifold ways of consuming the public money, reaching the all unprecedented figure of a thousand mil- lion dollars in two years, they could bring it about the more effectually by cutting away some important source of public revenue ; that it is always difficult for a popular Assembly to reimpose a tax when once removed ; and that the tax on sugar, besides bringing in a large revenue, had no protective effect except for States that refused to join in heaping up protective burdens on their fellows, and was therefore admirably fitted as a sacrifice ; when you consider these points, you will easily understand how this PROTECTION AND AGRICULTURE. 289 change came to be made. Had they been real and not sham statesmen they would have selected wool rather than sugar for an experiment of this kind ; thus providing abundance in place of scarcity of material for one of our most important manufactures, and greatly increasing the comfort of every citizen who has to think twice about the cost of the garments and carpets he buys. But they chose sugar, and its immediate fall in price clearly pointed out who had been paying the import tax upon it. A farmer of my acquaintance professed surprise when he found himself charged five instead of seven cents a pound for his sugar, and asked the reason. " Why, it 's the new tariff — don't you read the papers? " was his grocer's an- swer. To this the farmer objected : " I don't see how ; I thought the import duty was something the foreigner paid for admission to our markets." Had he confined his reading to Protectionist literature — to the essay of Sena- tor Edmunds, for example, wherein that ripe statesman adduced the case of the cheaper grades of coffee in 1872 as conclusive proof that taking off import duties did not reduce prices — he must certainly have been quite un- prepared for any such effect. While greatly curtailing the resources of the gov- ernment, therefore, the relief of sugar from taxation benefited you — but how much ? The fall in price was about two cents a pound ; the duty actually taken off was less than two, but the effect of a tariff duty is usually to increase the cost of the taxed article to the consumer by more than its full amount, because the rate of profit necessary to keep the retail merchant in business is, and must be, charged against every part of the cost (whether paid to producer, to transporter, or to government), and all parts of the importer's expense are therefore increased in the same ratio when the consumer comes to pay them. 19 290 ECONOMIC AND INDUSTRIAL DELUSIONS. A family that uses two hundred and fifty pounds of sugar per annum will save, at the two-cent rate, five dollars by favor of the McKinley law ; but few are the families that will not have to pay as much more for clothes, whose price has been increased by that law. Cheap clothes are still as plenty as ever, I admit ; our dealers find it easy enough to sell at the old prices, taking only the simple pre- caution to give a lower proportion of wool and a higher proportion of shoddy with each yard of stuff ; but if the buyer insists on having the same quality, he will find that he must pay a difference. A suit of clothes, or an over- coat, as good as he got for $20 last year will now cost him $25 probably, and thus absorb in one payment his year's saving by cheaper sugar. If his wife has to have a cloth or silk dress, in addition, the increased cost of that will be so much more on the debit side. If his floor requires a new carpet, the terms to be had are no longer what they were ; and he will have to keep a sharper lookout than ever on the quality of what is sold him. All the furniture of his table — cutlery, crockery, glassware — is similarly increased in price or deteriorated in quality by the new legislative narrowing of competition. THE " RECIPROCITY TREATIES." Certain arrangements with various powers, in America to the south of us, have been made in pursuance of the McKinley law. They provide that in consideration of our government's abstention from taxing raw sugar, coffee, and hides, the contracting powers shall admit various specified manufactures from our country, either free or under a reduced import duty. These arrangements are advertised as a grand benefit to you, because agricultural products are included with the manufactured articles to be admitted on easier terms. The extent of Latin America PROTECTION AND AGRICULTURE. 29I is vast, its number of inhabitants great and growing ; and it is concluded from these facts that a rich market has been opened to your products by the treaties. The countries with which these treaties are made can- not afford to pay very profusely for your produce, and it is not expected that such increased purchases as they may make will greatly improve the prices paid you ; but it is expected that your sales will be increased in number, and any gain of that kind which it is possible for you to obtain from this source, will be confessedly so much clear. The duty that a South American country sets upon our produce, even though its own citizens pay it in any of the sales we may actually make, injures us as well as them by preventing other sales ; and every producer who has anything that those countries can be persuaded to buy is interested in the removal of all obstacles. Such a benefit is of the same nature, for all practical purposes, as the improvement of a road between the producer and- his market, enabling him to haul larger loads at less cost. But now the question recurs, How much can you gain from any probable increased trade with South America ? Will the profit amount to anything like what the McKinley law is costing you on woven goods and table-ware ? On that question there is little room for doubt. If you had two markets, one of which furnished a steady demand for more than half the produce you brought for sale, while in the other you sold less than a tenth of it, to which market would it profit you most to improve your road and give yourselves easy access ? That is the very question you have to consider. The leading agricul- tural exports from this country (omitting " hog products," for which separate data are not furnished) are cotton, corn, wheat, and wheat-flour. Of each of these exports England regularly takes the larger part : between 59 and 292 ECONOMIC AND INDUSTRIAL DELUSIONS. 64 per cent, for an average of the years 1887-1889. But when we come to the American countries we can find separate accounts only for Brazil, Mexico, Cuba, and Porto Rico ; all the rest of Spanish America taking so little from us that its importation only forms a petty part of the " all other countries " column. Summing up the im- portations of these enumerated countries, it appears that we send them a fraction of one per cent, of our exported cotton, less than two per cent, of corn, a fraction of one per cent, of wheat, and not quite ten per cent, of wheat- flour. To give an idea of the relative importance of these items, I give the annual domestic export value in millions of dollars, an average of the same three years being taken : Cotton, 222 ; corn, 22 ; wheat, 63 ; wheat- flour, 51. The "hog product" value is also 63 millions per year, and that of mineral oil — our only non-agricul- tural export of considerable importance — 43 millions. You can easily judge by these figures which of the two markets is better worth cultivating. I am well aware that my Protectionist adversaries claim for their policy a power to remove this disparity — to raise our Spanish- American agricultural exports to something like the dimensions of the English — but is not their plan a good deal like that of rearing a pigeon into a turkey by gen- erous feeding ? Differences in the demand for agricultu- ral produce are more natural than accidental. Whatever change of diet we gave to the South American trade, we could not stimulate a very large demand for agricultural products among them, for the simple reason that those nations are themselves agricultural, and the imports they desire are manufactures. If you would follow the ad- vice I have just suggested, and aim to improve your road to the best market, your chief question will be, What obstacles in the way of trade with England remain to PROTECTION AND AGRICULTURE. 293 be removed? The answer is unquestionably, The laws we have enacted to prevent the English from paying us for what we send them. Reform these — stimulate and in- crease our trade with England, and you will be fattening your turkey instead of throwing away your provision in the wild endeavor to give an impossible growth to your pigeon. If foreign trade is of value to you — and the endeavors that the Republicans are making so strenu- ously in these days for commercial arrangements with southern countries are conclusive proof that they have abandoned the exclusive " home-market " position as no longer tenable — I have shown you the way to secure it. The New York Tribune, leading organ of protection, lately sent a trusty staff correspondent to the countries selected for this " reciprocity," with the object of working up a sentiment in its favor. Here is a sentence or two, in which he showed the reason why Cuba, especially, would be benefited by lower duties on its imports from us : " Other sugar-producing countries flourish because they get the full value in exchange for their staple. Cuba languishes because it is not allowed to buy freely in the United States, the only country where its sugar can be sold." The writer's intention is plain enough. He wants us to maintain a hopeful attitude toward " reci- procity," in view of the powerful incentives that Cuba has toward carrying it into effect. But is there a man of you, who is not able to read a deeper meaning into these sen- tences ? Do they not apply directly to yourselves ; do you too not languish because of the laws that obstruct you from buying freely in Great Britain, the only country where your breadstuffs, meats, and cotton can — to any- thing like the extent of the surplus you produce — be sold ? The truths of political economy will not down ; even the organs, whose one enduring purpose is their 294 ECONOMIC AND INDUSTRIAL DELUSIONS. suppression and confusion, are sometimes compelled to recognize them. A BORROWED POLICY. For neither the reduction on sugar, nor the increased trade with Spanish America, considered in themselves, have I a word of censure. There is no reason why I should have : however halting and inadequate, both are steps in the right direction. Both look toward a fuller foreign commerce, and better regard for the purchaser. If their promoters think to prosper in stealing Democratic "thunder" — in committing themselves to a policy which can have no sort of success except by proving the falsity of the cry that " the duty is paid by the foreigner," and the equal falsity of the other cry that " the home market is all-sufficient " — it is not for me to advise against it. My complaint is that these doubting, unwilling moves, in the direction we are headed, are intended to serve as obstacles to further and more salutary progress in that direction. Sugar is made free to prevent the reductions of which you are really in need ; South American trade is encouraged, in order to keep you amused and draw off your attention from the trade that, in your interest, ought to be encouraged. Nevertheless, since the only really popular features of this Republican legislation are obvi- ously mere imitations of the policy of their opponents, there can be very little doubt that those who can see how to grasp the substance will not be very long content with the shadow. THE SUB-TREASURY AND LOAN SCHEMES. The political party of the " Farmers' Alliance " — for although the Alliance at first disavowed the object of forming an independent party, and many of its most PROTECTION AND AGRICULTURE. 295 prominent leaders still prefer to act with the older par- ties, it has inevitably become such — is quite as active as any. It is largely made up from your own number, and professes to be very earnest in your interests. Its plat- form of principles is quite outspoken ; the farmers who set it up are evidently conscious that all is not as it should be with them, and have decided opinions as to the remedy. Not all of the Alliance, perhaps not the majority, are committed to the "sub-treasury" plan; but this has been so earnestly advocated in its councils, that some attention must be paid it, in any account of the past year's changes. If not actually suggested, it was much encouraged by the success of a bill for compulsory gov- ernment purchases of silver bullion ; for the argument was not at all unreasonable, that if the silver-producer is entitled to so much favor, the claim of the agriculturist is at least equal. The sub-treasuries called for in this plan are to be store-houses in bulk for all the less perish- able products of the soil, the government making an advance of eighty per cent, on their value in money, at a very low rate of interest. Associated with this is a land- loan project, in which the national government is to furnish every one able to give good real estate security with any loan that he may demand, at nominal interest. The attractive features in these two plans are combined into a very tempting display. No more compulsory sales of farm produce, while prices are low, because the owner must have money ; he is to await the price that suits him, meanwhile supplying his urgent needs by the government advance, and leaving the care of his produce to the same beneficent power. No more pinching want for any who have land to pledge; government is to tide them over their temporary embarrassments and bring them to easy 296 ECONOMIC AND INDUSTRIAL DELUSIONS. times on the easiest of conditions. No more dependence on the Shylocks when ready money has to be had ; their trade is to be broken up, and " innocuous desuetude " is to claim them for its own, when the government takes the loan business upon itself. Shall we turn aside from these alluring pictures, and try to form some real practical common-sense idea of how these plans would work, if actually carried out ? (1) One thing is indubitably certain : that if the govern- ment undertakes to furnish money on interest at less than the market rate, the effect must be just as if it offered anything else at less than its price — to excite an eager and exhaustless demand. It will be like passing a brand new pension law, or opening a tract of new territory under the Homestead Act. Leaving out what is charged for uncertainty of repayment, the interest on money is equal to the increase to be expected from the expendi- ture of the money. It is not an arbitrary charge, and not a burden ; for if there were no such thing as interest there would be no surplus capital — nothing to lend, no enterprise, and no advancement. There can be no sound objection to inheriting property, for it is well to give, and inheritance-gifts are the most natural. To any one who complains of interest as unfair, I would put the question whether, if he traded a horse for a wagon, believing each ' of equal value, he would be willing that the party he traded with should keep both horse and wagon for a year without recompense. This would be precisely equiva- lent to lending money without interest. Interest of course varies with its market value, from thirty-six per cent, in some new countries to as low as two per cent, in Holland; it has generally declined, just as the prices of most manufactured commodities have declined. There is no more danger of interest falling to nothing than there PROTECTION AND AGRICULTURE. 297 is of the price of commodities falling to nothing ; both find their level, and it would be as sensible to say that because a lady's hands and feet are pretty in proportion as they are small they would be prettiest cut off, as that be- cause low interest is an advantage it would be best to have none at all. Capital is essential to progress — an unmixedly good thing if honestly obtained. For the common weal, the laws should favor it. Interest is and should be regulated by supply and demand. If our gov- ernment should undertake to do better than that for the borrowers — should offer cash at two per cent., which could bring them four to six per cent, if invested, a great many people might be expected to snap at the offer. (2) Reckless speculation and heavy losses are no less certain. Many investments will be paraded before the farmer, as sure to bring him in a handsome return for his two per cent, outlay ; he will be strongly tempted to try a "flyer" in stocks, on money obtained so easily ; and if the courts of Wall Street and~ other investing centres are even now paved with the remnants of departed fortunes, dropped there by men who did not know quite all they fancied they knew of the ways of the money market, do you believe that, under the new loan-regime, their tale of victims could fail to be richly reinforced from your own calling ? It will be a very paradise for floaters of flash enterprises. Their prey will be guided into their nets by act of Congress. (3) What necessarily follows ? The government will be saddled with thousands of bushels of produce, or thousands of acres of land, which it will have to sell because the depositors or mortgageors cannot redeem them. This will give opportunity for jobs innu- merable : and he is very unfamiliar with the recent experience of our government when in possession of similar property, who doubts for an instant that such 298 ECONOMIC AND INDUSTRIAL DELUSIONS. sales must be at a heavy loss to it. (4) The government will infallibly be cheated in another way : in the appraise- ment of the valuables on which the loan is made. The appraiser whose decision is to determine the amount of the loan will be under the strongest kind of temptation to fix the value too high — and may be expected in most cases to succumb thereto. This will increase the amounts of produce or land finally thrown on the government. (5) Who will pay the money to be loaned ? It must come from labor: the charge must fall upon the bone and sinew of the country. I am aware that it is not pro- posed to raise the enormous fund which will be called for to meet the contemplated demand for loans, by any special tax, direct or indirect — that to a new issue of greenbacks will be entrusted the whole work of satisfying this colossal appetite ; but, I am compelled to remind you, that is dodging and not answering the question. Money can do no good (except in fraudulent payment of indebtedness) unless it represents value, and value cannot be given to the proposed currency except by the performance of labor : though the dollar is of course any- thing the government chooses to call by that name, what it is worth to you depends on the labor which it has cost, or which you can command by means of it. Assuredly, then, unless the Alliance plans are to result merely in a wild raid on public and private credit, the whole vast cost of the loans will be borne by the labor of the country — by yourselves, more than anybody else. (6) The gist of the whole proposition, leaving out of view the speculation, the failures, the cessation of honest industry, the universal demoralization in which its adop- tion must result, was very well put by a shrewd farmer of Western New York : " Shall you let the government lend you your own money at two per cent, interest, or shall PROTECTION AND AGRICULTURE. 2gg you keep it yourselves for nothing ? " Depend upon it, whatever the government gives you, it must first draw from you. It is an instrument worked by your own power, not an omnipotent Providence. The bad effects expected from the loan schemes favored by the Alliance are no empty conjectures or theoretical speculations. They have been thoroughly tested by ex- perience. Plans of the kind — the very same plans, in some instances — have been tried again and again ; some here, some in Europe, some at this very moment in South America. The record of these experiments is uniform, unrelieved, hopeless failure in every case. The French scheme of " assignats," at the time of their Revolution, was of that kind. At about the same date land loans were floated in Rhode Island, with some of the disastrous results I have sketched. The present financial troubles in the Argentine were brought on in a similar way. No surer precursor of ruin is conceivable than the adoption of such expedients as these. That human nature cannot be trusted to use them is a fact that must be remembered as long as we have human beings to deal with. TAMPERING WITH THE CURRENCY. The Farmers' Alliance, as I have admitted, has not agreed on the loan schemes just examined ; but on one point it has quite decided — a reform of the currency. The seventy-five to eighty cents' worth of silver in a coin which constituted the unit of values in this country until 1834 (but was then replaced by a gold unit as the result of a change in the coinage laws, and has never since been accepted as our standard) is again to become dominant, to be called a dollar, and given all the dollar's powers, while the reign of gold is to be brought to an inglorious end. Do you fail to recognize this as one of their plans ? 300 ECONOMIC AND INDUSTRIAL DELUSIONS. Well, they do not express themselves in the language I have chosen, I admit. They call their scheme by the more attractive name of " Free Coinage." The meaning of this is that they would take the control over the vol- ume of our silver money out of the hands of the govern- ment, and give it into the hands of those who own silver bullion, so that any man with seventy-five to eighty cents' worth of silver can have it made into a dollar, and pass it as a dollar. That is what people like to call the " two-metal " standard, though I have called it the silver standard with- out qualification ; they probably take some satisfaction or see some wit in pretending to believe there can be any doubt, any room for two opinions, whether or not the man who has the power to pay a debt of one hundred cents with seventy-five to eighty cents will do so. Were there any doubt about such a question, we might seriously speak of a " double standard " ; but as there is none, the expression is mere empty fooling. " Free coinage " practically means a provision that debts contracted in gold value shall be paid in silver value, and that the cred- itor shall be cheated out of the difference between the two. It is because it has that meaning, I deeply regret to add, that so many people find it attractive. Silver has never been our standard of values since 1834, I have just said. It did not cease to be so by any express legislation then enacted, for its legal tender power and the right to have it coined were not formally limited until 1853 ; but only by the principle that those who have debts to pay will pay them as cheaply as they can. The act of 1853 made no provision for a silver dollar, because that coin had been replaced by the gold dollar. About 1869, however, the coinage of silver dollars was revived, the coins being at first used altogether in foreign trade ; afterward the mines began to turn out this metal PROTECTION AND AGRICULTURE. 30I in unprecedented quantities, so that its value fell off ; there was at once seen to be money for somebody in passing as a dollar a coin no longer worth a dollar, and the silver question was upon us. But never has there been a serious question that gold was our standard metal. During the Civil War, when we had to look to sales in Wall Street to see what our currency dollar was worth, it was with gold that we concerned ourselves — the price of gold, not of silver, was what all the papers gave us. Whenever we go beyond the domain of our greenbacks, coin certifi- cates, and national bank-notes, it is gold that we take with us. If the Alliance and the silver owners persuade us to go back to a silver basis, they will restore a monetary standard that the country has not known for more than half a century. Now what is your interest in the silver-coinage ques- tion ? Many of you owe money, and the cheaper dollar would no doubt be a relief in those cases. But for those of you who are out of debt it could be nothing but an unmixed nuisance. What you sell and what you buy would both increase in price because of the depreciated unit of value ; but those who sell to you would take care to secure all the advantage of higher prices from the first, while those who buy of you would be considerably longer in hearing the news — that is the way such changes always work. After a while, of course, you would be substan- tially where you were, in a business way, only burdened with your share of responsibility for the government's loss of credit, and with the difficulty, which always pre- vails in-times of repudiated contracts, about getting such money advances as you might need. The debtors among you would suffer in the same way, except for the cancel- lation of part of their present debts ; those would of course be made easier by debasing the currency, just as 302 ECONOMIC AND INDUSTRIAL DELUSIONS. they would by a law forbidding attachments, or interfer- ing with collections in any way. No class of our people have a stronger interest in the maintenance of a currency of uniform excellence than those who are poor or unlearned in finance. If any kind of money is worse than another, that is the kind which is sure to be forced on them. Its lesser value is forgotten at such times, but is remembered well enough when they come to present it in any of their payments. Every honest citizen is interested in keeping the country's money all as good as the best, but none more so than yourselves. ALLIANCE OF THE " ALLIANCE " WITH THE PROTECTIONISTS. That you have a grievance indeed, in the way you are treated by government, none can be more conscious than I. Long have I been aware of it, and strongly have I in- veighed against it. But I must urgently caution you to be certain what your grievance is before you act. It may not be what you think it. Because many rich men, many men in corporations, many Eastern men, oppose the crude projects of the Alliance, it does not necessarily follow that these projects will be beneficial to agriculture, or the poor, or the West. Because the Treasury is sensitive to the lightest word from the bankers, is ready to fly to " the relief of Wall Street '' whenever there is any trouble there, while you are aware of no such complaisance toward yourselves, it does not necessarily follow that your interests are a sacrifice to the Street and the banks. For the relief extended to them is often a real relief, and indirectly wards off trouble from you at the same time — an impairment of the general credit, for instance, in which you would yourselves be finally involved, though now unconscious of the danger — while the relief for which so many of you are crying must in the long run, it is sin- PROTECTION AND AGRICULTURE. 303 cerely believed by those most attentive to the teachings of experience, injure far more than it can benefit you. Your real grievance, and what ought to be given you for its cure, I have tried to tell in the earlier part of this letter. Any one who calls away your attention from this real grievance, and from the measures that ought to be taken to cure it, is, whatever his professions, in the service of Protection. He who deliberately misguides you from your true impregnable position into one that is untena- ble, is a spy and a traitor, and should be counted among the enemy. If those who suffer under the redoubled burdens of the protective system can be led off on false scents, can be encouraged in making demands whose folly is so easy to demonstrate as to throw a doubt on the reality of their suffering, that mighty iniquity may count on a longer lease of life. But let us not be misled. Our enemy is in his last stronghold, and if we will but keep our view clear, our courage steadfast, our purpose earnest, he cannot long withstand us. CHAPTER X. SPECIAL DISCUSSIONS. THE following papers, mainly reprinted from various Pennsylvania and New York journals, give a fuller treat- ment of several branches of the tariff question (Iron and Steel Industries, Raw Materials, Drawbacks, " Ways and Means ") than is to be found in the foregoing chap- ters. A few alterations have appeared necessary, and been made accordingly, but the papers are substantially unchanged. All were originally signed with my own name ; but besides the generous and patriotic co-operation of Mr. Atkinson in the first two, I ought, and am glad, to acknowledge my brother's assistance in the preparation and revision of the whole. True Protection for the Iron and Steel Industry. This paper first appeared in the Philadelphia Record in April, 1890, and is a special application of the argument in Chapter IV. The fact that the iron product for 1890, here estimated "over 8,000,000 tons," actually exceeded 9,000,000, — though used for other purposes by the Protectionists, — is a favorable answer to my anticipations for the industry, which the more recent decline is not sufficient to reverse. COMPARISON OF BRITISH AND AMERICAN PRICES. In a recent article, the editor of the New York Tribune tries to break the force of Mr. Roger Q. Mills' exposure, 304 SPECIAL DISCUSSIONS. 305 in the North American Review, of the misstatements of Mr. James G. Blaine in the same periodical, by what purports to be an analysis of the prices of steel rails in this country and in Great Britain. The Tribune, follow- ing its habit in such cases, imputes to Mr. Mills the theory that because a duty is placed upon a foreign product — steel rails, for instance — the price upon the domestic product is advanced in equal measure. Mr. Mills, it need hardly be said, holds no such foolish idea, and nothing of the kind can be found in his reply to Mr. Blaine. What he does hold, and prove, is that in certain specific years the price of domestic steel rails has been held above the price in Great Britain in a sum equal to duties and freights, or even higher. Year. U. S. Product, Tons. British Price. U.S. Price. Difference. Excess of Cost. 1879 683,965 $26.88 $48.25 $21.37 $14,616,310 1880 954.46o 34-42 67.40 32.98 31,478,090 1881 l.33 ,302 30.41 61.13 30.72 40,866,877 1882 1,438,155 26.27 4850 22.23 31,970,185 1883 1,286,554 22.72 37-75 15-03 19,336,906 1884 1,116,621 23.19 30.75 7.56 8,441,654 1885 1,074,607 23.11 28.50 5-39 5,792,131 1886 1,763,667 18.70 34-5o 15.80 27,865,386 1887 2,354,132 19.70 37.08 17-38 40,914,814 1888 1,552,631 19.15 29.83 10.68 16,582,099 Total, 13,555,094 $236,864,462 Since the Tribune has provoked the discussion it becomes suitable to make use of the comparative prices of steel rails from 1879 to J 888 in rejoinder. . These years will be chosen for treatment because in them the prices in both countries have been upon a gold basis, all previous comparisons since 1861 being vitiated by our depreciated currency. 306 ECONOMIC AND INDUSTRIAL DELUSIONS. In this period the Bessemer rail production in the United States was very heavy, as shown in the table. The American and British prices given by the Tribune on the authority of the Iron and Steel Association, and their difference, are then shown, and the excess of cost to the consumers of rails in this country is easily computed. On examining the Tribune prices, I am led to believe that the American price belongs to the net ton of 2,000 pounds only. On the other hand, since British dealings are in gross tons, the British price stated is doubtless the price of a gross ton of 2,240 pounds. If this exact allow- ance were made it would add about eleven per cent, to the excess. The measure of the disadvantage of this country is quite sufficient, taking the Tribune's figures as they are, and we may, therefore, dismiss the fraction of 240 pounds per ton without further consideration. Even if the correction were to be made the other way, the excess paid in this country would be about $200,000,000 in ten years. Opponents may take it so, and then dis- prove the fact, if they can, that the cost of building up this comparatively petty branch of domestic industry — petty in respect both to value of product and to number of men employed therein — has been substan- tially as given below : $70,000,000 to $80,000,000 a year against the consumers of this country, and in favor of the consumers of iron and steel who have been supplied by Great Britain. The total domestic production of Bessemer steel in this period was 1 8,907,086 tons. It may be assumed that the difference in price on the remainder of the steel has been at least equal to that upon rails. This being computed year by year at the relative difference of each year, adds $81,696,361, making the total difference in ten years, between the price of British and American Bessemer SPECIAL DISCUSSIONS. 