CORNELL UNIVERSITY , LIBRARY BOUGHT WITH THE INCOME OF THE SAGE ENDOWMENT FUND GIVEN IN 1891 BY HENRY WILLIAMS SAGE Cornell University Library The original of tliis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924030184844 The Tariff History United States A SERIES OF ESSAYS BY F. W. TAUSSIG, LL.B., Ph.D. PROFESSOR OF POLITICAL ECONOMY IN HARVARD UNIVERSITY FIFTH EDITION' RBVISra), WITH ADDITIONAL MATERIAL G. P. PUTNAM'S SONS NEW YORK LONDON 27 WEST TWENTY-THIKD STRSKT 24 BEDFORD STREET, STRAND ^9°3 ; HF1753 .TaT'lMT'"' "-'""^ ^''llllMlliimillMiXiSJiNffi,? """ed States- olin 3 1924 030 184 844 Copyright, i8ga BY G. P. PUTNAM'S SONS tCbc Tftnfchctbochcc iptcss, mew tRocbcUc, TO, S?, NOTE TO THE FOURTH EDITION. For the second and third editions (pubHshed in 1892 and 1896) the history was brought to date by adding chapters on the tariff acts of 1890 and 1894. It is now again enlarged, in this fourth edition, by a chapter on the act of 1897. In preparing these chapters, I have made free use of articles contributed from time to time to the Quarterly Journal of Economics, the Political Science Quarterly, and the Economic Journal, Other parts of the volume, and more particularly those dealing with the period 1861-1883, have been revised and rewritten; and some changes and additions have been made in the tables in the Appendix. Cambridge, Mass, March, 1898. NOTE TO THE FIRST EDITION. Of the papers printed in this volume none is now presented to the public for the first time. The essay on " Protection to Young Industries as Applied in the United States " was first published in Cambridge in 1882, and was republished in a revised edition in New York in 1883. The paper on " The Tariff of 1828 " appeared in the Political Science Quarterly for March, 1888. That on " The History of the Tariff between 1830 and i860 " was printed in the Quarterly Journal of Economics for April, 1888. " The History of the Present Tariff " was published in New York in 1885. All, however, have been revised for the present volume, and considerable additions have been made. I have avoided repetitions, so far as this was possible, and have attempted to connect the narrative of the separate parts. Although not originally written with the design of presenting a complete history of our tariff legislation, these papers cover in some sort the entire period from 1789 to 1887. F. W. T. Cambridge, Mass., July, 1888. CONTENTS. Protection to Young Industries as Applied in THE United States 1-67 I^ — The Argument in General. — Conditions under Which it Applies. — These Conditions Existed in the United "-■ Stales Early in the Present Century. — Probably do not now Exist 1-7 II. — Industrial History of the Colonies and of the United States before 1808. — Condition of Foreign Trade. — Public Opinion on Protection and the Tariff of 1789. — Restrictive Measures of 1808-1815 and Their Effect. — Tariff of 1816. — Crisis of 1818. — Manufacturers in Better Position after 1819. — Strong Protective Movement Begins ....... 8-24 III. — The Cotton Manufacture. — First Factories. — Enormous Growth after 1808. — Introduction of the Power Loom in 1816. — Minimum Duties of 1816. ^Growth after the Crisis of 1818. — Conclusion as to the Effect of Protection ........ 25-36 IV. — The Woollen Manufacture. — First Factories. — Growth between 1808 and 1815. — Duties between 1816 and 1828. — Condition of the Industry after 1816. — Con- clusion as to the Effect of Protection . . . 37-45 V. — The Iron Manufacture. — Condition in the Colonies, Unchanged after 1789. — Use of Coke and Invention of Puddling in England. — No Change in the United States. — Duties of i8i5 and 1818. — Discriminating Duty on Rolled Bar-Iron. — Condition of the Industry After 1816. — Conclusion as to the Effect of Pro- tection 46~59 VI. — Concluding Remarks. — Effect of the Restrictive Period — 1808-1815. — Arguments Used during the Period under Consideration. — New Turn of the Protective Controversy after 1840 and Appearance of the Wages Argument 60-67 VUl CONTENTS. The Early Protective Movement and the Tariff OF 1828 68-108 The Early Protective Movement set in after the Crisis of 1819. — Its Stronghold in the Agricultural States. — New Eng- land Hesitates. — The South in Opposition. — Tariff Act of 1824. — Minimum Duties. — Condition of the Woollep Manu- facture. — Wollens Bill of 1827 and the Minimum System on Woollens. — Ilarrisburg Convention of 1827. — The Political Situation and the Attitude of the Adams and Jackson Parties to the Tariff. — Congressional Session of 1827-28. — Bill Pro- posed by the Jackson Men. — Duties on Raw Mateiials. — Duties on Woollens. — Object of the Bill. — Passage in the House. — Passage in the Senate. — Repeal of the Act by the Tariff of 1832. — The Minimum Duties Abolished. — Treat- ment of the Act by Protectionist Writers. The Tariff — 1830-1860 . . ... 109-154 Tariff Act of 1832. — Compromise Act of 1833. — Act of 1842. — Acts of 1846 and 1857. — Crisis of 1837. — Crisis of 1857. — Revival of 1843. — Crises and Tariffs. — The Period 1846-60. — The Duties on Iron. — Effect on Imports. — Rolled Iron Duty. — Production of Iron wiih Anthracite. — Temporary Revival of Charcoal Iron after 1842, and Its Ultimate Dis- placement. — The Cotton Manufacture. — Its Condition in 1833-40. — After 1842. — After 1846. — The Woollen Manu- facture. — Effect of Acts of 1842 and 1846. — Carpets and Hosiery. — Worsteds. — Effect of Free Wool after 1857. — Concluding Remarks. The History of the Existing Tariff — 1860- 1890 155-283 Chapter I. — The War Tariff . . . . -155 The Tariff before the War.— The Morrill Tariff of 1861.— Tax and Tariff Act of 1862. — Internal Revenue Act of 1864. —Tariff Act of 1864.— Tariff Act of 1864 is the Basis of the Existing Tariff. Chapter II. — The Failure to Reduce the Tariff after the War 171 Abolition of the Internal Taxes, 1866-72. — Failure to Reduce CONTENTS. IX the Tariff. — Unsuccessful Tariff Bill of 1867. — ^Act of 1870. — Situation in 1872. — Reform Bill in the House. — Ten per Cent. Reduction Proposed. — Policy of Protectionists. — Act of 1873. — Repeal of Tea and Coffee Duties, 187a. — Ten per Cent. Reduction Repealed. Chapter III. — How Duties were Reused above the War Rates 194 Woollens Act of 1867. — The Conopensating System. — ^Wool and Woollens Duties of 1864. — Act of 1867. — Duty on Wool ; on Woollen Cloths ; on Flannels, Carpets, Dress Goods. — Comment on the ad- Valorem Duty. — Comment on the Specific Duties. — The Woollens Act a Heavy Protective Measure in Disguise. — Doubtful Effect on the Manufacture. — Copper Act of 1869. — Steel Rails, 1870. — Marble, 1864-1870. — Other Cases Where Duties were Increased. — Character of These Measures. Chapter IV. — The Tariff Act of 1883 , . .230 Tariff Commission of 1882. — Act of 1883 ; How Passed. — Duties Raised in 1883 : Woollen Dress Goods, Woollen Cloths, Cottons, Iron Ore, Steel ; Other Articles. — Duties Reduced in 1883 : Wool, Woollens, Cotton, Iron, Steel Rails, Copper, Other Articles. — Duties on Wheat, Com, Untouched, — General Character of the Act. Chapter V. — The Tariff Act of tSgo . . .251 Unsuccessful Attempts at Legislation in 1884-86. — President Cleveland's Message in 1889. — The Mills' Bill and the Senate Bill in 1888.— The Election of 1888.— Passage of Tariff Act of l8go. — Changes in the Wool Duties : Clothing, Combing, and Carpet Wools. — Changes in the Duties on Woollens, Dress Goods, Cottons, Other Textiles. — Extension of the Minimum System. — Iron, Steel, Rails, Copper, Tin Plates, — The Sugar Duty Repealed, and a Bounty Given — The Re- ciprocity Provisions and their Probable Working. — The Question of Further Extending Protection Squarely Pi«- seated^ CONTENTS. Cuktt^kYI.— The Tariff Act of 1S94 • ■ .284 Democratic Victories in the Elections of 1890 and 1892. — Diffi- culties of the Democrats. — Passage of the Act of 1894. — Re- moval of the Wool Duty. — Corresponding Changeson Woollens. — Other Textiles. — Duties on Coal and on Iron Ore Reduced, not Repealed. — Iron and Steel. — Ad-valorem Duties Favored by House, Specific by Senate. — The Sugar Question. — Reasons for and against a Duty on Raw Sugar. — Such a Duty Finally Imposed, with the Income Tax. — ^Duty on Refined Sugar. — The Sugar Trust. — Final Outcome. — Disappointment of Tariff Re- formers. — General Character of the Act. CnAVT^KYll.— The Tariff Ad of i8q7 . . .321 Political Overturn of 1896. — Peculiar Position of the Republi- cans. — Need of Revenue. — Passage of the Tariff Act at the Extra Session of 1897. — Re-imposition of Wool Duties. — Compound Duties Re-imposed on Woollens. — Cottons Little Changed. — Specific Duties on Silks and Linens — Iron and Steel Left Unchanged, except Some Special Articles — New Con- ditions in the Iron Industry. — Steel Rails and Tin Plate. — Higher Specific Duties on Sugar, with Additional Duty on Re- fined Sugar Similar to that of 1894. — Reciprocity Provisions. — Uncertain Financial Yield. — General Character of the Act. Future of the United States as a Manufacturing Country. Some Aspects OF THE Tariff Question . . 361-409 Difficulty of Tracing Inductively the Effects of Tariff Legis- lation on General Prosperity. — Some Aspects on which His- torical Inquiry is more Helpful. — Character and History of Flax and Hemp Culture. — Beet Sugar Production. — General Peculiarities of American Agriculture. — The Manufacture of Silk Goods.— How Affected by the Qualities of Silk Fibre.— Present Stage of the Industry. — Similar Conditions with Linens and Dress Goods. — The Glass Manufacture : Pressed Glass, Window and Bottle Glass, Plate Glass. — Earthenware, Cutlery, Hardware. — The Doctrine of Comparative Costs Explains these Cases. CONTENTS. xi Appendix — Tables: 411 I. — Imports and Duties, 1860-1897. II. — Duties of 1861, and those of 1864 which were retained, without change, till 1883. III. — Duties raised after the war above the rates of 1864. IV. — Revenue from internal taxes and from the tariff, 1860- 1897. V. — Product, Imports, and Foreign and Domestic Prices of Copper, 1875-1886. VI. — Product, Imports, and Foreign and Domestic Prices of Steel Rails, 1871-1897. Index 419 THE TARIFF HISTORY OF THE UNITED STATES. PROTECTION TO YOUNG INDUSTRIES AS APPLIED IN THE UNITED STATES. THE ARGUMENT FOR PROTECTION TO YOUNG INDUSTRIES. Of the arguments in favor of protection, none has been more frequently or more sincerely urged than that which is expressed in the phrase " protection to young industries." None has received so generally the approval of economists, even of those little disposed to acknowl- edge the validity of any reasoning not in accordance with the theory of free exchange. Mill gave it the 'weight of his approval in a passage which has been frequently cited. Later English writers have followed him in granting its intrinsic soundness. The reasoning of List, the most prominent protectionist writer among the Germans, is based, so far as it is purely economic, on this argument, and since List's time the argument has taken an estab- lished place in German treatises on political economy, even though it be admitted that the conditions to which it fairly applies belong to the past. 2 PROTECTION TO YOUNG INDUSTRIES. The argument is, in brief, that it may be advantageous to encourage by legislation a branch of industry which might be profitably carried on, which is therefore sure to be carried on eventually, but whose rise is prevented for the time being by artificial or accidental causes. The essential point of the argument lies in the assumption that the causes which prevent the rise of the industry, and render protection necessary, are not natural and permanent causes, — not such as would permanently pre- vent, under a state of freedom, the growth of the industry. Let it be supposed, for instance, that the industry to be encouraged is the cotton manufacture. The natural ad- vantages of a given country for making cotton cloths are good, we may suppose, in comparison with the advantages for producing other things. The raw material is cheap, power for machinery is abundant, the general intelligence and industry of the people — which, since they admit of but very slow change, must be considered natural advan- tages — are such as to fit them for complex industrial operations. There is no permanent cause why cotton goods should not be obtained at as low cost by making them at home as by importing them ; perhaps they can even be produced at lower cost at home. But the cotton manufacture, let it be further supposed, is new ; the machinery used is unknown and complicated, and re- quires skill and experience of a kind not attainable in other branches of production. The industry of the country runs by custom in other grooves, from which it THE ARGUMENT FOR PROTECTION. 3 is not easily diverted. If, at tiie same time, the com- munication of knowledge be ^low, and enterprise be hesitating, we have a set of conditions under which the establishment of the cotton manufacture may be pre- vented, long after it might have been carried on with advantage. Under such circumstances it may be wise to encourage the manufacture by duties on imported goods, or by other analogous measures. Sooner or later the cotton manufacture will be introduced and carried on, even without assistance ; and the government's aid will only cause it to be established with less friction, and at an earlier date, than would otherwise have been the case. It may illustrate more clearly the conditions under which such assistance may be useful, to point out those under which it is superfluous. The mere fact that an industry is young in years — has been undertaken only within a short period of time — does not supply the con- ditions under which protection is justified by this argu- ment. An industry recently established, but similar in kind to other branches of production already carried on in the country, would hardly come within its scope. But where the industry is not only new, but forms a departure from the usual track of production ; where, perhaps, ma- chinery of an entirely strange character, or processes hitherto unknown, are necessary ; where the skill and ex- perience required are such as could not be attained in the occupations already in vogue ; under these circumstances protection may be applied with good results, if no natural 4. PROTECTION TO YOUNG INDUSTRIES. disadvantages, in addition to the artificial obstacles, stand in the way. The manufacture of linen goods in the United States, at the present time, probably supplies an example of an industry which, though comparatively new, can hardly be said to deserve protection as a young in- dustry. The methods and machinery in use are not essentially different from those of other branches of tex- tile manufactures. No great departure from the usual track of production is necessary in order to make linens. Manufacturers of the same general character are estab- lished on all sides. Work-people and managers with experience in similar work can be easily found. Moreover, the means of obtaining and communicating knowledge at the present time are such that information in regard to the methods and machinery of 'other countries can be easily obtained, while workmen can be brought from abroad without difificulty. Those artificial obstacles which might temporarily prevent the rise of the industry do not exist, and it may be inferred that, if there are no permanent causes which prevent linens from being made as cheaply in the United States as in other countries, the manufacture will be undertaken and carried on without needing any stimulus from protecting duties. There are two sets of conditions under which it is sup- posable that advantages not natural or inherent may be found in one country as compared with another, under which causes merely temporary and accidental may pre- vent the rise of certain branches of industry in the second THE ARGUMENT FOR PROTECTION. 5 country, and under which, therefore, there may be room for the application of protection. These are,/firsO:he state of things in a new country which is rapidly growing in population, and in which, as population becomes more dense, there is a natural change from exclusive devotion to the extractive industries toward greater attention to those branches of production classed as manufactures. The transition from a purely agricultural state to a more diversified system of industry may be retarded, in the complete absence of other occupations than agriculture, beyond the— tune when it might advantageously take place, ^econdu?, when great improvements take> place in some of the arts of production, it is possible that the new process may be retained in the country in which they originate, and may fail to be applied in another country, through ignorance, the inertia of habit, and perhaps in consequence of restrictive legislation at the seat of the new methods. Here, again, the obstacles to the intro- duction of the new industry may be of that artificial kind which can be overcome most easily by artificial means. Now, both these sets of conditions seem to have been ful- filled in the United States in the beginning of the present century. The country was normally emerging, to a con- siderable extent, from that state of almost exclusive devo- tion to agriculture which had characterized the colonies. At the same time great changes were taking place in the mechanical arts, and new processes, hardly known outside of England, and held under a practical monopoly 6 PROTECTION TO YOUNG INDUSTRIES. there, were revolutionizing the methods of manufacturing production. Under these circumstances there would seem to have existed room for the legitimate application of protection for young industries. The more detailed examination in the following pages of the industrial condition of the country during the ear- lier part of this century will bring out more clearly the reasons why protection may then have been useful. It may be well, however, to notice at this point one difference between those days and the present which must seriously affect the application of the argument we are considering. Even if we were to suppose the conditions of i8io to exist now ; if the country were now first beginning to attempt manufactures, and if a great revolution in manu- facturing industry happened to make the attempt pecu- liarly difficult ; even then the obstacles arising from the force of custom, and from the want of familiarity with new processes, would be much more easy to overcome now than sixty years ago. The ties of custom in industry have become much loosened in the last half century; cap- ital and labor turn more easily to new employments. The railroad, the telegraph, the printing-press, the immense increase in the facility of communication, the constant change in methods of production in all industries, have tended to make new discoveries and inventions common property, and to do away with advantages in production based on other than permanent causes. It is true that there are still appreciable differences in the arts of p*^o- THE' ARCb3fENT FOR PROTECTION: J duction in different countries, and that some may have a superiority over others based on the merely accidental or temporary possession of better processes or more effective machinery. But the United States hardly lag behind in the industrial advance of the present day, and where they do labor under artificial or factitious disadvantages, these cannot endure long or be of great consequence under a system of freedom. Sixty years ago, however, the state of things was very different. The conditions were then in force under which protection might be needed to enable useful indus- tries to be carried on. The argument for protection to young industries was accordingly the most effective of those urged in favor of the protective policy. During the twenty years which followed the war of 1812 the pro- tective controversy was one of the most important fea- tures in the political life of the nation ; and the young industries argument was the great rallying-cry of the pro- tectionists. It is of interest to examine how far protec- tion of the kind advocated was actually applied, and how far it was the cause, or an essential condition, of that rise of manufactures which took place. The object of this paper is to make such an investigation. II. THE INDUSTRIAL HISTORY OF THE UNITED STATES, AND THE COURSE OF PROTECTIVE LEGISLA- TION, FROM 1789 TO 1838. The early economic history of the United States may be divided into two periods. The first,'which is in the main a continuation of the colonial period, lasted till about the year 1808.; the embargo marks the beginning of the series of events which closed it. The second began in 1808, and lasted through the generation following. It was during the second period that the most decided at- tempt was made to apply protection to young industries in the United States, and with this period we are chiefly concerned. During the first period the country was, on the whole, in the same industrial condition in which the colonies had been. The colonies had been necessarily engaged aJ^st exclusively in agriculture, and in the occupations closBve connected with it. The agricultural community cou ^n not get on without blacksmiths, carpenters, masons, she 5n makers, and other artisans, and these existed side by sioat with the farmers. In those days, it must be remembered>- 8 INDUSTRIAL HISTORY OF THE UNITED STATES. 