307 metal, $318,560,813. If the British mines and works could have supplied the United States with 18,907,086 tons of Bessemer metal between 1879 an d 1888 inclusive, at British prices (as they could not) it would have cost us $318,560,813 less than we actually paid. From January 1, 1879, to J u ly I > I 883, the duty on Bessemer rails was $28 per ton ; since July 1, 1883, it nas been $17 per ton. Had the whole rate of duty been added to the British price on our domestic product the disparity in the cost of Bessemer metal to our customers would have been $389,566,177, but $71,005,364 more than the actual dis- parity. The freight charges and insurance are computed by the Tribune at $3 per ton, or $56,721,258 in all, leav- ing for the unnecessary excess of cost of Bessemer metal in the United States, as compared to Great Britain, $261,839,555. So much for the cost of developing the Bessemer steel industry in the United States by means of a tax on British steel, on the hypothesis that must necessarily be made if we are to ascribe the development to our customs legislation. AN ESTIMATE OF THE TOTAL COST. To comprehend the cost of developing the production of crude iron and steel of all kinds in the United States from 3,070,885 tons in 1879 to over 8,000,000 tons in 1890, a computation must be made for iron as well as for steel. Our production of pig-iron was, from 1879 to 1888 inclusive, 62,273,470 tons ; of which about 20,273,470 tons may have been converted into 18,907,686 tons of Besse- mer rails and other forms of that metal, leaving 42,000,000 tons of pig-iron for other uses. Throughout this period the average price of American pig-iron was at least $10 per ton above that of British iron of the same quality 308 ECONOMIC AND INDUSTRIAL DELUSIONS. at furnace : 42,000,000 tons at $10, $420,000,000. A freight charge of $3 per ton might have been paid, rf British mines and works could have supplied the quantity of metal, amounting to $126,000,000, leaving the net excess of price $294,000,000. This gives us : Additional cost of Bessemer steel, . $262,000,000 Additional cost of pig-iron, .... 294,000,000 Total, $556,000,000 These figures confirm the estimates of Messrs. Edward Atkinson and David A. Wells, each covering a slightly different decade and computed on a different basis. In addition to our domestic product, however, we have required about 17,000,000 tons of iron in the years 1879 to 1888, which we have imported in the forms of ore, pig, bar, rails, tin plates, machinery, and hardware, and upon which duties of about $200,000,000 have been collected. It therefore follows that if the British or foreign mines and works could have supplied this country with iron and steel during the last ten years under consideration — 1879 to 1888 — without any advance in the prices in Great Britain, our domestic railways, mills, works, engines, tools and machinery would have cost nearly $800,000,000 less than they have cost ; or $80,000,000 a year. The entire capital in all the blast furnaces, rolling mills and steel works of the United States in 1880 was only $231,000,000, and probably does not now exceed $400,000,000. The ten years' excess of cost, on every- thing into which iron and steel have entered as com- ponent materials in this country, as compared to other countries, must therefore have been double the capital now invested in all the works where these crude materials are produced. SPECIAL DISCUSSIONS. 3O9 FEEBLE PLEA FOR THE DUTIES. " But," says the advocate of the system, " have we not reduced the prices of iron and steel by protection to these industries ? " This is the sole justification attempted by the Tribune & Co. for the duties on iron and steel ; yet they dare not present that argument to the farmers in defence of the duties on farm products. I challenge the Tribune to say to the farmers or wool growers that the object and intention of the duty on wool has been to lower the price of domestic wool. Such has been the effect upon American wool, to be sure, but the advocates of duties on wool dare neither admit the fact nor jus- tify it. They call attention carefully away from the fall- ing off in domestic manufacturing, which the scarcity of material has brought about, and the consequent dimin- ished demand for United States wool to mix with the coarser foreign wools. In the Tribune article, and in almost every attempted defence of the taxation of foreign iron and steel, we are told that their prices have been reduced in this country by protection. But the course of prices with us has been anticipated in Great Britain, down to a very recent period. Almost ever since the specie standard was re-established in this country, or from the beginning of 1880 to 1889, there has been a progressive reduction in the price of pig- iron in the United States. But from 1880 to 1889 there has also been as steady and progressive, and even a greater, reduction in the price of pig-iron in Great Britain, subject to occasional upward fluctuations. Now, if this reduction can be attributed to protection in the United States, why has it not been due to free trade in Great Britain ? The whole argument, used only with those kept in ignorance of British prices, is based on a fallacy, a delusion, or a lie. 3IO ECONOMIC AND INDUSTRIAL DELUSIONS. The decrease has in fact been due to a complete revolu- tion in every branch of the art by which the iron and steel have been produced ; and, as usual, it has been accompanied by a rise in wages. Cost, wages, and prices have fluctuated from time to time, but both cost and prices were very much lower in 1889 than in 1879, ana " wages were higher not only in the United States but also in Great Britain, in Germany, in France, and in Belgium. CHANGES OF PROFOUND SIGNIFICANCE. The result of all these changes is one of profound sig- nificance. Great Britain has lost her supremacy in the production of iron and steel, and the United States have assumed it. The reasons for this are not far to seek, and may be stated in a very few words : First. The supply of fine ore suitable for the manufac- ture of Bessemer metal and crucible or open-hearth steel is very limited, and the Spanish deposits from which large supplies have been derived are nearly exhausted. Eng- land is looking toward the south of Spain, inside the gates of Gibraltar, and to the north of Sweden, at a point over two hundred miles from the northern end of the Baltic Sea, for the possibility of keeping up her fine steel works. The supply of ores for common pig-iron and for " basic " steel remains ample, but such a one- sided supply will not suffice to maintain her previous position. Second. The available British supply of coal suitable for conversion into coke is now worked at very high cost, low wages, and small product. The Durham mines, which yield the larger part of the coke, are at a great depth, the veins horizontal and only two feet in height. Miners are therefore obliged to lie on their sides and to work in a SPECIAL DISCUSSIONS. 311 foul atmosphere at an excessive temperature. The presi- dent of the Iron and Steel Institute of Great Britain sounds the cry of alarm in his last address over future supplies of fine ore. Under these conditions the exces- sive prices of coke, now three times as high in Durham as they are in Western Pennsylvania, 1 are readily explained. The time has now come when the United States should naturally be called upon to supply the iron-works of Great Britain with pig-iron in large quantities, just as the colonies of America supplied them in the middle of last century. Then, just as the development of the iron and steel industry in Great Britain, a century since, made her the richest and most powerful nation, and enabled her to gain control of the commerce of the world, although numbering but 10,000,000 to 12,000,000 people, so the lead now assured to us in the production not only of iron and steel, but of copper and lead, will give us the com- mand of the commerce of the world when we are willing to grasp it. A PERTINENT QUESTION REPEATED. Mr. William M. Grosvenor, in his work entitled " Does Protection Protect ? " after showing the progress in the production of iron and steel, and the prosperity which these arts had attained, before the Revolution (a demon- stration which is fully sustained by Mr. James M. Swank, Secretary of the Iron and Steel Association, in his special report for the census of 1 880) asked these pertinent ques- tions as early as 1871 : " If this manufacture (of iron and steel) has had such natural advantages that in its very infancy it alarmed English manufacturers of the higher grades, and though 1 The facts about coke can be found in the reports upon this industry by Mr. Joseph D. Weeks, of Pittsburg. 24 312 ECONOMIC AND INDUSTRIAL DELUSIONS. exposed to wholly unchecked competition with foreign industry, actually advanced with such vigor and rapidity before the adoption of any tariff laws whatever as to produce bars for exportation, machines unmatched in ex- cellence, implements of acknowledged superiority, and scythes and axes equal to the best of European make, is it not the height of folly to say that it would never have existed, or could not now be sustained, without pro- tective duties? " Mr. Grosvenor relates that prior to 1750 the iron im- ported into England " had been subject to a duty of 35. gd. a ton ; and when it was proposed to repeal this impost and to admit American iron free, the ironmasters pro- tested that their works at Sheffield and elsewhere, erected at great expense, would be ruined, the laborers would be rendered destitute or forced to emigrate." He then remarks : " How often have we heard from American lips the same dismal prophecies ! It is the old cry of threatened monopoly, pleading anxious regard for the welfare of labor. Were these men honest ? Every bit as honest as the men who say that American furnaces would now be closed by the repeal of duties on pig-iron ! " What then has been the effect of the protective sys- tem ? Simply to put money into the pockets of those who smelt iron, to the disadvantage of all iron-workers, and at the expense of the whole nation." This statement is commended to the New York Trib- une, and I venture to suggest that as this same William M. Grosvenor is now on its staff he should be invited to disprove his own indictment of the policy of privation, which he now advocates under the guise of protection. PRETENCES EXPOSED BY CENSUS RETURNS. How utterly false the pretences under which a privation of foreign iron has been imposed upon this country for the SPECIAL DISCUSSIONS. 313 alleged benefit of the workmen, has howhere been so con- clusively proved as in the census returns of 1880, and Mr. Swank's report upon the iron and steel industry. As this matter is of more importance to the State of Pennsylva- nia than to any other State, the following data (from the sworn returns of representatives of all the mines, blast furnaces, and coke ovens, compiled by their own chosen experts in the census reports) will be limited to our own statistics; but it may be remembered that in 1880 we produced one half the iron of the country, and that we still hold the leading place : Employes in iron mines Employes in anthracite mines Employes in bituminous coal mines Employes in coke ovens Employes in blast furnaces . Add for work in limestone quarries, etc., at same average wages . Total .... 35,000 $11,163,838 This shows that 35,00x3 men and boys earned $320 each, in an arduous and undesirable work which gave them precarious employment for about nine months out of the twelve. Since 1880 our production has about doubled, work is more continuous, wages a little higher, cost some- what lower, and conditions a little more favorable. As the artisans of Pennsylvania are the largest con- sumers of iron in the Union, they have had to pay roundly for the development of the pig-iron industry of their State. The price of protection or privation of pig- iron was above computed at about $80,000,000 a year. Number. Wages. 8,733 % 2,i9 2 > l6 7 5,000 1,600,000 3,3°° 1,089,000 1,100 440,000 13.460 4,75z, 8 38 3^593 10,074,005 3,407 1,089,833 314 ECONOMIC AND INDUSTRIAL DELUSIONS. Our consumers in Pennsylvania have paid at least one half this sum in the increased price of our crude iron and steel, over that to the consumers who have been supplied by British mines and furnaces. It has, therefore, cost us $40,000,000 a year, each year for ten years, to enable our ironmasters (what a suitable title, forsooth !) to pay out $11,000,000 to $20,000,000 in wages at $320 to $400 per man. AMERICA COULD HAVE MASTERED THE WORLD. " But," says the advocate of Privation, " if the mines and furnaces of Pennsylvania had not been developed, would not the price of iron have been a great deal higher in Great Britain? " To which I simply reply: Of course it would ; and what would the consequence have been ? In that case the present scarcity of ores and coal in Great Britain would have been manifest a dozen years ago ; the cost of crude materials for making rails, building steamers, engines, machinery, and tools of every kind would have been the same on both sides of the ocean (allowance being made for freight), and we, instead of the British, would already have become the greatest constructors of steamers, machinery, and tools in the world. We already consume three hundred pounds of iron per head, almost forty per cent, of the iron product of the civilized world. When railway building starts up again next year we shall consume more than forty per cent. Great Britain cannot meet even the present demand upon her mines and works, without any addition to it from us. The extension of railway and steamship communication is developing an increasing demand for iron in Asia, Africa, South and Central America, and Australia, which no other country except the United States can supply. The one measure needed in order to establish this SPECIAL DISCUSSIONS. 315 supremacy for all time is to repeal every duty or tax upon ores, coal, metal, machinery, and tools of every de- scription ; break down the disparity in prices ; hold the cost and wages of Great Britain where they are, and then beat her at every point by our own superiority of con- ditions. Even under all the disadvantages to which my own business has been subjected, our export trade is a warrant for these views. Our works are making and sending to South America tens of thousands of plows and other agricultural implements and machines, many of them wholly of iron and steel, thus aiding the farmers there to turn their sheep pastures into wheat-fields, and become competitors to North American wheat-growers in the European market. A refusal to take South American wool thus brings other hardships upon our suffering farmers besides that of dearer clothes, blankets, and car- pets. We also ship to Canada, Europe, Australia, and Africa. Now, is it not self-evident that, since we can manufac- ture here and export, in competition with the world, every kind of implement and machine, we can only desire protection to support us in imposing higher prices upon consumers at home ? But this advantage to the manu- facturer is more than counterbalanced by the tariff laws, which bear with peculiar severity upon exporters. Until President Cleveland's great message of 1887 revived our hope that a reform might ultimately come, I was even ready to try subsidies as a last resort or makeshift to revive our commerce. A tallow dip is better than total darkness, but with the dawn of day the candle is laid aside. The subject has a very different aspect now from the one it wore before Cleveland's message of promise. With free ships and enlightened navigation laws, free raw 31 6 ECONOMIC AND INDUSTRIAL DELUSIONS. materials, and a tariff for revenue only (like that of 1857) our manufacturers would rise superior to protection, our flag would again float upon every sea, our ships be filled with steady work, necessarily to be paid for with good wages. OTHER INDUSTRIES OPPRESSED. Many other branches of industry in Pennsylvania have been similarly oppressed by this tax upon their materials. All men are consumers of iron and steel in one sense, since these metals are necessary in every branch of pro- duction ; hence all are taxed when these crude materials are taxed. In the year 1880 in Pennsylvania 1,456,067 men and women were occupied for gain out of about 4,250,000; now about 1,800,000 out of 5,250,000. Not one in ten of these could be subjected to foreign competi- tion had there never been a protective tariff ; and out of this grand total only 35,000 got their meagre living in the production of pig-iron. This is easily proved. The occu- pations in Pennsylvania in 1880 were : Farmers and farm laborers, 301 , 1 1 2. Only a little wool, potatoes, and tobacco could be imported in competition with them were there no tariff ; while they were all taxed on their railway transportation, their farm tools, their tin cans, their clothes, and much else. Persons engaged in professional and personal service, 446,713. No foreign product could be imported to inter- fere with them ; yet all were taxed on their iron and steel. Trade and transportation gave employment to 179,965. If free iron gave more material at less cost, their work would be increased and not diminished. Manufacturing, mechanical, and mining industries gave occupation to 528,277, of whom 35,000 were engaged in SPECIAL DISCUSSIONS. 317 the production of pig-iron. Including every person occu- pied in these industries, a part of whose product could be imported, not over one third could be named. All the rest are taxed without recompense. 1 PROTECTING FOREIGNERS AT OUR OWN EXPENSE. Whether by means of " protection " or in spite of priva- tion, the world's production is now insufficient for the numberless uses to which iron could be put in this coun- try. We have steadily protected the workers of iron in Great Britain and Germany at the cost of our own, by taxing our own iron while theirs has been free : their iron has been relatively low in cost while ours has been high, whatever the actual prices may have been. We have given them the trade of the world, and have not even held our own. No first-class textile factory can now be built in this country unless it is in considerable part supplied with foreign machinery ; while foreign tex- tile fabrics more and more displace our own. This is due to our taxes on iron, steel, wool, and dyes. In spite of all the advantages we have thrown away, our natural superiority in iron ores, coal, and coke has at last gained us supremacy. Since 1889 the incapacity of Europe to supply the demand of the world for iron and steel has been demonstrated. All that is now needed to give the United States the paramount position in com- merce is free trade in crude materials and in the partly manufactured articles required for our domestic industry. Revenue duties on other imports, and a tax on intoxi- cants and tobacco, will then suffice to meet all our expenses. 1 See Census of 1880, and also the "Analysis of the Industries of Penn- sylvania," in that remarkably comprehensive work, "The Distribution of Products," by Edward Atkinson, for further development of this argument. 3l8 ECONOMIC AND INDUSTRIAL DELUSIONS. Finally, in order to protect all interests in the most equitable and effective manner, we must equalize our prices of all crude or partly manufactured materials of manufacturing with those of Great Britain. We need free ore, free iron, free wool, free wood, free dyestuffs, and the like ; then we can manufacture at high wages and low cost, and no other country can compete with us — espe- cially no country in which so costly a luxury as " pauper labor " prevails. The Tin-Plate Question. (Printed in the Philadelphia Record, June, 1890.) The reason or unreason for which the duty on tin plate is to be heavily advanced by the McKinley Bill, is the asser- tion that the United States would gain more than the cost of this tax by establishing a home manufacture of tin plate. The matter has never been analyzed in a business-like manner. This tax and others are justified purely on theoretic grounds, to wit : Anything which can be made in this country ought to be made in this country, no matter at what cost to the consumers. That is the theory of " Protection with incidental revenue," advanced by Mr. W. McKinley. the case as it stands. It is time to state this tin-plate problem in facts and figures. Disregarding small fractions, the case stands as follows : In the last two or three fiscal years we annually im- ported tin plate of which the declared value averaged $21,000,000; the tax assessed thereon yielded $7,280,000. It is proposed to increase the duty from 1 cent to 2-fo SPECIAL DISCUSSIONS. 319 cents per pound. This would add $8,736,000 to the tax, making the total tax $16,016,000. The cost of tin plate which might be had for $21,000,000, with a small amount added for freight, would then be $37,000,000 a year, if this act should become law. There would certainly be some falling off in the use of tinware, following so marked an advance in the cost ; but we may suppose, for the present, that this is to be offset by the increased demand of an increasing population. It has taken generations to establish the art of dipping sheet metal into tin in Wales, where is found an inherited aptitude for this low grade of hand-work, conducted under bad conditions of life, at low rates of wages. A compara- tively small number are engaged in making all the tin plate used in the world — not exceeding 30,000 — starting from the naked bars. Children are employed, and girls between the ages of 12 and 14. These poor little waifs carry full boxes of tin, weighing 108 pounds, resting them on their hips when their arms are not strong enough. A portion of the work is very unhealthy. In the pickling- rooms the employes lose their teeth and are otherwise so disfigured as to appear more like beasts than men. The rank odor of the oils used is very unpleasant. How long would it take to establish tin-plate works in this country, so that domestic competition would reduce the cost of tin plates now required from $37,000,000 to $21,000,000? Mr. McKinley will kindly inform us. A better form of this problem would be to put it in terms of exchange, for we would thus have it as it really is. As a matter of fact, we now buy our tin plate in England, in exchange mainly for cotton and wheat. Our $21,000,000 worth of plates at their cost price in England may be held to represent $12,000,000 worth of cotton at $50 a bale (240,000 bales) plus $9,000,000 worth of wheat 320 ECONOMIC AND INDUSTRIAL DELUSIONS. at 90 cents a bushel (10,000,000 bushels). A market in Great Britain is thus established by our purchase of tin- plate there, for 240,000 bales of cotton and 10,000,000 bushels of wheat, in exchange for $21,000,000 worth of tin plates, which are to some extent, as we have seen, the product of a class of laborers verging on pauperism. The cost of the tin cans and tin boxes made of this plate is so large in proportion to the cost of the fruit, fish, meat, crackers, and other articles of food which are packed in them as to make even the tax now imposed a very important factor. If it were not for the present tax on tin plate we could export much larger quantities of crackers, fish, fruit, and meat than we now do. In conse- quence of this tax English and French farm products, packed in tin cans free of tax, are sent all over the world ; for we have deliberately and designedly handicapped our- selves in the competition. If the present tax should be removed, and tin plate could be had at prime cost, we should import more of it in exchange for a larger quantity of cotton and wheat ; and we should also establish a larger market for domestic farm products by exporting them in tin packages. The addition of $8,736,000 of tax would increase the cost of tin plate to the consumers of this country, and would tend yet more to prevent the export of provisions in cans, and of bread and other food in boxes. A FALLACIOUS PLEA. The plea for this particular tax is that it would enable some one to make tin plate in this country, whether com- petent or otherwise, and that then a home market (for home consumption, and not for export) would be created by setting a large number of persons at work — who are SPECIAL DISCUSSIONS. 321 now occupied in that art in Wales — in this country to make tin plate. The extent of such a home market may be readily measured. In order to measure it, it may be admitted that the greater part of the price of tin plate is paid to the workmen in the iron mines, rolling-mills, and tin works from which the product is derived. But no one conversant with the art would question the fact that at least 10 per cent, of the price must be set aside for the profits of the business, the royalties for the owners of the mines, and the general expenses, insurance, and taxes ; leaving 90 per cent, at the utmost as a wage fund ; $21,000,000 less 10 per cent, leaves $18,900,000 for the compensation of the workmen, most of whom would have to be imported from Wales in order to establish this branch of industry in our country. The average earnings of all who were engaged in min- ing iron ore and coal, and in converting coal and ore into the finished sheets and bars of iron in this country in 1880 was less than $400 each. The men who might undertake to establish this art would not, of course, pay any higher rates of wages — or rates above the average in other branches of work of like kind. If, then, we divide $18,- 900,000 by $400 each, we find that the total force which would be required to make tin plate in this country, counting from the ore to finished product, would number 47,250. But wages have advanced a little since 1880; and in order to entice workmen from other branches of work into this undesirable employment it might become necessary to pay $500 each. In that case the .number of workmen represented by the value of the tin plate im- ported, less 10 per cent., would be 37,800. Let us concede another point : that the tax of $16,000,- OOO, in addition to the present cost, would be mainly paid out to workmen. Assuming that the cost of tin plate 322 ECONOMIC AND INDUSTRIAL DELUSIONS. to the consumers of this country would be advanced from $21,000,000 to $37,000,000; that 10 per cent, of the $37,- 000,000 would suffice for profits, wages, royalties, taxes, and general expenses, — we then have a wage fund to be paid out in the United States to tin plate makers at the cost of the consumers of tin plate of $33,300,000, which at $500 each would represent the work of 66,600 men and boys. In order to prove exactly what the home market for farm products would be in supplying 66,600 men and their families — the maximum which can be claimed as the force required to conduct this branch of industry here — we should multiply the number of workmen by three, as it is the established rule that each workman who earns $400 to $SOO a year supports two others. We should then have a group of 199,800 men, women, and children supported at the cost of the consumers of tin plate in this country, as a result of establishing the manufacture in this manner. The average consumption of flour to each person is one barrel a year. Taking the maximum of five bushels of wheat to a barrel of flour, the home consumption of this body of workmen would be 999,000 bushels of wheat. The average consumption of cotton in this country is about fifteen pounds. The home market for cotton de- veloped by this art would, therefore, come to very nearly 6,000 bales a year. The rest of the wages would, of course, be spent for other kinds of food and for fuel, clothing, and shelter. The effect, however, would be to reduce the de- mand for the cotton and wheat with which we now pay for tin plate in Great Britain from over 240,000 bales of cotton to 6,000, and from 10,000,000 bushels of wheat to 1,000,000 bushels. Of course there would be a little more demand for SPECIAL DISCUSSIONS. $2$ meat, clothing, and shelter, which to some extent would compensate farmers for the loss of market suffered by growers of wheat and cotton. These adjustments would all be made in time. But what would be the immediate effect ? Would it not be the same that follows all such futile attempts to turn capital and labor by force of law into directions which competent persons do not care to follow, and, therefore, to put great branches of industry at the hazard of incompetent persons, who are thus taken into partnership by the government at the expense of the taxpayers ? THE WORKMEN WOULD BE IMPORTED. The promoters of this scheme for taxing the public on one of the most essential articles in use have talked indefi- nitely about a huge force of idle people who would be set to work if this art should be established in our country. We have measured this " huge force " at its maximum. The idle people in this country, as is well known to those who know them, would not be capable of doing this work. The workmen would, of necessity, be imported in spite of the Alien Contract Labor law. The farmers would be deprived of a great market for cotton and wheat, and the country would be taxed $16,000,000, in order to set peo- ple at work in a branch of business for which they show no capacity ; about which, I should add, they must be absolutely ignorant, if they believe the statements which have been submitted in order to justify the tax. It is, however, absurd to suppose that the promoters of this scheme for making tin plate in this country, who want to support themselves by taxing the consumers, have any idea of being content with a normal profit of 10 per cent., or any idea of paying higher wages than are paid in other 324 ECONOMIC AND INDUSTRIAL DELUSIONS. branches of work of like kind in and around Pittsburg (or in whatever section of the country this work could be done). It is absurd to imagine so slender a basis for the fat " campaign contributions " expected of them. When they build their works at Pittsburg (or anywhere else) in order to supply tin plate at a very much higher price than it can now be bought for, they will soon deprive the gov- ernment of the revenue which will at first be paid in consequence of the advance in duty, and even of the revenue which the government now derives from the import of tin plate at present rates. If they should succeed they would make the tin plate with as little labor and as small a number of laborers as are now engaged in making our present supply in Wales (a number, so far as one can get any information upon the subject, not exceed- ing 40,000 through the various processes from ore to finished sheet). These would be mainly ignorant foreign workmen, each of whom in this country might be compe- tent to support two other people. The demand for farm products would be reduced from what it has been previ- ously computed to what this little force could purchase. They might require 500,000 or 600,000 bushels of wheat and 3,000 or 4,000 bales of cotton, and other articles in corresponding measure. But the consumers of tin plate would pay the high prices, and the export demand for wheat and cotton would be reduced by $21,000,000 worth, unless our British customers could find something else to exchange with us for wheat and cotton (directly or indi- rectly) in place of tin plate. Otherwise they would have transferred their demand for wheat and cotton to India and South America, where their own goods are accepted in exchange. In international commerce product is ex- changed for product, not for money. We are building up the competition of other countries by this class of meas- SPECIAL DISCUSSIONS. 