9 handicraft workmen of this kind occupied a more import- ant place in industrial organizations than they do at the present time. They made many articles and performed many services which are now the objects of manufacturing production and of extensive trade, and come within the range of international dealings. Many tools were then made by individual blacksmiths, many wares by the car- penter, many homespun cloths fulled and finished at the small fulling-mill. Production of this kind necessarily, takes place at the locality where consumption goes on. In those days the division of labor between distant bodies of men had been carried out to a comparatively slight extent, and the scope of international trade was therefore much more limited. The existence of these handicraft workmen accounts for the numerous notices of " manu- factures " which Mr. Bishop industriously collected in his " History of Manufactures," and is not inconsistent with the mainly extractive character of the industry of the colonies. What could be imported at that time was im- ported, and was paid for by the exportation of agricul- tural produce. The exportation took place, so far as the northern colonies were concerned, largely to the West Indies. From the West India trade the means for pay. ing indirectly for the imported goods were mainly ob- tained. There were some important exceptions to this general state of things. Ship-building was carried on to a considerable extent in New England, where abundance of material and the necessity of transportation by water lO PliOTECTIOr^ TO YOUNG INDUSTRIES. made such an industry natural. The production of un- manufactured iron was carried on to a considerable extent ; for at that time the production of pig and bar iron tended to fix itself in those countries where wood, the fuel then used, was abundant, and was therefore an industry much more analogous to agriculture than it has been since the employment of coal as fuel. In the main, however, the colonies made only such manufactures as could not be im- ported. All manufactured goods that could be imported were not made at home, but obtained in exchange for agricultural exports. This state of things was little changed after the end of the Revolutionary war and the adoption of the Constitu- tion. The year 1789 marks no such epoch in economic as it does in political history. Agriculture, commerce, and the necessary mechanic arts, continued to form the main occu- pations of the people. Such goods as could be imported continued to be obtained from abroad in exchange for exports, mainly of agricultural produce. The range of importable articles was, it is true, gradually extending. Cloths, linens, and textile fabrics were still chiefly home- spun, and fine goods of this kind were still in the main the only textile fabrics imported. But with the great growth of manufacturing industry in England during this time, the range of articles that could be imported was growing wider and wider. During the Napoleonic wars the American market was much the most important for the newly established English manufactures. Large quanti- INDUSTRIAL BISTORY OF THE UNITED STATES. l\ ties of cotton and woollen goods were imported, and the importations of manufactures of iron, in regard to which a similar change in production was then taking place, also increased steadily. Sooner or later the change in the course of production which was going on in England must have had, and did have, a strong influence on the eco- nomic condition of the United States ; but for the time being this influence was little felt, and the country con- tinued in the main to run in the grooves of the colonial period. This absence of development was strongly promoted by the peculiar condition of the foreign trade of the country up to 1808. The wars of the French Revolution opened to this country profitable markets for its agricultural products in the West Indies and in Europe, and profit- able employment for its shipping, both in carrying the increased exports and in a more or less authorized trade between the belligerent countries and their colonies. For many years the gains arising from these sources, though not regular or undisturbed, were great, and afforded every inducement to remain in the occupations that yielded them. The demand for agricultural products for exporta- tion to the belligerent countries and their colonies was large, and the prices of wheat, corn, and meat were corre- spondingly high. The heavy exports and the profits on freights furnished abundant means for paying for im- ported goods. Importations were therefore large, and imported goods were so cheap as to afford little induce- 12 PROTECTION TO YOUNG INDUSTRIES. - ment for engaging in the production of similar goods at home.' The tariff legislation of this period was naturally much influenced by the direction taken by the industries of the ' The following tables of imports and exports show the influence of these circumstances on the foreign trade of the country. The exports of foreign produce show the swelling of the carrying-trade. The price of flour shows the effect on the prices of agricultural produce. The influ- ence of the temporary stoppage of the war in Europe during the time of the Peace of Amiens is clearly seen. Year. Gross Imports. 000 Omitted. Gross Exports. 000 Omitted. Exports of Fof' eign Produce. Price of Flour 000 Omitted per Bbl. 1 791 29,200 19,000 500 > ■ • 92 31.500 20,700 1.750 $ 5-07 93 31,100 26,100 2,100 6.21 94 34.600 33,000 6,500 7.22 95 69,750 48,000 8,500 12.05 96 81,400 67,000 26,300 12.43 97 75,400 56,800 27,000 9.00 98 68,500 61,500 33.000 8.78 99 79,000 78,600 45.500 g.62 1800 91,200 71,000 39,100 9-85 01 III, 300 94,000 46,600 10.45 Reace of ( 02 Amiens. \ 03 76,300 72,000 35,700 6.75 1 6.73 64,700 55,800 13,600 04 85,000 77,700 36,200 8.22 05 120,600 95.500 53,200 10.28 • 06 129,400 101,500 60,300 • 7 30 07 138,500 108,300 59.600 7.00 08 57,000 22,400 13,000 5-6o 09 59,400 52,200 20,800 6.90 10 85,400 66,700 24,400 9.66 ir 53,400 61,300 16,000 •0.00 12 77,000 38,500 8,500 ?-75 13 22,000 27,900 2,800 P-50 14 13,000 6,900 150 7.70 The tables of imports and exports are from the Treasury Uepo^^ts. The last table, givingthe price of flour, is in " American State Papers, Fina"«'a,'' ni.. 536. INDUSTRIAL HISTORY OF THE UNITED STATES. I3 country. The peculiarly favorable conditions under which agriculture and commerce were carried on prevented the l growth of any strong feeling in favor of assisting manufac- tures. Much has been said in the course of the protective controversy about the views of the fathers of the repub. lie. But for nearly twenty years after the formation of the Union other subjects so absorbed the attention of public men that no distinct opinion appears in their utterances for or against protective duties. Considering the state of economic knowledge in those days, the example set by European countries, and the application of the colonial system before the days of independence, we cannot be surprised that some disposition was shown to impose pro- tective duties. It is curious that in the first session of Congress these were advocated most earnestly by the representatives from Pennsylvania, who took their stand from the first as unflinching advocates of a protective policy. On the other hand, the current toward more lib- eral views, which had set in so strongly after the writings of the French economists and the publication of the "Wealth of Nations," had made its way to the United States. One might expect to find its influence most strong among the followers of Jefferson, whose political philosophy led them in general to oppose government interference. But both Federalists and Republicans were influenced in their attitude to the question of protection most of all by its bearing on the other more prominent questions on which parties began to be divided. 14 PROTECTION TO YOUNG INDUSTRIES. Madison had maintained the principle of free intercourse in 1789,' and Jefferson in 1787 had extolled the virtues of a simple agricultural State.' But in 1793, when the Fed- eralists and Republicans began to differ on questions of foreign policy, and especially on the attitude the country should take in the wars of the French Revolution, Jef- ferson advocated vigorous measures of protection, directed against England, and Madison brought forward a set of resolutions based on his recommendations.' On the other hand, Fisher Ames had said, in 1789, that the general gov- ernment should nurture those industries in which the individual States had an intereist ; but in 1794, when his political views led him to oppose Madison's resolutions, he called the whole theory of protection an exploded dogma.* It has often been said that the first tariff act, that of 1789, was a protective measure, and that in the debate on it the protective controversy appeared full- grown. But such considerations had little to do with the act ; and the discussions on protection by no means indi- cate what was the real centre of interest.' The act was modelled on the five per cent, import duty, which the ' "Annals of Congress," 1789, pp. 112-114. ' "Notes on Virginia, Works," VIII., 404. ' See Jefferson's " Report on Commerce, Works," VII., 637 ; and Madi - son's resolutions of 1794, based on Jefferson's Report, "Annals of Con. gress," 1794, pp. 155, 209. • "Annals of Congress," 1789, p. 221 ; 1794, p. 342. * It is significant, for example, that Madison's letters to Jefferson, then in Paris, about the debates on the tariff act of 1789, make no reference whatever to the protective discussion. Madison'5 "WorHs," I,, 466, 480. INDUSTRIAL HISTORY OF THE UNITED STATES. I J Congress of the Confederation had tried in vain to im- pose, and its main object was to secure revenue for the new government, whose successful working was the one end which all the legislation of the first few years sought to bring about. The general level of duties was five per cent, on the value. On certain articles of luxury, higher ad valorem rates were fixed, the highest being fifteen per cent, on carriages. In certain specific duties, on articles like hemp, cordage, nails, iron manufactures, and glass, there was doubtless an intention of aiding the domestic producers.' Some of these articles were selected because it was supposed they would be needed in time of war. On others it is not unlikely that a concession to protective demands was made by those who had at heart the success of the new government, in order to insure the passage of the indispensable revenue act.' The same general state of feeling and the same policy continued during the twenty years following. For a short time after 1 789, it may be possible to detect a drift in favor of protective duties," which doubtless was strength- ' It seems to have been understood that the duties on these articles were made specific with this intention. See a brief report by Hamilton in his "Works," II., 55. ' This suggestion is made in Professor H. C. Adams's essay on " Taxation in the United States," 1789-1816, in the "Johns Hopkins University Studies," vol. II., pp. 29, 30. The reader who wishes further information is referred to this excellent monograph. ^ A number of committee reports on petitions for higher duties are printed in "American State Papers, Finance," vols. I., II. After 1794 the reports are generally against the petitions. l6 PROTECTION To YOUNG INDUSTRIES. ened by the powerful advocacy of protection in Hamil- ' ton's " Report on Manufactures " {ijg^. But that famous document had little, if any, effect on legislation. The moderate policy of 1789 was maintained. The duties were increased from time to time as more revenue was needed, but they were in all cases moderate. Those which were most distinctly protective aimed to assist industries which already had a good foothold, and they had no appreciable influence in diverting the industry of the country into new channels. No action at all was taken for the encouragement of the production of textiles, of crude iron, and of the other articles which later became the great subjects of dispute in the protective controversy. The industrial situation changed abruptly in 1808. The complications with England and France led to a series of measures which mark a turning-point in the industrial history of the country. The Berlin and Milan decrees of Napoleon, and the English orders in Council, led, in December, 1807, to the Embargo. The Non- Intercourse Act iollowed in 1809. War with England was declared in 1812. During the war, intercourse with J England was prohibited, and all import duties were doubled. The last-mentioned measure was adopted in the hope of increasing the revenue, but had little effect, for foreign trade practically ceased to exist. This series of restrictive measures blocked the accustomed channels of exchange and production, and gave an enormous stimulus to those branches of industry whose products JNDUSTRJAL HISTORY OF THE UNITED STATES. 1 7 had before been imported. Establishments for the manufacture of cotton goods, woollen cloths, iron, glass, pottery, and other articles, sprang up with a mushroom growth. We shall have occasion to refer more in detail to this growth when the history of some of these manu- factures comes to be considered separately. It is sufficient , here to note that the restrictive legislation of 1808-15, was, for the time being, equivalent to extreme protection.' The consequent rise of a considerable class of manufac- turers, whose success depended largely on the continuance of protection, formed the basis of a strong movement for more decided limitation of foreign competition. ^ Some signs of the gradual growth of a protective feeling appear before the close of the war.' It was natural that the patriotic fervor which the events of the period of re- striction and war called out for the first time in our his- tory, should bring with it a disposition to encourage the production at home of a number of manufactured articles, of which the sudden interruption in the foreign supply caused great inconvenience. Madison, whose views on this subject, as on others, shifted as time went on and circumstances changed, recommended the encouragement of manufactures ; and in some of Clay's earlier speeches we can see the first signs of the American system of the ' It is curious to note that in 1802-1804, during the temporary lull that followed the Peace of Amiens, the committee reports seem to show a drift toward protection. See " American State Papers, Finance," II., pp. 29, 80, and the report on the Barbary Powers Act of 1804, " Annals of Congress," 1804, pp. 946-950. l8 PROTECTION TO YOUNG INDUSTRIES. future.' The feeling in favor of the manufactures that had sprung up during the time of restriction obtained some clear concessions in the tariff act of _i8j6. The control of the policy of Congress at that time was in the hands of a knot of young men of the rising generation, who had brought about the war and felt in a measure responsible for its results. There was a strong feeling among these that the manufacturing establishments which had grown up during the war should be assisted. There was little feeling, however, either in Congress or among the people, such as appeared in later years, in favor of a permanent strong protective policy. Higher duties were therefore granted on those goods in whose production most interest was felt, textile fabrics ; but only for a limited period. Cotton and woollen goods were to pay 25 per cent, till 1 8 19; after that date they were to pay 20 per cent. A proviso, intended to make more secure this measure of protection, was adopted in regard to a minimum duty on cotton goods, to which reference will be made in another connection. These and some other distinctly protective provisions were defended by Calhoun, mainly on the ground of the need of making provision for the exigencies, of another war ; and on that ground they were adopted, and at the same time limited. The general increase of ' See Madison's message of 1809, "Statesman's Manual," I., aSq • and Clay's speech of 1810, "Works,'' I., 195. Madison never gave up his general acceptance of the principle of free trade, but admitted it to be inapplicable to articles needed in time of virar, and in circumstances to which the young-industries' argument applied. See his " Works," III. 42, INDUSTRIAL HISTORY OF THE UNITED STATES. I9 duties under the act of 18 16, to an average of about twenty per cent., was due to the necessity of providing i for the payment of the interest on the heavy debt con^ tracted during the war. For some time after the close of the war and the enactment of the tariff of 18 16, there was no pressure for a more vigorous application of protective principles. The general expectation was, that the country would fall back into much the same state of things as that which had ex- isted before 1808 ; that agriculture and commerce would again be as profitable as during the previous period, and would be as exclusively the occupations of the people. Such an expectation could not in the nature of things be entirely fulfilled, but for a time it was encouraged by several accidental circumstances. I'The harvests in Europe for several seasons were bad, and caused a stronger de- * mand and higher price for the staple food products. -The demand for cotton was iarge, and the price high. Most important of all, the currency was in a state of complete disarrangement, and concealed and supported an unsound economic condition. Under cover of the excessive issues of practically irredeemable bank-notes, the prices of all commodities were high, as were the general rates of wages and rents. The prices of bread-stuffs and provisions, the staples of the North, and of cotton and tobacco, the staples of the South, were high, not only absolutely, but relatively, and encouraged continued large production of these articles. The prices of most manufactured 20 PROTECTION TO YOUNG INDUSTRIES. goods were comparatively low. After the war the im- ports of these from England were very heavy. The long pent-up stream of English merchandise may be said to have flooded the world at the close of the Napoleonic^^wars. In this country, as in others, imports were carried beyond the capacity for consumption, and prices fell much below the normal rates. The strain of this over-supply and fall of prices bore hard on the domestic manufacturers, especially on those who had begun and carried on opera- tions during the restrictive period ; and many of them were compelled to cease production and to abandon their works. This abnormal period, which had its counterpart of feverish excitement and speculation in Europe, came to an end in i8i8-ig. The civilized world then settled down to recover slowly from the effects of a generation of war and destruction. In the United States the cur- rency bubble was pricked in the latter part of 1818. Prices began to fall rapidly and heavily, and continued to fall through 1819. The prices of the agricultural staples of the North and South underwent the greatest change, for the harvests in Europe were again good in 18 18 the English corn-laws of 18 16 went into operation, and the demand for cotton fell off. A new scale of monetary ex- change gradually went into operation. During the period of transition there was, as there always is in such periods much suffering and uneasiness ; but gradually the difficul- ties of adjusting old contracts and engagements were overcome, and the habits of the people accommodated INDUSTRIAL HISTORY OF THE UNITED STATES. 