325 ures, in both wheat and cotton, as well as in canned provisions and the like, thereby depriving our farmers of a great market and increasing the cost of everything that they use. It would seem that the farmer, having already been so starved that no more " fat " can be fried out of him, is to be abandoned altogether and made common prey. When will this thing stop ? WHEN WILL THE PEOPLE'S EYES BE OPENED ? Yes, when will it stop ? For stop it will, and must. It seems to be one of the laws of our social organization that the worst abuses are destroyed by the very completeness of their triumph. Only the assurance which the tin-plate and other schemers thought they might draw from the last presidential and congressional elections, that the eyes of the people were firmly closed, and their pockets wide open to admit any hand that would filch from them in the name of protection, can account for the impudence of their present demands ; and that very impudence is doing more than the best-studied efforts of statesmen and econo- mists to prove what protection truly is. Here is the only question : Is it this tin-plate iniquity that is to open the people's eyes, or must we await some- thing yet grosser and more glaring — if that be possible ? From every point of view, the sooner the disguises be stripped, the better. For grotesque extravagance the " case for the tin-plate advance " rivals the ravings of delirium and beggars the wildest creations of opera-bouffe. It is based on the pre- tence that our country is paying in money an adverse balance of trade because of purchases of foreign plate, and that home production would leave us this money for wages to workmen not now employed ; when the simplest in- 326 ECONOMIC AND INDUSTRIAL DELUSIONS. spection of any foreign-commerce statement shows that we are sending out no such money, and the most elemen- tary knowledge assures us that the industry could only be established by embarrassing industries more important. It assumes to defend people against their own folly; asserting " immense profit on importation of snide brands," and that we could buy cheaper after the home manufac- ture got a start ; when the merest tyro in business knows that, if such assertions were any approach to the truth, tin plate would long ago have been made here, with the " protection " (already absurdly high) now allowed it. Then, as if for a cap-sheaf, we are treated to the statement, on the august authority of a certain W. C. Cronemeyer, " Secretary of the American Tinned-Plate Association," that the reason why higher " protection " was not as early as 1864 extended to this ware was an "erroneous decision of the Secretary of the Treasury." The fabled toad that tried to swell to the size of a neigh- boring ox was a modest and rational creature beside the Cronemeyer who presumes to set his legal opinions on a level with those of William Pitt Fessenden. That is the sort of stuff these precious plotters have to offer us. With it they have scored one great success, in their " McKinley Bill." But the end is not yet. postscript ; 1 89 1. The boast of the tin-plate statesmen, headed by Sena- tor Aldrich, that " the new industry would give employ- ment to 70,000 workmen " is one that becomes ludicrous when subjected to the rules of simple arithmetic. The labor- cost of our yearly supply of these plates is easily computed when one has the data ; and these have recently been furnished by a manufacturing correspondent of the New York protectionist trade-paper Hardware. Taking his SPECIAL DISCUSSIONS. $2? figures unchanged, the labor on 800,000,000 pounds of tin plates (this exceeds the amount the country has annu- ally used hitherto) would cost some $13,600,000, making less than $200 per annum for each when divided among 70,000 workmen. If the labor-cost of mining the required iron and preparing the steel be also included we should have a total of $17,360,000, not enough to employ half of 70,000 men at the ruling prices for skilled labor in this country. It is easily calculated from the same figures (origi- nally contributed, it appears, with no other object than that of vindicating the practicability of the industry in the United States), adding to this cost of labor that of all the necessary materials, that the total cost of plates as here produced could not be less than 4.54 cents per pound. The present foreign price is 3.25 cents, but for five years past the average has been less than 3. Hence it follows that the country must pay at least $10,000,000 a year, and more probably over $12,000,000, in addition to what it now pays for tin plates, for the privilege of sup- plying itself from this yet unborn " infant industry." If it were to " give employment to 70,000 workmen," and pay them good wages, the plates would be of course 2 cents a pound dearer, and the annual increase in the total cost more than doubled. But the " infant," by the latest news, is contemplating nothing of that sort. It is endeavoring to circumvent the Contract Labor Law, exactly as predicted above. Moreover, the hints with which the McKinley organs are now filled, about the wonderful new " labor-saving machinery " by which the infant is to be rocked, when once safely born, appear to indicate that the portion of this extra cost to which American labor can fall heir, is even smaller than above calculated. 25 328 ECONOMIC AND INDUSTRIAL DELUSIONS. " Drawbacks to the Drawbacks." Printed in the New York Tribune, April, 1890, as a reply to a communication signed " Protectionist," taking the writer to task for his omission to mention that section of the Revised Statutes which allows a drawback on certain kinds of machin- ery when exported. As a constant reader of your interesting journal (a sub- scriber to the daily, I might add, of thirty years' standing) I could not fail to notice the reference to myself, my business, and my Reform Club address in a letter from one of your correspondents in your issue of March 29th. " Protectionist " is giving himself some trouble on my account ; but his criticism of my position loses something of its force by the very evident fact that he has no practi- cal knowledge of what he is talking about. In other words, has not familiarized himself with the exporting business. I cheerfully concede to him that if the relief afforded by R. S. Sec. 3020 had been as complete as he fancies that it was — as complete, I further concede, as was pos- sibly the intention of its framers, — I should have been gravely at fault in making no allusion to it ; but as facts are I should have been quite as much at fault in alluding to it without calling attention to the embarrassments which encounter the manufacturer who would take advan- tage of the " drawback " privileges allowed him by law, and which combine to make these provisions almost a dead letter. The least of these is the fact that the " duty " is not " refunded," but only a portion of it, 90 per cent. But the regulations which are required by the Treasury Department to guard against frauds ; the neces- sity of using the same port for export as for import, of identifying the material exported with that imported, and SPECIAL DISCUSSIONS. 329 of proving that the imported goods in each article exceed half its value ; the limit of time in which drawbacks can be claimed ; the danger of having orders countermanded through various and repeated delays ; all these practically involve so much annoyance and consumption of precious time as to eat up all the profits there ever were in the drawbacks, even when our material was as much as 30 per cent, cheaper in Great Britain than here. Again, as it ought not to be necessary to remind your correspon- dent, importations in small lots to supply part of our trade could not be so economically made as if we were permitted to make them wholesale and at will. There- fore, our not importing raw material was not, as he in- ferred, " because the domestic material was cheaper than the foreign without the addition of duty." I have spoken in the past tense about the greater cost of my raw material, because the most important part of it, iron and steel, happen just at present not to be seriously increased in cost by the duty. But I do not know, nor does any one, how soon it may be increased, as it was in 1880. Were I tempted to believe that a condition belong- ing- exclusively to the last few months depended on legis- lation a quarter of a century old, a little inspection of price-lists would cure me. It is not that the prices have fallen here, but that they have risen in England. We must look to England for the explanation, then ; and there we easily find it in a specially sharpened local de- mand for steel and iron, and in the approaching exhaus- tion of British mines. Free Raw Material. This letter first appeared in the New York World. It was written in reply to the following inquiry : 330 ECONOMIC AND INDUSTRIAL DELUSIONS. The Home Market Club, Boston, Mass., May 16, 1891. Mr. A. B. Farquhar, York, Pa.; Dear Sir. — Having recently seen a statement attributed to you that your firm sells goods in the Latin countries south of us and in South Africa at prices from 5 to 10 per cent, less than they are sold for in this country, and that ' ' the manufacturer who is able to export his goods can have no use for Protection except to enable him to extort more money from home pro- ducers than he is able to get from those abroad," I desire to know a little more about the facts pertaining to this business. Will you kindly inform me — 1. What percentage of your goods is sold abroad? 2. Whether or not you sell directly to houses in the countries named or to purchasers in this country for shipment thence ? 3. What is the reason that you do not get as good prices there as here ? 4. Do you sell any goods in England, France, and Germany, and if so, how do prices compare with American prices ? 5. What is the value of the raw material entering into « plow compared with the finished product ? 6. Do you think the duty on such implements as you manufacture is rela- tively higher than that upon goods in other lines of wood and iron and of the various classes of textiles ? 7. Would you favor a reduction or repeal of the duty on manufactured goods as well as on raw material ? 8. Do you believe that American manufacturers generally would be able to sell many more goods abroad than now if they had free raw materials, and if so, about what percentage more than now ? Some of our New England manufacturers favor free raw materials and some do not. I am desirous of obtaining as much light upon the subject as possible from the different industries in different parts of the country. You will confer a favor by answering the above questions at your earliest con- venience. Yours truly, Albert Clarke, Secretary. York, Pa., May 25, 1891. Mr. Albert Clarke, Secretary, &c. Dear SIR. — In reply to your favor of May 16th I have to acknowledge it quite true that our firm sells implements and machinery through Mexico, South America, and Africa SPECIAL DISCUSSIONS. 33 1 " at prices from 5 to 10 per cent, less than they are sold for in this country." In adding that " the manufacturer who is able to export his goods can have no use for Pro- tection except to enable him to extort more money from home purchasers than he is able to get from those abroad," I was only stating a fact that I believed self-evident. It is inconceivable that the same rival manufacturers with whom we successfully compete on equal terms in foreign markets can be thought capable of driving us from the market at our own doors. On that point, among intelli- gent men, no argument is needed. Now, as to your questions. I will answer them seriatim : First. — We send upon an average about one half of our manufactures abroad ; something less just now, owing to the troubles in the Argentine and Chili, where we usually find our best market. Second. — In both ways. We sell to the foreign houses directly, and also through commission merchants in New York. Third. — The reason we do not get as good prices abroad as at home is that we have to compete with coun- tries having the great advantage of free raw material in their manufactures and the further advantage of better transportation facilities. Great Britain, in pursuance of her free-trade policy, has for years been extending her foreign commerce ; while we, pursuing an opposite policy, have left her in full possession. The Clyde shipyards are open to every European investor who wishes to start a line of steamers, while we must satisfy ourselves with vessels built at a dozen disadvantages. Fourth. — Yes, we sell a few goods in England, France, and Germany, but they are made especially for those markets, and it would be rather hard to compare the 332 ECONOMIC AND INDUSTRIAL DELUSIONS. prices with the American. They undoubtedly average lower, for goods of similar construction. Fifth. — The value of the raw material in a plow cer- tainly averages more than half its total cost. We manu- facture thousands of four-horse plows, for instance, for the African market, weighing, " full-trimmed, with draft- rod, wheel, cutter, two extra shares," boxed, about two hundred pounds each. This plow is delivered on board vessels in New York for less than $5 — about the cost of the material in it if purchased at retail prices. Handles and beam . . . . . . (i oo Steel and iron ....... 2 oo Boxing, freight, etc. ...... 55 Total $3 55 — leaving about $1 for cost of labor and profit. Sixth. — The duty on our implements and machinery is not relatively higher than upon other manufactures. I need not enlarge upon this, but may respectfully refer you to the tariff schedule of 1890. Seventh. — I would unhesitatingly favor a repeal of the duty on all the manufactured goods we make. Since we can and do export, the duty can be of no possible service ; and since it tends to provoke retaliation, we find it a serious obstacle. Reciprocity treaties covering our goods are acceptable to us. We should indeed be ungrateful if they were not, for the advantage in such treaties is clear enough — for the manufacturer — whatever might be thought of them for the farmer. Eighth. — I do believe that American manufacturers generally would be able to sell many more goods abroad than now if they had free raw material. The importa- tion of this material would of itself stimulate a demand SPECIAL DISCUSSIONS. 333 for American products abroad. It is difficult to estimate the percentage, but I should expect an increase of at least 25 per cent. Although my time is very much taken up, and I am not especially desirous of publishing the inside history of our business, I cannot refuse any claim upon my atten- tion made with a view of " obtaining light." What is " Raw Material " ? The following reply to a stricture in a local paper, on the fifth answer given above, first appeared in the York Gazette June, 1891. An extended article that recently appeared in the York Dispatch, criticising a statement of my own — which, in the florid and fervid rhetoric of the protection school, it pleased to brand as a " misrepresentation " — about the cost of raw material in a plow, seems to call for some acknowledgment. To my mind it is plain that the Dis- patch's own ideas, at the points where its denunciations are falling thickest, stand in need of considerable clearing up. Plainly and candidly, I set down its dictum, that " the cost of raw material is deliberately misrepresented " in my letter to the Home Market Club, as a correction of one who knows at least what he is talking about, by one who does not ; and I am prepared to give my reasons for taking that view. In the interest of brevity I avoided detail in the esti- mate they copy, but by raw material I meant what every manufacturer means, the shape in which the material entered the factory to be worked up. The term " raw material " was not used by me — has never been used by anybody, so far as I am aware, except by protectionist orators and essayists in their loftiest 334 ECONOMIC AND INDUSTRIAL DELUSIONS. flights of satire — to mean material on which no labor has been expended. The raw material of any manufacture, as is perfectly understood by intelligent people " outside of politics," is material in the shape it has when it reaches the manufacturer's hands. It is perfectly understood, also, that the term is essentially a relative one ; that the raw material of one industry may be — in fact, generally is — the completed product of another. The comparative cost of the material and of labor for which my own firm had to pay, was the plain, practical question before me ; that I answered, and answered it so that the Club which sent the question clearly understood me. If they had wanted me to go beyond our own factory, and track our material away back to mine and forest, they could easily have said so. In the supposed correction of my supposed error in setting down " handles and beam," "steel and iron," as raw material, they accept " wood and iron ore " as de- serving that title. But where, pray ? Wood at the mill and ore at the furnace have had value added to them by labor, in their transportation, just as truly as if they had been manufactured into different form ; they are the com- pleted products of the carrying industry, and raw material only at the place of production. There we find the lum- berman and miner ; what is raw material to the carrier is their completed product, and the raw material of the extractive industries must be a growing tree or ore in its lode — something inseparable from the soil where it is found. Such material is a gift from God to man, and its value is simply that of a right of access, and forms part of the rent of land. It disappears as movable value alto- gether. The evolutionist who finds pleasure in the men- tal exercise of tracing things to their primordial elements, or gases, and so discovering a material that is ideally SPECIAL DISCUSSIONS. 335 " raw," will be quite justified in claiming that he has in that exercise quite abolished its value. It is but a small Component in rent of ground, to start with ; all else is added by labor upon it. But after all, this ideal raw ma- terial is not raw material for our business, because we cannot use it. It has to be elaborated through several degrees, before it can be even " raw material " to the implement manufacturer. The Dispatch writer says of me : " But he should be willing that the labor of other men's hands should also be as well rewarded as his own." " Have not the iron men as good a right to be protected in their business as Mr. Farquhar to be favored in his ? " Will it surprise you if I accept that sentiment, and that view of my duty, cordially and unreservedly ? I have not asked, and shall not ask, any privilege which I am unwilling to share. Whatever advantage there could be for me in free raw materials, all other manufacturers are more than welcome to. Whatever I may be gaining from my patents (and of that he appears to have an entirely erroneous notion, but I need not stop to debate the point) others able to invent, or to secure the confidence of inventors, have al- ways been equally free to gain — nor would I dream of seeking to abridge their freedom. Since our patent sys- tem frequently encourages monopoly, unjust to the peo- ple, I am even in favor of limiting it ; and I would be alto- gether willing, so far as I am concerned, to exchange all the advantages I obtain front patents for the greater advantage of free raw material. But there is an important differ- ence between the claim of iron-men to protection, and our own to free raw materials, to which I cannot refrain from calling attention. If it were simply a question be- tween them and ourselves, the protectionist position would be so unassailably right that there would be noth- 336 ECONOMIC AND INDUSTRIAL DELUSIONS. ing more to be said. But why do they forget the public, to whom both they and we are undertaking to minister? By protecting iron they have steadily kept its price at such a figure, in this country, that we have been com- pelled to relinquish into English hands most of the world's hardware trade, which American skill and indus- try could easily, but for that handicap, have won for us ; they have hampered exporting enterprise ; they have ex- terminated the ship-building industry, in which, while ships were built of a material which could be procured cheaply this side the Atlantic, we led the world. By allowing us free raw material, on the other hand, they will not only enable us, and many other manufacturers similarly circumstanced, to extend our business and find employment for hundreds of additional hands ; but will permit us — nay, compel us — to reduce the price of our tools and machines, thus handing on the benefit to every one who has to use them. I am perfectly aware that the iron-men tell us that their object in obtaining power by law to increase the price of their product for a time, is to make it cheaper for the consumer in the end. They promise greater cheapness, just as Alexander Hamilton promised it in their behalf a hundred years ago. But estimating the result as those who meet foreign manufac- turers in competition have to estimate it, by comparison of our prices of iron with theirs, we are as far behind as ever in the race for cheap production. The situation appears to be, that by " protecting the iron-men in their business," the consumer gets a renewed promise of " goods as cheap as anybody's," on which payment has been al- ready deferred for a hundred years ; while by granting free raw materials he gets the cheap goods themselves. A vindication of my plea for cheaper materials as not merely a move to advance my own personal interests at SPECIAL DISCUSSIONS. 337 the iron-men's expense, but as one • to promote the wel- fare at the same time of the great body of our citizens who are neither implement-makers nor iron-men, was de- manded of me, and that I have made. My critics will be free to doubt the completeness of my vindication, and will probably use their freedom, but they can hardly doubt that I have stated my honest opinion. Plundering the Farmers. Printed in the New York World, July, 1891. The World added the following editorially : " The fact that the goods of ' protected ' manufacturers in the United States are sold in foreign countries for less than they are sold for here is utterly fatal to the contention of the monopoly taxers. That this is true was very practically and very conclusively shown by the answer of Mr. A. B. Farquhar, the agricultural-implement maker of York, Pa., to the Home Market Club, presented by the World and widely published by tariff-reform newspapers. It was a complete demolition of the spurious arguments of the Protectionists, and has put them on the defensive in every quarter. There is no answer to it. " As a last resource some of the agricultural-implement makers have been induced to appeal to Mr. Farquhar not to imperil the profits of his own class by a too candid statement of the truth, and many efforts have been made to induce him to recede from the position he has taken in favor of free com- merce and free manufacturing. He has been urged to recon- sider and see if he cannot modify his statement of the facts, and among other suggestions to startle or intimidate him is the one very freely made, that the admission on his part that he takes a higher price from the American than from the foreign cus- tomer is calculated to injure his trade at home. The latest sally in this direction was by the Agricultural-Implement Her- ald, published at Indianapolis. We give to-day Mr. Farquhar's reply. It is as clear and as crushing as the answer to the Home Market Club. 338 ECONOMIC AND INDUSTRIAL DELUSIONS. " If the ' protection ' delusion still lingers in any degree among the farmers of the United States this testimony ought to destroy it. They pay on their implements five to ten per cent, more than the same implements are sold for to farmers abroad whose products are marketed in competition with ours. The duties, are, therefore, simply a discrimination against American farmers for the benefit of manufacturers who do not need it. We commend the facts especially to the farmers of Ohio, who have an opportunity to deal with the author of the iniquitous McKinley Bill." M. R. Hyman, Esq., General Manager, &c. Dear Sir : I take pleasure in acknowledging your letter of June 23d, referring to an editorial in the Indian- apolis News. The News is correctly informed. We do sell goods from five to ten per cent, cheaper to customers in foreign countries directly and to jobbers for export than we do to the domestic trade. This I could not truthfully deny or candidly conceal. You " would like to learn the process " by which the manufacturer " can afford to sell the foreign buyer goods for less than he can the home customers." The reply is simplicity itself. We receive the prices current in the markets in which we sell — we cannot get more, and could not be expected to take less. The embargo upon competition of outside producers and upon raw material advances the price of goods in this country beyond any figure possible for it to reach in countries where the law visits the consumer with a smaller measure of ingenious malignity. In our export trade, moreover, we have occasionally some advantage in the drawback upon imported raw material. This advantage is of less importance to us because of the onerous condi- tions by which recovery of the drawback is attended; but it has its legitimate effect, nevertheless, in giving the SPECIAL DISCUSSIONS. 339 foreigner our goods on better terms than our own country men can obtain. We sell abroad, in free markets, at the scantiest margin of profit. On many of our plows for export we have less than a dollar margin for our hands and ourselves ; our raw material — beams, handles, cast- ings, steel plates, wrought bar, in the rough — costing within that figure of what we realize on the product. Raw material, I need not explain, is here used in its proper meaning: material in the condition in which it comes to the factory. The raw material of one industry is usually the finished product of another. I am in cordial sympathy with the American farmer, and welcome every indication that he objects to paying an excess of price. I would cheerfully exchange the higher domestic prices which " protection " compels the purchaser to pay upon our goods for the immense ad- vantages which free raw material would give us in both home and foreign markets. Free markets all around would be almost as great a relief to us as to our American customers. The wool-growers of Indiana and Ohio were taught to believe that the McKinley Bill would give them better prices. But what is the result ? The embargo upon foreign wools has closed many of our large woollen mills, throwing the workmen out of employment. The fine American wools are no longer in demand for mixing, and as a consequence the farmer is getting from four to five cents a pound less for his wool than before the McKinley Bill was enacted — besides paying more for his clothing, carpets, and other woollens. Indeed, the history of our tariff legislation tends to prove that the higher the tariff upon wool the lower the price to the American wool- grower — because of the necessity of mixing different growths in one fabric. There was double the present 340 ECONOMIC AND INDUSTRIAL DELUSIONS. number of sheep in Pennsylvania in the days of compara- tively free wool. This is the conclusion of the whole matter: That if the American farmer wishes to enjoy the twofold advan- tage of the lowest possible price in his supplies, and the best prices for his wheat, corn, and cotton exported to pay for them, the tariff embargo must be removed. Second Letter to the "Home Market Club" of Boston, Mass. (Printed in the York Gazette and New York World, July, 1891.) GENTLEMEN : You devote a great deal of space in your July Bulletin to an attempted refutation of my answer to your secretary's questions. The New York Tribune, at the head of the monopoly tax organs, surprises me by the discovery that you have " shattered my case." The principal points of your paper I shall quote as briefly as possible in your own words, and I think, after dis- posing of them, my position must be acknowledged as unassailable. I shall be quite willing to leave with any intelligent reader to determine who and what has been shattered by the collision. You say : " Mr. Farquhar's answer . . . confesses . . . that the agitation for free raw materials is an agitation for free trade." Of course free raw materials is " free trade," in exactly the same sense that free sugar and reciprocity are. Any movement for partial free trade might be called " free- trade agitation," but that is child's play. It is a matter of more significance that you take the liberty of treating my personal desire that the import taxation on our rnanu-. SPECIAL DISCUSSIONS. 34I factures should be removed, as a " confession," " commit- ting " other people to some policy they have disavowed — a use of it which is totally without justification. I have no reason to believe that you correctly represent the Massachusetts politicians, against whom you quote me .; but, assuming that you do, to pretend that any position I may occupy, ought to or can affect theirs in any way, is either altogether disingenuous or hopelessly silly. You say : " The steel and iron of such a plow [four-horse, full-trimmed] as he describes does not cost $2 without any labor expended on it. . . . Oak for the woodwork costs $28 a thousand. As there are only 8J square feet in one plow, the cost is less than 25 cents, instead of $1, as he states it." The steel and iron of our plows, " without any labor expended on it," — meaning ore untouched in the hills, — Cost practically nothing. But that is not what any one was thinking of. In asking me about "raw material," you were presumed to have meant what every business man would mean in speaking to another, — such material as entered a plow factory to be worked up. If a business man had had occasion to learn the cost of that material in a less finished state, — something nearer the primal ore, — he would have inquired of the manufacturer who re- ceived or prepared it in that state, not of me. The " gentleman " who is able to procure the steel and iron, bolts, etc., for a four-horse plow, " full-trimmed, with draft- rod, wheel, cutter, two extra shares/' for less than $2, should go into the business at once. Great profits await him. The same may be said of him who can get out all the timber-work for such a plow from material costing "less than 2$ cents." Allowing for waste, and for beams and handles rejected as defective, he who. calculates- the 342 ECONOMIC AND INDUSTRIAL DELUSIONS. cost of the bare timber in a plow by multiplying twice 8| into $28 per thousand, could not long make both ends meet, in the practical business. I was not concerned with that matter, however. The raw material of most plow- works at the present day consists of handles and beams in shape, and with that alone had I to deal. Until recently, we ourselves sawed the beams and handles used in these plows from lumber purchased for the purpose, — then this lumber would have been our raw material, — but we found after counting waste that the beams cost us over fifty cents apiece. We tried it many, times before we bought them in shape. As they come to plow facto- ries generally, the beam of this plow, after culling, costs about 38 cents ; the handles, 33 cents a pair, were left out of your calculation altogether ; the device, rounds, rods, shellac, and varnish used in finishing, 29 cents, more or less; total, about $1. The $2 covers the steel coulter, wheel, moulds, lands, extra shares, bolts, and other metal not a part of beam or handles. You say : " Even then it was not raw material in any true sense. It was, on the contrary, . . . the finished product of other producers." Raw material, in the business man's acceptation, is always " the finished product of other producers." Only to the miner and lumberman can it be otherwise. But the term is not on that account improper to use, or at all ambiguous in its meaning to such as have a fair knowl- edge of the business. You say : " He does not require a change in the tariff to get his ma- terial for export trade practically free of duty. He can import it, and the McKinley tariff allows him to draw back 99 per cent, of the duty." SPECIAL DISCUSSIONS. 