21 themselves to the new regime. Within three or four years after 1819 the effects of the crash were no longer felt in most parts of the country. * Two results which it is important to note in this con- nection followed from the crisis of iSigi-^first, a great alteration in the position and prospects of manufacturing industries ; and second, the rise of a strong public feeling in favor of protecting these industries, and the final en- actment of legislation for that purpose. The first of these results was due primarily to the fact thjijheJalHn^ firices after 18 19 did not so greatly affgc t most manufa c- tured goods as it did other articles. The prices of manu- factured goods had already declined, in consequence of the heavy importations in the years immediately follow- ing the war. When, therefore, theJieayy,JalLlQQk place in 1819 in the prices of feodaJoApLraw^materials, in the gains of agriculture, in money wages and money rents, the general result was advantageous for the manufacturers. They were put into a position to produce with profit at the lower prices which had before been unprofitable, and to meet more easily foreign competition. After the first shock was over, and the system of exchange became cleared of the confusion and temporary stoppage which must attend all great fluctuations in prices, this result was plainly felt.' It is easy to see that the whole process ' ' ' The abundance of capital, indicated by the avidity with which loans are taken at the reduced rate of five per cent., the reduction in the wages of labor, and the decline in the price of property of all kinds, all concur favor- ably for domestic manufactures." — Clay, Speech of 1820. " Works," I., 419, 22 PROTECTION TO YOUNG INDUSTRIES. was nothing more than the evolution of the new state of things which was to take the place of that of the period before 1808. In that earlier period manufactured goods, so far as they could be obtained by importation at all, were imported cheaply and easily by means of large ex- ports and freight earnings. These resources were now largely cut off. Exports declined, and imports in the end had to follow them. The tightening of the Eng lish corn-law, and_thegeneral restriction of trade and naviga- tion by Engla nd and other countries, con tribu ted to s trengthen this _ tendency , and necessarily served to stimu- late the growth of manufactures in the United States. That growth was indeed complicated and made more striking by the revolution which was then taking place in many departments of manufacturing industry. Especially in the production of textile fabrics, machinery was rapidly displacing — in England had already largely displaced — production by hand on a small scale. Home-spun textiles were gradually making room for the products of the spin- ning-jenny and the power-loom. The state of things that followed the crisis of 1818-19 was favorable to the rise of manufactures ; but the change took place not so much by j an increase in the relative number of persons engaged in I such occupations, as in the substitution of manufactures I in the modern sense for the more simple methods of the previous period.' ' According to the census returns of 1820 and 1840, the only two of the earlier returns in which occupations are enumerated, there were engaeed INDUSTRIAL HISTORY OF THE UNITED STATES. 23 The second effect of the change that followed the financial crisis of 18 19, was the strong prot ective rnoyc; ment which exercised so important an influence on the political history of the next generation. The diminution of the foreign demand, and the fall in the prices of staple products, naturally gave rise to a cry for a home market. The absence of reciprocity and the restrictive regulations of England, especially in face of the comparatively liberal import duties of this country, furnished an effective argu- ment to the advocates of protection. Most effective, how- ever, was the argument for protection to young industries, which was urged with persistency during the next ten or in manufactures and the mechanic arts in 1820, 13.7 per cent, of the work- ing population ; in 1840, 17. 1 per cent. In New England 21 per cent, were so engaged in 1820, 30.2 per cent, in 1840 ; in the Middle States 22.6 per cent, in 1820, 28 per cent, in 1840. Mac Gregor, " Progress of America," II., loi. There are no census figures before 1820. In 1807 it was loosely estimated that out of 2,358,000 persons actively employed, 230,000 were engaged in mechanics and manufactures — less than 10 per cent. Blodgett, " Thoughts on a Plan of Economy," etc. [1807] p. 6. The fluctuations in the exports of wheat flour, which was the most im- portant article of export among agricultural products during the early part of the century, tell plainly the story of the country's foreign trade. They were as follows, the figures indicating millions of dollars : Yearly average, 1803-7 (expanded trade) .... 8.2 " " 1808-10 (restriction) 4.0 " " 1810-12 (restrictions removed) , . . 13.5 " " 1813-15 (war) 5.5 " " 1816-17 (temporary revival) . . . 14.5 Year 1818 6.0 " 1819 5.0 " 1820 4.3 During the decade 1820-1830, when matters settled down to a normal state, the yearly export was between four and five millions of dollars. See "Quarterly Reports of the Bureau of Statistics," 1883-84, No. 4, pp. 523, 524. 24 PROTECTION TO YOUNG INDUSTRIES. fifteen years. The character and history of this early pro- tective movement will be discussed elsewhere.' Here it is sufificient to note that its effect on legislation was not merely to maintain the protective provisions of the tariff of 1816, but much to extend the protective element in tariff legislation. Already in 18 18 it had been enacted that the duty of 2$ per cent, on cottons and woollens should remain in force till 1826, instead of being reduced to 20 per cent, in 18 19, as had been provided by the act of 1816. At the same time the duty on all forms of unman- ufactured iron was considerably raised ; a measure to which we shall have occasion to refer in another connec- tion. In 1820, while the first pressure of the economic revulsion bore hard on the people, a vigorous attempt was made to pass a high protective tariff, and it barely failed of success, by a single vote in the Senate. In 1824 the protectionists succeeded in passing the tariff of that year, which increased all duties considerably. Four years later, in the tariff of 1828, the protective movement reached its highest point. The measures which followed in 1832 and 1833 moderated the peculiarly offensive pro- visions of the act of 1828, but retained the essential parts of protection for some years longer. On the whole, from 1816 on, there was applied for some twenty years a con- tinuous policy of protection ; for the first eight years with much moderation, but after 1824 with high duties, and stringent measures for enforcing them. ' In the next essay, pp. 68-75. III. THE COTTON MANUFACTURE. We turn now to the history of some of the industries to which protection was applied during this long period, in order to determine, so far as this is possible, how far their introduction and early growth were promoted or rendered possible by protection. We shall try to see how far and with what success protection to young industries was applied. The most important of them, on account both of its magnitude and of the peculiarly direct applica- tion of protection to it, is the cotton manufacture ; and we are fortunate in having, at the same time, the fullest and most trustworthy accounts of the early history of this industry.' During the first of the two periods into which we have divided the early economic history of the United States, several attempts were made to introduce the manufacture of cotton by the machinery invented by Hargreaves and Arkwright in the latter part of the i8th century. One or ' In S. Batchelder's ' ' Introduction and Early Progress of the Cotton Man- ufacture in the U. S." (1863) ; G. S. White's " Memoir of Samuel Slater " (1836) ; and N. Appleton's " Introduction of the Power-loom and Origin of LoweU " (1858). 25 26 PROTECriON TO YOUNG INDUSTRIES. two of these attempts succeeded, but most of them failed, and the manufacture, which then was growing with marvel- lous rapidity in England, failed to attain any considerable development in this country. In 1787 a factory using the new machinery was established at Beverly, Mass., and obtained aid from the State treasury ; but it was soon abandoned. Similar unsuccessful ventures were made at Bridgewater, Mass., Norwich, Conn., and Pawtucket, R. I., as well as in Philadelphia. The spinning-jenny wa-s introduced in all these, but never successfully operated.' The first successful attempt to manufacture with the new machinery was made by Samuel Slater, at Pawtucket, R. I. Slater was a workman who had been employed in Arkwright's factories in England. He joined to mechani- cal skill strong business capacity. He had become famil- iar with the system of carding, drawing, roving, and mule- spinning. Induced to come to the United States in 1798 by prizes offered by the Philadelphia Society for Promot- ing Manufactures, he took charge in the following year of i a cotton-factory which had been begun and carried on with little success by some Quakers of Pawtucket. He was suc- cessful in setting up the Arkwright machinery, and became the founder of the cotton manufacture in this country, - Through him machinery, and instruction in using it, were obtainable ; and a few other factories were begun under, ' Batchelder, p. 26 seq.; White, ch. III. The cotton-mill at Norwich, built in 1790, was operated for ten years, and then abandoned as unprofit- able. — Caulkins, " Hist, of Norwich," p. 696. THE COTTON MANUFACTURE. 2,^ his superintendence. Nevertheless, the manufacture' hardly maintained its hold. In 1803 there were only four factories in the country.' The cotton manufacture was at that time extending in England at a rapid rate, and the imports of cotton goods from England were large. The Treasury reports of those days give no separate statements of the imports of cotton goods ; but in 1807 it was esti- mated that the imports of cotton goods from England amounted to eleven million dollars' worth — a very large sum for those days." The consumption of cotton goods was large ; but only an insignificant part of it was supplied by home production, although later developments showed that this branch of industry could be carried on with dis- tinct success. The ease with which these imports were paid for, and the stimulus which this period, as described in the preceding pages, gave to agriculture and com- merce, account in part for the slowness with which the domestic manufacture developed. The fact that raw cot- ton was not yet grown to any considerable extent in the country, together, doubtless, with the better machinery and larger experience and skill of the English, account for the rest. When, however, the period of restriction began, in 1808, the importation of foreign goods was first impeded, and soon entirely prevented. The domestic manufacture accordingly extended with prodigious rapidity. Already 'Bishop, " Hist, of Manufactures," II., 102. ' See the pamphlet by Blodgett " On a Plan of Economy," etc., already cited, p. 26. 28 PROTECTION TO YOUNG INDUSTRIES. during the years 1804-8 greater activity must have pre- vailed ; for in the latter year fifteen mills had been built, running 8,000 spindles. In 1809 ^^ number of mills built shot up to 62, with 31,000 spindles, and while 25 more mills were in course of erection.' In 1812 there were 50 factories within thirty miles of Providence, operat- ing nearly 60,000 spindles, and capable of operating 100,- 000.° During the war the same rapid growth continued, rendered possible as it was by the increasing supply of raw cotton from the South. The number of spindles was said to be 80,000 in 181 1, and 500,000 in 1815. In 1800, 500 bales of cotton had been used ; in 1805, 1,000 bales. In 1 8 10 the number consumed rose to 10,000; in 1815, it was 90,000.° These figures cannot be supposed to be ' Gallatin's Report on Manufactures in 1810 ; " Amer. State Papers, Finance," II., 427. ^ " White : " Memoir of Slater," p. 188. ' See the Report of a Committee of Congress on the Cotton Manufacture in 1816 ; " Amer. State Papers, Finance," III, 82, 84. This estimate re- fers only to the cotton consumed in factories, and does not include that used In household manufacture. The number of spindles for 1815, as given in this report, is probably much too large. In Woodbury's Report of 1836 on cotton, the number of spindles in use in factories is given as follows : In 1805 . . 4,500 spindles. " 1807 " 1809 " 1810 " 1815 " 1820 " 1821 " 1825 Exec. Doc," I Sess., 24 Congr. 8,000 " 31,000 " 87,000 " 130,000 " 220,000 " 230,000 " 800,000 " No. 146, p. 51. It need not be said Jiat these figures are hopelessly loose ; but they are sufficient to support the general assertions of the text. THE COTTON MANUFACTURE. 29 at all accurate ; but they indicate clearly an enormously rapid development of the manufacture of cotton. The machinery in almost all these new factories was for spinning yarn only. Weaving was still carried on by the hand-loom, usually by weavers working in considerable numbers on account for manufacturers. Toward the end of the war, however, a change began to be made almost as important in the history of textile manufactures as the use of the spinning-jenny and mule : namely, the substitu- tion of the power-loom for the hand-loom.^ The introduc- tion of the power-loom took place in England at about the same time, and some intimation of its use seems to have reached the inventor in this country, Francis C. Lowell. He perfected the machine, however, without any use of English models, in the course of the year 1814. In the same year it was put in operation at a factory at Waltham, Mass. There for the first time the entire pro- cess of converting cotton into cloth took place under one roof. The last important step in giving textile manufac- tures their present form was thus taken.' When peace was made in 1815, and imports began again, the newly established factories, most of which were ' badly equipped and loosely managed, met with serious embarrassment. Many were entirely abandoned. The manufacturers petitioned Congress for assistance ; and they received, in 18 16, that measure of help which the public was then disposed to grant. The tariff of 18 16 'Appleton, pp. 7-1 1 ; Batchelder, pp. 60-70. 30 PROTECTION TO YOUNG INDUSTRIES. levied a duty of 25 per cent, on cotton goods for three years, a duty considered sufficiently protective in those days of inexperience in protective legislation. At the same time it was provided that all cotton cloths, costing less than 25 cents a yard, should be considered to have cost 25 cents and be charged with duty accordingly ; that is, should be charged 25 per cent, of 25 cents, or 6|- cents a yard, whatever their real value or cost. This was the first of the minimum valuation provisos which played so considerable a part in later tariff legislation, and which have been maintained in large part to the present time. A similar minimum duty was imposed on cotton-yarns.' At the time when these measures were passed, the minimum provisos hardly served to increase appreciably the weight of the duty of 25 per cent. Coarse cotton cloths were then worth from 25 to 30 cents, and, even without the provisos, would have paid little, if any thing, less than the minimum duty. But, after 1818, the use of the power- loom, and the fall in the price of raw cotton, combined greatly to reduce the prices of cotton goods. The price of coarse cottons fell to 19 cents in 18 19, 13 cents in 1826, and 8|- cents in 1829." The minimum duty became proportionately heavier as the price decreased, and, in a few years after its enactment, had become prohibitive of the importation of the coarser kinds of cotton cloths. ■ The minimum system seems to have been suggested by Lowell. Apple- ton, p. 13. Compare Appleton's speech in Congress in 1833, — "Congres- sional Debates," IX., 1213. ' Appleton, p. 16. THE COTTON MANUFACTURE. 3 1 During the years immediately after the war, the aid given in the tariff of 1816 was not sufificient to prevent severe depression in the cotton manufacture. Reference has already been made to the disadvantages which, under the circumstances of the years 18 15-18, existed for all manufacturers who had to meet competition from abroad. But when the crisis of 1818-19 had brought about a re- arrangement of prices more advantageous for manufac- turers, matters began to mend. The minimum duty became more effective in handicapping foreign competitors. At the same time the power-loom was generally introduced. Looms made after an English model were introduced in the factories of Rhode Island, the first going into opera- tion in 1817 ; while in Massachusetts and New Hampshire the loom invented by Lowell was generally adopted after 1816.' From these various causes the manufacture soon became profitable. There is abundant evidence to show that shortly after the crisis the cotton manufacture had fully recovered from the depression that followed the war.' The profits made were such as to cause a rapid ' Appleton, p. 13 ; Batchelder, pp. 70-73. ^ The following passage, referring to the general revival of manufactures, may he quoted : "The manufacture of cotton nov^ yields a moderate profit to those who conduct the business with the requisite skill and economy. The extensive factories at Pawtucket are still in operation. ... In Phil- adelphia it is said that about 4,000 looms have been put in operation within the last six months, which are chiefly engaged in making cotton goods, and that in all probability they will, within six months more, be increased to four times that number. In Paterson, N. J. , where, two years ago, only three out of sixteen of its extensive factories were in operation ... all are now in vigorous employment. " — " Niles's Register," XXI., 39 (1821). Com- 32 PROTECTION TO YOUNG INDUSTRIES. extension of the industry./ The beginning of those man- ufacturing villages which now form the characteristic economic feature of New England falls in this period. Nashua was founded in 1823. Fall River, which had grown into some importance during the war of 1814, grew rapidly from 1820 to 1830.' By far the most important and the best known of the new ventures in cotton manu- facturing was the foundation of the town of Lowell, which was undertaken by the same persons who had been en- gaged in the establishment of the first power-loom factory at Waltham. The new town was named after the inventor of the power-loom. The scheme of utilizing the falls of the Merrimac, at the point where Lowell now stands, had been suggested as early as 1821, and in the following year the Merrimac Manufacturing Company was incorporated. In 1823 manufacturing began, and was profitable from the beginning ; and in 1824 the future growth of Lowell was clearly foreseen." pare Ibid., XXII., 225, 250(1822); XXIII., 35, 88(1823); a.nd passim. In Woodbury's cotton report, cited above, it is said (p. 57) that " there was a great increase [in cotton manufacturing] in 1806 and 1807 ; again during the war of 1812 ; again from 1820 to 1825 ; and in 1831-32." ' Fox's " History of Dunstable " ; Earl's " History of Fall River," p. 20 '' See the account ip Appleton, pp. 17-25. One of the originators of the enterprise said in 1824 . " If our business succeeds, as we have reason to expect, we shall have here [at Lowell] as large a population in twenty years from this time as there was in Boston twenty years ago." — Batchel- der, p. 69. In Bishop, II., 309, is a list of the manufacturing villages of 1826, in which some twenty places are enumerated. THE COTTON MANUFACTURE. 33 From this sketch of the early history of the cotton manufacture we may draw some conclusions. Before 1808 the difficulties in the way of the introduction of this branch of industry were such that it made little progress. These difficulties were largely artificial ; and though the obstacles arising from ignorance of the new processes and from the absence of experienced workmen, were partly removed by the appearance of Slater, they were sufficient, when combined with the stimulus which the condition of foreign trade gave to agriculture and the carrying trade, to prevent any appreciable development. Had this period come to an end without any accompanying politi- cal change — had there been no embargo, no non-inter- course act, and no war with England — the growth of the cotton manufacture, however certain to have taken place in the end, might have been subject to much friction and loss. Conjecture as to what might have been is danger- ous, especially in economic history, but it seems reasonable to suppose that if the period before 1808 had come to an end without a jar, the eager competition of well-estab- lished English manufacturers, the lack of familiarity with the processes, and the long-continued habit, especially in New England, of almost exclusive attention to agriculture, commerce, and the carrying trade, might have rendered slow and difficult the change, however inevitable it may have been, to greater attention to manufactures. Under such circumstances there might have been room for the legitimate application of protection to the cotton manu- 34 PROTECTION TO YOUNG INDUSTRIES. facture as a young industry. But this period, in fact, came to an end with a violent shock, which threw indus- try out of its accustomed grooves, and caused the strikmg growth of the cotton manufacture from 1808 to 181 5. The transition caused much suffering, but it took place sharply and quickly. The interruption of trade was equiv- alent to a rude but vigorous application of protection, which did its work thoroughly. When peace came, in 1815, it found a large number of persons and a great amount of capital engaged in the cotton manufacture, and the new processes of manufacture introduced on an extensive scale. Under such circumstances the industry was certain to be maintained if it was for the economic interest of the country that it should be carried on. The duties of the tariff of 18 16, therefore, can hardly be said to have been necessary. Nevertheless, they may have been of service. The assistance they gave was, it is true, insignificant in comparison with the shelter from all foreign competition during the war. Indeed, most manu- facturers desired much higher duties than were granted." It is true, also, that the minimum duty on cottons was least effective during the years immediately after the war, when the price of cottons was higher, and the duty was therefore proportionately less high. But these years be- " " In 1816 a new tariff was to be made. The Rhode Island manufac- turers were clamorous for a very high specific duty. Mr. Lowell's views on the tariff were much more moderate, and he finally brought Mr. Lowndes and Mr. Calhoun to support the minimum of t\ cents a yard, which was carried." — Appleton, p. 13. THE COTTON MANUFACTURE. 35 tween the close of the war and the general fall of prices in 1819 were trying for the manufacturers. The normal economic state, more favorable for them, was not reached till the crisis of 18 18-19 was well over. During the inter- vening years the minimum duty may have assisted the manufacturers without causing any permanent charge on the people. The fact that careful and self-reliant men, like the founders of the Waltham and Lowell enterprises, were most urgent in advising the adoption of the rates of 1 8 16 — at a time, too, when the practice of appealing to Congress for assistance when in distress had not yet be- come common among manufacturers — may indicate that those rates were of service in encouraging the continuance of the manufacture. How seriously its progress would have been impeded or retarded by the absence of duties, cannot be said. On the whole, although the great im- pulse to the industry was given during the war, the duties on cottons in the tariff of 18 16 may be considered a judi- cious application of the principle of protection to young industries. Before 1824, the manufacture, as we have seen, was se- curely established. The further application of protection in that and in the following years was needless, and, so far as it had any effect, was harmful. The minimum valua- tion was raised in 1824 to 30 cents, and in 1828 to 35 cents. The minimum duties were thereby raised to 7^ and 8|- cents respectively. By 1824 the manufacture had so firm a hold that its further extension should have been 36 PROTECTION 7'0 YOUNG INDUSTRIES. left to individual enterprise, which by that time might have been relied on to carry the industry as far as it was for the economic interest of the country that it should be carried. The increased duties of 1824 and 1828 do not come within the scope of the present discussion. IV. THE WOOLLEN MANUFACTURE. The sudden and striking growth of the cotton manu- facture in the last hundred years has caused its history, in this country as in others, to be written with comparative fulness. Of the early history of the manufacture of woollen goods in the United States we have but scanty accounts ; but these are sufficient to show that the general course of events was similar to that in cotton manufac- turing. During the colonial period and the years imme- diately after the Revolution, such woollen cloths as were not spun and woven in households for personal use were imported from England. The goods of household manu- facture, however, formed, and for many years after the in- troduction of machinery continued to form, by far the greater part of those in use. The first attempt at making ivoollens in large quantities is said to have been made at Ipswich, Mass., in 1792 ; but no machinery seems to have been used in this undertaking. In 1794 the new machin- ery was for the first time applied to the manufacture of wool, and it is noteworthy that, as in the case of the cot- ton manufacture, the machinery was introduced by En- 37 38 PROTECTION TO YOUNG INDUSTRIES. lish workmen. These were the brothers Arthur and John Scholfield, who came to the United States in 1793, and in the next year established a factory at Byfield, Mass. Their machinery, however, was exclusively for card- ing wool, and for dressing (fulling) woollen goods ; and for the latter purpose it was probably in no way different from that of the numerous fulling-mills which were scat- tered over the country during colonial times. Spinning and weaving were done, as before, on the spinning-wheel and the hand-loom. The Scholfields introduced carding- machinery in place of the hand-cards, and seem to have carried on their business in several places with success. A Scotchman, James Saunderson, who emigrated in 1794, also introduced carding-machines at New Ipswich, N. H., in 1 801. Their example, however, was followed by few. Carding-machines were introduced in a few other places between 1800 and 1808 ; but no development of the busi- ness of systematically making cloth, or preparing wool for sale, took place. The applicafion of machinery for spinning does not seem to have been made at all.' One great difficulty in the way of the woollen manufacture was the deficient supply and poor quality of wool. The means of overcoming this were supplied when in 1802 a '^' large flock of fine merino sheep was imported from Spain, ' See a sketch of the early history of the woollen manufacture in Taft's " Notes on the Introduction of the Woollen Manufacture.'' Compare the same writer's account in " Bulletin National Ass. of Wool Manufacturers," II., 478-488 and the scattered notices in Bishop, " Hist, of Manufactures," I., 421, and II,, 106, 109, 118, etc. THE WOOLLEN MANUFACTURE, 39 followed in 1809 and 18 10 by several thousand pure me- rinos from the same country.' But imports from England continued to be large, and those woollen cloths that were not homespun were obtained almost exclusively from the mother country.' When the period of restriction began in 1808, the wool- len manufacture received, like all other industries in the same position, a powerful stimulus. The prices of broad- cloth, then the chief cloth worn besides homespun, rose enormously, as did those of flannels, blankets, and other goods, which had previously been obtained almost exclu- sively by importation. We have no such detailed state- ments as are given of the rise of the cotton manufacture. It is clear, however, that the manufacture of woollen goods, which had had no real existence before, began, and was considerably extended. The spinning of wool by 'Bishop, II., 94, 134. ' The United States were important customers of woollens for England, as appears from the following figures, which give in millions of pounds sterling the total exports of woollens from England, and those of exports to the United States. Total To the U. S. 1790 5-2 1-5 1791 5-5 1.6 1792 5-5 1.4 1793 3.8 I.O 1794 4.4 I '4 1795 5.2 2.0 1796 6.0 2.3 1797 4.9 1.9 1798 . 6.5 2.4 1799 6.9 2.8 Brothers, " Wool and Woo i Manufactui es of Grea t Britain," 143, 144 40 PROTECTION TO YOUNG INDUSTRIES. machinery was introduced, and goods were made for sale on a large scale. As early as i8io the carding and spin- ning of wool by machinery was begun in some of the cotton mills in Rhode Island.' In Northampton, Mass., Oriskany, N. Y., and other places, large establishments for the manufacture of woollen goods and of satinets (mixed cotton and woollen goods) sprang up. The value of woollen goods made in factories is said to have risen from $4,000,000 in 18 10 to $19,000,000 in 1815.' After 181 5 the makers of woollens naturally encountered great difficulties in face of the renewed and heavy impor- tations of English goods. The tariff of 18 16 gave them the same duty that was levied on cottons, 25 per cent., to be reduced in three years to 20 per cent. The reduction of the duty to 20 per cent., which was to have taken place in 1 8 19, was then postponed, and in the end never took place. No minimum valuation was fixed for woollen goods ; hence there was not, as for cotton goods, a mini- mum duty. Wool was admitted at a duty of 15 percent. The scheme of duties, under the tariff of 1816, thus afforded no very vigorous protection. Nor did the provi- sions of the act of 1824 materially improve the position of the woollen manufacturers. The duty on woollen goods was in that act raised to 30 per cent, in the first instance, and to 331^ per cent, after 1825. At the same time the ' Gallatin's report of 1810, " Am. State Papers, Finance," II. 427 ; Taft, 44- ' " Bulletin Wool Manufacturers," II., 486. This is hardly more than a loose, though significant, guess. THE WOOLLEN MANUFACTURE. 4I duty on wool (except that costing ten cents a pound or less) was raised to 20 per cent, in the first place, to 25 per cent, after 1825, and to 30 per cent, after 1826. If foreign wool had to be imported to supplement the domestic supply, — and such a necessity has constantly existed in this country since 1816, — the increased price of wool in this country, as compared with other countries which ad- mitted wool free or at a lower duty, would tend to make the effectual protection to woollen manufacturers far from excessive. Notwithstanding the very moderate encouragement given from i8i6to 1828, the woollen manufacture steadily progressed after the crisis of 1819, and in 1828 was securely established. During the years from the close of the war till 18 19 much embarrassment was felt, and many establishments were given up ; but others tided over this trying time.' After 1819 the industry gradually responded to the more favorable influences which then set in for manufactures, and made good progress. During 1821 and 1822 large investments were made in factories for making woollen cloths, especially in New England." In 1823 the manufacturers of woollens in Boston were sufficiently numerous to form an independent ' Thus a large factory in Northampton, built in 1809 (Bishop, II., 136), was still in operation in 1828 ("Am. State Papers, Finance," V., 815). In Taf t's " Notes " there is mention (pp. 39-40) of the Peacedale Manufacturing Company, which began in 1804, and has lasted to the present time. It is said that the spinning-jenny was first applied to wool in this factory. ' Bishop, II., 270, 294 ; Niles, XXII., 225. 42 PROTECTION TO YOUNG INDUSTRIES. organization for the promotion of their interests, which were, in that case, to secure higher protective duties.' The best evidence which we have of the condition of the industry during these years is to be found in the testi- mony given in 1828 by various woollen manufacturers be- fore the Committee of the House of Representatives on Manufactures. This testimony shows clearly that the industry was established in 1828 on such a scale that the difficulties arising from lack of skill and experience, unfa- miliarity with machinery and methods, and other such temporary obstacles, no longer had influence in prevent- ing its growth." The capital invested by the thirteen manufacturers who testified before this committee varied from $20,000 to $200,000, the average being $85,000. The quantity of wool used by each averaged about 62,000 pounds per year. These figures indicate a scale of opera- tion very considerable for those days. Six of the fac- tories referred to had been established between 1809 ^"'^ 181 5. With the possible exception of one, in regard to which the date of foundation was not stated, none had been established in the years between 1815 and 1 820 ; the remain- ing six had been built after 1820. Spinning-machinery was in use in all. Some used power-looms, others hand-looms. The application of the power-loom to weaving woollens, said one manufacturer, had been made in the tJnited States " Niles, XXV., 148, 189, ' The testimony is printed in full in "American State Papers, Finance," v., 798-832. THE WOOLLEN MANUFACTURE. 43 earlier than in England.' An indication, similar to this, of the point reached by the American producers in the use of machinery, was afforded by the difference of opin- ion in regard to the comparative merits of the jenny, and of the " Brewster," a spinning-machine of recent inven- tion. Goods of various kinds were made — broadcloths, cassimeres, flannels, satinets, and kerseys. The opinion was expressed by several that the mere cost of manufac- turing was not greater in the United States than in Eng- land ; that the American manufacturer could produce, at as low prices as the English, if he could obtain his wool at as low prices as his foreign competitor." This testi- ' Testimony, p. 824. The same statement is made by Bishop, II., 317. In Taft's " Notes,'' p. 39, there is an account of the- application of the power-loom to weaving saddle-girths as early as 1814. In 1822 the power-loom for weaving broadcloths seems to have been in common use. — Taft, p. 43. ' " Broadcloths are now (1828) made at much less expense of labor and capital than in 1825, by the introduction of a variety of improved and labor- saving machinery, amongst which may be named the dressing-machine and the broad power-loom of American invention " (p. 824). The power-loom was very generally used. " Since the power-looms have been put in opera- tion, the weaving costs ten cents per yard, instead of from eighteen to twenty-eight cents " (p. 814). Shepherd, of Northampton, to whose factory reference has already been made (ante p. 44, note i), said : " The differ- ence in price of cloths (in the United States and in England) would be the difference in the price of the wool, as, in my opinion, we can manufacture as cheap as they (the English) can " (p. 816). In the same connection another manufacturer said: "The woollen manufacture is not yet fairly established in this country, but I know no reason why we cannot manufac- ture as well and as cheap as they can in England, except the difference in the price of labor, for which, in my opinion, we are fully compensated by other advant^es. Our difficulties are not the cost of manufacturing, but the great fluctuations in the home market, caused by the excessive and irreg- 44 PROTECTION TO YOUNG INDUSTRIES. mony seems to show conclusively that at the time when it was given the woollen manufacture had reached that point at which it might be left to sustain itself ; at which accidental or artificial obstacles no longer stood in the way of its growth. That many of the manufacturers themselves wanted higher duties, is, for obvious reasons, not inconsistent with this conclusion. Progress had been less certain and rapid than in the case of the kindred cot- ton manufacture, for the conditions of production were less distinctly favorable. The displacement of the house- hold products by those of the factory was necessarily a gradual process, and made the advance of the woollen manufacture normally more slow than that of the kindred industry. But the growth of the cotton manufacture, so similar to that of wool, of itself removed many of the ob- stacles arising from the recent origin of the latter. The use of machinery became common, and, when the first great steps had been taken, was transferred with com- parative ease from one branch of textile production to another. In 1828, when for the first time heavy protec- tion was given by a complicated system of minimum du- ties, and when the actual rates rose, in some cases, to over icxD per cent., this aid was no longer needed to sus- ular foreign importations. The high prices we pay for labor are, in my opinion, beneficial to the American manufacturer, as for thofe wages we get a much better selection of hands, and those capable and willing to per- form a much greater amount of labor in a given time. The American man- ufacturer also uses a larger share of labor-saving machinery than the Eng- lish " (p. 829). THE WOOLLEN MANUFACTURE. 45 tain the woollen manufacture. The period of youth had then been past. It appears that direct protective legislation had even less influence in promoting the introduction and early growth of the woollen than of the cotton manufacture. The events of the period of restriction, from 1808 to 1815, led to the first introduction of the industry, and gave it the first strong impulse. Those events may indeed be considered to have been equivalent to effective, though crude and wasteful, protective legislation, and it may be that their effect, as compared with the absence of growth before 1808, shows that protection in some form was needed to stimulate the early growth of the woollen manufacture. But, by 1815, the work of establishing the manufacture had been done. The moderate duties of the period from 1816 to 1828, partly neutralized by the duties on wool, may have something to sustain it ; but the position gained in 181 5 would hardly have been lost in the absence of these duties. By 1 828, when strong pro- tection was first given, a secure position bad certainly been reached. V. THE IRON MANUFACTURE. We turn now to the early history of the iron manufac- ture, — the production of crude iron, pig and bar. We shall examine here the production, not of the finished article, but of the raw material. It is true that the pro- duction of crude iron takes place under somewhat different conditions from those which affect cotton and woollen goods. The production of pig-iron is more in the nature of an extractive industry, and, under ordinary circum- stances, is subject in some degree to the law of diminishing returns. To commodities produced under the conditions of that law, the argument for protection to young indus- tries has not been supposed, at least by its more moderate advocates, to apply, since the sites where production will be carried on to best advantage are apt to be determined by unalterable physical causes." It happens, however, that changes in the processes of production, analogous to those which took place in the textile industries, were made at about the same time in the manufacture of crude ' See, for instance, List, " System of National Economy," Phila., 1856, pp. 296-300. 