343 No one with a practical knowledge of the business will contend that the " drawback " feature of our tariff laws gives us within one per cent, of the full advantage of free raw materials for export trade. If the McKinley law, instead of taking one per cent, off, had added a bounty of 20 per cent, on, it would not yet compensate us for the delay and vexation involved in proving all that the manufacturer has to prove to get his drawback, or for having to import in small quantities for special orders instead of wholesale. To shift the discussion of the actual question between us, you raise another, respecting wages paid in our estab- lishment ; and, having no knowledge of the subject, you insinuate something about " the low level of $1 a day," which your ally, the Tribune, boldly converts into the positive assertion that " the average wages of his hands are only a dollar a day." It is nothing to the purpose, but I may state in passing that your assertion is alto- gether untrue. Counting all, except apprentices under instruction, our average is $1.42 and a fraction ; leaving out also the " laborers," very nearly $1.60. Our unskilled laborers and helpers average over $1. We pay the best wages prevailing in York ; and while these wages are not the highest in the United States, when compared with the cost of living here they go as far as any in satisfying the working-men's wants. You say : " If transportation is all he seeks, why does he recommend . . . a scheme which would close the great shipyards on the Delaware," instead of some subsidy scheme " by which this government would aid its citizens to establish and maintain lines precisely as the Britisn and French and German govern- ments. . . . Instead of following their example, he proposes to play into their hands, and keep the exporters of this country dependent upon them, unless they can build up 344 ECONOMIC AND INDUSTRIAL DELUSIONS. competing lines in face of established business and government subsidies. . . Why a . . . business man, without a political end to serve, should recommend one scheme and not so much as mention the other, is a mystery." Your never-failing specific for every evil, actual or alleged, is a subsidy out of the public treasury into some- body's pocket, — more taxes upon the many, more bounties to the few. You complain because I suggested a real cure for our deficiency in means of transportation, and made no mention of a scheme for calling the people's attention away from it, and amusing them while certain favorites were getting something for nothing out of the national treasury. The country made a fair trial of ship- ping subsidies twenty years ago, and found them a dead failure. Some Continental powers have tried them more recently, and with little or no success in their immediate object of competing with England, whose fixed policy of commercial freedom maintains her unapproachable supe- riority among the maritime nations of the earth. England owes not a particle of her maritime supremacy to the pay- ment of subsidies. Of her merchant-vessels, less than one sixth receive any allowance from the imperial treasury, and those that receive it are the lines that have shown most ability to prosper without it. Why should I have mentioned your wretched subsidy scheme ? Or why should you insolently censure me for omitting it ? I was discussing a practical question, and needed to speak only of practical remedies. I felt no mission to aid you or your kind in looting the treasury and further oppressing the tax-payers of the United States. This may be truly a " mystery " to you, but it will be none to any man who desires to benefit the whole country and not a class. You say : SPECIAL DISCUSSIONS: 345 "We have information of the most trustworthy character that Mr. Farquhar's firm sold abroad an average of only about 30 per cent., instead of 50 per cent., of its goods prior to the South American troubles. . . . He has founded an argument for free trade upon an exaggerated statement of an exportation that probably is not and cannot well be duplicated in any other line of manufacture." My statement was perfectly accurate. You could not possibly have any trustworthy information about our business except what we might communicate to you. If you chose to question my statement and fish from a corrupted employe something different, one would have supposed that in view of the tainted source you would have submitted it to me or taken some other decent and sensible means of verifying it before giving it to the public as truth. For the year 1889, preceding the financial collapse of the Argentine Republic, our sales of goods for the export trade even surpassed our domestic sales, and the tonnage of goods manufactured for and shipped to the foreign market largely exceeded domestic tonnage. Such an export business is probably unusual, I well know. The aim of our legislation, to infuse through all our manufacturers an unworthy — -and as needless as unworthy — terror of foreign competition on equal terms, has met with a success beyond its desert, and many other enterprises that might even now make themselves known abroad have been frightened from the undertaking by that spirit of craven dependence on government bounty, which has been so artfully and so unremittingly inculcated. But your assertion that a business like ours " cannot well be duplicated in any other line " is surely unfounded. On examining the tables of our exported manufactures, and passing over such items as sole-leather, boards, etc., which are hardly more than crude products, I find " sewing- machines " nearly equal to all agricultural implements — 26 346 ECONOMIC AND INDUSTRIAL DELUSIONS. they were even a little ahead of us a few years ago ; " house furniture," ditto ; " cotton cloth, colored," exports rather in excess of ours ; " cotton cloth, uncolored," three or four times our amount. The export trade in sewing- machines, it has been discovered, is kept up by running prices to foreign customers 25 per cent., or even more, below what American customers must pay ; and the other manufactures are obviously favored by cheap raw material. We are gaining a continually increasing market for small castings used in buildings, and various manu- factures of wood, for which articles we have either an advantage in raw material, or a large amount of labor in proportion to material. There is ample proof in those facts that our trade, if perchance it is exceptional, need not remain so. You quote an anonymous and doubtless mythical " working-man of York " as follows : " Is it honest to claim that the wood in a plow costs $1, when it costs only 25 cents ? Is it honest to name material and transportation as the only advantages his foreign com- petitors have over him, when he knows that the lower cost of their labor is the most important item ? Is it honest to exact from his own countrymen a higher price than he gets abroad, . . . or to claim in 1880 that he did not sell goods cheaper to foreigners, and now to admit it ? " Your working-man is clearly a most industrious one. It must have cost him a good deal of labor, besides con- siderable wear and tear of conscience, to get together such a mass of baseless falsehoods as he has served up for your eager appetite. You were not fortunate in your sources of information, but your straits were such that you found almost any detraction acceptable ; for of such is the gos- pel which the Bulletin delights to spread. Accordingly you have adopted this fellow's cackle as your own; SPECIAL DISCUSSIONS. 347 otherwise I should not notice it. Through him you assert that I omitted "the lower cost of their labor" from my account of the advantages of foreign competitors. I did not omit it, because it has no existence, and there- fore could not be omitted. No one whose skull has room for the most rudimentary notion of what " the cost of la- bor ' ' really is, can have a particle of difficulty in understand- ing that if our plows sell in South Africa, say, side by side with plows of English make, as it is well known they do ; if our transportation charge is higher, as it must be when we have to ship by way of England ; if our raw materials, lumber excepted, are more costly, as any inspection of comparative prices will instantly show, — then our firm must either be drawing no profit whatever, or be at less expense for labor. No other conclusion is possible, unless some way can be found for making larger subtractions from the same sum, and not leaving smaller remainders. Which is the fact ? Our business affords enough profit to justify continuance in it, and that is probably all that our English competitors would admit. No question whatever, then, that the cost of labor on our plows is less than on the English, and that your " working-man " has precisely reversed the truth. Our average of daily wages, given above, is certainly in excess of English figures. Some minds are capable of seeing in that fact a contradiction of what I have just said. Such would probably conclude that if an English manufacturer put two plows in a box, while we put four, and sold each box at three fourths of what we get for one of our boxes, he was furnishing plows cheaper. Seven years ago, I visited some English agricultural factories, and saw them in operation ; since then I have had no trouble in understanding or in explaining how it is that we have cheaper labor although our workmen earn more 348 ECONOMIC AND INDUSTRIAL DELUSIONS. per day. I then and there saw that their " workman's daily labor " was not the same thing ; it was the box holding fewer plows. It is just so with us in York. We have always been desirous of getting hold of more " high-priced " workmen, for the very purpose of getting cheaper labor. We would gladly pay an even higher average of wages, if our country (which already leads the world in that respect) only turned out more men of the high-priced sort. For years we have made it a rule to employ our highest-paid workmen on the goods sold at smallest profits, — in other words, on work for export. That is a fact which an inspection of our pay- roll makes easily evident. But I need not stop longer on a point so well understood by intelligent men, and which the writings of Mr. Atkinson (among other economists) have made so clear. This man's complaint that we sell goods at the market price in this country may be passed over, since the people have the privilege of reducing this market price by re- moving our " protection." I have already assured him of my approval in that course. He charges me with deny- ing, eleven years ago, that we " sold goods cheaper to foreigners." I have no recollection of such a denial. But if I did make it, it would have been proper, since we did not sell goods to foreigners at all in 1880. The goods we made for the foreign market were then sold exclusively to dealers in New York, of whose manner of doing busi- ness I was not informed. You conclude: " The Democratic press . . . demands that the economic policy of the country shall be conformed to his wish. . . . Let us see how this proposition strikes other manufacturers in his own city. Here is what they say : SPECIAL DISCUSSIONS, 349 " ' The undersigned, manufacturers in York, Pa., believe that without a protective tariff few manufacturing industries could have been built up in this country, in the face of the expressed determination of established foreign concerns to possess the market and prevent domestic competition. We also believe that we could not now continue to pay wages much in advance of those paid by foreign competitors, unless those competitors were compelled to pay the difference into the United States Treasury before being permitted to sell their goods here. We believe, furthermore, that the case of an American manufacturer selling a portion of his goods, which are largely of special design, in foreign markets at prices confessedly lower than those at home, so far from proving that protection is no longer needed, shows how an assured pros- perity at home enables a producer to develop business abroad. It does not prove that he could sell his entire product at foreign prices and continue to pay American wages. We know that we could not, although York is much more favor- ably situated for economy in production than most American cities ; and, moreover, we believe that the two provisions in the new tariff for a rebate of 99 per cent, on imported ma- terials for manufacture exported and for a reciprocity with other countries in the dissimilar products peculiar to each, afford us a much greater advantage in foreign markets than we could get by free trade, and while doing this they both increase business and lessen the cost of living at home.' " (Here follow the names of thirty-five York manufacturers, none of them in the export business, and but one — and that a small concern — engaged in the manufacture of agricultural implements.) I note your tender fear that the Democratic newspapers will decline to publish this declaration of thirty-five York manufacturers that they want all they can get, and want it as long as they can keep it. It will be no fault of mine if this generous wish of theirs be not widely known. I reproduce it here in order that you and they may have the full benefit of it. I shall even ask them to add my free and unforced testimony, that that list of manufac- turing firms includes some of our best citizens, and that the entire good faith of afiy declaration to .which they 35^ ECONOMIC AND INDUSTRIAL DELUSIONS. have set their signatures is unimpeachable. But no amount or perfection of good faith can supply gaps in their knowledge ; and if these manufacturers, whom I am glad to count among my personal friends, sincerely believe that "without a protective tariff few manufacturing in- dustries could have been built up in this country," it can only be because their information is incomplete and their credulity has been imposed on ; for before there ever was a. protective tariff here, a large number of manufacturing industries actually were built up. Alexander Hamilton's celebrated " Report on Manufactures " is authority for that. If they sincerely believe that they " could not now continue to pay wages," etc., it can only be because of a confusion in their minds between rate of wages and cost of labor, from which better-informed minds are free. If they sincerely believe that " foreign competitors " can by any conceivable contrivance be " compelled to pay the difference into the United States Treasury," it can only be because they have not learned how foreign prices are regulated. If they sincerely believe, in opposition to my deliberately, repeatedly, emphatically declared opinion, that I should be in the least puzzled to dispose of my "entire product at foreign prices, and continue to pay American wages " — or even better wages, besides employ- ing double or treble my force of hands, — if allowed free raw material, it can only be because they do not know quite so much of my business, from an outside point of view, as do I who have given my life to it. If they sincerely believe that the " rebate of 99 per cent, on imported materials for manufactures exported " is better for exporters than an impartial exemption from the duties could be, it can only be because they are without practical experience in applying the rebate provisions. In point of fact, I doubt if the entire thirty-five have ever exported SPECIAL DISCUSSIONS. 35* as much in any year as we do in a month. If the Demo- cratic papers fail to attach as much importance to the testimony of my friends as they do to my own, it will doubtless be because they know that an opinion, to have real value, must be based upon some degree of informa- tion as well as sincere belief. A Specimen Question. (Printed in the New York Saturday Globe, July, 1890.) The trouble with the grand " campaign of education " undertaken on behalf of Cleveland and Thurman two years ago, is now well known to have been that it did not begin far enough back. Prepared as we had been for some degree of blindness to their true interests on the part of our fellow-citizens, for some degree of slowness to learn strange truths, and eager following of false scents, we had yet to discover that none of these obstacles had been duly estimated by us — that the mists were denser, the hides tougher, the false scents more alluring, than we had dreamed. But the progress of time, when joined with earnest and unceasing efforts on our part, is all in our favor. There are encouraging signs of an interest in the vital question of the government's power to tax, newly aroused in many who have hitherto refused to listen except to their party oracles, but who are beginning now to suspect that it may, after all, be worth their while to hear what is said by those who draw inspiration from other sources. From a vast number of letters of inquiry, brought to me in almost daily installments, I select the following by a writer who, although unusually bright, would not a year ago have consented " to look at this great question " on more than one side : 352 ECONOMIC AND INDUSTRIAL DELUSIONS. "... While I cannot' agree with you, I am determined to look at this great question from every standpoint. I think I understand your views as to the effect of the present tariff system on the various business interests of this country, but there is one feature of the question that I should like very much to have you touch on, and it is the method of raising 400,000,000 (in round figures) dollars that will be required to run this government for the fiscal year beginning July, 1890 ?" Not because of the difficulty in answering this inquiry ; but because of the keen practical interest it has, do I think my reply worthy of publication and attention. It depends on one or two principles which are admitted, I believe, by everybody. 1. There is an amount of revenue, on any given line of imports, which cannot be exceeded. Increasing the duty increases the revenue, until that amount is reached ; be- yond that point the revenue must lose more by dimin- ished importations than it gains by the higher rate. The amount can be considered as a fixed one only when con- ditions continue the same ; for example, removing the duty on wool will greatly reduce our importation of wool- len goods, and the revenue from them, though the duty on the latter remains unchanged ; so it may then be true, though not true now, that we could collect more revenue on woollens by lowering the duty. 2. Many of the import duties now prevailing are in excess of the point at which the largest revenue would be derived from them. This is a result which it is the object of protection to attain ; for it is only by the greatly diminished importations which follow higher rates of duty, that that policy can be effective. It follows that we could irfcrease our revenues by a slight lowering of the duties admitted to be protective, or draw an undimin- ished revenue from a quite considerable lowering. It should be plain to every mind, then, that we might secure SPECIAL DISCUSSIONS. 353 a great alleviation of this species of burden, without any falling off of revenue, by exercising a proper judgment on what articles and to what amounts to make our reductions. 3. The foregoing paragraphs will hardly be opposed. But my correspondent will censure as a defect, what I commend as a merit, in the proposed method of main- taining revenues while lowering rates of duty : that it accomplishes this by increasing our importations of the articles whose protection is reduced. My reasons for regarding this as desirable are, (a) that by securing a con- stant source of foreign, in addition to domestic, supply, we leave the price of the article less at the mercy of those combinations to restrict production and keep up prices, which are such sport to the producers and death to us consumers. The more widely distributed our supply, the harder it is to " corner.'' (b) Increased imports neces- sarily bring about increased exports, and hence encour- agement of those lines of industry whose products are exported. The interdependence of exports and imports is a law of commerce whose truth has been amply and often demonstrated. 4. Though the problem of my correspondent is thus completely solved without recourse to any new taxes, or increase of old ones, I do not recommend that we so limit ourselves. There are a few luxuries of foreign pro- duction, of which tea and coffee are most important, which are particularly and pre-eminently suited to bear the weight of indirect taxation ; because they are luxu- ries, because they are easily accessible to the collector, and because every dollar paid by the people — allowing for the expenses of collection — is available for the govern- ment. It can only have been this high and exceptional fitness for taxation that induced our perverse legislators 354 ECONOMIC AND INDUSTRIAL DELUSIONS. to grant these articles the exemption that should have been granted to so many other articles, a few years ago ; the public being cajoled into regarding as a blessing what its experience has shown to be a grievous oppression : ex- acting, beside the tax to the government, an uncounted additional tax for the purpose of diverting the national industries from more suitable to less suitable channels. Naturally, to those who can be made to believe such a diversion of our industry the " creation " of an industry, the additional tax may look like a good investment ; but the time to come will be short, by my reckoning, before those good people will be ranked along with such as yet dream that human contrivance can be made to produce action without reaction — something out of nothing. Popular education must, as already said, begin far enough back. We may find it natural to suppose that our mode of lightening the people's burdens and at the same time supporting' the government was made suf- ficiently clear in the " Mills Bill " — a measure that would be extravagantly, even insanely, protective if applied to a country in a normal condition, but which was accepted by us when offered as the greatest progress in the right direction that could reasonably be undertaken in a single step. If we find this policy not so clear to others as it is to us, however, we should spare no pains to make it so. In studying how to maintain the government, we have always to remember that " no tax is good in itself" ; all are burdens, and the study of the statesman is to choose such as bear lightest under existing circumstances. What we look forward to as the best system of taxes for the year beginning July, 1900, may therefore be very far from the best to apply for the year beginning July, 1890. In this reply the collection of our revenues by a tariff of some kind is assumed. But the burden upon the peo- SPECIAL DISCUSSIONS. 355 pie would be lighter, if the necessary expenditures of the government were derived from direct taxation. There is no occasion for the annual expenditure of "$400,000,000," and if the people would only realize the fact that every dollar expended by their government is taken from their pockets, by far the largest portion coming from the work- ing-men and farmers, there would be an end to the waste of hundreds of millions in jobbery and corruption. Al- though at peace with the world, and comparatively with- out a standing army or navy, our war expenses are greater than those of any country of Europe, notwithstanding their enormous standing armies. Half of this is worse than wasted ; it goes to fill the pockets of pension sharks and to encourage idleness and dissipation. Thirty years ago the expenses of our government were but $50,000,000 per annum, and $200,000,000 would be amply sufficient now. CHAPTER XI. THE SILVER QUESTION. The following essay was originally prepared for the York Gazette and appeared in its columns in a series of nine papers, from January to March, 1891. A tenth paper was added in May. Its object was to contribute, by a timely appeal to the sober sense of my fellow-countrymen — particularly those in fellowship with the Democratic party — some help in averting a great and threatening disaster, After the appearance of the first paper, that disaster grew less threatening ; for the Fifty-first Congress, from whose pliancy in sacrificing public interests to power- ful private interests the silver men had already extorted one all-too-liberal concession, finally declined to go further upon the path down which they would have dragged it ; and, moreover, each of the two great parties had heard and heeded words of sound counsel from an approved and trusted leader. The Republican Secretary of the Treasury, who obediently served the silver interests while in the Senate, had now become awakened to the danger of further submission, and had shown that danger in an address to business men, whose clear, well-considered words speedily derived a terrible emphasis from his sud- den death. The great Democratic leader had also been heard, in a letter read at a New York meeting. Those three short paragraphs over the signature of Grover Cleveland will have, and deserve to have, great weight with the Democratic party. 356 THE SILVER QUESTION. 357 Nevertheless, a grave peril yet faces the American people. The public men of both political parties through- out the South and Southwest, and in the silver-producing States, together with many leaders in other sections, urged on by a vast and powerful organization known as the Farmers' Alliance, seem unflexibly determined that the United States shall have " free coinage of silver." Their proposition is as follows : " Hereafter any owner of silver bullion may deposit the same at any mint of the United States, to be formed into standard dollars, for his benefit, and without charge. The owners of said bullion shall have the option to receive coin, or its equivalent in Treasury certificates, and such bullion shall be sub- sequently coined." Thus runs the proposed law as it passed the Senate. What does this measure signify, and what will be its probable effects ? It means that, so far as these states- men can compass it, the government is to take one dollar of the money drawn by taxation from the American people, and pay it for every eighty cents' worth of a certain commodity that may be offered for sale. The eighty cents Will be called a dollar after receiving a par- ticular shape and impression ; but as that operation costs but a small fraction of twenty cents, and adds nothing to its value, it must remain intrinsically only eighty cents. If the government stamp were worth twenty cents, why might it not be worth ninety-nine cents ? Why take an expensive metal with which to create a little wealth, when, by using paper, five times as much wealth might be created in the same operation ? In sober truth, a nation has no such power, when it coins money to supply its citizens with a standard or measure of wealth, and wealth can no more be created by fiat out of silver than out of rags. Paper money is simply credit, worth its face value 358 ECONOMIC AND INDUSTRIAL DELUSIONS. only when the people have an abiding faith that every bill can be redeemed in coin. Its value is founded on coin. The value of coin depends, always and necessarily, on the cost of producing it. Though government should call 25.8 grains of standard gold and 412^ grains of stand- ard silver by the same name of one dollar, its decrees are impotent to make equal the cost of producing the two. None knows this last fact better than the silver-producers themselves, and that is the very reason why every man of them in this broad land, no matter what his party affilia- tions, is clamoring for free coinage of silver. Why that wealthy and powerful class, and those depend- ent upon it, all banded together by self-interest, should urge this measure, is as clear as day ; but why the great Democratic party, which has just won a glorious victory in defence of the masses against the classes — why the same leaders who are so nobly battling for the people against other special interests and mighty monopolies, should endeavor to create this more dangerous monopoly, is a harder question to answer. The parallel is perfect. There is no argument in favor of free coinage that has not also been used in defence of protection. In both there is an organization of million- aires, assisted by an unscrupulous lobby, pleading with pathetic tenderness in behalf of the farmer and working- man. In one it is " the poor man's dollar," while in the other it is "the dignity of American industry." In one the bugbear is " gold bugs," and " Wall Street sharks," while in the other it is "British gold," and "pauper labor." In both cases the government is asked to tax the many for the benefit of the few, in the hope that the few will then proceed to share part of their gains with the many. Will some " Alliance," " Knight," or Bonanza advocate THE SILVER QUESTION. 359 of free coinage tell us how the farmer will obtain a larger share of the national wealth by having himself taxed to pay for transferring metal from mines in Nevada to vaults in Washington, and how the working man will be benefited by receiving for his daily or monthly wages money of less purchasing power in every market where necessary supplies are to be bought ; or are we expected forever to accept declamation for demonstration, rhetoric for reasoning ? No prouder honor could be mine than to have borne some appreciable part in fixing the attention of Demo- cratic citizens on that first essential of good government, an untarnished public credit ; on the fleeting, fickle, delusive character of the best relief that unlimited silver coinage can possibly bring to present agricultural distress ; and finally on the true remedy, which is lost to sight in the chase after a quack nostrum. If that distress cannot be relieved by pruning down our excessive import taxa- tion, it is surely not among the ills " which kings or laws can cure." Now, if ever, is the time for every one who has at heart the cause of sound political economy and fair dealing to make his voice heard. IS BI-METALLISM POSSIBLE ? / There are some words very easy to define in language, which are yet terribly difficult to translate into practical working. It is no trouble at all to tell any one who in- quires of us, " bi-metallism means the use of two metallic standards on exactly equal terms, at some definitely fixed ratio of value, so that any debt may be paid or other con- tract performed equally well with one of them or with the designated ratio of the other," just as it is to define the dragon or gryphon as " a serpent with the wings and beak of a bird "; the pinch comes only when we are required to 360 ECONOMIC AND INDUSTRIAL DELUSION. confirm our definition by a practical example. Not that the difficulty of illustrating the two definitions has the same utterly hopeless character ; for while we may be perfectly certain that no imaginable labor or study could discover or produce for us such a dragon or gryphon as our definition calls for, there is no such impossibility in the case of double coinage. Human effort and human contrivance are capable of achieving the task, it may be admitted. But for every-day practical purposes a com- plete example of bi-metallism is as inaccessible as one of the monsters of mythology. Why have we no example of silver and gold entering on equal terms into a national currency ? There are ex- amples in abundance of countries having a silver standard — China, India, Mexico, and other regions of Spanish America. But these do not give us bi-metallism, for in them gold is not regularly current at a fixed ratio of value. It is easy to find examples of countries where silver circulates as a limited legal-tender — Great Britain and its colonies, and Germany. In these the ratio is definite enough, but the two metals enter unequally; gold with the imperial stamp will pay any debt whatever, while silver coins from the same mint are not accepted in any payments above some such small sums as five or ten dollars. There are other countries which set no limit, but put the two metals on an inequality by refusing to extend, on any terms, the coinage of silver beyond the amount already in circulation — France, Italy, and other countries of the " Latin Union," in which the franc is the unit. These countries continued to furnish beautiful illustrations of the possibility of a double standard up to the time when they unfortunately shut off their coinage of silver ; in much the same way that the old Grecian taught his horse to live without eating — it was a magnificent success, until the THE SILVER QUESTION. 