46 THE IRON MANVFACTURE. 47 iron. These changes rendered more possible the success- ful application of the principle of protection to young industries, and make the discussion of its appHcation more pertinent. There is another reason why we should consider, in this connection, the raw material rather than the finished article. The production of the latter, of the tools and implements made of iron, has jiot, in general, needed protection in this country, nor has protection often been asked for it. The various industries by which crude iron is worked into tools and consumable articles were firmly established already in the colonial period, and since then have maintained themselves with little difificulty. The controversy on the protection of the iron manufac- ture has been confined mainly to the production of pig. and bar-iron. It is to this, therefore, that we shall direct our attention. The production of pig- and bar-iron will be meant when, in the following pages, the " iron manu- facture " is spoken of. During the eighteenth century England was a country importing, and not, as she is now, one exporting, crude iron. The production of pig- and bar-iron was accordingly encouraged in her colonies, and production was carried on .in them to an extent considerable for those days. Large quantities of bar-iron were exported from the American colonies to England." The manufacture of iron was ' See the tables in Bishop, I., 629, and Scrivenor, " History of the Iron Trade," p. 81. In 1740 the total quantity of iron produced in England was about 17,000 tons ; at that time from 2,000 to 3,000 tons annually were regularly imported from the American colonies. 48 PROTECTION TO YOUNG INDUSTRIES. firmly established in the colonies according to the meth- ods common at the time. During the second half of the eighteenth century, however, the great change took place in England in the production of iron which has placed that country in its present position among iron-making countries, and has exercised so important an influence on the material progress of our time. Up to that time char- coal had been used exclusively for smelting iron, and the iron manufacture had tended to fix itself in countries where wood was abundant, like Norway, Sweden, Russia, and the American colonies. About 1750 the use of coke in the blast furnace began. The means were thus given for producing iron in practically unlimited quantities, without dependence for fuel on forests easily exhaustible ; and in the latter part of the century, when the steam- engine supplied the motive power for the necessary strong blast, production by means of coke increased with great rapidity.' At the same time, in 1783 and 1784, came the inventions of Cort for puddling and rolling iron. By these the transformation of .pig-iron into bar-iron of convenient sizes was effected in large quantities. Before the inven- tions of Cort, pig-iron had been first converted into bar under the hammer, and the bar, at a second distinct oper- ation in a slitting mill, converted into bars and rods of con- venient size. The rolled bar made by the processes of puddling and rolling — which are still in common use — is ' See the good account of the importance of the use of coke (coal) in Je- vons, " The Coal Question," ch. XV., pp. 309.316. THE IRON MANUFACTURE. 49 inferior in quality, at least after the first rolling, to the hammered and slit iron, known as hammered bar, pro- duced by the old method. Cort's processes, however made the iron much more easily and cheaply, and the lower price of the rolled iron more than compensated, for most purposes, for its inferior quality. At the same time these processes made easy and fostered the change from production on a small sale to production on a large scale. This tended to bring about still greater cheapness, and made the revolution in the production of iron as great as that in the textile industries, and similar to it in many im- portant respects. During the period 1789- 1808 these changes in the iron < manufacture were too recent to have had any appreciable effect on the conditions of production and supply in the United States. The manufacture of iron, and its trans- formation into implements of various kinds, went on without change from the methods of the colonial period. Pig-iron continued to be made and converted into ham- mered bar in small and scattered works and forges.' No pig-iron seems to have been imported. Bar-iron was im- ported, in quantities not inconsiderable, from Russia'; but no crude iron was imported from England. The im- portations of certain iron articles, not much advanced be- yond the crude state, such as nails, spikes, anchors, cables, showed a perceptible increase during this period.' ' French, " Hist, of Iron Manufacture," p. 16. ' Ibid., p. 13. 2 The imports of iron, so far as separately stated in the Treasury reports, may be found in Young's Report on Tariff Legislation, pp. XXVI.- XXXVI. Cp. Grosvenor, "Does Protection Protect?" pp. 174, 175. so PROTECTION TO YOUNG INDUSTRIES. Whether this increase was the result of the general con- ditions which tended to swell imports during this period, or was the first effect of the new position which England ivas taking as an iron-making country, cannot be deter- mined. Information on the state of the industry during this period is meagre ; but it seems to have been little affected by the protective duties which Congress enacted on nails, steel, and some other articles. No protection ^ was attempted to be given to the production of pig or bar-iron, for it was thought that the domestic producers would be able to compete successfully with their foyeign competitors in this branch of the iron-trade. During the period of restriction from 1808 to 1815, the iron and manufactures of iron previously imported, had to be obtained, as far as possible, at home. A large in- crease in the quantity of iron made in the country accord- ingly took place. The course of events was so similar to that already described in regard to textile manufactures that it need not be referred to at length. When peace came, there were unusually heavy importations of iron, prices fell rapidly, and the producers had to go through •^ a period of severe depression. In 1 8 16 Congress was asked to extend protection to the manufacture of iron, as well as to other industries. The tariff of 18 16 imposed a duty of 45 cents a hundred- weight on hammered-bar iron, and one of $1.50 a hun- dred-weight on rolled bar, with corresponding duties on .sheet, hoop, and rod iron. Pig-iron was admitted under THE IRON MANUFACTURE. 5I an ad valorem duty of 20 per cent. At the prices of bar- iron in 1 8 16, the specific duty on hammered bar was equivalent to about 20 per cent.,' and was, therefore, but little higher than the rates of 15 and 17^ per cent, levied in 1804 and 1807. The duty on rolled bar was much higher, relatively to price, as well as absolutely, than that on hammered bar, and was the only one of the iron duties of 1 8 16 which gave distinct and vigorous protection. These duties were not found sufficient to prevent the manufacturers from suffering heavy losses, and more effec- tive protection was demanded. In 181 8, Congress, by a special act, raised the duties on iron considerably, at the same time, as was noted above," that it postponed the reduction from 25 to 20 per cent, on the duty on cottons and woollens. Both of these measures were concessions to protective feeling, and they may have been the result of an uneasy consciousness of the disturbed state of the country and of the demand for protection which was to follow the financial crisis of the next year.' The act of 1 8 18 fixed the duty on pig-iron at 50 cents per hundred- weight — the first specific duty imposed on pig-iron ; ham- mered bar was charged with 75 cents a hundred-weight, instead of 45 cents, as in 1816; and higher duties were put on castings, anchors, nails, and spikes.* These duties ' See the tables of prices in French, pp. 35, 36. ' Ante, p. 27. ' There is nothing in the Congressional debates on the acts of 1818 to show what motives caused them to be passed. < " Statutes at Large," HI., 460. 52 PROTECTION TOYOUNG INDUSTRIES. were comparatively heavy ; and with a steady fall in the price of iron, especially after the crisis of 1818-19, they became proportionately heavier and heavier. Neverthe- less, in the tariff of 1824 they were further increased. The rate on hammered bar went up to 90 cents a hundred- weight ; that on rolled bar still remained at $1.50, as it had been fixed in 1816. In 1828 a still further increase was made in the specific duties on all kinds of iron, al- though the continual fall in prices was of itself steadily increasing the weight of the specific duties. The duty on pig-iron went up to 62^ cents a hundred-weight ; that on hammered bar to a cent a pound (that is, $I.I2 a hundred- weight) ; that on rolled bar to $37 a ton. In 1832 duties were reduced in the main to the level of those of 1824, and in 1833 the Compromise Act, after maintaining the duties of 1832 for two years, gradually reduced them still further, till in 1 842 they reached a uniform level of 20 per cent. On the whole, it is clear that after 1818 a system of increasingly heavy protection was applied to the iron manufacture, and that for twenty years this protection was maintained without a break. From 18 18 till 1837 or 1838, when the reduction of duty under the Compromise Act began to take effect to an appreciable extent, the duties on iron in its various forms ranged from 40 to 100 per cent, on the value. It is worth while to dwell for a moment on the heavy duty on rolled iron — much higher than that on hammered iron — which was adopted in l8 16, and maintained through- THE IRON MANUFACTURE. %% out this period. Congress attempted to ward off the competition of the cheaper rolled iron by this heavy dis- criminating duty, which in 1828 was equivalent to one hundred per cent, on the value. When first established in 1 8 16, the discrimination was defended on the ground that the rolled iron was of inferior quality, and that the importation of the unserviceable article should be impeded for the benefit of the consumer. The scope of the change in the iron manufacture, of which the appearance of rolled iron was one sign, was hardly understood in 1816 and 1818, and this argument against its use may have repre- sented truthfully the animus of the discriminating duty. But in later years the wish to protect the consumer from impositions hardly continued to be the motive for retain- ing the duty. Rolled bar-iron soon became a well-known article, of considerable importance in commerce. The discriminating duty was retained throughout, and in 1828 even increased ; it was still levied in the tariff of 1832 ; it reappeared when the Whigs carried the tariff of 1842 ; and it did not finally disappear till 1846. The real mo- tive for maintaining the heavy tax through these years undoubtedly was the unwillingness of the domestic pro- ducers to face the competition of the cheaper article. The tax is a clear illustration of that tendency to fetter and impede the progress of improvement which is inhe- rent in protective legislation. It laid a considerable burden on the community, and, as we shall see, it was of no service in encouraging the early growth of the iron 54 PROTECTION TO YOUNG INDUSTRIES. industry? It is curious to note that the same contest against improved processes was carried on in France, by a discriminating duty on English rolled iron, levied iirst in 1816, and not taken off till i860.' After 1815 the iron-makers of the United States met with strong foreign competition from two directions. In the first place, English pig and rolled iron was being pro- duced with steadily decreasing cost. The use of coke be- came universal in England, and improvements in methods of production were constantly made. Charcoal continued to be used exclusively in the furnaces of this country ; for the possibility of using anthracite had not yet been dis- covered, and the bituminous coal fields lay too far from what was then the region of dense population to be avail- able. While coke-iron was thus driving out charcoal-iron for all purposes for which the former could be used, the production of charcoal-iron itself encountered the com- petition of Sweden and Russia. As the United States advanced in population, the more accessible forests became exhausted, and the greater quantity of charcoal-iron need- ed with the increase of population and of production, could be obtained at home only at higher cost. The Scandinavian countries and Russia, with large forests and a population content with low returns for labor, in large part supplied the increased quantity at lower rates than the iron-makers of this country. Hence the imports of iron show a steady increase, both those 'of pig-iron and ' Ame, " Etudes sur les Tarifs de Douanes," I., 145. THE IRON MANUFACTURE. 55 and those of rolled and hammered bar; the rolled bar coming from England, and the hammered bar from Sweden and Russia. The demand for iron was increasing at a rapid rate, and there was room for an increase both of the domestic production and of imports ; but the rise in imports was marked. Notwithstanding the heavy duties, the proportion of imported to domestic iron from 1818 to 1840 remained about the same.' Since importations continued regularly and on a con- siderable scale, the price of the iron made at home was clearly raised, at the seaboard, over the price of the for- eign iron by the amount of the duty. The country, there- fore, paid the iron tax probably on the greater part used, whether of foreign or domestic origin, in the shape of prices from forty to one hundred per cent, higher than those at which the iron could have been bought abroad. ' On the production and imports of iron in the years aft-fir 1830 the reader is referred to the remarks on p. 124, and to the " Quarterly Journal of Eco- nomics," vol. II. , p. 377. Until the middle of the decade 1820-30 the annual product of pig-iron is supposed to have been about 50,000 tons, while in the second half of the decade it is put at 100,000 tons and more. The imports of crude iron averaged about 20,000 tons per year in 1818-21, about 30,000 tons in 1822-27, a"iu.foreign trade for the supply of articles of common use ; this point also was much urged by the protectionists. Similarly the want of reciprocity, and the possibility of securing, by re- taliation, a relaxation of the restrictive legislation of for- eign countries, were often mentioned. But any one who is familiar with the protective literature of that day, — as illustrated, for instance, in the columns of " Niles's Regis- ter," — cannot fail to note the prominent place held by the young-industries argument. The form in which it most commonly appears is in the assertion that protection norm- ally causes the prices of the protected articles to fall, ' an assertion which was supposed, then as now, to be suffi- ciently supported by the general tendency toward a fall in the price of manufactured articles, consequent on the great improvement in the methods of producing such articles. Shortly after 1832, the movement in favor of protec- tion, which had had full sway in the Northern States since 1820, began to lose strength. The young-industries ' See, for instance, the temperate report of J. Q. Adams, in 1832, in which this is discussed as the chief argument of the protectionists. Adams, though himself a protectionist, refutes it, and bases his faith in protection chiefly on the loss and inconvenience suffered through the interruption of foreign trade in time of war. The report is in " Reports of Committees, 22d Congress, 1st Session, vol. V., No. 481. CONCLUDING REMARKS. 65 argument at the same time began to be less steadily pressed. About 1840 the protective controversy took a new turn. It seems to have been felt by this time that manufactures had ceased to be young industries, and that the argument for their protection as such, was no longer conclusive. Another position was taken. The argument was advanced that American labor should be protected from the competition of less highly paid foreign labor. The labor argument had hardly been heard in the period which has been treated in the preceding pages. Indeed, the difference between the rate of wages in the United States and in Europe, had furnished, during the early period, an argument for the free-traders, and not for the protectionists. The free-traders were then accustomed to point to the higher wages of labor in the United States as an insuperable obstacle to the successful establish- ment of manufactures. They used the wages argument as a foil to the young-industries argument, asserting that as long as wages were so much lower in Europe, manufac- turers would not be able to maintain themselves without aid from the government. The protectionists, on the other hand, felt called on to explain away the difference of wages ; they endeavored to show that this difference was not so great as was commonly supposed, and that, so far as it existed, it afforded no good reason against adopt- ing protection.' About 1840, the positions of the con- ' See, among others. Clay's Tariff Speech of 1824, " Works," I., 465. 466. 66 PROTECTION TO YOUNG INDUSTRIES. tending parties began to change.' The protectionists be- wgan to take the offensive on the labor question : the free- traders were forced to the defensive on this point. The protectionists asserted that high duties were necessary to shut out the competition of the ill-paid laborers of Eu- rope, and to maintain the high wages of the laborers of the United States. Their opponents had to explain and de- fend on the wages question. Obviously this change in the line of argument indicates a change in the industrial situa- tion. Such an argument in favor of protection could not have arisen at a time when protective duties existed but in small degree, and when wages nevertheless were high. Its use implies the existence of industries which are supposed to be dependent on high duties. When the protective system had been in force for some time, and a body of in- dustries had sprung up which were thought to be able to pay current wages only if aided by high duties, the wages argurnent naturally suggested itself. The fact that the ' Same signs of the appeal for the benefit of labor appear as early as 1831 in a passage in Gallatin's " Memorial," p. 31, and again in a speech of Web- ster's in 1833, "Works," I., 283. In the campaign of 1840, little was heard of it, doubtless because other issues than protection were in the foreground. Yet Calhoun was led to make a keen answer to it in a speech of 1840, " Works," III., 434. In the debates on the tariff act of 1842, we hear more of it ; see the speeches of Choate and Buchanan, Cbwg'r. Globe-, 1841-42, pp. 950, 953, and Calhoun's allusion to Choate, in Calhoun's "Works," IV., 207. In 1846 the argument appeared full-fledged, in the speeches of Winthrop, Davis, and others, Congr. Globe, 1846, Appendix, pp , 967, 973, 1114. See also a characteristic letter in Niles, vol. 62, p. 262. Webster's speech in 1846, " Works," V., 231, had much about pro- tection and labor, but in a form somewhat different from that of the argu- ment we are nowadays familiar with. CONCLUDING REMARKS. 6^ iron manufacture, which had hitherto played no great part in the protective controversy, became, after 1840, the most prominent applicant for aid, accounts in large part for the new aspect of the controversy. The use of the wages argument, and the rise of the economic school of Henry C. Carey, show that the argument for young industries was felt to be no longer suflScient to be the mainstay of the protective system. The economic situation had changed, and the discussion of the tariff underwent a corresponding change. THE EARLY PROTECTIVE MOVEMENT AND THE TARIFF OF 1828. In the present essay we shall consider, not so much the economic effect of the tariff, as the character of the early protective movement and its effect on political events and on legislation. The protective movement in this country has been said to date from the year 1789, even from before 1789 ; and more frequently it has been said to begin with the tariff act of 1816. But whatever may have been, in earlier years, the utterances of individual public men, or the occasional drift of an uncertain public opinion, no strong popular movement for protection can be traced before the crisis of 1818-19. The act of 1816, which is generally said to mark the beginning of a distinctly protective policy in this country, belongs rather to the earlier series of acts, beginning with that of 1789, than to the group of acts of 1824, 1828, and 1832. Its highest permanent rate of duty was twenty per cent., an increase over the previous rates which is chiefly accounted for by the heavy interest charge on the debt incurred during the war. But after the crash of 1819, a movement in favor of protection set in, which 68 JHE EARLY PROTECTIVE MOVEMENT. 69 was backed by a strong popular feeling such as had been absent in the earlier years. , The causes of the new move- ment are not far to seek. On the one hand there was a great collapse in the prices of land and of agricultural products, which had been much inflated during the years from 1815 to 1818. At the same time the foreign market for grain and provisions, which had been highly profitable during the time of the Napoleonic wars, and which there had been a spasmodic attempt to regain for two or three years after the close of our war in 181 5, was almost entirely lost.^' On the other hand, a large number of manufacturing industries had grown up, still in the early stages of growth, and still beset with difficulties, yet likely in the end to hold their own and to prosper. That disposition to seek a remedy from legislation, which always shows itself after an industrial crisis, now led the farmers to ask for a home market, while the manufacturers wanted protection for young industries. The distress that followed the crisis brought out a plentiful crop of pamphlets in favor of pro- tection, of societies and conventions for the promotion of domestic industry, of petitions and memorials to Congress for higher duties. The movement undoubtedly had deep root in the feelings and convictions of the people, and the .powerful hold which protective ideas then obtained influ- enced the policy of the nation long after the immediate effects of the crisis had ceased to be felt.' ' The character of the protective movement after 1819 is best illustrated by the numerous pamphlets of Matthew Cary. See especially the ' ' Appeal 70 THE EARLY PROTECTIVE MOVEMENT. The first effect of this movement was seen in a series of measures which were proposed and earnestly pushed in Congress in the session of 1819-20. They included a bill for a general increase of duties, one for shortening credits on duties, and one for taxing sales by auction of imported goods. The first of these very nearly took an important place in our history, for it was passed by the House, and failed to pass the Senate by but a single vote. Although it did not become law, the protective movement which was expressed in the votes and speeches on it re- mained unchanged for several years, and brought about the act of 1824, while making possible the act of 1828. Some understanding of the state of feeling in the differ- ent sections of the country is necessary before the peculiar events of 1828 can be made clear, and it may be conven- iently reached at this point. The stronghold of the protective movement was in the Middle and Western states of those days — in New York, New Jersey, Pennsylvania, Ohio, and Kentucky. They were the great agricultural States ; they felt most keenly the loss of the foreign market of the early years of the century, and were appealed to most directly by the cry for a home market. At the same time they had been most deep- ly involved in the inflation of the years 1816-19, and were, in that condition of general distress and confusion which to Common Sense and Common Justice " (1822) and " The Crisis : A Sol- emn Appeal," etc. (1823). " Niles's Register," which had said little about tariff before i8ig, thereafter became that the high tariff of 1842 brought back prosperity ; that depres- sion again followed the passage of the act of 1846, and that the panic of 1857 was precipitated by the tariff act of 1857. On the other hand, free traders not infrequently describe the period between 1846 and i860 as one of ex- ceptional prosperity, due to the low duties then in force. It would not be worth while to allude to some of these assertions, if they were not so firmly imbedded in current literature and so constantly repeated in many accounts of our economic history. This is especially the case with the curious assertion that the crises of 1837 and 1839 were caused by the compromise tariff of 1833, or connected with it. This assertion had its origin in the writings of Henry C. Carey, who has been guilty of many curious versions of economic history, but of none more remarka- ble than this. It may be found in various passages in his works; and from them it has been transferred to the writings of his disciples and to the arguments of protec- tionist authors and speakers in general.' Yet no fair- ' References to the supposed effects of the act of 1833 abound in Carey's works. As good a specimen as any is this : ' ' Agitation succeeded in pro- ducing a total change of system in the tariff of 1833, * f f Thencefor THE TARIFF, 1830-1860. ' II7 minded person, having even a superficial knowledge of the economic history of these years, can entertain such notions. The crises of 1837 and 1839 were obviously due to quite a different set of causes— to the bank troubles, the financial mistakes of Jackson's administration, the in- flation of the currency, and to those general conditions of speculation and unduly expanded credit which give rise to crises. The tariff act had nothing whatever to do with them. Indeed, the reductions in duty under it, as we have ward the building of furnaces and mills almost wholly ceased, the wealthy English capitalists having thus succeeded in regaining the desired control of the great American market for cloth and iron. As a consequence of their triumph there occurred a succession of crises of barbaric tendency, the whole terminating, in 1842, in a scene of ruin such as had never before been known, bankruptcy among the people being almost universal," etc. " Let- ters on the Iron Question " (1865), p. 4, printed in his "Miscellaneous Works " (1872). To the same effect, see his " Financial Crises," p. 18; "Review of Wells' Report," p. 5; " Social Science," II., p. 225. Professor Thompson makes the same statement in his " Political Economy," p. 353. See also Elder, "Questions of the Day"(i87l), pp. 200, 201. Senator Evarts, in a speech made in 1883, ascribed to the act of 1833 " a bank- ruptcy which covered the whole land, without distinction of sections, with ruin." The pedigree of statements of this kind, which are frequent in cam- paign literature, can be traced back to Carey. Doubtless Carey wrote in good faith ; but his prejudices were so strong as to prevent him from taking a just view of economic history. Oddly enough, Calhoun ascribed the crisis of 1837 to the fact that duties under the act of 1833 remained too high. The high duties brought in a large revenue and caused a surplus in the Treasury ; the deposit and distribution of this brought inflation and speculation, and eventually a crisis (" Works," IV., p. 174). No doubt the high duties were one cause of the government surplus, and thereby aided in bringing about the crisis, so that this view, incomplete as it is, has more foundation than Carey's explanation. On the other hand. Clay, as might be expected, took pains to deny that the act of 1833 had any thing to do with the troubles of the years following its passage (" Works," II., pp. 530, 531 ; edition of 1844). Il8 THE TARIFF, 183O-1860, seen, were slight until 1840, ai"fd~could hardly have influ- enced in any degree the breaking out of the panics. Even if the reductions of duty had been greater, and had been made earlier, they would probably have had no effect, favorable or unfavorable, on the inflation of the earlier years or on the depression which followed. We may dispose at this point of a similar assertion oc- casionally made in regard to the crisis of 1857,— that the tariff act of 1857 caused or intensified it. This view also is traceable, probably, to Carey. It appears in his writ- ings and in those of his disciples.' In fact, the crisis of 1857 was an unusually simple case of activity, speculation, over-banking, panic, and depression ; and it requires the exercise of great ingenuity to connect it in any way with the tariff act. As it happened, indeed, the tariff was passed with some hope that it would serve to prevent the crisis. Money was accumulating in the Treasury ; and it was hoped that by reducing duties the revenue would be diminished, money would be got out of the Treasury, and the stringency, which was already threatening, prevented." ' Carey speaks in one place of "the terrific free-trade crisis of 1857." " Letters to Colfax,'' p. 15 ; "Financial Crises,'' p. 8 ; " Review of Wells,'' p. 5 (all in his "Miscellaneous Works"). Thompson ("Political Econ- omy," p. 357) says : "In 1857, Congress reduced the duties twenty-five per cent. * * * It at once intensified all the unwholesome tendencies in our commercial and industrial life. * * * Another great panic followed through the collapse of unsound enterprises." ' See a letter from a Boston merchant to Senator Wilson, "Congr. Globe, 1856-57, Appendix," p. 344 ; and the statement by Senator Hunter, ibid., yii^. THE TARIFF, 183O-1860. II9 The reduction failed to prevent the panic ; but, at the time, it would have been considered very odd to ascribe the disaster to the tariff act. On the other hand, it has been very often said that the activity of trade in 1843-44 was due to the enactment of the protective tariff act of 1842. There may be a degree of truth in this. The unsettled state of legislation on the tariff before the act of 1842 was passed must have been an obstacle to the revival of confidence. After July i, 1842, there was the uniform duty of 20 per cent. ; nay, it was doubtful whether there was by law even that duty in force. It was certain that Congress would wish not to retain the horizontal rate, but would try to enact a new tariff law ; yet the quarrel between the Whigs and Tyler made the issue quite doubtful. Such uncertainty neces- sarily operated as a damper on trade ; and the passage of any act whatever, settling the tariff question for the time being, would have removed one great obstacle to the re- turn of activity and prosperity. It is even possible that the passage of the act of 1842 may have had a more direct effect than this. No doubt, in the regular recurrence of waves of activity and depression, the depression of 1840- 42 would soon have been followed, in any event, by a period of activity. The point at which activity will begin to show itself under such circumstances is largely a mat- ter of chance. It begins, for some perhaps accidental reason, with one industry or set of idustries, and, the materials for general revival being ready, then spreads 120 THE TARIFF, 183O-I860. quickly to the others. In the same way, when the mate, rials for a crisis are at hand, a single accidental failure may precipitate a general panic. In 1842-43 the high duties of the tariff act probably helped to make profits large for the time being in certain manufactures, notably those of cotton and iron. Prosperity in these set in, and may have been the signal for a general revival of confi- dence and for a general extension of business operations. ,To that extent, it is not impossible that the protective (tariff of 1842 was the occasion of the reviving business of the ensuing years. But it is a very different thing from this to say that the tariff was the cause of prosperity, and that depression would have continued indefinitely but for the re-establishment of high protec- tive duties. In truth, there has been a great deal of loose talk about tariffs and crises. Whenever there has been a crisis, the free traders or protectionists, as the case may be, have been tempted to use it as a means for overthrowing the system they opposed. Cobden found in the depression of 1839-40 a powerful argument in his crusade against the corn laws, and knew that a return of prosperity would work against him.' Within a few years, the opponents of protection in this country have found in general de- pression a convenient and effective argument against the tariff. In the same way, the protectionists have been tempted to use the crises of 1837 and 1857, and conversely ' See passages in Morley's " Life of Cobden," pp. 162. 163, 210. THE TARIFF, 183O-1860. 121 the revival of 1843-44, to help their case. But the effect of tariffs cannot be traced by any such rough-and-ready method. The tariff system of a country is but one of many factors entering into its general prosperity. Its influence, good or bad, may be strengthened or may be counteracted by other causes ; while it is exceedingly diffi- cult, generally impossible, to trace its separate effect. Least of all can its influence be traced in those varia- tions of outward prosperity and depression which are marked by " good times " and crises. A protective tariff may sometimes strengthen other causes which are bring- ing on a commercial crisis. Some such effect is very likely traceable to the tariff in the years before the crisis of 1873. It may sometimes be the occasion of a revival of activity, when the other conditions are already favora- ble to such a revival. That may have been the case in 1843. But these are only incidental effects, and lie quite outside the real problem as to the results of pro- tection. As a rule, the tariff system of a country] operates neither to cause nor to prevent crises. They ; are the results of conditions of exchange and produc- tion on which it can exercise no great or permanent' influence. Remarks of the same kind may be made on the fre- quent assertion that the prosperity of the country from 1846 to i860 can be traced to the low duties then in force. He who is convinced, on grounds of general rea- soning and of general experience, that the principles of 122 THE TARIFF, 183O-1860. I free trade are sound and that protective duties are harm- ful, can fairly deduce the conclusion that the low tariffs of 1846 and 1857 contributed, so far as they went, to gen- eral prosperity. But a direct connection cannot be traced. , A number of favorable causes were at work, such as the general advance in the arts, the rapid growth of the rail- '< way system and of ocean communication, the Calif ornian 'gold discoveries. There is no way of eliminating the ; other factors, and determining how much can be ascribed to the tariff alone. Even in the growth of international trade, where some direct point of connection might be found, we cannot measure the effect of low duties ; for international trade was growing between all countries under the influence of cheapened transportation and the stimulus of the great gold discoveries.' The inductive, ; or historical, method absolutely fails us here. ' The growth of foreign trade under the tariffs of 1846 and 1857 was cer- tainly very striking. In Grosvenor's " Does Protection Protect ? " there is a table showing the imports and exports per head of population from 1821 to 1869, in which it is stated that the annual average per head of popula- tion was : Imports. In 1843-46, $4.66 " 1847-50, 6.35 " 1851-55. 9-10 " 1856-60, 10.41 The imports and exports were, in millions of dollars : Annual average of the four years 1843-46, ' " 1847-50, " " five " 1851-55, " " ' " " " 1856-60, But how are we to measure the share which low duties had in promoting this growth ? $5-22 6.32 7.35 9-45 Imports. Exports. 92.7 100 138.3 136.8 231. 186.2 SOS- ' 278.2 THE TARIFF, 1830-1860. I23 We turn now to another inquiry, as to the effect of the fluctuating duties of this period on the protected indus- tries. That inquiry, it is hardly necessary to say, leads us to no certain conclusion as to the effect of the duties on the welfare of the country at large. It is quite conceiv- able, and indeed on grounds of general reasoning at least probable, that any stimulus given to the protected indus- tries indicated a loss in the productive powers of the com- munity as a whole. But it has often been asserted, and again often denied, that the duties caused a growth of certain industries ; and it is worth while to trace, if we can, the tangible effect in this direction, even though it be but a part of the total effect. It is the production of iron in the unmanufactured„fo4:in that-has been mqst hotly discussed in the protective con- troversy. . And in regard to this, fortunately, we have good, if not complete, information. The duty on pig-iron had been 62J cents a hundred- weight under the tariff act of 1828. In 1832 it was re- duced to 50 cents, or $10 per ton. This rate was equiva- lent to about 40 per cent, on the foreign price at that time; and, under the Compromise Act of 1833, it was gradually reduced, until it reached 20 per cent, in 1842. Under the act of 1842, the duty was again raised to $10 a ton. In 1846 it was made 30 per cent, on the value, and in 1857 24 per cent. As the value varied, the duty under the last two acts varied also. In 1847, a time of high prices, the duty of 30 per cent, was equal to $5.75 per 124 THE TARIFF, 183O-1860. ton ; in 1852 it was only $3.05 ; in 1855 it was as high as $6; in i860 it again fell to $3.40/ The duty on bar-iron was of two kinds until 1846, — a duty on hammered bar-iron, and another heavier duty on rolled bar-iron. The duty on hammered bar was, in 1832, fixed at 90 cents per hundredweight, or $18 per ton. That on rolled bar was nearly twice as heavy, being $30 per ton, or nearly 100 per cent, on the value. These duties were reduced under the Compromise Act ; and, as we have seen, the reduction on rolled bar was very great, and, in 1842, very sudden. Under the act of 1842, the duty on hammered bar was made $17 per ton, that on rolled bar $25 per ton. The act of 1846 gave up finally the discrimination between the two kinds, and admitted ' The duty from year to year, on the average, for the fiscal years ending June 30th, is given in the following table. The foreign value, on which the duty was computed, is also given. The figures are compiled from the tables given in French, " History of Iron Manufacture," p. 70, and in the " Re- port of the Iron and Steel Association for 1876," p. 182. Duty 30 per cent, till 1857, Year ending June zoVa.. Average value. 24 per cent, after 1857.) 