361 poor brute spoiled the whole experiment by unfortunately- dying. Our own land, under its latter-day tendency to plunge its currency into reckless confusion, mixes up the second and third plans : its minor silver coins are legal tender for small debts, while its " dollar of the daddies," dollar of Bland and Allison, is coined only in strictly limited amounts. Search where we will, on this or any other continent, the bi-metallism of our definition is not to be seen in practical working. The idea has yet to be materialized. Nevertheless, the idea is no impossible one, if the means are only granted. There is a way of accomplishing it, just as there is of keeping any kind of merchandise at a certain price. We may study the methods of Chicago's " Old Hutch " in cornering and bulling wheat ; of Claus Spreckels in his sugar operations ; of the " Binding Twine Combine," the " Wood-screw Trust," and so on, in commanding higher prices for their wares ; and draw our inference from them. The all-essential requisite for fixing a price on any article in any market, is to get control of the entire supply. If the kind assistance of import duties is not available for our purpose, we must provide ourselves with the means to buy up all of the article that may be offered, anywhere on the globe, until the price rises to our figure ; or keep a stock in hand sufficient for unlimited sales, when the price is too high for us and we seek to reduce it. Some of our statesmen assume this great country to be vitally interested in giving to 258 grains of gold the exact pur- chasing power of 4,125 grains of silver. Why it should be so interested, no one knows — these statesmen certainly cannot explain. But be it so, and let us suppose ourselves setting about the establishment of that price. Since our 258 gold grains will now exchange for more than 5,000 of silver, it is silver that we must at once begin buying, and 362 ECONOMIC AND INDUSTRIAL DELUSIONS. must continue to buy, resolutely and steadily, until the ratio of 258 to 4,125 is reached. The "amount of surplus silver on the world's market " is an amount very differently estimated by different people ; but this we know certainly about it — it will be very much larger when the value of silver approaches one sixteenth of gold than it is at one twentieth. After all this surplus is purchased and stored, what will next happen ? Probably this : having at such pains increased the value of silver with respect to all other valuables, we shall find ourselves actively stimulating the production of that metal — new mines will be developed, old disused mines will be reopened, and the tendency of the increased product to lower the price will have to be counteracted by new purchases. In the meanwhile, no silver can be sold by our Treasury, or the required ratio of value can no longer be maintained. The cost of the whole hoard must therefore be borne by the taxpayers of the United States, to not one in five hundred of whom the investment brings any return ; it might, so far as the great body of us are concerned, be sunk in the sea. Cer- tain experts are of the opinion that no future discoveries of silver, on the scale of those we have seen within twenty years, are to be expected. Should they happen to be right, the burden would probably rest somewhat lighter in course of time — on the next generation perhaps, but hardly on our own. A practical example of bi-metallism is thus shown to be possible. But the probability that our citizens will be persuaded to tax themselves with the millions — maybe hundred millions — needed to exhibit it, may be set down as too small for rational consideration. The object really sought by the advocates of " free coinage," therefore, can- not possibly be bi-metallism. They are evidently seeking some other object — and what is that other object ? THE SILVER QUESTION. 363 BI-METALLIC COINAGE BY INTERNATIONAL AGREEMENT. In calling attention to the advocates of free silver coin- age who profess a desire to " put the two metals on an equality," I have suggested that in leaving out of view the most necessary as well as most burdensome measure for making that policy a success — the accumulation by taxation of a fund sufficient to buy all of the overvalued metal that the whole world is prepared to supply at less than our legal coinage rate — they prove themselves to be false guides ; either ignorant how to attain their professed object, or really aiming at one entirely different. It is well, however, before undertaking the task of disen- tangling real objects from professed ones, to examine some proposed easier means for securing the desired equality between silver and gold, than recourse to an elaborate " silver corner." It is widely believed that the charge of maintaining a ratio of value equal to the legal coinage-ratio would not necessarily be borne by one country alone ; that if one or more of the strong European powers were to join us in decreeing a fixed price for silver, that price would by their and our united action become the standard price by which other nations, and in time all their citizens, would be governed ; and that free bi-metallic coinage could cer- tainly prevail, at least as long as the agreement held. The bi-metallists of Europe, headed by M. Cernuschi, earnestly advocate this consummation as both desirable and practi- cable, and with them agree some of the best economists in our country — F. A. Walker, Hugh McCulloch, S. D. Horton, and many others. In their view, silver is in itself quite as good a measure of value as gold, if not even better — for its fall in price, within the last twenty years, has exactly coincided with the cheapening of many neces- saries of consumption, through economies in production 364 ECONOMIC AND INDUSTRIAL DELUSIONS. and in transportation ; and it has therefore held, within that period, nearer to what they consider the true unit of value : the value, that is to say, of a constant quantity of those common necessaries. They also show us that the • rude unsettlement of prices caused by rich discoveries of gold, which was felt about 1850 and may again occur when exploration brings new deposits to light, might be greatly relieved if we were allowed another financial support to . rest on. The proof that their proposed consummation is desirable is itself, they argue, proof that it is practicable ; for what nations agree that they ought to have, that they will set about obtaining. The weakness of the international bi-metallist position lies in this last argument — essentially in its practical side. Even were it true — and it is far from true — that the best opinion of Europe is as entirely committed in favor of the double standard as it is in favor of a great reduction in standing armies, it might as readily fail in achieving the former end as it has the latter. Nor would the induce- ments that we could hold out to the European nations be strong enough to move them ; none would be easily able to see in our project any so obvious tangible gain for its own citizens, as the power to sell the product of their mines at a higher price would undoubtedly bring to some of ours. Europe would be more ready than our United States have been, moreover, to count the cost of the enter- prise before embarking in it. For to assure the equal currency of the two metals it would be no less necessary to make preparations on a large scale for " cornering " one of them, with several nations in the " bull pool," than if all the work were thrown upon one ; the share of the bur- den resting on each would only be somewhat lighter. It seems a perfectly reasonable expectation, therefore, that the uncertain gains and the certain costs of the proposed THE SILVER QUESTION. 365 bi-metallic agreement will deter European nations from entering it with us in the future as in the past. However grave the difficulties that lay in the way of this project before our government committed itself by legislation, there can be no question that we have further aggravated them by declaring for the ratio of 258 to 4,125, or one to fifteen and eighty-five eighty-sixths, in 1878. That definite declaration was, it will be remembered, accompanied by an invitation to the leading powers of Europe to join us in coining silver freely at a fixed ratio ; but there can be little wonder that our invitation fell flat. The question, " If those people across the Atlantic are going to keep on paying one in gold for fifteen and eighty- five eighty-sixths in silver, when the market rate here is down to one for eighteen or more, why need we do any- thing further in the matter than simply furnish them all the silver they want to buy at their price ? " was not one that needed to be twice asked. The European powers heard us politely, encouraged us to continue as we had set out, and declined to co-operate. We have not yet, to be sure, allowed them the opportunity to trade off their old silver here at a higher price than they could get for it at home ; but we have never failed to hold out hopes that we might some day allow this, and the expected day may now be approaching. The prospect of an international agreement, in our present state of mind and legislation on the silver question, is very much what we should expect if we asked a man who was thinking of the gains in store for him from selling us his goods at an exorbitant price, to join us in buying such goods and paying the exorbitant price to somebody else. If the proposed international agreement is not practi- cable now, or in the immediate future, there seems to be little use in speculating whether it may be practicable in 366 ECONOMIC AND INDUSTRIAL DELUSIONS. some remote future, or whether it would be desirable if ever practicable. For the purpose of this series of papers, the principal claims of Messrs. Cernuschi and Walker may- be freely admitted. It might even be granted that " there is not gold enough in the world to do the world's busi- ness " ; although the deficiency is known to be fully made up by certificates of credit, such as bank drafts and clear- ing-house paper, through which about nineteen twentieths of our whole volume of business is in fact done. The total currency of the mercantile world is now made up of at least nineteen parts of credit to one of hard specie. Since credit depends more on the quality than the quantity of its basis, there is no more effectual way to bring about a disastrous contraction and paralysis of enterprise than by corrupting the coinage ; and there is no reason why, with sound money assured us, a yet larger superstructure of credit could not be built on the foundation we have. The need of a large amount of specie, or indeed of any definite amount of specie, for business purposes is by no means the evident essential thing that it is often made to appear. I must not forget to point out, before dismissing the bi- metallist writers, that the present proposition to coin silver without provision for its redemption in gold or for concert of action with European countries, is as directly opposed to their teachings as to those of all other econo- mists. They advocate two standards for the very purpose of escaping abrupt changes of value and price ; this prop- osition leads inevitably to the sudden substitution of a silver for a gold unit of account — no easy transition, but a rude collapse. It is no more consistent with their advice than would be the conduct of a patient who, counselled by his physician to take his daily airing in a soft-cushioned carriage and so avoid lurches and jars, complied by attempting to leap into such a carriage from another when both were moving. THE SILVER QUESTION. $6? The teachings of experience have greater force, how- ever, than those of any writer or school of writers. To the effects of the Silver-Dollar Act of 1878 appeal has been made by some free-coinage partisans; whether those effects, properly considered, are encouraging or discoura- ging for their project, will form the subject of our next inquiry. PRESENT AND PAST CONDITION OF THE COINAGE. Experience under the Coinage Act of 1878 is said to have proved that the United States can sustain a bi-metallic currency alone. Surely a remarkable claim to make, on behalf of a compromise which set no question at rest and gave no satisfaction ; though the act confessedly survived the proposed amendments by which it was attacked either from the one side or the other at almost every session of Congress for twelve years, and so long, as interpreted by successive heads of the national Treasury, continued to govern us unchanged. Under it nearly four hundred million silver dollars, making a sum from three to four times as great every year as the total silver-dollar coinage in the ninety years between the adoption of the Constitu- tion and the passage of the act, were thrust into circula- tion ; and five out of six of them returned immediately to the vaults of the Treasury, their place in the circulation being filled by certificates. These certificates, which now form so important a part of the circulation — amounting to more than three hundred millions and therefore nearly equalling the whole outstanding greenback currency, — are practically, therefore, the principal outcome of that piece of legislation. They are not legal tender, except in pay- ment of debts due the government, though they pass as if they were ; but there is no reason why they should not, for the greenback has been made as dependent as they on the value of the silver dollar, and the coins for 368 ECONOMIC AND INDUSTRIAL DELUSIONS. which they are exchangeable on demand have the legal- tender quality. Notwithstanding this copious addition to the currency, our standard of values continues to be, not two metals, but simply gold ; all other kinds of money in circulation being for practical purposes gold notes. True, the silver dollar is not redeemable, and has a bullion value of eighty cents or often even less ; but it does the same work in paying taxes as its nominal equivalent in gold, and so long as the government receives' by taxation every year a sum equal to all the silver it has coined in twelve years, the government will doubtless continue to assure it an enhanced value. But that is not alone sufficient. The money received by government is promptly paid out for pensions, salaries, and other expenses ; were nothing given it but silver, it would have nothing else to pay, and the coin could gain no fictitious value by its action. The essential point is seen in the strict limit set to this coin- age, and the government monopoly of it. Greenbacks, which now circulate along with silver and silver certifi- cates, are by law redeemable in coin, which the Treasury Department has interpreted as practically meaning gold. While the Treasury continues to pay gold for it, and while the silver certificates continue insufficient for the entire work of a national currency, the greenback will 1 continue both to command its face value in gold and to carry the rest of the currency with it. Granted, the holder of the greenback might now obtain gold for it, and might obtain abroad with that gold a larger quantity of silver than his note could command in silver coin at home — but from that he could get no profit. No form of silver that he could procure would in any way bring him more than its bullion value, — the laws against counterfeit- ing are strictly enforced in this country, even when the THE SILVER QUESTION. 369 metal of which the false coins are made is itself genuine and of full weight, — hence there is no inducement to any one to buy silver abroad by sending gold. It would be a speculation very much like that of buying and holding paper, under the encouragement of the high artificial value that the government's stamp is able to give to that substance. The object of this paper is to show that the parallel circulation of gold and silver, under the act of 1878, affords no proof whatever that our whole monetary sys- tem would not lapse to a silver standard with the introduc- tion of " free coinage." If the privilege of having silver coined into dollars were open to every possessor of silver, our situation would become radically different at once. The holder of gold in a country where he could get for it only sixteen times its weight in silver would be certain, as soon as silver acquired an exchange value not depen- dent on coinage by our government, to send it to some other country where he could get eighteen or twenty for it ; and he would be equally certain to put none of it at any such work as sixteen parts of silver could do equally well. For practical purposes, then, gold would be de- monetized in this country. It would remain " legal ten- der," of course, just as it was before 1834 or from 1862 to 1878 ; but it would become the mere commodity with us that it was then, and for precisely the same reason. In point of fact, the thing that " free coinage " would do would be to reproduce for us the conditions before the adjustment of coinage in 1834, in an exaggerated form; for the difference at that date between coinage-ratio and exchange-ratio of the two metals was only that between 15 and 15.8, while it is now far more disproportionate; then the work of exchange between this country and Europe was done on a small scale, by slow sailing-vessels, 370 ECONOMIC AND INDUSTRIAL DELUSIONS. while now we have not only " ocean greyhounds " but ocean telegraphs. The coinage act of 1834, it will be remembered, was passed for the express purpose of retaining gold in the country as money ; we were then under the nominally bi-metallic system now advocated, which had become in fact exactly what it would inevitably again become under the manipulation of the free-coinage men of this day, exclusively a silver system : and the only available device for holding gold was found to be a debasement of the gold dollar. As a matter of course, gold was debased too far — was reduced in weight from the fifteenth to the sixteenth of the silver dollar, the commercial ratio of the two metals being between the two figures — with the neces- sary consequence that, before twenty years were over, silver had disappeared as gold before it, and the only resource was to debase silver in turn. Had the debased silver been made an unlimited legal tender and coined in unlimited quantities in the readjustment of 1853, the experience previous to 1834 would of course have been repeated, and the net result of twenty years' progress would have been two acts providing for partial repudia- tion of debts. Fortunately, however, wiser counsels pre- vailed in 1853 ; the debased silver was made legal tender only for limited payments, and could therefore be used as money without disturbing the basis of credit. The silver dollar was not debased along with the minor coins, simply because that was believed unnecessary ; for that dollar had already been replaced by a small gold piece, and was no longer coined except in insignificant amounts. To show the inevitable, though sometimes gradual, effect of attempting " bi-metallism " with a coinage value different from the market value, I have made out a table giving the amount of each metal coined by the United THE SILVER QUESTION. 371 States, from the foundation of the first mint until our abandonment of that attempt in 1853. It ought to be observed, however, that the volume of the coinage gives no adequate idea of the relative use of the two metals as money ; for people begin to send abroad the better coin and use the worse, some time before the mint finds it out. Considerable gold was coined at our mints in the days when it commanded a premium and did not circulate at all, we must remember. The stamp of the mint is a con- venient guaranty of the weight and purity of the metal which receives it ; hence our coins are always welcome to manufacturing jewellers, and none the less so when they fail to circulate because their intrinsic value is too high. The effect of overvaluing one of the money metals is therefore seen more speedily in the circulation than in the Mint Reports. To show that our retrogression to a single standard, thus retarded, was steadily progressive, I have divided each period, before and after 1834, into three parts : Total United States Average Average Coinage, in Millions Percentage Dates. No. Coinage of Dollars. Coined. Years. Ratio. Ratio. Gold. Silver. Gold. Silver. 1793-1805 13 15 15.53 2.5 1.9 57 43 1 806-1 820 15 IS 15.58 4.9 9.1 35 65 1821-1833 13 15 15.80 4-5 25-3 15 85 1834-1842 9 15.99 15.75 19.2 22.3 46 54 1 843-1 849 7 15-99 15.86 54-3 17.8 75 25 1850-1852 3 15.99 15.58 I5I.4 3-6 9» 2 The last two columns giving the average percentage of each metal coined, with the falling off that they show in the relative amount of the undervalued metal, are most 372 ECONOMIC AND INDUSTRIAL DELUSIONS. instructive. They have an easy lesson for us in pointing out the only possible result to be anticipated from an- other vain effort after the bi-metallism which our laws up to 1853 purported to provide. It ought to be admitted that the huge coinage of gold in the last three years be- fore 1853 is due to the fact that then did California first make herself felt at our mints; but that fact does not explain the falling off in silver coinage, from two and a half millions to little over one million per annum, which those years also showed. No fact can be clearer from our country's experience, I conclude, than that free coinage at an arbitrary ratio, though advocated in the name of bi-metallism, always de- feats bi-metallism, and banishes the undervalued metal. As already admitted, this fact of experience is not one that must necessarily be true ; if we made due prepara- tion for the work, and started the right kind of move- ment to " rig the market " — and if we proved ourselves strong enough — we might quite possibly prove successful. But none of our free-coinage friends is willing to enter upon any such task ; none of them has anything to pro- pose but the plan followed in the early years of the Re- public — a plan which in two distinct trials proved a hope- less failure. We have never had a bi-metallic standard, whatever our laws may have declared. We have been able to use gold and silver together as money only by keeping one of them subordinate ; limiting its amount in circulation, and its currency as legal tender. The country is far stronger and far richer than in 1834. Has it by this time gained that power to fix the price of silver by a bold declaration of its purpose to do so, of which it then proved itself so lamentably destitute ? That is conceivable, but those who look on it as probable are hearkening to their hopes rather than their reason. THE SILVER QUESTION. 373 THE "CRIME" OF 1873. The difference between the law and the fact is always showing itself, as we follow the course of financial history. The thing that our law undertakes to furnish is not the thing that our experience gives us ; and not uncommonly the same law works for a time in one way and afterward in a very different way. We have seen a bi-metallic cur- rency carefully prescribed and provided for the United States, so far as it was in the power of the law to do this, placing the two metals on an exact equality until 1853, and have observed that in changing the status of the small coin in that year, the lawmakers neglected the already obsolete silver dollar. They thus, while recog- nizing the subordinate place that silver must thereafter hold in our currency, left a loophole through which it might enter in copious floods and drive out gold when changing conditions brought about a change in the rela- tive value of the two. That loophole, existing through oversight rather than design, was closed in 1873, by an act to provide new regulations for the mint ; this act ex- plicitly stopped the coinage of silver dollars of 412^ grains weight, and allowed but a limited legal-tender function to any part of the silver coinage. Thus the state of the coinage, as it had been settled in 1853, was made per- manent. The Mint Act of 1873 has been subjected to bitter de- nunciation from those who suffer, and those who imagine that they suffer, from the closing of the silver-dollar loophole. In fact, it has grown to be a real shibboleth of true " friends of the white metal," to call that act some kind of " crime ; " as, for instance, when one of them assures us that it " must stand in history as the crime of the age." As a matter of fact, however, it passed after full discussion, and with little or no opposition ; and it 374 ECONOMIC AND INDUSTRIAL DELUSIONS. was received with such general acquiescence and even satisfaction that the pathetic excuses afterwards made by some who had joined in enacting it — their piteous appeals that the kindly shelter of the Baby Act might cover their complicity — excite less commiseration than contempt. True, the silver dollar of 412^ grains, whose coinage was then suspended, had recently come a little more into demand; our mints, which from 1793 to 1868 coined only 4,600,000 of these dollars, had issued in the following four years, 1869 to 1872, no fewer than 3,100,000 of them, for foreign trade exclusively ; but that loss was more than compensated by the new " trade dollar '' then provided, which better fulfilled the only use for which the silver- dollar was in those days desired. When and wherein did the " criminality " of the act become manifest ? The United States produced very little silver before the Civil War. The production of the country has since advanced by steady strides; its mines had already in 1873 begun to furnish more than $30,000,000 worth, or two fifths of the world's supply of that metal, and in increasing their yield to $50,000,000 they have kept pace with the world's increase, and still maintain the same pro- portion of two fifths. The present annual product of silver from this country alone is greater than the whole world ever obtained in any year before 1865. The one striking fact in the recent history of silver is this enormous increase in its production by the world at large and particularly by this country ; and to that fact we owe all the denunciations heaped upon the Mint Regulation Act. It affects our problem in two ways. So unprecedented an increase in the supply could not be without effect on the price of the article. The only inference to be drawn from the frantic efforts that are made to explain in some other way the remarkable fall THE SILVER QUESTION. tf$ in the value of silver since 1873, is that that metal is really- believed to be the one valuable in all this universe which disobeys the inexorable law of supply and demand. But that is an idle superstition. It is worth while to observe that the price of silver had been slowly but steadily falling, even before 1873; having stood, for the mean of six years, 1867 to 1872, at 1 to 15.59, while the mean of six years just preceding, 1861 to 1866, was 1 to 15.41, and that of 1855 to i860 was 1 to 15.32; and the greatly accelerated decline that began in 1873 closely followed a rapidly increased production of silver in the United States: for 1870, $16,000,000; for 1871, $23,000,000; for 1872, $29,000,000; for 1873, $36,000,000. With these facts in view, we can easily estimate at its just value the pretence that the " crime " of 1873 caused the decline. The truth is almost opposite ; the decline is the sole cause of the appearance of the 1873 act in a criminal role. Immediately and practically, the " crime " did not affect the standing of silver in the smallest degree. At that time, neither metal was used as currency in this country. No other country was bound by our legal- tender laws ; and yet the decline was felt, of course, everywhere. The German Empire made an important coinage reformation between 1871 and 1875, substituting order for the chaos of irreconcilable systems that had previously oppressed the country ; and owing to the limit set in its reformed coinage on the legal-tender function of silver, much mischief is ascribed to that precaution of the Germans. But their change was so obviously, like the suspension of silver coinage among the Latin nations, an effect and not a cause of the changing value of silver, that we need give it little consideration. The attempt of that country to sell surplus silver in other countries may have contributed to the decline in price ; but no such 376 ECONOMIC AND INDUSTRIAL DELUSIONS. effect could have followed it if that decline had not been already started by the increased supply. The rapid development of silver production affects our problem in another and more dangerous way. It has created an " interest," which our legislators feel under obligation to recognize, conciliate, and protect ; an alert, calculating, exacting " interest," determined as a clear perception of speedy gains on the one hand and tardy gains on the other — plausible as approved skill and sharpened wits — powerful as great wealth and perfect combination — can make it. To the silver interest the bitterest denunciations of hostile legislation come easy enough. Neither of these two factors can be rejected in account- ing for the free-coinage cry. Let us inquire into the operation of each successively. LEGISLATION IN FAVOR OF THE DEBTOR. To the question already asked, what " other object " the professed champions of a currency based equally on gold and silver can have in advocating a measure which could give us no such currency, one easy answer is at once sug- gested by the recent cheapening of the inferior metal : that contracts may be carried out and debts paid at less cost. That the man who engages to give the value of ten hours' work, say, may discharge his obligation with eight hours. The desire to shirk is about as strong as any that exists in the human breast ; and, where opportunity is given, few indeed are they who would hesitate to seize it. When it is realized that " free coinage " may give us ten silver dollars at the same cost in produce or labor that we now incur for eight, and each of them equal to any of the eight in debt-discharging power, the longing for free coinage is easy to understand. That that longing may be THE SILVER QUESTION. $77 active and ardent enough to determine congressional elections, and call out statesmen pledged to gratify it, need not surprise us. It is a rock-ribbed certainty that any desire which is strong enough and widespread enough will elect many of its advocates to Congress. But it is by no means cer- tain that all strong and widespread desires ought to be carried out. And the policy of facilitating the partial repudiation of debts, of impairing the obligation of con- tracts, is one which can be conclusively shown to be bad in the long run for all classes of society without exception ; bad" for those who incur obligations, along with those who give the value of service for which obligations are in- curred. This is after all only an application and slight extension of the old, often heard, but not always heeded, principle that " the best policy is honesty." But how is this ? How can it be better for borrowers as well as for lenders, that debts should be discharged in full according to the contract ? Surely the former class must gain by any legislation which lightens the debt? No, not as a class, and in the long run. It may readily be granted that to poor John Doe, whose little farm is under a thousand-dollar mortgage, any act which enabled him to clear himself by paying a value that he could call a thou- sand while it cost only eight hundred, would be a great relief at the moment ; but how about his neighbor, Richard Roe, who might be obliged to borrow money on another farm at that very time ? How about Doe himself, who might have to renew his mortgage, or raise more money by the same means ? It is certain that the terms on which this could be done would become decidedly less favorable to the debtor. If the conditions are made by law in any way disadvantageous to the lender, there will inevitably be fewer lenders, and less money available^to borrowers ; 378 ECONOMIC AND INDUSTRIAL DELUSIONS. the law of demand and supply will therefore work ad- versely to the latter. This adverse working is brought about, of course, by adjustment of the interest on money, a name denoting what its holder has to be paid for the difference between its present value to him, and that of his expectation of it a year hence. Any act or law which scales down debts, has necessarily the effect of impairing the confidence of the man with money to lend, that the value he is to receive next year will be as much as he gives this year ; the difference between present value of present money and of future money will therefore be higher, and must be met by higher interest. Or, if the higher interest cannot be paid, the would-be borrower must suffer the refusal of a loan, and thus, as an indirect consequence of the very act by which he expected to benefit, must have to complain of hard times. It thus appears that legislation for the relief of those who have borrowed is legislation adverse to those who would borrow, and favors the " debtor class " of to-day at the expense of its successor to-morrow. Would not an act which favored the creditor, by adding to the value of his investment, have an exactly contrary tendency? Would not the necessary effect of such an act be to increase the money at the disposal of those in temporary need of it, and thereby to render easier the conditions on which it is to be had ? Must not the rate of interest fall when two lenders have to run after each borrower, as cer- tainly as it rises when each lender is sought by two bor- rowers? I do not insist that our national legislature should be driven into passing acts of the kind suggested by these questions, but I am quite justified in asking that the points brought out by them should receive due consideration, along with those made on the other side. It may be believed, and quite a strong case may be THE SILVER QUESTION. 