1847 . . . $19.90 . . . $5.95 1848 15.80 4-75 1849 13.30 4.00 1850 12.70 3.80 1851 12.60 3.75 1852 10.20 3.05 1853 13-40 4.00 1854 18.00 S.40 1855' 20.00 6.00 1856 19.80 5-95 1857 19.50 5.85 1858 17.60 4.20 1859 15.20 3.65 i860 14.10 3.40 THE TARIFF, I83O-I860. I25 both alike at a duty of 30 per cent. ; and the act of 1857 admitted them at 24 per cent.' Before proceeding to examine the economic effect of these duties, it should be said that our information as to the production of iron is in many ways defective, and that the statements relating to it in the following para- graphs cannot be taken to be more than roughly accurate. The government figures give us trustworthy information as to the imports ; but for the domestic production we must rely, at least for the earlier years, on estimates which are often no more than guesses. Nevertheless, the general trend of events can be made out pretty clearly, and we are able to draw some important conclusions." It seems to be clear that the importation of iron was c/^ somewhat affected by the duties. The years before 1842, when the compromise tariff was in force, were years of such disturbance that it is not easy to trace any effects clearly to the operation of the tariff ; but imports during these years were a smaller proportion of the total con- sumption of iron than they were during the period after ' Between 1832 and 1842, an exception had been made for one class of rolled iron, — iron rails actually laid down on railroads. These were ad- mitted free of duty ; or, rather, a drawback was granted of the full amount of duty due or paid on them. Between 1828 aud 1832, a drawback had been granted such as to make the duty on railroad iron only 25 per cent. After 1842, however, it was charged with duty like any other iron. ' The reader who wishes to examine further the data as to the production of iron before i860, is referred to the Appendix to the Quarterly Journal of Economics for April, 1888, vol. II., pp. 377-382, where I have considered the figures in detail. 126 THE TARIFF, 183O-1860. 1846. It must be remembered that from 1830 till 1842 all railroad iron was admitted free of duty, and that a large part of the imported iron consisted of rails. If this quantity be deducted from the total import, the remaining quantity, which alone was affected by the duties, becomes still smaller as compared with the domestic product. In 1 84 1 and 1842, when duties began to be low under the operation of the Compromise Act, imports were larger in proportion to the home product. On the other hand, in the four years, 1843-46, under the act of 1842, they show a distinct decrease. After 1847, they show as distinct an increase, and continue to be large throughout the period until i860. In the speculative and railroad-building years, from 1852 to 1857, the importation was especially heavy ; and in 1853 and 1854 the total quantity of iron imported was almost as great as the home product. The most effective part of the iron duties until 1846 was the heavy discriminating duty on rolled bar-iron. That duty amounted (from 18 18 till 1846, except during a few months in 1842) to about lOO per cent. Rolled iron, made by the puddling process and by rolling, is the form of bar-iron now in common use. The process was first applied successfully by Cort in England about 1785, and in that country was immediately put into extensive use. It made bar-iron much more cheaply and plentifully than the old process of refining in a forge and under a hammer ; and, at the present time, hammered bar of the old-fashioned kind has ceased to be made, except in com- THE TARIFF, 183O-1860. I27 paratively small quantities for special purposes. Cort's processes of puddling and rolling were practicable only- through the use of bituminous coal and coke. The abundant and excellent coal of Great Britain gave that - country an enormous advantage in producing rolled iron, as it had already done in smelting pig-iron, and put her in that commanding position as an iron producer which she continues to occupy to the present day. When rolled iron first began to be exported from England to foreign countries, it aroused strong feelings of jealousy, being so much cheaper than other iron. Several countries fought against the improvement by imposing discriminating duties on it.' That course was adopted in the United States. In.i8i8, a discriminating duty was put on rolled \ iron, partly because it was said to be inferior in quality to hammered iron, and partly from a feeling in favor of pro- ; tecting the domestic producers of hammered iron. The duty was retained, as we have seen, till 1846. Its effect was neutralized in part by the free adrnlisiorTof railroad iron, which was one form of rolled iron ; but, so far as it was applied to rolled iron in general, it simply prevented the United States from sharing the benefit of a great im- provement in the arts. It had no effect in hastening the use of the puddling and rolling processes in the country. Though introduced into the United States as early as ' In France a discriminating duty equivalent to 120 per cent, was im- posed in 1833 on iron imported by sea, i. e., on English iron. Anne, " Tarifs de Douanes," I., 144, 145. The discrimination was maintained until 1855. Ibid., 271. 128 THE TARIFF, 1830-1860. 18 17, these processes got no firm hold until after anthra- cite coal began to be used, about 1840, as an iron-making fuel.' We turn now to the history of the domestic production. By far the most important event in that history is the use of anthracite coal as a fuel, which began about 1840. The substitution of anthracite for wood (charcoal) revo- lutionized the iron trade in the United States in the same way as the use of bituminous coal (coke) had revolution- ' The first puddling and rolling mill in the United States was put up in Pennsylvania in 1817. The first puddling in New England was done as late as 1835. Wood was used as fuel at the outset. Swank, " Iron in All Ages," 166, 330. The effect of the duty on rolled iron cannot be better described than in the clear and forcible language used by Gallatin in 1831 ; " It seems impracticable that iron made with charcoal can ever compete with iron made from bituminous coal. * » * A happy application of anthracite coal to the manufacture of iron, the discovery of new beds of bituminous coal, the erection of iron-works in the vicinity of the most East- erly beds now existing, and the improved means of transportation, which may bring this at a reasonable rate to the sea-border, may hereafter enable the American iron-master to compete in cheapness with foreign rolled iron in the Atlantic districts. On those contingencies the tariff can have no effect. To persist, in the present state of the manufacture, in that particu- lar competition, and for that purpose to proscribe the foreign rolled iron, is to compel the people for an indefinite time to substitute a dear for a cheap article. It is said that the British iron is generally of inferior quality ; this is equally true of a portion of that made in America. In both cases the consumer is the best judge, — ^has an undoubted right to judge for himself. Domestic charcoal iron should confine itself to a competition with the for- eign iron made from the same fuel." Gallatin added, prophetically : ' ' Your memorialists believe that the ultimate reduction of the price of American iron to that of British rolled iron can only, and ultimately will, be accomplished in that Western region which abounds with ore, and in which are found the most extensive formations of bituminous coal," — " Memorial of the Free-Trade Convention," pp. 60, 61. THE TARIFF, 183O-1860. 1 29 ized the English iron trade nearly a century before. Up to 1840, pig-iron had been smelted in this country with charcoal, a fuel which was expensive, and tended to be- come more and more expensive as the nearer forests were cut down and wood became less easily attainable. Char- coal pig-iron could not have competed on even terms with the coal-made English iron. But_betweenj830 and 1840 it was protected by the heavy duties on English iron ; and, under their shelter, the production in those years steadily increased. There seems to be no doubt that, with lower duties or no duties at all, the domestic production would have been less, and the import greater. In other words, the duty operated as a true protective , duty, hampering international trade and increasing the 1 price of the home product as well as of the imported iron. In_i8^2j^however, anthracite coal began to be applied to the making of pig-iron. The use of anthracite was made possible by the hot blast, — a process which was put in successful operation in England at nearly the same time.' The importance of the new method was immediately appreciated, and predictions were made that henceforth there would be no longer occasion for importing iron, even under the 20 per cent, duty of the Compromise Act. Many furnaces were changed trom the charcoal to the ' The hot blast was successfully applied in a furnace in Pennsylvania in 1835, but the experiment was not prosecuted. In 1837, Crane applied it in Wales, and about the same time the process was successfully used in this country. Swank, " Iron in All Ages," 268-273 I French, " History of the Iron Trade," 58-60., t30 The tariff, 1830-1860. anthracite method.' At very nearly the same time, as it happened, the tariff act of i842_was passed, imposing heavy duties on all kinds of iron, among others on the railroad iron which had hitherto been admitted free. Very shortly afterwards a general revival of trade set in. Under the influence of these combined causes, the pro- duction of iron was suddenly increased. The exact amount of the increase is disputed; but the production seems to have risen from somewhere near 300,000 tons in 1840-41, to 650,000 or more in 1846-47. Some part of, this great growth was certainly due to the high protection \ of 1842 ; but, under any circumstances, the use of anthra-^ cite would have given a great stimulus to the iron trade. This is shown by the course of events under the tariff acts of 1846 and 1857. The production remained, on the whole, fairly steady throughout the years when these acts were in force. There was, on the whole, an increase from between 500,000 and 600,000 tons in the earlier years of the period to between 800,000 and 900,000 tons in the later years. For a few years after the passage of the act of 1846, the reduction of the duty to 30 per cent, had little, if any, effect. Prices were high both in England and in the United States ; for it was a time of active railroad building in England, and consequently of great demand for iron. The ad valorem duty was correspond- ' See the notices in Hazard's " Statistical Register," I., pp. 335, 368 ; III., p. 173 ; IV., p. 207, That great results were at once expected from the new method is shown by an interesting speech of Nicholas Biddle's, ibid., II., p. 230. THE TARIFF, 1830-1860. I3I ingly high. In 1850-51 the usual reaction set in, prices went down, production decreased, and the iron-masters complained.' But the natural revival came after a year or two. Prices rose again ; production increased, and continued to increase until i860. Although the duty, which had been $9 a ton under the act of 1842, was no more than $3 and $4 under the 24 per cent, rate which was in force during the years 1858, 1859, and i860, and although these were not years of unusual general activity, the domestic production showed a steady growth. The country was growing fast, many railroads were in course of construction, much iron was needed. An un- diminished home product was consumed, as well as largely increased imports. The most significant fact in the iron trade, however, is to be seen, not in the figures of total production, but in ' the shifting from charcoal to anthracite iron. While the total product remained about the same, the component elements changed greatly. The production of anthracite ■ TJie iron-masters admitted that the act of 1846 had been sufficiently protective when first passed. But in 1849 and 1850, they began to com- plain and ask for higher duties. See ' ' Proceedings of Iron Convention at Pittsburg (1849)," p. 9 ; " Proceedings of Convention at Albany," pp. 27, 42. They certainly had a legitimate subject for complaint in the operation of the ad valorem duty, in that it tended to exaggerate the fluctuations of prices. When prices abroad were high, the duty was high ; when prices abroad were low, the duty was low. Consequently, the price of foreign iron in the United States, which is the sum of the foreign price and the duty, fluctuated more widely than the foreign price alone. This was cer- tainly an evil, especially with an article whose price was liable under any conditions to vary so much as the price of iron. See the table above, p. 124. 132 THE TARIFF, 183O-1860. iron rose steadily : that of charcoal iron fell as steadily. The first anthracite furnace was built in 1840. In 1844 there were said to be twenty furnaces, making 65,000 tons annually.' Thence the production rose with hardly an interruption being in 1844 65,000 gross tons " 1846 110,000 " " " 1849 . 115,000 " " " 1854 . 308,000 net " " 1855 ■ 343,000 " " " 1856 394,000 " " As the anthracite iron production increased, that of char- ! / coal iron decreased. Under the tariff act of 1842, a large number of new charcoal furnaces had been put up." Many of these had to be given up under the combined competition of anthracite and of English iron. Some maintained themselves by using coke and raw bituminous coal, in those parts of the country where bituminous coal was to be had * ; others disappeared. That at least some ' See a " Letter of the Philadelphia Coal and Iron Trade to the Commit- tee on Finance" (pamphlet, Philadelphia, 1844). ' The figure for 1846 is that given in Taylor, "Statistics of Coal," p. 133. Swank gives the figure for 1846 as 123,000 (gross ?) tons. " Iron in All Ages," p. 274. The figures for 1849-56 are from Lesley, " Iron Manufacturers' Guide (1859)," pp. 751,752. Those given by Grosvenor, "Does Protection Protect ? " p. 225, vary somewhat ; but the differences are not great. ° See the figures in Grosvenor, p. 215. There were built in 1843 9 char- coal furnaces ; in 1844, 23 ; in 1845, 35 ; in 1846, 44 ; in 1B47, 34 ; in 1848, 28 ; in 1849, 14. * The use of coke began in the United States about 1850, but was of little importance until after 1856. The use of raw bituminous coal was in- troduced about 1850 in the Shenango and Mahoning valleys (on the border THE TARIFF, 183O-I860. I33 of them should disappear was inevitable. Charcoal iron for general use was a thing of the past ; and the effect of the tariff of 1842 was to call into existence a number of furnaces which used antiquated methods, and before long must have been displaced in any event by anthracite furnaces The use of anthracite not only stimulated the produc- tion of pig-iron, but also that of rolled iron and railroad bars. Anthracite was first used in puddling and reheating in 1844 and 1845/ ^rid thenceforward rolled iron was made regularly in large quantities. In 1856 the production of rolled iron was nearly 500,000 tons." Iron rails first began to be made while the tariff act of 1842 was in force, though the steps towards making them were taken even before that act put an end to the free admission of Eng- lish rails." With the decline in railroad building and the between Pennsylvania and Ohio), where there is suitable coal. Swank, " Iron in All Ages," pp. 2S1— 284. In the " Report of the American Iron and Steel Association for 1876 " (prepared by Swank), the following figures are given of the production of iron with the various kinds of fuel. I have selected a few typical years : Anthracite Charcoal Bituminous coal Year. iron. iron. and coke iron. Total. 1854 339,000 342,000 55,000 736,000 1856 443,000 370,000 70,000 883,000 1858 362,000 285,000 58,000 705,000 i860 519,000 278,000 122,000 919,000 The figures here denote net tons. 'Speech of A. S. Hewitt, in " Proceedings of Iron Convention at Albany " (1849), p. 54. ' Lesley, " Iron Manufacturers' Guide," p. 761. 'See a pamphlet, "Observations on the Expediency of Repealing the Act by which Railroad Iron is Released from Duty,'' 1842. It gives an ac. count of large rolling mills then being erected at Danville, Pennsylvania. 134 THE TARIFF, 183O-1860, general fall in iron prices, which took place in 1849, many of the rail mills stopped work. But the business revived with the general prosperity which set in early in the dec- ade, and the production of rails steadily increased until 1856. Under the influence of the crisis of 1857 it fell, but soon rose again, and in i860 was more than 2CX3,ooo tons.' To sum up : The high duty on iron in its various forms between 1832 and 1841, and again in 1842-46, impeded importation, retarded for the United States that cheapen- ing of iron which has been one of the most important factors in the march of improvement in this century, and maintained in existence costly charcoal furnaces long after that method had ceased in Great Britain to be in general use. The first step towards a vigorous and 'healthy growth of the iton industry was in the use of an- thracite in 1840. That step, so far from being promoted by the high duties, was taken in a time when duties were on the point of being reduced to the 20 per cent, level. Hardly had it been taken when the high duties of the tariil act of 1842 brought about (not indeed alone, but in conjunction with other causes) a temporary return to the ' See the figures given in " Report of Iron and Steel Association for 1876," p. 165. The production of rails is there stated to have been : In 1849 24,000 tons. " 1850 44,000 " " 1854 108,000 " ",1856 180,000 " " 1857 162,000 " " i860 205,000 " THE TARIFF, 1830-1860. 