379 made out to support the belief, that there would be more good than harm in legislation increasing value of invest- ments — legislation openly favoring the " creditor class." It has already been shown that such legislation would bear hard only on those already in debt and not on any who are hereafter to be in debt ; so that we have to con- sider only the effect on present debts. Who, then, form the most important part of the " creditor class " in our country ? " Bloated " holders of the bonded debt- of the government ? " Shylocks " who have mortgages on West- ern farms? It is safe to say that for every creditor in either of these classes there are a hundred investors in savings banks, building associations, etc., whose small saving, the result of years of toil and self-denial, is abso- lutely at the mercy of legislation affecting the value of the dollar ; or a thousand working men in arrears of wages, whose reward must be depreciated by debasement of the standard — who can only claim the same nominal sum from their employers, that is to say, and have to surfer by the diminished purchasing power of that sum if the unit of reckoning is debased. Working people are uniformly creditors, to an extent not generally known or realized. It has been estimated that the amount due them averages fully a hundred million dollars ; twenty per cent, coinage debasement would result in a direct and immediate loss to this class, least able to bear it, of over twenty million' dollars on account of wages due. The contrast between "poor debtor" and " rich creditor" is one often drawn in poetry and rhetoric, and with respect to some kinds of debt that contrast really exists ; but it is a great mistake to suppose that it exists generally. The very poor are not debtors, because they can obtain no credit ; they are often creditors, because they are obliged to submit to that condition. Notwithstanding our natural sympathy with 380 ECONOMIC AND INDUSTRIAL DELUSIONS. the cries of those who have debts to pay, we must remem- ber that it is not among them that we must look to find the poorest and most wretched. Legislation to relieve them is no aid to the class of our population most in need of relief. I must repeat, and I cannot repeat too earnestly, that my object in calling attention to these points is to show that the question has another side, considered merely as a question of policy or pity. But the question cannot be so decided. So long as we undertake to balance the " claims " of one class of citizens against those of another, or to decide who has the best title, in misfortune or even in private virtue, to government favor — so long have we to proceed through a trackless sea without chart or compass, so long is our task too mighty for human faculty. The course of government first becomes clear, when it ceases to listen which party can utter the loudest cry, but con- siders only the counsels of Justice. Justice of the band- aged eye — Justice with partiality for no class — to that arbiter alone let us listen. What has Justice to say to the scheme of making all debts payable in silver, coined in unlimited quantities for the sole benefit of the holder of the bullion, a dollar for every 412^ grains? Were it true, as we are told by the unlimited-coinage schemers, that both metals together formed our standard of value until 1873, at which date one of them was "de- monetized " by a " crime " of some kind against it, the answer might be different. But since that is not true; since neither our own nor any nation has ever had at the same time two standards of value — though its laws may have been such as to allow a change from one standard to another, as circumstances of production changed ; since silver was not demonetized by the Mint Act of 1873, its use as money having at once largely increased under that THE SILVER QUESTION. 381 very act ; since gold has been in fact our standard unin- terruptedly from 1834 to the present hour, excepting the seventeen years when we were forced to make all values depend on the prospect of obtaining gold for a government promise to pay it ; — in view of this state of facts, there can be no serious question that existing contracts are based on gold values, and that only gold or some accepted repre- sentative of gold can justly discharge them. THE CRY FOR MORE MONEY. " Hard times " are popularly associated with a scarcity, and " flush times " with a plenty, of currency. The gov- ernment is credited with power to make currency scarce or plenty by legislation. Legislative measures for increas- ing the volume of the currency, therefore, never lack advocates. No subject is more important for us to con- sider, than whether such measures are capable of bringing about the desired end, and whether they may not accom- plish more mischief than good in the effort. In the first place, I must deny the existence of any such relation between hard or flush times and the volume of currency in circulation, as is popularly believed. There is a good deal to explain such a belief, I admit. The pioneer or dweller in remote country districts, who has learned the use of money and is forced to dispense with it, keenly feels the inconvenience of his lack of cash. The farmers, to whom experience has taught the usefulness of an ample currency in hand when the time comes to " move their crops," are its natural advocates. Business houses, when they have to meet a call for cash while their assets are not readily convertible, appreciate the ills of " tight money " as much as anybody, and are as ready to join in movements to make money easier. But there is no proof in any of these facts that a large amount of currency 382 ECONOMIC AND INDUSTRIAL DELUSIONS. would make the burden permanently lighter for those who now complain. Financially, an easy condition seems never to arise from the possession of a large supply of currency, though it may be brought about by an increased supply. The stimulus to business is given by the act of putting more money in circulation ; but after the increase has ceased, the stimulus disappears ; business is no more active, no more secure against another period of depression, with the larger currency circulation, than it had been with the smaller. In this there is a likeness to certain drugs, whose effect on the system can be kept up only by con- tinual increases in the dose ; the stronger dose, taken constantly, having no more stimulative power than had the weaker one before. Bearing this in mind, remember- ing that the relief to be had from an increased currency is necessarily only temporary in its duration, we are led to consider the more lasting effects of the increase, which, if the addition is currency of a quality inferior to that previously circulating, cannot but be evil. The bad money, as was long ago pointed out, must drive out the good. The increased currency supply will thus bring temporary relief only at the cost of permanent injury. Another grave objection to the inflated circulation of silver, and of notes representing silver, proposed as a means of appeasing the hunger for " more money," is the difficulty of getting the money into the hands of those who are calling for it. 1 We must remember that, while a lamentable deficiency of money is complained of in some quarters, at the very same moment there is a surplus of it in others — great hoards of it lying idle, vainly seeking a borrower on good security at unprecedentedly low interest. 1 To a paper on " Money Fallacies," by Clarence E. Dutton, Major U.S.A. (before the Philosophical Society of Washington) the author is here under obligations. THE SILVER QUESTION. 383 Such additions as Congress might make to the circulation would probably go only to increase these hoards. Why ? Because the government cannot be expected, any more than the bankers, to part with value on inferior security ; and if private money finds no better investment than in mere storage, or in supplying the languid demand which is the best for which good security is to be had, public money must follow the same course, unless forced into another course. There are propositions in abundance, it is well known, for compelling another disposition of the desired inflation of public money than would be permitted by sound business principles ; but are any of them deserving of serious attention ? Is it not fully enough to say of such projects, as that of lending money at low interest to any one who will furnish real estate security for the loan, that if private money is not to be had on the terms offered, the government — that is to say, the tax- payer who sustains it — is asked to do for nothing, a favor which is worth money ; is asked to make a present in the guise of a loan, of money extorted by taxation ; is asked to turn over, without compensation, to some citizens the property of others? Practically, therefore, there is no way in which the demand for more money can be met by government that can. afford any real relief, and be at the same time clear of what amounts to legalized spoliation. It should also be borne in mind that the economic dis- order, diagnosed by plausible political quacks as lack of currency, is often something different, — lack of capital. In order to move the crop, or make the needed improve- ment, it is wealth that is needed, and not particularly wealth in a convertible and portable form. The need is no less serious for that ; it is, indeed, too serious to be curable by increasing the currency. 384 ECONOMIC AND INDUSTRIAL DELUSIONS. The reply to any proposition for supplying the people with more money, if the addition is to be of an inferior quality, and, therefore, of a tendency to drive off or depreciate what is already in circulation, should therefore be in almost all cases a decided negative. Only the most pressing, most urgent national distress can justify the step. As a remedy, it is too dangerous, and too likely either to fail in reaching the complaint, or to prove no remedy when the complaint is reached. As has been shrewdly said, the government is omnipotent to make money, but pitiably feeble to give value to the money it makes ; and, after all, it is value that we want as a basis to our monetary system, for we are as incapable of measuring value by that which is without value as of measuring length by something without length. Where credit is good, and business methods sound, more can be done with a small basis of reliable money than with a much larger basis of doubtful money. The certainty that the free coinage of silver would at first give us a large increase of money in circulation, and the strong probability that that increase might finally surpass what we should lose by exportation of under- valued gold, are far from being the convincing arguments in favor of the measure that they appear to many minds. Silver inflation must be very much like paper inflation in its effects ; the inflated prices resulting upon it would have a lower limit, doubtless, because the silver dollar has a real value approaching its artificial value ; but they would reach their limit more promptly, because the hope- lessness of any redemption for the depreciated money would be sooner felt. The additional circulation must pass into the hands of the holders of silver bullion ; and how it is to go from these to the aid of those in need of a larger currency, is not shown. The only aid that it THE SILVER QUESTION. 385 could possibly bring would be to those now in debt who would gain not by the increased quantity, but by the de- preciated quality of the money of account. A wild and terrible tale of woe has been going the rounds of the papers " friendly to silver," in which the shuddering listener is told of the fell work of our mis- guided government when it " destroyed half the money in the world " on that ill-starred day in 1873, and arbitra- rily caused " silver to fall as compared with gold." " This fable teaches us," it appears, the fearful results of dimin- ishing the money supply, and the crying need of increas- ing the same. Attention has already been called to the large increase in the use of silver as money under the act which is said to have "demonetized" that metal; the mint reports show that the coinage of silver money rose at once to a higher figure than had been reached since 1861, and already in 1876 and again in 1877 more of such money was coined than in any previous year since the foundation of the government. The clause of the Mint Act which prevented the silver dollar from usurping the place of gold as a standard of values and finally banishing it altogether, could have had no immediate influence on the standard, which was in those years neither silver nor gold, but depreciated paper. In fact, at the time when the fable tells us that our law was hurling down the price of silver, it was in reality hav- ing no appreciable effect at all. But fable ought to be confronted with fact at another point ; where the fall in price of other forms of property is ascribed to the act in question. The fall was really due, as is well understood by all who are not dupes of one or another class of Protectionist plotters, to improvements in methods of production and economical transportation ; which cheapened gold itself 386 ECONOMIC AND INDUSTRIAL DELUSIONS. in some degree, but not in nearly the same degree as the commodities compared with it. The proof of this is plain, when we consider expenses unaffected by these improvements : as wages of labor, which have not fallen, and rent of land for business purposes, which has gener- ally risen. In reality, therefore, the evil which it is pro- posed to cure by a pretended increase in the volume of legal-tender money, and a practical limiting of legal tender to silver and representatives thereof, has no existence. PROTECTION TO THE MINE-OWNERS. Neither of the two cravings I have considered, that for cheaper money to make debt-paying easier, or that for more money to " lubricate the wheels of commerce " and " restore confidence to business," would ever have been powerful enough to bring upon us the silver agitation, but for the co-operation of a redoubtable ally. For debt-sealers and inflationists we have always with us ; there has been nothing to give them greater cogency or even plausibility since they hitched themselves to the silver car than before ; the fact that they seek temporary relief to them- selves at the cost of lasting inconvenience to those with whom they ought to be most in sympathy — advocate a remedy which is less sure to satisfy any one than to excite a cry for further doses — has been as evident as in all history heretofore ; they have already been defeated in the battle over "fiat money," and would not now be for- midable but for the partnership into which they have had the fortune to enter. The unparalleled increase in the product of silver, to which its equally unparalleled fall in price is undoubtedly due, was brought about by more than one cause. Not only did rich new deposits reward the prospector, but the cost of extracting from them the pure metal by improved THE SILVER QUESTION. 387 processes, and of carrying it to market by the Pacific railroads, was greatly diminished. The mining combina- tion needed no instruction to perceive the princely profit possible to it, if it could use the means provided by nature and man for cheapening production without being subject to the inconvenience of lower prices ; or to act thereon with all its shrewdness and energy. Its interest has always been plain as a pike-staff, and no doubt of the entire devotion of its Congressional representation has ever been raised. While its members have continued to furnish an admirable example of ardor in a common cause, all others have been divided and irresolute, thus affording the determined minority an opportunity which it was not slow to seize. But how, it will be naturally asked, came this to be permitted ? How has it ever been possible for a few silver men to bend a legislative majority to their interests ? How has it been possible to conceal the fact that any gain which they could draw from complaisant acts of Congress must be at the general cost ? The answer is no simple one, for several causes have contribu- ted ; but the most important source of strength to the silver combination and of weakness to the rest of the Re- public has been, I do not hesitate to say, the protective superstition. It happened very luckily for the silver interest, that the days in which it had to approach legislative halls with its axe to grind, were those when the country was so abject a prey to delusion. The general interest was always sought in favoring the few who gained by high prices rather than the many who saved by low prices — thus pro- moting scarcity and fighting off abundance — or, better to show the delusion, in favoring on general principles those able to make out a strong case for governmental favor, not stopping to consider at whose expense, or even deny- 388 ECONOMIC AND INDUSTRIAL DELUSIONS. ing that it fell on anybody, — the belief being that what was gained by the beneficiaries was either freely bestowed by a benignant Providence or was wrested from the hated foreigner. This delusion well served the purpose of the silver men. What they wanted was such legislation as would insure them higher profits on their product; exactly what all the protection-seekers have always wanted, since protection was first contrived for them. Like the creators of protection, they did not wish the cost of their increased profits to fall on their fellow-coun- trymen ; or, if that must needs be, they did not wish their fellow-countrymen to feel it so ; and this kindly supersti- tion was exactly fitted to bring their plans to success. It has helped them more than once, and it helps them yet. It at this moment puts these men in the attitude of pen- sioners of the Republic, spreads far and wide the impres T sion that we owe them something because we have given them so much already, and takes no account of the people's rights on the other side. Are not we after all the sufferers most worthy of consideration ? Against those " vested rights " which are really vested wrongs, whoever profits by them, I feel like repeating the reply of the Abolitionists to the proposal to " pay ransom to the owner " : " Who is owner ? The Slave is owner, And always was. Pay him." Their scanty numbers, and the greater prominence of other issues in our politics, have been difficulties but not discouragements to the silver representatives. A little strategy has been necessary — nothing more. Strong and undoubted as are their " claims " to protection — being few, already rich, and tightly combined — they might yet have failed in securing the aid of other Protectionists, THE SILVER QUESTION: 389 notwithstanding their unfailing co-operation in all plans for pillaging the multitude to benefit a few favorites, had they not secured outside support. The inflationists and debtor-party have become as necessary as themselves to the success of the movement under their direction ; although, they having an intelligent understanding of it which their allies lacked, they are the only ones to get any profit from it. The arguments used to confirm and sustain this alliance are of a "spider and fly" nature; any sober appeal to reason would be thrown away on persons who, it seems, have yet to learn that no measure for making a so-called dollar easier to get, is ever going to make the goods, for obtaining which the dollar has all its value, a bit easier to get. Like other Protectionists, the silver men make out the principal part of their case by skipping over pertinent facts, and laying stress on irrelevancies. Shall a few be mentioned ? The silver dollar is " the poor man's dollar " — certainly ; when one remembers that the worst dollar is always given to the poor man, the truth of this claim is seen to be no recommendation of it. It was " the original dollar " — that is to say, the dollar was at first a silver coin. That it was, and so, it might be added, did the words " car " and " train," and many others, have very different meanings in ruder states of society, from those given them in more advanced states. It is no reflection on our forefathers that we do not recognize the same monetary unit. We cannot ; the work expected of money in our day is different altogether. Just as we abandoned trains of wagons and cars pulled by beasts for something that better suited our growing needs, so we have, in these days of far transportation and economy of labor, abandoned the silver dollar for a more concentrated 390 ECONOMIC AND INDUSTRIAL DELUSIONS. expression of value. It was not done by the purpose or wit of man, but by the movement of the age. But their favorite cry is one that has the high advantage of greater vagueness ; they want to put silver and gold " on an equality " in coinage. This is, when considered, only a finer way of saying that they want to force every man who has any claim on one of these metals to satisfy himself with sixteen times its weight in the other — nothing less or more. In every other way the " equality " is as perfect at present as could be desired. A contract to deliver so many ounces of standard silver — whatever the number — would be recognized and enforced, under present laws, and the government's stamp would be accepted as evidence of weight and fineness, precisely as if the contract called for gold. And this is what a money contract essen- tially is. It is not pretended that gold has any other than a " commodity " value — exactly what the same metal has when applied to other uses — except so far as the supply for the other uses is reduced by the withdrawal of so much in the form of coins ; or that its withdrawal affects its value in any other way than it would be affected by the introduction of some new use for gold — a form of fashionable jewelry, for instance — which called for the same amount of it. The fact is, what the silver-protectionists are after is something altogether different from equality. They wish to stamp upon their metal a value not given it by demand and supply, which determine all other values, that of gold not excepted. Though they do not claim the power to sell an ounce of silver for a legally determined amount of wheat or cloth, they do claim to say how much gold it shall sell for — the relation in value of gold to wheat and cloth being determined exactly as are the relations of wheat and cloth to each other. They are not content with THE SILVER QUESTION. 39 1 a gold status for silver, but would raise their product to an eminence that no other product occupies. That the sole possible means of accomplishing such a result, a fund in our Treasury for unlimited purchases of silver, will never be allowed them, we may look upon as quite certain. The uncertainty is, what is to happen to our Treasury and our general business while we are making our effort to achieve their end for them without the necessary means? FREE-COINAGE PROBABILITIES. " Don't ever prophesy unless you know " is a favorite motto, and the uncertainty of prediction has received many a practical illustration in political history — particu- larly in that of our silver question. Not from any taste for the office of oracle do I undertake to forecast the probable results of free coinage, but only because I find it indispensable to a full discussion of the project ; there must be a clear idea of all its possibilities, and a careful estimate of the degree of probability belonging to each, before one can rightly judge it. On such an idea and such an estimate is every project adopted or rejected. The ends desired by the two interests which are calling on us for free coinage of silver cannot, it is easily seen, both be fully realized. He who has a debt to pay wants the dollar that will cost him least, in labor or in goods — the dollar whose real value will be farthest below its face ; he hopes that the silver which is to compose the new standard will not'increase in value, and therefore in cost to him. He who has silver to sell wants the dollar that will buy him most — the dollar whose real value will be equal to its face ; he hopes that the value of silver will increase with its adoption as the standard, even to the point, $1,293 per ounce Troy, at which the value of 1 5.988 parts of silver equals one of gold. Free coinage cannot 392 ECONOMIC AND INDUSTRIAL DELUSIONS. completely satisfy both sets of clamorers ; which set is then to be satisfied and which disappointed ? The result may be something between the two desires ; some rise in value which will bring additional gain to the mining interests, yet not sufficient rise to disappoint the debtor of his longing to pay his debt with a less value than he contracted to pay. Each party to the conspiracy would thus win something ; but the miner would continue to gain as long as his metal continued to bring higher prices, while his partner could never gain a penny after his immediate debt was discharged. He would suffer, on the contrary, in two ways: he would have to procure his future loans on less favorable terms, and the premium thus temporarily set on borrowing — the sudden ease with which his nominal dollar was made — would confirm him in unthrifty habits. More debts would thus be incurred, at the very time that their payment was made more difficult. The first effect of a free-coinage act would be to bestow large profits on all who have silver to sell. By the bill which a few months ago passed the Senate they would have been assured against any delay in realizing those profits, being allowed immediate payment for silver bul- lion in fresh issues of Treasury notes; the mint might then work slowly or swiftly — their gain will be equally secure. For some time this would be tantamount to making them a present of the difference between the market value of silver (now less than $1.00) and the par value of $1,293 per ounce; and this would continue as long as the silver dollars and the notes payable therein could be made to do the work now done by dollars based on gold. That work could be done permanently in the discharge of debts ; for a long time in payment of wages to the laborer, because it would take him many months of THE SILVER QUESTION. 393 high prices and hard times to learn that his dollar meant something different from what it used to mean ; for a con- siderable but shorter time in settling accounts with the farmer, who would be a little less slow to make the same discovery ; for less and less time in other kinds of busi- ness, according to varying intelligence and ability to combine. It is to this first effect that the silver men seem to be mainly looking. A second effect would not wait long upon the first. Our mints would be suddenly choked with silver bullion and foreign silver awaiting recoinage ; and the public resources would be strained by the difficulty of disposing of so vast a mass of metal. That some tendency of this kind would exist, it requires little more than plain com- mon-sense to see ; for it is quite evident that the amount of silver now for sale, here or abroad, at the rate of one twentieth or less, must be very much increased when a buyer willing and able to pay one sixteenth enters the market. Production would be stimulated, and the market would be flooded. It is often denied that European gov- ernments would be disposed to sell us their silver coins at one sixteenth of gold when they pass such coins off at home for a higher price : one to fifteen and a half. I should not dare to trust them, knowing that the only way in which they are able to make silver coins pass at the 1 5^ rate is by suspending the coinage, and jealously hoarding up all silver beyond the limited amount that the people must have for small change. Those governments could not keep their gold in the country if they were willing to let out their whole stock of silver coins at 1 to 15^-; they would be glad indeed to save themselves an embarrass- ment by throwing it on us, and to sell us many millions' worth of silver on terms so favorable. The position of the governments that hold a surplus of silver is not unlike 394 ECONOMIC AND INDUSTRIAL DELUSIONS. that of the capitalist who has power to pass every sheet of paper in his desk at many thousand times its value, by writing a few words on it ; who is nevertheless glad to sell that paper, blank, at the smallest advance on its cost price. He can easily replace the paper he sells, and so can they replace their silver. I admit, however, that this state of things could not long continue unchanged. As the second effect grew out of the first, it would lead to and be checked by the one next in order. The third effect would be to depreciate the purchasing power of the dollar in about the ratio that the value of a silver ounce now holds to $1,293, making it worth less than are eighty cents at present. This change would be known as an increase in prices. Though all prices must sooner or later be raised, to correspond with the depreciated unit of value, I have shown that the move- ment would not be simultaneous ; it would start among the wealthy and educated dealers who have power and experience in concerted action, and would last reach the poor, uncontriving, and uninstructed day-laborer. When the artisan at the manufacturing centre, the farmer, and finally the toiler in his fields, became at last able to make good their claim to an equal nominal increase or real res- titution in the sums paid to them, the adjustment would be complete. Silver, by that time the unit of value, would have little or no more than its present purchasing power, and the mine owner could realize from the necessity or credulity of his fellow-citizens little or no more than his present gains. His great season of prosperity would be meanwhile, before the adjustment could be completed ; and would be paid for, as I have plainly pointed out, chiefly by the " unlettered hind " and manual laborer. In explanation of my confidence that unlimited coin- age of silver would give it no appreciable permanent in- THE SILVER QUESTION. 39$ crease of purchasing power, measured either by gold or by other commodities, I may refer to the table given in a preceding paper, where our sixty years of attempted bi- metallism, 1793-1853, were divided in six periods, to show the progressive practical demonetization of one metal in which such attempts must result. Our legal coinage ratio was entirely without influence on the commercial ratio between the two metals, for the latter rose through the mean values 15.53, ^-S^, 15.80, during the three periods while we were trying to keep it at 15, and fluctuated through 15.75, 15.86, and 15.58 during the three while our laws would have made it 15.99. These figures show nothing of that effect of bringing the commercial ratio up or down to the legal, on the pretence of which the claim of the free-coinage advocates to the name of " bi-metallist " is essentially based ; and there is thus nothing in our experience to suggest a conclusion different from the one I have drawn, that any present change in our standard of values must be quite without effect on the price of gold as compared with silver. The coincidence of the Mint Act of 1873, which cut off the unlimited legal-tender feature from a dollar coined always in very small quanti- ties and at that time exported as fast as coined, with a fall in the gold price of silver, is about the only fact that might suggest a different conclusion ; but that has been already sufficiently explained. The next effect would inevitably be the complete dis- appearance of gold from the circulation. Gold is never to be had when inferior money will go just as far; whether the substitute be dubious paper or overvalued metal. Its disappearance under our unlimited coinage of silver at one fifteenth before 1834 has already been remarked. The tables of the Mint Reports do but scanty justice to the effect as felt outside, however, for we are told that as 396 ECONOMIC AND INDUSTRIAL DELUSIONS. early as " in 1822 not a single American gold coin was in circulation in the United States, though $6,000,000 had been coined at the mint." As to another effect, unfortunately only too possible, that of a severe financial crisis to follow such a tampering with credit, it is worth while to quote from a striking article on " The American Silver Bubble," by the distin- guished English economist, Mr. Robert Giffen. A clearer view of affairs in any country is often to be had from out- side the country, just as the movements of an army are better understood by those who have the advantage of distance and are not moving with it ; and Mr. Giffen's position at home is such that the views he takes of our situation are probably those which will be generally taken at the world's greatest business centre. The writer cites a remark of the late Mr. Bagehot, that our country is the theatre where the result of economic experiments, or rather illustrations of the truth of elemen- tary economic principles, can best be studied on a large scale ; and he finds a verification of it in the case of our recent financial legislation. He then describes our half- dozen kinds of " substitutionary or representative " cur- rency, since we first fancied that we gave up trying " to have a complete monometallic system "; for in his view, " although this intention has been partially nullified by legislation of a different kind in 1878, on resuming specie payment, and since, at the instigation of the abundant money party, yet gold in fact retains its pre-eminence in the United States system." This conclusion, that gold is still our standard, and our only standard, and that it can only cease to be such by ceasing altogether to be money, has already been made sufficiently familiar to readers of these pages. Our six kinds of substitute currency all depend for their value on the gold dollar of 25.8 grains THE SILVER QUESTION. 397 and the credit of the government. The difference among them is in the kind of security given for the perform- ance of an identical promise to pay a gold dollar ; the greenback, for instance, has behind it a special deposit of $100,000,000 in specie to meet all demands ; the gold cer- tificate a deposit of the total amount outstanding ; the silver dollar (in addition to its intrinsic value) the force of laws which make it receivable at par with gold for all dues to the government, etc. But is not the dependence of the holder, in every one of these cases, simply on the good faith of the national government ? By recourse to so various and involved ways of enlisting and securing that good faith, do we pledge it more firmly in any case ? No wonder our contrivance of half a dozen devices for expressing precisely the same thing is characterized as "wastefulness " and perverted ingenuity. It would be interesting to quote from Mr. Giffen at greater length, but there is only room for a few extracts in which he shows the want of confidence in the solidity of our financial structure, with which our silver vagaries are now inspiring the cautious Briton : " By departing from the simplicity and perfection of a single standard in the vain hope of increasing ' money,' as it is thought, and so raising prices, which they think can be done by making gold and silver standard — a thing that is impossible — or by multiplying representative and small-change currency only, which has little or no effect on prices, the people of the United States are running the most serious risks of financial disaster. The moment the present expedients to keep all the substitu- tionary currency on a level with gold cease to be effective, and this currency is pressed upon the market in excess, gold will cease to be standard ; the gold in the United States will be either hoarded or exported, or used at a premium ; and silver will fast become the standard money. Existing creditors will receive in consequence less than they contracted for ; many contracts will be disturbed ; and in circumstances easily con- ceivable there will certainly be panic. . . . The return 398 ECONOMIC AND INDUSTRIAL DELUSIONS. to specie payments in this country after the inconvertible paper at the beginning of the century was a most painful process, and the great panic of 1825 incidentally arose out of it. . . . To this sort of evil the United States, having got a good standard, voluntarily exposes itself in deference to the fanatics of bi-metallism, stimulated by the private interests of mine owners who have silver to sell. . . . The crisis may possibly come before long. It is only a question of a short time when the United States will be face to face once more with the problem of surplus silver. . . . Another fact which points in the direction of an early crisis is the pros- pect of a diminution of the annual surplus of revenue over expenditure, which has hitherto enabled the United States Government to act so powerfully on the money market. . . . It is evident then, that the situation in the United States under the new regime must be extremely complex and difficult." Commercial crises do not come so often as they are predicted ; and it is rare that they come in the manner expected, for their very prediction tends to ward them off. Secretary McCulloch began to prepare the country for a panic as soon as the Civil War closed, and was look- ing out for it as long as he continued at the head of the Treasury ; and yet he ingenuously confesses that when it did arrive in 1873 it surprised him as much as any one. It is altogether possible, therefore, that even though gold payments should be suspended in this country, in conse- quence of the clamor of shortsighted men for a " re- adjustment " of their debts and their impending realization that they can obtain no such readjustment as long as gold is accepted as a standard of value, there might be no such period of general distress as we had in 1857 or 1 %7Z- But none the less is it madness to incur the risk ; madness to neglect the lessons which experience, both in our own and in other countries, has for us. We should not so often have to serve as a theatre for the illustration of economic truth to other lands, if we paid closer attention to the exhibitions that they have made for our benefit, or better THE SILVER QUESTION. 399 remembered the truths that we ourselves have exemplified in the past. SILVER AND DEMOCRACY. This discussion has reached a greater length than was at first intended for it, but none can claim that its subject is lacking in importance or in timeliness. Few- questions are more constantly arising in our national legislation, few receive more attention from public men, and yet few more obstinately elude a satisfactory settlement, than that of the silver dollar. The Coinage Act of 1878, as we have seen, satisfied nobody, and yet no change in it was possible for twelve years because no acceptable substitute was proposed ; amid universal agreement that the act needed amendment, there was no agreement what amend- ment it needed. The measure which, through many vicissitudes, pushed its way to enactment in July, 1890, is destined to be little more fortunate. Notwithstanding the complacency with which the Republican press affects to regard it, the party is plainly at odds on the subject ; while disapprobation among the Democrats is universal. Manifestly, then, the silver question is yet before the country for settlement. When the Democratic party comes into its own again, it ought to hold clear views upon this question, and have the power as well as the will to turn them to good purpose. What attitude, with regard to the coinage, ought to be taken by the Democrats? What attitude .is ,<*niqsjt truly Democratic ? There should be no hesitancy in replying ; the one which involves least interference by the, govern- ment and the widest liberty of the citizen,. It is the duty of the government to enforce contracts, ( and 'this/ obliga- tion extends no further than z to. se'£ that whenever a "dollar" is promised, the same value shall'be paid— un- 400 ECONOMIC AND INDUSTRIAL DELUSIONS. less public interests require otherwise. The powers of the government in coining money are granted it for the purpose of facilitating the fulfilment of such contracts and for no other purpose. The party now dominant has gravely declared it " the policy of the United States to maintain a parity between gold and silver on the present legal ratio," and certainly the government has been called upon to make some powerful efforts toward that end ; but its power over values has never gone beyond its own coinage — uncoined silver, in contempt of governmental acts and policies, regulating its price strictly according to supply and demand. Apart from its proved futility, this policy is fundamentally unsound according to the Demo- cratic view. Whatever a paternal government may take upon itself to maintain, no truly sound or free government will assume to declare that so much of one valuable shall be exchanged for so much of another. The whole con- trivance of sumptuary laws, along with which regulations of that kind must be classed, is discredited in our country; not only because it is an infringement of liberty, but be- cause the folly of it has been proved by experience here and in other lands. Is it not in strict accordance with the view of the func- tions belonging to government always held by Democrats, to look on any attempt to fix a standard of values as alto- gether out of the sphere of legislation ? The fact that the country acknowledges the gold standard, that a dollar really means some definite quantity of pure gold, but no definite quantity of any other substance, is not due to legislation. ' Instead of the supposed tricks of a "demon- etizing " act,, surreptitiously passed to increase the ill- gotten gains of; rich men, the matter was determined by the needs' of our eontmerce. As business transactions multiplied, and largejr Values had to be transported in TffE SILVER QUESTION. 40 1 settling accounts, economy in the transportation had to be considered ; and the substance which gave more value in the same bulk and weight was necessarily preferred. Such is the true explanation and the only explanation ; and it has escaped discovery by statesmen intent upon unravelling some deep-laid plot or cunning hocus-pocus, probably because of its very simplicity. The reasons for the persuasion that this is a gold-standard country in common with the great commercial nations generally, and not a silver-standard country such as Mexico or China, need not again be detailed ; but it must be acknowledged that they owe their force to the volume of our commerce. Were our commercial transactions confined within Mexi- can or Chinese limits, the Mexican or Chinese standard of values might suffice us. Nor is this decision of imperative business interests one which the government is called upon to review or to reverse. This statement of Democratic doctrine, although its strict orthodoxy admits no question whatever, is un- acceptable to many faithful Democrats. There are those who cherish the " iridescent dream " that it is possible to have two standards at the same time, without throwing upon the government which should undertake to main- tain them a burden of expense equal to that of prose- cuting a mighty war. It is only necessary to remember that the circulation of two metals in unlimited quantities, at par on a fixed ratio, is something that has never actu- ally been attained, but something whose successful accom- plishment would require the maintenance in the Treasury of a sufficient supply of one metal to purchase all that could be brought thither of the other, from the wide world — to realize that the endeavor would be certain to cost far more than it was worth. Is not national economy truest Democracy? 402 ECONOMIC AND INDUSTRIAL DELUSIONS. There are others who contend that the equal recogni- tion by our laws of the silver dollar and gold coins, at the suspension of specie payments, was or should have been of itself sufficient to put the two on the same foot- ing when specie was reinstated ; so that the debtor be- came entitled to an option, in which coin he should pay. It is unquestionable that most of the Democratic support for schemes of free-silver coinage is obtained on some such statement of the case as this. Yet the answer is an easy one. No advantage can possibly come from pay- ing one's debts in silver, so long as the only silver money to be had represents gold value. If the value of the silver dollar is going to depend entirely on that of gold, that of the metal it contains not entering into the cal- culation, there is plainly no use in having a silver dollar at all, and we should represent the gold dollar in more convenient shape. If, on the other hand, we give the debtor the advantage of paying only the face value of the silver dollar, the gold dollar ceases to be currency ; for no possessor of such a dollar will put it to a use in which it brings him less than its value. The result toward which those who would provide an easier way of paying debts are really looking, therefore, is the single silver standard. The question is before us, not to be disguised or evaded ; shall our standard of values be gold or silver ? On this question, if our Demo- cratic advocates of free coinage could see that it and no other was really involved, there could be no reasonable doubt of the position of the party. Whatever leanings Democrats may have shown toward that impartial treat- ment of the two metals whose possibility is found rather in the realm of fancy than in that of actuality, none has maintained that silver is a better standard than gold, when the two are incompatible. THE SILVER QUESTION. 403 Another reason, it must be truthfully confessed, why many good and able men have suffered themselves to be misled on the silver question, is the shrewdness with which the mining interest has always played its part in the national legislature. By pretending in the first place, to a consuming zeal for free coinage of the white metal, it manages to enlist for a movement to that end a large Democratic as well as Republican support. Here falls the curtain on the first act of its little play — so success- fully performed in 1878 as to encourage a repetition on a grander scale after a twelve years' interlude. The second act discloses some very interesting consternation among the more conservative heads in Congress, over the danger threatening the coinage system, and a decision to avert that danger by a " liberal concession to silver." In the final act the mining interests are granted their heart's desire, a law by which the government is forced to con- tribute to their gains by a compulsory purchase of a large part of their product ; all the actors retire in high satisfaction, and nobody suffers except the swindled pub- lic, at whose cost the schemers are rewarded. The pretty feature about the play is that nobody seems to suspect, when the star performers come so ardently and emphati- cally to the front with their demand for free coinage, what they are actually after ; that is left to appear in the denouement. Will the Democrats whose unwitting aid has more than once been used to advance the plans of a bold and con- scienceless silver lobby, ever again consent to serve as cat's paw ? I see their eyes opening ; I trust and have faith to believe that they have appeared in that role for the last time. Even Mr. Bland, the acknowleged leader among them, confesses to a disappointment at the work- ing of the act of 1878, with which — in spite of the fact 404 ECONOMIC AND INDUSTRIAL DELUSIONS. that it was essentially the work of the Republican Alli- son — he is generally complimented by the association of his name. He has given us to understand that' were it to be done over, he would not again become responsible for a measure from which the mine-owners alone could draw benefit ; and he is as ready as any one to recognize the true tendency of the act passed by the Republicans last July. Can he not take one short step farther, and agree that it is forever hopeless for the party to make any capital, or to accomplish any useful work by trying to outbid the Republicans for the support of the silver mining ring ? A few years ago there were Democrats who still clung to protection, and thought it in the power of the party to soften the opposition of its beneficiaries by dealing gently with that mighty abuse. The futility of such counsels has been amply demon- strated ; and a like demonstration awaits any Democratic courtship of the beneficiaries of Congressional silver deals. They know too well that between their interests and our principles no adjustment is possible. Who is blind to the fact that there are no firmer Republicans than they — none more ready to vote for all the schemes of the Protectionist, for every device that will build up the interests of a few capitalists at the expense of the people ? Who deludes himself with the fancy that the Republicans knew not whom they were receiving when they admitted the " rotten-borough " States ? The owners of silver mines are truly, as Mr. Giffen recently assured us, the " gainers by the American silver bubble. They are even better off than if they had got unlimited coinage of silver, which was so very near being carried." Will all good Democrats remember, that by any possible legislation in behalf of silver, no others can be permanent gainers ? That their gains must be paid THE SILVER QUESTION. 405 by our losses, the heaviest burdens falling on the weakest shoulders? That private favoritism and Democratic doctrine are hopelessly irreconcilable — forever in mortal conflict ? DEVICES FOR INCREASING THE CIRCULATION OF SILVER. Associated with the free-coinage scheme which has so long occupied our attention, are a few others which deserve notice. These have in view the same end, of bringing more of our large annual silver production into use as money, but undertake to attain it without degrad- ing our standard of values and driving gold to a premium. Two of these have already been carried into effect by Republican enactment ; one of them by Mr. Allison's amendment to the " Bland Bill" in 1878, the other by the caucus bill which became law in 1890. The effects of the first have already been examined ; those to be ex- pected from the second may be readily inferred from a brief consideration of its character. It increases the silver circulation only in a representative form — coins being re- placed by Treasury notes. It has three conspicuous traits : 1. Burdening the national Treasury with the care of a large quantity of silver bullion for which it can find no practical use. There can be no demand for the metal as coin, so long as none of the coin can be had except by giving gold value for it ; and any sale of it by the government would obviously defeat the second aim of the act. 2. Increasing the price of the metal and the profits of those who own silver mines. This effect naturally follows the creation of an artificial demand. The government has entered into a " corner " in which it throws all the risk and cost on the taxpayers who supply it the means, and hands over to the mine-owners all the profit. That 23 406 ECONOMIC AND INDUSTRIAL DELUSIONS. is pleasant for the mining interest, but when one thinks of the higher cost set by legislation upon the table-ware and watch cases, and other articles of wide but less uni- versal use, little that is better than vulgar highway rob- bery can be seen in it. Beautifully appropriate it is, that the entire responsibility for the passage of a law despoil- ing the great body of our citizens for the benefit of a favored class should rest on the Republican party. 3. Inflating the currency, by an addition analogous to the French assignats of a century ago and to the Argen- tine cedulas of our own day. Although without the most dangerous features of those experiments in finance — issue by the government in unlimited quantities, and no pro- vision for redemption — the new Treasury notes are a step in the same fatal direction. They steadily increase by large monthly instalments, so that their accumulation is certain after a time to embarrass our Treasury, which must either let them depreciate to a silver basis and carry down with them its whole credit, or must put them on a gold basis at some such cost in financial stringency as was experienced in redeeming our greenbacks after the close of the civil war. To hand down to another generation, which will assuredly have burdens enough of its own to bear, the obligations incurred by the present generation, is pardonable when the national safety is involved, as in the civil war, but is a cowardly evasion when the nation is not in danger, and despicable trickery when the stress is only that of party need. Like the assignats and the cedulas, the new notes have value behind them; unlike them, they are not issued in enormous excess of that value; but the silver bullion on which they are issued cannot be used in any way for redeeming them without sacrificing the main purpose of the act — to increase the price of silver by " cornering " it. THE SILVER QUESTION. 407 So much for the devices made into laws by Republi- can legislation. Their bad character can hardly be in need of further exposition. Another plan, distinguished from these by containing no scheme for the gratuitous enrichment of any " industry," is for that reason less at- tractive to the Republican mind, and finds its chief sup- port among Democrats. This proposes the " full weight dollar," a dollar to be coined equally with gold as un- limited legal-tender, just as in the other silver schemes, but differing essentially from other proposed dollars in its weight, which is to be fixed by the present market price of silver in terms of gold ; now about one to twenty, instead of one to sixteen. This new silver dollar, freely coined for unlimited legal-tender purposes, would there- fore weigh not far from 500 grains, in place of the 4I2-J prescribed by Bland and Allison. There would be many points of interest in this plan, if it were a practicable one — if there were a real prospect of its enactment. First, unless the act carrying it into effect bound the government, or made it the duty of some strong corporation, to maintain the decreed ratio of value between gold and silver, the plan would not give us two standards, however it might appear to do so while the price of silver remained unchanged in the markets of the world. As soon as silver became dearer or cheaper, prices would base themselves on gold alone or silver alone, and the standard would thus remain until changing conditions of production brought another overturn; we should have either the coinage system that prevailed with us before 1834, or that between 1834 and 1853 — not bi-metallism. Second, unless the price of silver should rise, so as to assure us the gold standard, our unit of values would be fluctuating and unsteady — as reckoned in the currency of the nations with which we have our prin- 408 ECONOMIC AND INDUSTRIAL DELUSIONS. cipal commercial dealings. It is worth while to stop and explain, that I do not ascribe to gold any greater in- herent, intrinsic fixity of value than belongs to silver, or to any other commodity ; I am merely calling attention to the inconvenience of a standard of values that holds no steady relation to that recognized in the countries with which we trade. Third, the fact that when the two metals pull apart, as they inevitably must, the currency of the country will be brought down to one of them alone, is sufficient to assure us that this device could not bring about the desired increase in the circulating medium. Just as the fullest employment of labor is provided by its division among different pursuits, as all experience has proved, so it has equally proved that the fullest use of gold and silver as money is provided by giving them different parts to perform — one as full legal-tender, the other as subsidiary. I can freely admit that the " full- weight-dollar " project is altogether free from the graver objections made against such free-silver bills as those that have lately passed the Senate, for there would be nothing dishonorable in paying public and private debts with the proposed dollars ; and yet I am unable to commend the project as prudent or appropriate. The objections to it are those which must attend every possible plan for making silver full legal-tender in this country, except by concert with other commercial nations. But in admitting that the free coinage of a dollar whose real value is equal to its professed value would swindle no one, and would pay no one a bounty at the public cost, I have stated precisely the thing that will prove fatal to the whole plan. To the silver man, those two objects are vital. Were it out of his power to attain them, the restoration of silver to supremacy in our coinage, for which he now so earnestly appeals to us, would become THE SILVER QUESTION. 409 to him a matter of indifference. " Free coinage " must do those two things, or it will not be advocated. The play would be " Hamlet without the title-r61e," and would be taken off the boards after the first night. One more plan remains for examination. Since the " natural right " of the citizen to the good offices of his government in assaying and weighing out pieces of metal, and stamping them with some name indicating value, is the same in the case of silver — or of copper or pewter or aluminum, it might be added — as in that of gold, the question has sometimes been suggested : Why not grant free and unlimited coinage of silver, as desired by pro- ducers of that metal, with the simple proviso that the new coins shall be legal tender only where they have been mentioned in the contract, and shall not be used to im- pair the obligation of existing contracts ? We could have " dollars " denoting different values, applicable to different uses, just as we have "troy" and "avoirdu- pois" pounds and ounces. Mr. Atkinson has put this question, very forcibly and concisely, in a recent Forum. On general principles, the suggestion may be considered a good one. Though the " natural right " is not so essen- tial as to transcend public safety and convenience, it pught not to be overlooked. There is no reason why those who may prefer the silver standard should not be allowed the fullest opportunity to use it, if they are pre- vented from using it in violation of present obligations. Unfortunately, however, the law limiting the legal- tender power of such free-coined dollars to silver con- tracts, however clear its language might be, would not in practice be sufficient to prevent their use in violation of obligations. Eighteen years ago this government began to coin a " trade dollar," which was at first legal tender in payments of five dollars or less, but was in 1876 de 4IO ECONOMIC AND INDUSTRIAL DELUSIONS. prived of that limited power, so that nobody was there- after under obligation to receive it on any terms for any debt. Nevertheless, as we all remember, millions of those coins came into circulation, passing as dollars among the poor and uninstructed, though rated at ninety cents, more or less, among those who were shrewd enough to be informed as to their real status. They came from the government, and had the name Dollar upon them ; they were thus made, for thousands of our citizens, as good as any dollar. I heard again and again from intelligent people, while these coins were in circulation, bitter com- plaints against the " repudiation " practised by our government in refusing to accept them for something they were never meant to be, a full legal-tender dollar. It was in response to these complaints, not to any real obligation upon the government, that Congress a few years ago made provision for their redemption. The lesson of this experience is easy indeed to read. The coinage of the " trade-dollar " was a mistake, by which the poorer people suffered. Like all other experiments upon the coinage that have ever been made, in this country and in others, it served only to show that any measure which casts a doubt upon the standard of value is ' oppressive to the poor man by affording those who have him at their mercy additional opportunities for cheating him. Mr. Atkinson will not need to be taught this lesson, for the object of his suggestion was very plainly to point a moral rather than to recommend a measure of practical legislation. If noticed at all by the silver men, his paper will clearly bring out the fact that what they desire of a silver dollar is less the honest payment of future contracts based on silver, than the dishonest pay- ment of present contracts based on something else ; and with that view he evidently wrote it. If, in despair of THE SILVER QUESION. 41 1 their own unlimited legal-tender silver scheme, they should take up with any such project as this, it would only be for the purpose of making what they could by forcing other dollars on people at a valuation which belonged to gold dollars. Some profit could be realized by the mine-owners in that way, doubtless, at the expense of the needy and ignorant ; but no mortgage-holder could be so beguiled. The scheme would have nothing in it for any who owe money on land. Does the prospect appear discouraging, then, for any increase in the circulation of silver by legislative act? Can no measure be devised, which will accomplish this end by altogether honorable means, and be at the same time able to command votes enough to pass it ? What can Congress do for silver, any way ? I cannot see that the great mass of the people are interested in having Congress do anything whatever for silver. The people would be permanently better off if Congress should undo the ill-judged things it has already done. It has been effectually disproved that the amount of money — even the amount of specie — in circulation has any important influence on the well-being of the country, at ordinary times ; for the Treasury reports have shown considerable changes in this amount when there was no change in the general condition. The quality of our currency, not the quantity, is what most urgently calls for wise regulation. It is quality, not quantity, which most concerns the people. Let the government constantly, scrupulously, jealously preserve that — let it hold as its first and highest duty to see that every coin or bill which it permits its citizens to call a dollar, is always and everywhere as good as the best dollar, and the volume of the circulation will adjust itself. There will be enough of credit-currency to satisfy all needs, when credit is assured the right kind of 412 ECONOMIC AND INDUSTRIAL DELUSIONS. basis. What architect would thank the mason for build- ing his foundation a foot or two higher, if it were made less steady and solid by the added material ? In regarding the amount of money in circulation as of minor importance to the people, at ordinary times, I am by no means blind to the fact that there are times when the deficiency of good money gives rise to sore distress. Such a deficiency is the very essence of the commercial crisis ; next to want of confidence, want of specie is the best remembered feature of the terrible years 1837, 1857, 1873. But it cannot be too strenuously maintained that the preventive for this monetary stringency is not increased activity of the mints ; coining money, and putting it where people most want it, are widely different things. Panics have not been preceded by reductions in the coin- age, and they have generally been preceded by increases in it. The total amount coined at our mints in the seven years 1830 to 1836 was about equal to that in the whole thirty-seven years between the establishment of our first mint and 1830. That in the seven years 1850 to 1856, in consequence of the California discoveries, was nearly double that in the whole fifty-seven years preceding 1850; being 320 million dollars to 190 million. The volume of our coinage fell off greatly after suspension of specie payments ; but it had been slowly increasing for some years before 1873, and was larger that year than any since 1861. Since the panic did not set in until near the end of the year 1873, there is no doubt that it came in the very face of a marked revival of activity in our mints. I grant that an ample coin reserve is a superb balance- wheel in time of commercial distress, but I find in that fact no reason whatever for increased coinage by govern- ment. When the speculative impulses of the people are preparing the way for a panic, money so distributed can THE SILVER QUESTION. 413 never be a safeguard. The easier it comes, the easiet it is spent ; the cautionary coin reserve is neglected, and the specie increase is found to have disappeared when it is most needed. The interest of the laborer, in having no money in circulation but the very best money, is one with that of the capitalist — only keener, in that the capitalist has means of protection from depreciated currency that he has not. As in other instances, those here in opposition to the laborer are not the employers of labor with whom he co-operates, but the speculators who thrive by public disorders and the sharpers who grow rich by fleecing him. No betrayal of confidence could be less pardonable, than seducing our laboring fellow-citizens into the movement for " cheap money." INDEX. Agricultural Implement Herald, In- dianapolis, answered, 337 Agricultural implements, affected by protected iron, 99 ; exporters of, embarrassed, 114, 315 ; the interest one with the farmer's, 253 ; at lower prices to foreign customers, 265, 315. 33°. 338, 348 ; cost (of a plow), 332, 333i 339, 34i I should be free, 332 Agriculture, see Farmer Aldrich, Nelson W., tin-plate predic- tions, 326 Alliance, Farmers', its activity, 286, 294 ; sub-treasury and land-loan schemes, 295 ; currency policy, 299, 357 ; serving the Protectionists, 302 Allison, see Bland Anglo-Saxon stock and industrial progress, 122 Argentine monetary mistakes, 299, 406. See also South American Armour & Co. and duty on hides, 283 Astronomy, disbelief in its teach- ings, 3 Atkinson, Edward, on iron and steel, 304, 308, 317 ; on cost of labor, 348 ; his plan for free coinage, 409 Australia, see New South Wales, Vic- toria Axes and saws protected, 108 B Bagehot, "Walter, quoted, 396 Balance of trade, cannot be kept favorable, 50 ; tariffs may make it adverse, 52 ; per inhabitant (table), 58 ; gradual unfavorable turns and sudden recoveries, 64 ; British, 65, 145, 258 ; in Protectionist teaching, 67, 254 ; test by coincidences, 68 ; by two-year intervals, 69 ; by groups of years, 73 ; law of disconnection, 76, 258 ; turns in i838-'40 and 1874-78, 77, 258 ; associated with crises, 85, 259 ; with independence, 156 ; unchanged by export taxation, 261 Barley, importations, 224 ; protected, 281 Bastiat, Frederic, his anti-sunlight petition, 193 Bi-metallism, see Coinage Blaine, James G., on panic of 1857, 86 ; refuted by McCulloch, 89 ; on reciprocity, 134 ; on labor, 163 ; on tariff and trusts, 176 ; exposed by Mills, 305 Bland, Richard P., leader of silver Democrats, 403 ; and W. B. Alli- son, their silver dollar, 361, 405, 407 Brazil, see South American British, rotten borough representation, 5 ; hatred of slavery, 6 ; subsidies to shipping, 9, 136, 344 ; desires and their significance, 10, 124, 158, 274 ; origin of our protective sys- tem, 41 ; war, its calamities, 42 ; expressly favored by our tariff, 52, 145, 274 ; incompleteness of statis- tics back of 1856, 56 ; commercial development (table), 60 ; export double our amount of merchandise, 63 ; balance of trade, 65, 145, 258; 4 J 5 416 IXDEX. prices of steel rails, 112, 273 ; real and fancied, contrasted, 126; in- difference to our concerns, 127, 133, 159 ; our chief commercial rivals, 136, 151 ; great maritime develop- ment, 139, 145, 161, 344 ; recovery after Crimean War, 144 ; weaker than we where protection is asked, 154 ; interdependence with us, 157 ; progress since 1846, 166, 260 ; its causes, 16S ; wages compared with ours, 173 ; poor, their distress, 174 ; emigration, 177 ; compared in in- dustrial opportunities, 178, 277 ; in- efficiency of laborers, 183, 347 ; large exports in 1815, 195 ; manu- facture of wood-screws, 221 ; invest- ments here, 258 ; demand for our agricultural products, 291 ; trade, how to increase it, 292 ; prices of iron and steel, 303, 309, 329 ; loss of supremacy in iron industry, 310, 317 ; production of tin plate, 319 ; gold standard, 360 Burke, Edmund, definition of party, 17 C Calhoun, John C, and tariff of 1833, 37 California, effects of gold discoveries, 76, 255, 257, 364, 412 ; rate of wages, 166 ; mining industries, 182 Carey, Henry C, advocate of protec- tion, 7 ; on tariffs and crises, 87 ; attacks the Atlantic Ocean, 130 Carpets, high duties on, 283, 290 Cernuschi, Henri, bi-metallist, 363, 366 Christian religion opposes war, 44, 47, 125 ; allied to commerce, 48 Clarke, Albert, letter and reply, 330 Clay, Henry, active part in tariff of x 833, 87 ; associated with protec- tive principle, 223 Cleveland, Grover, misrepresented in Republican platform, 22, 25 ; loss of New York vote in 1888, 24 ; ad- ministration contrasted with Fifty- first Congress, 35 ; advocacy of free wool, 201 ; on the proper function of government, 236 ; 1887 message, 315 ; opposes free coinage, 356 Coal, price advanced by tariff, 100 ; the mining industry, 175 ; failing British supply, 310 Cobden Club, in fiction and in fact, 127, 274 Coffee, prices, 289 ; and tea, why free, 134, 353 Coinage, acts of 1S78 and 1890 essen- tially bounties, 23g, 403, 405 ; so- called profits and real losses, 240; 1890 act suggests sub-treasuries, 295 ; change in 1834, 299, 370 ; double, not found on equal footing, 360 ; how possible, 361, 372, 401 ; in partnership with other countries, 363 ; defeated by free silver, 366, 372 ; effects of 1878 act, 367 ; change in 1853, 370; useful for purposes not monetary, 371 ; Mint Act of 1873, 373, 395 ; glut to fol- low free silver, 393 ; full-weight dollar, 407 ; and natural right, 409 ; and crises, 412. See also Gold, Silver Colbert's protective system, 242 Collins steamship line, 141 Commerce, see Balance, Exports, Free Trade, Imports, Reciprocity Confederates, why they lean to free trade, 11, 38, 278 ; received on equal terms as a necessity, 39 ; in Virginia, 40 Congress, Fifty-first, its extravagance, 35, 356 ; special acts, 36, 286. See also Coinage, Pensions, Tariff of 1890 Copper, advantages enjoyed by mine* owners, 100, 101 Corn, Indian, production and prices, 205 ; proportion of exports, 209, 287, 291 ; protected, 281 Cotton, its use to replace wool en- couraged by protective system, 102 ; its manufactures exportable, 136, 346 ; exports, 291 ; and wheat pay for imported tin-plate, 319, 322 Crisis, commercial, why connected with the tariff, 84, 259 ; and an ad- verse trade-balance, 85 ; differs from hard times, 97 ; might come from silver inflation, 397 ; and coinage, 412 ; — of ;8i8, under increased duties, 88 ; — of 1S37, and tariffs of INDEX. 417 1828 and 1833, 87, 259 ; McCulloch on its sources, 89 ; on its effects, 94 ; —of 1857, its causes, 86, 88, 95, 2 59 i — °f !873, its severity, 87 ; Mc- Culloch's testimony, 96, 398 Cronemeyer, W. C, on tin-plate pro- tection, 326 Cullom, Shelby M., quoted, 168 Cunard steamship line, 146 Cutlery, duty increased, 288, 290 D Debtor class, temporary gains and final loss by debased currency, 376, 392 ; its claims not paramount, 379 Delusions, general nature, 1 ; feeble, 2 ; political, historical instances, 5 ; parallel with the protective, 6 ; their discussion negative, 121 ; their cure in experience, 246 ; their aid to silver schemes, 387 Democratic party, attitude toward protection, 23, 404 ; and free wool, 27 ; now unsectional, 32 ; best friend to the negro, 34 ; do. to public credit, 36 ; and sugar pro- duction, 134 ; policy borrowed, 294 ; papers and what they pub- lish, 349 ; addressed in silver papers, 35°. 399 ; imposed on by silver men, 403 ; and the full-weight dol- lar, 407 Denslow, Van Buren, advocate of pro- tection, 8 ; on American and foreign labor, 219 ; on protective and reve- . nue tariffs, 224 Dispatch, York, answered, 333 Drawbacks on imported raw materials, unsatisfactory, 328, 343 ; tell in favor of foreign purchasers, 338 Dry Goods Economist, investigation of woollen factories, 102 Dutton, Clarence E., paper on "Money Fallacies," 382 Duty, see Protection, Tariff Edmunds, George F., on prices of coffee, 289 Education, needed among British working men, 175 ; national aid to, 232 Electrical apparatus, and duty on cop- per, 101 Elliott, Ezekiel B. , population tables, 56 England, see British Exports, large in 1806 and 1807, 57 ; per inhabitant (table), 58 ; increas- ing since 1 850, 66 ; test by two-year intervals, 69 ; one year insufficient, 71 ; test by groups of years, 73; law of connection, 75, 261 ; mis- statements of law corrected, 78 ; examples under it, 79 ; of agricul- tural implements, 99, 114; kind sent to South America, 136 ; how apparently and how really paid for, 256 ; their taxation would not alter trade balance, 261 ; chief agricul- tural, 291 ; affected by tin-plate tax, 320 ; not helped by drawbacks, 328 ; of U. S. manufactures, 345. See also Balance Farmer, two effects of high duties, 10, 285, 309 ; how burdened by. tobacco tax, 28 ; his interest upheld by ex- Confederates, 39, 278 ; amused by reciprocity, 134 ; especially subject- ed to home-market appeal, 199, 214 ; his protection, 200, 280 ; when helped by market near by, 211, 266 ; competition threatening him, 218, 277 ; paying people for not competing, 220 ; how he does the opposite, 222, 315 ; addressed in open letters, 250, 286 ; considered in new tariff acts, 251, 280, 339 ; interest coincides with farm imple- ment maker, 253; present depres- sion, 279, 284 ; leading exports, 280 ; temptations under easy loans, 297 ; finally pays their cost, 298 and free coinage, 301, 359, 393 and tin-plate duty, 320 ; how plun- dered, 338. See also Alliance Fessenden, William P., decision on tin-plate tax, 326 Flax, its protection, 201 Foreign producers, their alleged pay- 4iS INDEX. ment of duties, 10, 224, 269, 288, 291 ; accessories and home consum- ers principals, 33 ; their protection at cost of our exporters, 114, 317 ; what they intend to do with prices, 194 ; must increase sales if they pay duties, 271 ; how they really suffer, 275. See also British, etc. Forum, E. Atkinson in, 409 Franklin, Benjamin, on war and peace, 46 Free trade, in Mills Bill, etc., 25 ; favored by Confederates, 38 ; allied to Christianity, 48 ; to be credited with our industrial progress, 115 ; its success here overwhelms protec- tionist maxims, 116; approved by other tests, 120 ; could not be bet- ter for England than for us, 126 ; British moderation in advancing it, 128 ; reciprocity a dilution of it, 131 ; how destructive to shipping interests, 1 39 ; does not equalize wages, 165 ; increases productive capacity of labor, 172 ; and con- stancy in prices, 210 ; and diversion of labor to farming, 215, 277 ; in theory and practice, 247 ; and free raw materials, 340 Freedom, requires free trade, 33, 54 ; transgressed by forcing citizens into involuntary partnership, no French, nobility before the Revolu- tion, 5, 34 ; solicitude over our com- mercial treaties, 133, 161 ; subsidies, 139; assignats, 299, 406; bi- metallic coinage, 360 Gazette, York, articles from, 333, 340, 356 George, Henry, on labor in coal dis- tricts, 174 ; on direct taxation, 229 German, trade with South America, 161 ; emigration, 177 ; call for pro- tection, 182 ; wages and efficiency, 183 ; coinage, 360, 375 Giffen, Robert, statistics of British progress, 166; on "the American Silver-Bubble," 396, 404 Gold, its exportation prohibited, 51 ; movements in foreign trade, 64 ; not exported by British, 65 ; effects of discoveries, 76, 255, 257, 364, 412 ; premium on, and census of 1870, 103 ; production in Victoria, 119; cheap here despite high wages, 187 ; production needs no encour- agement,. 238 ; our basis of values since 1834, 301, 368, 381,396,400 ; compared with silver as standard, 363, 400, 402, 408 ; demonetized by free silver, 369, 384, 395 ; coin- age debased in 1834, 370 ; disap- peared from coinage until 1834, 371, ' 395 j "commodity" value, 390. See also Money Government, its proper functions, 15, 236, 241, 399 ; regulation of cur- rency supply, 82, 381, 411 ; de- posits in State banks, 91 ; regula- tion of industries, 98, 188, 242 ; forcing citizens into business part- nerships, 1 10, 405 ; dependence on, 113 ; regulation of ocean commerce, 130 ; magic power, 162 ; giving employment, 219 ; needs import duties, 227 ; first need, 234 ; in the loan business, 295, 383 ; supported by labor, 298 : cannot give value, 357. 3 8 4 I credit the basis of all but gold currency, 368, 396 Graphical method, superior to tabular for illustration, 55 Great Britain, see British Greeley, Horace, advocate of protec- tion, 8 ; against transportation of agricultural products, 130 Grosvenor, William M. , on protection of iron and steel, 311 H Hamilton, Alexander, references to his report on manufactures, 105, 108, 155, 169, 215, 336, 350; his industrial aims, 242 Harbor and river improvements, 231 Hardware, New York, tin-plate cal- culation in, 326 Hawthorne, Nathaniel, on effects of government aid, 114 Hebrew influence on Protestant refor- mation, 233 Hides, why free of duty, 134, 283 INDEX. 419 Hill, David B. , ally of liquor interest, 24 Home market, a specimen quibble, 10, 211, 267 ; not built up by cut- ting off foreign markets, 151 ; its three uses, 199 ; insufficiency, 209, 294 ; laws needed to sustain it, 210, 267 ; taxes twenty to benefit one, 214, 266 ; obtained by protecting tin-plate, 320 Home Market Club, Boston, Mass., letter from secretary and reply, 330 ; second letter to, 340 Hyman, M. R., answered, 338 I Immigration, why it comes, 177 ; its amount, 218 Imports, of specie, 50, 173, 254 ; ex- cessive, 1806 to 1818, 57 ; pre- vented, 62 ; affected without affect- ing exports, 79 ; excesses affect tabular duty-rates, 85 ; of cheap goods, 192 ; of potatoes, 203 ; of agricultural products, 284 ; should be larger, 353. See also Balance, Tariff. Independence and protection, 155 Inman steamship line, 141 Interest, rate higher here, 153 ; affec- ted by government underbidding, 296 ; increased by debasing the currency, 378 Iron and steel, their protection de- pressing, 99, 312, 316, 336 ; expor- tation prevented, 137 ; in ocean vessels, 144 ; improvements since 1846, 152 ; varying effect of duties, 227 ; product in 1890, 304 ; excess of cost in U. S., 305 ; capital em- ployed in, 308 ; why prices have decreased, 310 ; our supremacy, 314 Iron ore, taxed, 100 ; exhaustion of European, 310 ; as raw material, 334 Italian subsidies, 139 ; emigration, 177 ; coinage, 360 J Jackson, Andrew, part in crisis of 1837. 88 Jasper, John, solar theories, 2 Jefferson, Thomas, and name " Re- publican," 36; platform in 1800, 48 K Kasson, John A., quoted, 189 L Labor, the laborer and his hire : quib- ble on duties, wages, and prices, 9, 180 ; on replacing home by foreign, 10, 80, 219 ; affecting cost of ships, 138, 144 ; wages here compared with British, 153, 173, 347; impor- tance of question, 163 ; courted by Protectionists, 164 ; condition in Great Britain, 166, 260 ; in New South Wales, 168 ; by the manufac- turer's testimony, 170 ; made effec- tive by free trade, 172 ; oppressed by trusts, 175 ; less costly at high daily wages, l8t, 318, 347 ; what kind needs protection, 188 ; how favored by machinery, 190 ; pauper competitors, 191 ; confined to agri- culture, 215, 277 ; displaced by actual not potential purchases, 218 ; under tariff of 1 890, 245 ; must pay every government bounty, 277, 298, 355 ; in Pennsylvania iron indus- tries, 313 ; on tin plate, 321, 326 ; wages in York, Pa., 343 ; suffers by depreciated money, 379, 392, 394, 413 Latin Union, coinage at 15^, 366, 375, 393 Lead ore, its protection, 282 Lincoln, Abraham, acknowledgment of his election, 37 ; appointments as head of the Treasury, 226 ; second inaugural quoted, 234 Liquors (alcoholic), influence on Presi- sidential vote in 1888, 24 ; cheap, fate of plank calling for, 30 ; pro- duce misery among laboring people, 175 Literary production, here discouraged, 113; defects of new copyright law, 194 Lodge, Henry C. , essay on ' ' The Co- lonial Spirit," 162 420 INDEX. Lotteries, their policy, log ; how their success might be increased, in Lumber, sometimes increased in price, ioo ; in shipbuilding, 144 ; admit- ted free by special acts, 272 ; in a plow, 334, 341 ; its manufactures exportable, 346 M Maish, Levi, quotes essay on ' ' Pro- tection and Agriculture," 250 Manufactures, and Republican party, 20 ; growth by the census, 103, 264 ; the interest united for protec- tion, 104 ; how diversified, 107, 350; change since 1846, 152; and independence, 155 ; of advantage to farmer, 211 ; need a home market, 215 ; how dependent on protection, 216 ; how exportable, 264, 345 ; compensating duties, 272 ; want cheaper raw materials, 331, 336, 340 ; what is raw material, 333, 339, 341. See also Cotton, Iron, Woollen McCulloch, Hugh, tariff attitude, 38 ; testimony on crises, 89 ; bi-metallist, 363 McKinley, William, use of British desire for trade, 10 ; prepares tariff plank of 1888, 21 ; on tariff and favorable balance, 67, 254 ; blow at England, 161 ; flies to relief of onions, 203 ; pretences of reductions on certain hardware, 221, 288 ; re- port on tariff bill, 251 ; campaign speech in 1888, 254, 270; sugar re- duction, 288 ; protection with inci- dental revenue, 318. See also Tariff of 1890 Medicines, quack, typical of delu- sions, 4 Merchant vessels, British, 9, 145 ; per inhabitant (table), 58 ; doctrine of stimulation, 135 ; reason for our decline, 138, 331, 336 ; decreases in 1811, '18, and '29, 139; facts shown in the chart, 143 ; two-year test insufficient, 147 ; test by un- equal periods, 149 ; coastwise ton- nage suffers worst, 150 Mexico, compared with New South Wales, 117 ; daily wages, 182 ; our duty on its lead ore, 282 ; silver standard, 360, 401. See also South American Miller, Warner, reports on tariff and agriculture, 202 Mills, Roger Q., his tariff bill, 25, 2 7> 354 i North American Review article, 304 Morrill, Justin S., see Tariff, war Money, effect of bringing it in, 50, 173, 254 ; Treasury tables show no imports or exports before 1821, 57 ; keeping it at home, 82 ; need for more of it, 83, 381, 411 ; replaced by credit in business, 366 ; quality, not quantity, essential, 366, 384, 411 ; our various kinds, 396 ; infla- tion of 1890, 406 ; scarcity and in- creased coinage, 412 N Negro, now best served by Democratic party, 34 ; used against the farmer, 278 New England, rate of wages, 166, 173, 182 ; origin of popular education, 233 New South Wales, compared with Mexico, 117; with Victoria, 119; may return to higher duties, 121 ; condition of laboring people, 168 ; immigration to, 177 New York State, carried by barter in 1888, 24 North American Review, tariff arti- cles, 89, 304 O Ohio, wool interest, 28, 339 ; vote in 1889 and 1890, 103 Onions, their protection, 202 Panic, see Crisis Party (political), its quality variable, 13; constitutional construction ques- tion, 15 ; Burke's definition, 17. See also Republican, etc. INDEX. 421 Paupers, diminishing in England, 167, 260 ; as laborers, 191, 318 Pennsylvania, election in 1890, 26 ; condition of miners, 174 ; statistics of iron industries, 313 ; other in- dustries affected, 316, number of sheep, 339 Pensions, to veterans, etc., 234; when truly honorable, 237 ; their cost, 355 Plow, its cost, 332, 333, 339, 341 Porter, Robert P., Census of 1890, 56 ; report on labor in Great Bri- tain, 174 Potatoes, dug with hoe, 189 ; effects of their protection, 203, 281 ; table of production, values, and imports, 206 Prices, and true value of money, 83, 173, 255, 394 ; before 1837, 92 ; after, 94 ; enhanced by trusts, 1 76, 206 ; reduced by labor-saving in- ventions, 191 ; foreign control and free trade, 194 ; in contracted mar- kets, 208 ; with taxed exports, 261 ; here and in Europe, 268 ; con- sidered in deciding who pays duties, 270, 288 ; — of iron and steel, 99, 100, 144, 304, 329 ; of coal and lumber, 100; of steel rails, ill, 273 ; of exported agricultural im- plements, 115, 265, 330, 338 ; of leading exports to Brazil, 136 ; of necessaries in England, 167 ; of cloth and gold reciprocal, 187 ; of wool, 200, 309, 339 ; of corn and wheat, 205, 287 ; of potatoes, 206 ; of silver, 240, 361, 375, 390, 395, 405 ; of tin plate, 319, 327 ; of plow materials, 332, 339, 341 Protection, parallel with slavery, 6 ; yet unconquered, 7 ; five elements of its case, 8 ; appeals to senti- ment, II ; taken up by Republican party, 19 ; alleged American, 22, 41 ; in the Northwest in 1888, 25 ; disasters following its abandon- ment, 26 ; Herbert Spencer's view, 33 ; prefers a part to the whole, 29, 34, 212 ; associated with prodi- gality, 35, 355 ; and Confederates, 40 ; associated with war, 46, 125 ; may make an adverse trade-balance, 52 ; depressing effect on industries using iron, 99, 312, 316 ; on all manufacturing for export, 101, 266, 345 ; on copper industries, 101 ; on woollen manufacture, 102 ; on manufactures generally (by census), 103, 264 ; why most manufacturers cry for it, 104, 265 ; industries be- come diversified without it, 108 ; analogies to lotteries, 109 ; on steel rails, Hi ; reversed for the literary industry, 113; its hierarchy of in- dustries, 126 ; must act reciprocally, if at all, 129, 157 ; the orthodox, 130 ; the new, 131 ; and subsidies, 135 ; effect on our shipping, 150 ; to newer industries, 152 ; supporta- ble only by strength, 154 ; and independence, 155 ; chains us to delusion, 162 ; its effects in Eng- land, 166 ; became a national policy about 1816, 170 ; diminishes value of money, 173 ; favors trusts, 175 ; and "pluck-me" stores, 178 ; the labor that needs it, 188 ; what its home market does, 199 ; on farm products, 200 ; little of our industry dependent on it, 216 ; and revenue incompatible, 223, 226 ; and silver, 239, 358, 387 ; permits higher prices to home customers, 2 °5. 3*5. 331 ! at expense of labor, 277 ; reinforced by Alliance, 302 ; said to lower prices, 309, 336 ; of foreigners at our expense, 317 ; with incidental revenue, 318 ; on tin- plate, 320 ; carries taxation beyond highest revenue point, 352 Quibbles, illustrated, 9 R Rails, steel, duties and prices, ill, 273 ; recent growth of the industry, 152 Reciprocity, theory of treaties, 131 ; alarm in Europe, 132 ; its new in- terpretation, 133 ; and the farmer, 290, 332 ; vs. home market, 294 RerorJ, Philadelphia, extract from 422 INDEX. letter in, 25 ; from editorial, 250 ; articles from, 251, 304, 318 Republican party, changed applica- tion of its liberal construction, 16 ; irrelevancy of its past services, 17, 253 ; its triumphs, IS ; when its mission terminated, 19 ; tariff ad- vocacy a perversion, 20 ; moral degeneracy shown in last national platform, 21 ; carried Indiana and New York in 1888, 24; would re- duce revenue, 28 ; its whiskey plank retracted, 30 ; now opposed by the true Republicans, 31, 38 ; cultivates sectional hatred, 32 ; use of the negro, 34, 278 ; foe to national credit, 35 ; in Virginia, 40 ; advances on Democratic lines, 294 ; on government and silver, 400 ; deals with silver men, 404, 406 River and harbor improvements, 231 Rusk, Jeremiah M. , letter to farmers, 251, 283 Sandy Spring, Maryland, instance under home markets, 212 Saturday Globe, New York, articles from, 158, 351, 399 Saws and axes protected, 108 Selfishness, two kinds, 1 1 Shearman, Thomas G., on high-paid competitors, 183 Sheep, number in great Northern States, 28 ; in Pennsylvania, 339 Silver, demands of mine owners, 237, 357. 39°. 39 1 I now tne dollar cir- culates, 240 ; made supreme by Alliance, 299 ; standard in Mexico, etc. , 360 ; legislation to stimulate its production, 362, 393 ; compared to gold as measure of values, 363, 400, 402, 408 ; advantage Europe would take, 365 ; free coinage de- feats bi-metallism, 366, 372 ; cer- tificates, status of, 367 ; not yet purchased abroad, 368 ; our earliest unit, 370, 389 ; debased in 1853, 370 ; less coined after 1834, 371 ; legal tender law changed in 1873, 373. 385 ! more dollars in 1869, 374 ; the trade-dollar, 374, 409 ; increased production, i87o-'73, 374, 386; increased coinage in 1873, 380, 385 ; would drive out gold, 384, 395 ; how kept at par in Europe, 393 Slavery, type of political delusion, 5 Sloane, William M., on pensions and socialism, 234 Smith, Adam, on restriction of gold exportation, 51 Soldier, see Pensions South American republics, exports thither repressed by protection, 52 ; Tribune's investigations, 53 ; sub- sidized lines to, 81, 136, 141 ; del- egation to Washington conference, 132; our commerce indirect, 138; trade in British hands, 161 ; growth of wheat, 222, 315 ; demand for farm products, 291. Spanish, prohibition of gold export, 51 ; subsidies, 139 Specie, see Gold, Money, Silver Spencer, Herbert, on protective policy, 33 Steel, see Iron, Rails Subsidies to shipping; examples of assumptions, 9, 81, 135 ; their in- adequacy, 136, 231, 344 ; advocated by Secretary Windom, 137 ; our experience, 141, 344; British pay- ments so called, 146, 344 ; better than nothing, 231, 315 Sugar, duty cut down in 1890, 61, 134, 288 ; reciprocity with countries pro- ducing it, 293 Sumner, William G., on buying off competition, 220 Swank, James M., report on iron and steel, 311, 313 Swiss cotton mills, their efficiency, 183 T Tableware, increased duty, 290 Tammany Hall, its objects, 40 Tariff, high, and high wages, 9, 180; who pays it, 10, 224, 269, 288, 291, 350 ; high, on farm and other pro- ducts, 10, 285, 309 ; varying state- ments of Treasury Department, 56 ; and large importations, 57, 85 ; two INDEX. 423 ways of reckoning compared, 62 ; and increase in exports since 1850, 66 ; high, and favorable balance, 67, 76, 256 ; test by coincidences, 68 ; by two-year intervals, 69 ; one year insufficient, 71 ; test by groups of years, 73 ; and export law, 75 ; misstatements of law corrected, 78 ; examples under it, 79 ; assumed connection with crises, 84, 259; rates on agricultural - implement raw materials, 100 ; effect on manu- factures, by census, 103 ; high in Mexico, 117; low in New South Wales, 118 ; rather high in Victoria, 119 ; effect on merchant-marine ownership, 147, 150 ; changes from revenue to protective, 227 ; specific and ad valorem, 228 ; how best mitigated, 229 ; advocated for dou- ble purpose, 230 ; unjust because partial, 241 ; how planned and car- ried, 243, 273 ; mischiefs of ideal- ization, 248 ; brings but limited revenue, 352 ; — of 1828 and crisis of 1837, 87, 259; —of 1833, how passed, 87 ; of 1833 and '46, sup- posed effect on balance, 76 ; of 1833, '72, and '90, increased free imports, 61 ; — of 1846, chiefly ad valorem, 86 ; and increase of ship- ping, 140, 148 ; — of 1857, tax on iron, 145 ; — war, led to party con- troversy, 19 ; voted by low-tariff men, 226 ; — of 1890, effects, 75, 287, 339 ; motive of wool increase, 102 ; reciprocity provision, 134, 290 ; how received in Europe, 160 ; raises duty on potatoes, 203 ; used by Philadel- phia carpet dealers, 245 ; what its passage proves, 249 ; special exam- ination, 280 Taussig, F. W., on variations in tabular duty-rates, 56 ; steel-rail tables, 112 Taxation, of incomes, 227 ; direct, has fewest evils, 228, 354 ; injustice of, for partial benefits, 241. See also Tariff Tea, labor producing, 165 ; and coffee, why free, 134, 353 Theory, essential in mental operations, 247 Thompson, Robert E., advocate of protection, 8 ; on panic of 1857, 86 ; on tariff of 1828, 139 Timber, see Lumber Times, London, old extracts from, 160; — New York, McCulloch's letter in, 89 Tin plate, an example under export law, 79 ; effects of its protection, 282, 327 ; in facts and figures, 318 ; how made in Wales, 319 ; using imported workmen, 323, 327 Tobacco, importance as a staple, 29 Treaties, commercial, see Reciprocity Tribune, Chicago, quoted, 396 ; — New York, leading in good and bad causes alike, 8 ; charge against Gov. Hill, 24 ; on neglect of pro- tection in the West, 25 ; sends cor- respondent to S. America, 53 ; holds rod over manufacturers, 106, 244 ; neglects New South Wales, 121 ; on effects of Pan-American conference, 133 ; on British ship- ping, 146 ; use of extracts from London Times, 160 ; on English laborers' distress, 174 ; on protec- tion of onions, 202 ; at work for reciprocity, 293 ; discussion of iron and steel prices, 304 ; plea for the duties, 309 ; Mr. Grosvenor with, 312 ; letter printed in, 328 ; cor- roborates Home Market Club, 340, 343 Trusts and trade combinations, in whiskey in Illinois, 30 ; oppressive to labor and fostered by protection, x 75. 2 45 ; principle they depend on, 208 ; payments to escape competi- tion, 220 ; of silver producers, 238, 358, 361. 37 6 > 387. 404; cause higher prices to home customers, 265 V Victoria, compared with New South Wales, 119 Virginia, Republican party in, 40 W Wages, see Labor Walker, Francis A., tariff attitude, 424 INDEX. 38 ; bi-metallist, 363, 366 ; — Robert J., see Tariff of 1846 War, its wastes, 42 ; preparations for it undesirable, 44, 230 ; demoraliza- tion, 46 ; associated with protec- tion, 47 ; not the normal condition, 124 Webster, Daniel, exposure of ' ' Amer- ican-system " sham, 22 Weeks, Joseph D. , on the coke indus- try, 311 Wheat, in Dakota and India, 184 ; protected, 198, 281 ; production and prices, 205 ; proportion of ex- ports, 209, 287, 291 ; grown in Paraguay, 222 ; and cotton ex- changed for tin plate, 319, 322 Windom, William, reports as Secre- tary on subsidies, 137 ; opposes free coinage, 356 Wood, see Lumber Wool, question of free, 27, 131, 289;' effects of the duty, 102, 222, 309, 315. 339 I its growers numerous, 106 ; gainers by its protection, 200, 283 ; must be compensated, 272 Woollens, failures in the business, 27, 104 ; degraded by wool protec- tion, 102, 290 ; Tribune disciplines manufacturers, 106 ; higher cost prevents exportation, 137 ; encour- agement of the manufacture in Eng- land, 194 ; compensating duties, 201, 272 ; cost in 1891, 290 World, New York, articles from, 329, 338, 340 ; editorial quoted, 337 York, Pennsylvania, wages paid in, 343. 347 ; memorial of 35 manu- facturers, 349 PUBLICATIONS OF G. 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