1 35 old charcoal process. A number of new charcoal furnaces were built, unsuited to the industry of the time and cer- tain to succumb before long. Under the lower duties from 1846 to i860, the charcoal production gradually be- came a less and less important part of the iron industry, and before the end of the period had been restricted to those limits within which it could find a permanent market for the special qualities of its iron.' On the other hand, the lower duties did not prevent a steady growth in the making of anthracite iron ; while the production of railroad iron and of rolled iron in general, also made pos- sible by the use of anthracite, showed a similar steady progress. There is no reason to doubt that, had there been no duty at all, there would yet have been a large production of anthracite pig- and rolled iron. Meanwhile the country was rapidly developing, and needed much iron. The low duties permitted a large importation of foreign iron, in addition to a large domestic production. The comparative cheapness and abundance of so import- ant an industrial agent could not have operated other- wise than to promote material prosperity. We turn now to another industry, — the manufecture of cotton goods, by far the largest and most important branch of the textile industry. Here we are met at the ' Charcoal iron has qualities which cause a certain quantity of it to be in demand under any circumstances. Since it settled down, about i860, to its normal place as a supplement to coal-made iron, the product has steadily increased with the growing needs of the country. In the years 1863-65 the annual product was about 240,000 tons, In 1886 it was 460,000 tons. 136 TBE TARIFF, 183O-I860. outset by the fact that, at the beginning of the period which we are considering, the cotton manufacture was in the main independent of protection, and not likely to be much affected, favorably or unfavorably, by changes in duties. Probably as early as 1824, and almost certainly by 1832, the industry had reached a firm position, in which | it was able to meet foreign competition on equal terms.' | Mr. Nathan Appleton, who was a large owner of cotton factory stocks, and who was also, in his time, one of the ablest and most prominent advocates of protective duties, said in 1833 that at that date coarse cottons could not have been imported from England if there had been no duty at all, and that even on many grades of finer goods competition was little to be feared. In regard to prints, the American goods were, quality for quality, as cheap as the English, but might be supplanted, in the absence of duties, by the poorer and nominally cheaper English goods, — an argument, often heard in our own day, which obviously puts the protective system on the ground of regulating the quality of goods for consumers. The gen- eral situation of the cotton manufacture, as described by Appleton, was one in which duties had ceased to be a factor of much importance in its development.' ' See the previous essay on " Protection to Young Industries," Part III., where an account is given of the history of the cotton manufacture up to 1824. ' See Appleton's speech on the Verplanck bill of 1833, " Congressional Debates," IX., pp. 1216-1217. Compare his remarks in the same vol- ume at p. 1579. THE TARIFF, 1830-1860. I37 During the extraordinary fluctuations of industry and the gradual reduction of duties which ensued under the compromise tariff of 1833, the business of manufacturing cottons was profitable and expanded, or encountered de- pression and loss, in sympathy with the industry of the country at large, being influenced chiefly by the expansion of credit and the rise of prices before 1837 and 1839, and the crisis and liquidation that followed those years. Not- withstanding the impending reductions of duty under the Compromise Act, large investments were made in the business in the earlier part of the period. Thus, in 1835- 36, the Amoskeag Company began on a large scale its operations in Manchester, N. H." The depression at the close of the decade checked growth for a while, but did not prevent new investments from being made, even before the passage of the act of 1842 settled the tariff uncertainty." The best informed judges said that the causes of increase or decrease of profit had been, as one might expect, the same as those that produced fluctua- tions in other branches of business ; and they made no mention of duties or of tariff.' Appleton's account of the ' Potter, " History of Manchester," p. 552. The Stark Mills were built in 1838, the second Stark Mills in 1839. * Earl, " History of Fall River,'' pp. 35-37. " From the panic of 1837, which affected every business centre in the country, Fall River seems to have speedily recovered, since within a few years from that date nearly every mill in the place was enlarged, though only one new one was built." Ibid., p. 53. ^ See the answers from T. G. Cary, treasurer of a Lowell mill, and from Samuel Batchelder to circulars sent out in 1845 by Secretary Walker. Batch- 138 THE TARIFF, 183O-1860. stage reached by the industry finds confirmation in a care- ful volume on the cotton manufacture in the United States, published in 1840 by Robert Montgomery. This writer's general conclusions are much the same as those which competent observers reach for our own time. Money wages were about twice as high in the United States, but the product per spindle and per loom was considerably greater. The cotton, in his time, was not so well mixed, not so thoroughly cleaned, not so well carded in the United States as in England ; but, on the other hand, the Americans were superior in ordinary power-loom weaving, as well as in warping and dressing. Elaborate tables are given of the expenses per unit of product in both countries, the final result of which, when all things were considered, showed a difference of three per cent, in favor of the American manufactures. Calculations of this kind, which are common enough in discussions of protective duties, are apt to express inadequately the multiplicity of circumstances which affect concrete indus- try ; yet they may gauge with fair accuracy the general conditions, and in this case were made intelligently and without bias. It is worth noting that Montgomery attrib- utes the success of the Americans in exporting cottons to elder, our most trustworthy informant on the early history of the cotton manufacture, writes that " the increase and decrease of profit from 1831 to 1844 have conformed very nearly to the general prosperity of the country." The circulars and answers are printed in the appendices to Walker's Re- port. Exec, Poc, 1845-46, vol. II., No. 6, pp. 215, 216, 313. THE TARIFF, 1830-1860. I39 greater honesty in manufacturing and to the superior quality of their goods.' During the years following the passage of the act of 1842, by which the duties on cottons were increased largely, the manufacturers made high profits. In Secre- tary Walker's Report, and in other attacks on protective duties, much was made of this circumstance, the high profits being ascribed to the new duties. The protec- tionists denied the connection, and a lively controversy ensued.' The truth seems to be that the case was not different from that usually presented in economic phe- nomena, — several causes combined to produce a single general effect. The high duties very likely served, in part, to enable a general advance of profits to be main- tained for several years. But there was also an increased ' See " Montgomery's " Cotton Manufacture,'' pp. 29, 38, 82, 86, 91, loi. The tables of expenses are on pp. 124, 125 ; the remarks on quality of goods, on pp. 130, 194 ; on wages and product, on pp. 118-121, 123. Montgomery was superintendent of the York Factories at Saco, Maine, of which Samuel Batchelder was treasurer. Allusions to Montgomery's book, and confirmation of some of his conclusions, may be found in Batchelder's " Early Progress of the Cotton Manufacture," p. 80 and following. At a convention in favor of protection, held in New York in 1842, com- mittees were appointed on various industries. The committee on cottons reported a recommendation to Congress of minimum duties on plain and printed goods, but added that these duties were ' ' more than is necessary for much the largest part of the cotton goods," and that "most of the printed calicoes are now offered to the consumer at lower prices than they could be imported under a tariff for revenue only. " ' See T. G. Cary, " Results of Manufactures at Lowell," Boston, 1845 ; N. Appleton, " Review of Secretary Walker's Report," 1846 ; and the speeches of Rockwell, " Congr. Globe," 1845-46, pp. 1034-1037, and Win- throp, ibid,. Appendix, p. 969, 1/ I40 THE TARIFF, 183O-1860. \ export to China, which proved highly profitable. More- over, the price of raw cotton was low in these years, lag- ging behind the advance in the prices of cotton goods ; and, as long as this lasted, the manufacturers made large gains. The fact that prosperity was shared by the cotton manufacturers in England shows that other causes than the new tariff must have been at work. On the other hand, when the act of 1846 was passed, ' the protectionists predicted disaster ' ; but disaster came not, either for the country at large or for the cotton in- dustry. Throughout the period from 1846 to i860 the manufacture of cotton grew steadily, affected by the gen- eral conditions of trade, but little influenced by the lower duties. Exact figures indicating its fortunes are not to be had, yet we have enough information to enable us to judge of the general trend of events. The number of spindles in use gives the best indication of the growth of cotton manufacturing. We have no trustworthy figures as to the number of spindles in the whole country ; but we have figures, collected by a competent and well-informed writer, in regard to Massachusetts. That State has always been the chief seat of the cotton manufacture, and its progress there doubtless indicates what took place in the country at large. The number of spindles in Massachu- ' Abbott Lawrence predicted in 1849 that " all this [a general crash] will take place in the space of eighteen months from the time this experimental bill goes into operation ; not a specie-paying bank doing business will be found in the United States.'' "Letters to Rives," p. 12. Appleton made a similar prediction in his " Review of Walker's Report," p. 28. THE TARIFF, 183O-I860. I4I setts, which was, in round numbers, 340,000 in 1831, had nearly doubled in 1840, was over 800,000 in 1845, ^"d was over 1,600,000 in i860, having again nearly doubled during the period of low duties.' The same signs of growth and prosperity are seen in the figures of the consumption of raw cotton in the United States, which, compiled independently, reach the same general result. Between the first half of the decade 1840^50, and the second half of the decade 1850-60, the quantity of raw cotton used in the mills of the United States about doubled. The annual consumption, which had been about 150,000 bales in 1830, rose to an average of more than 300,000 bales in the early years of the next decade, and again to one of more than 600,000 bales in the years 1850-54. In the five years immediately preceding the civil war, the average annual consumption was about ■ The following figures are given by Samuel Batchelder in a " Report to the Boston Board of Trade," made in i860 (published separately ; the essen- tial parts printed also in " Hunt's Merchants' Magazine," xlv., p. 14) : Spindles in Massachusetts ; ' 1840 ' 1845 ' 1850 624,500 (other sources make it 665,000) 817,500 1,288,000 ' 1855 . ' i860 1,519,500 1,688,500 For Ne'v England, and the United States as a whole, Batchelder gives the following figures, taken from De Bow, for the years 1840 and 1850. They are not entirely trustworthy, but may be accepted as roughly accurate. We add the census figures for i860 : Spindles in New England. United States. 1840 . . 1,597,000 . . 2,112,000 1850 . . 2,751,000 . . 3,634,000 i860 . . 3,859,000 . . 5,236,000 142 THE TARIFF, 183O-1860. 800,000 bales. During these years the consumption of cotton in Great Britain seems to have increased at very nearly the same rate.' Such figures indicate that the cotton manufacture was advancing rapidly and steadily.* Another sign of its firm position is the steady increase during the same period in the exports of cotton goods, chiefly to China and the East. The vajue of the cotton goods exported averaged but little over $3,000,000 annu- ally between 1838 and 1843, ''ose to over $4,000,000 between 1844 and 1849, was nearly $7,000,000 a year between 185 1 and 1856, was over $8,000,000 in 1859, ^"'^ almost touched $11,000,000 in i860. An industry which regularly exports a large part of its products can hardly be stimulated to any considerable extent by protective duties. No doubt, the absence of high duties had an effect on the range of the industry. It was confined mainly to the production of plain, cheap, staple cotton cloths, and was not extended to the making of finer and " fancy " goods. But, even under the high protective duties of the last twenty-five years, the bulk of the product has continued to be of the first mentioned kind, and cottons of that grade have been sold, quality for quality, at prices not above those of foreign goods ; while comparatively little progress has been made in the manu- facture of the finer grades.' ' The reader is referred to the Appendix to the Quarterly Journal of Economics for April, 1888, for tables of the consumption of cotton and of the exports of cotton goods. * Batchelder, who was a decided advocate of proctection, wrote in 1861 a THE TARIFF, 1830-1860. I43 The situation of the woollen manufacture differs in some important respects from~fhat of the cotton manu- facture, most noticeably in that it is less favorable as ,/ regards the supply of raw material. The maker of cot- ton goods is sure of securing at home cotton of the best quality at a price below that which his foreign rival must pay. But many qualities of wool cannot be produced to advantage in the United States ; while others cannot be grown at all, or at least, notwithstanding very heavy protective duties, never have been grown. Moreover, the raw material, when obtained, is neither so uniform in quality nor so well adapted to treatment by machin- ery as is the fibre of cotton. Wool is of the most diverse quality, varying from a fine silk-like fibre to a series of articles for the Boston Commercial Advertiser, in which, after com- paring the prices and qualities of English and American shirtings, he said : " The inquiry may then be made, What occasion is there for a protective duty ? The answer is : There would be none in the ordinary course of busi- ness. But there are sometimes occasions when * * * there has been a great accumulation of goods in the hands of manufacturers abroad, so that, if crowded on their market, it would depress the price of the usual supply of their customers at home. On such occasions, our warehouse system af- fords the opportunity, at little expense, to send the goods here, where they may be ready to be thrown on the market to be sold, " etc. In Ellison's " Handbook of the Cotton Trade," it is stated, at p. 29 ; " It is believed that, had it not been for the free-trade policy of Great Brit- ain, the manufacturing system of America would at the present time have been much more extensive than it is ; but the spinners and manufacturers of Lancashire can as yet successfully compete with those of Lowell, though for how long a time remains to be seen, for the latter are yearly gaining ex- perience and improving their machinery, so that before long they will be able to compete with the old country, more especially should the executive \tic\ abolish the present protective system adopted with respect to the im- port of cotton manufactures." This was written in 1858. 144 1'^^ TARIFF, 1 830-1 860. coarse hairy one. A process of careful sorting by hand must therefore be gone through before manufacture can begin. In some branches of the industry the qualities of the fibre, and those of the goods which are to be made from it, call for more of manual labor, and admit in less degree of the use of machinery^ than is the case with the cottons ; and it is a familiar fact, though one of which the true meaning has not often been grasped, that a need of resorting to direct manual labor in large proportion and a difficulty in substituting machinery, constitute, under con- ditions of freedom, an obstacle to the profitable prosecu- tion of a branch of industry in the United States. But, on the other hand, certain qualities of wool are grown to advantage in the climate of this country and under/ its industrial conditions, especially strong merino wools of good though not fine grade, of comparatively short staple, adapted for the making of flannels, blankets, and substantial cloths. At the same time, machinery can be applied to making these fabrics with less diiificulty than to the manufacture of some finer goods. Our information in regard to the history of the woollen manufacture is even more defective than that on iron and cottons. For the period between 1830 and 1840 we have no information that is worth any thing. In 1840 the in- dustry was confined to making satinets (a substantial, inexpensive cloth, not of fine quality), broadcloths, flan- nels, and blankets.' The tariff act of 1842 imposed on ' See a passage quoted from Wade's "Fibre and Fabric " in the Bureau of Statistics' " Report on Wool and Manufactures of Wool," 1887, p. xlvii. THE TARIFF, 183O-1860. I4S woollen goods a duty of 40 per cent., and on wool one of three cents a pound plus 30 per cent, on the value. It is said that during the four years in which these rates were in force a stimulus was giving to the making of finer qualities of broadcloths, the development being aided by evasions of the ad valorem duty on wool.' The act, however, did not remain in force long enough to make it clear what would have been its permanent effect on the woollen manufacture. Whatever may have been the start made in these few years in making finer woollens, this branch of the industry, as is generally admitted, well- nigh disappeared under the duties of 1846. The tarifT of that year imposed a duty of 30 per cent, on woollen goods in general ; but flannels and worsteds were admitted at 25 per cent., and blankets at 20 per cent. On wool also the duty was 30 per cent. Under this arrangement of duties, — whether or not in consequence of it, — no development took place in those branches of the manu- facture which needed wool that was subject to the 30 per cent. duty. The finest grades of woollens were not made at all. But the manufacture of cloths of ordinary quality (so-called cassimeres and similar goods), and that of blankets and flannels, continued to show a regular growth. The census figures are not of much value as accurate statistics, but there seems to be no reason for doubting that they prove a steady advance in the woollen manufac- 'Grosvenor. "Does Protection Protect ?" p. 147; Introduction to th* volume of the " Census of i860 " on Manufactures, p. xxxiii. 146 THE TARIFF, X83O-1860. ture as a whole." The growth was confined mostly to [ those branches which used domestic wool ; but within these there was not only increase, but development. The methods of manufacture were improved, better machinery was introduced, and new kinds of goods were made.' It is a striking fact that the very high protective duties which were imposed during the civil war, and were increased after its close, have not brought the manufacture of woollen cloths to a position substantially different from that which had been attained before i860. The descrip- tion of the industry which the spokesman of the Asso- ' The census figures on the woollen manufacture are : Capital, Value of Product. Hands (In million dollars.) Employed. 1840 .... 15.7 20. 21,342 1850 .... 26.1 43.5 34.895 i860 .... 30.8 61.9 4I1360 The figures for 1850 are exclusive of those relating to blankets ; for i860 are exclusive of those relating to worsteds. ' ' ' Eighteen hundred and fifty saw the success of the Crompton loom at Lowell and Lawrence, on which were made a full line of Scotch plaids in all their beautiful colorings, as well as star twills, half-diamonds. * * * Up to that time fancy cassimeres had been made largely through the Blackstone Valley (in Rhode Island) on the Crompton and Tappet looms, as made by William Crompton. As early as 1846 the Jacquard was used at Woon- socket and Blackstone. From 1850 to i860 fancy cassimeres made a rapid advance, and the styles ran to extremes far more than they have ever since." "Wade's " Fibre and Fabric," as quoted above, p. xlviii. According to the official "Statistical Information Relating to Certain Branches of Industry in Massachusetts," 1855, at pp. 573-575, woollen goods were made in 1855 in that State as follows : Broadcloth to the value of $ 838,000 Cassimeres to the value of 5,015,000 Satinets to the value of 2,709,000 Flannels and blankets to the value of . . . 3,126,000 Woollen yarns to the value of 386,000 THE TARIFF, 1830-1860. 147 ciation of Wool Manufacturers gave in 1884 is, in the main, applicable to its state in i860. " The woollen manu- facture of this country * * * is almost wholly absorbed in production for the masses. Nine tenths of our card-wool fabrics are made directly for the ready-made clothing establishments, by means of which most of the laboring people and all the boys are supplied with woollen gar- ments. The manufacture of flannels, blankets, and ordi- nary knit goods — pure necessaries of life — occupies most of the other mills engaged in working up carded wool." ' Some outlying branches of the woollen manufacture, however, showed a striking advance during the period we are considering. The most noteworthy of these is the carpet manufacture, which received a great impetus from the application of newly-invented machinery. The power-- loom for weaving ingrain carpets was invented in 1841 by Mr. E. B. Bigelow, and the more complicated loom for weaving Brussels carpets was first perfected by the same inventive genius in 1848." The new machinery at ' Mr. John L. Hayes, in the ' ' Bulletin of the Association of Wool Manu- facturers, '' vol. xiv. , p. 116. Mr. Hayes also states the woollen manufacture to be " capable of producing commodities of the highest luxury, — rich car- pets, fine upholsteries, and superfine broadcloths " ; but his description of other branches of the industry is similar to that quoted in the text on card- wool goods. ' ' The dress goods manufactured are fabricates almost exclu- sively for the million, the women of the exclusive and fashionable classes supplying themselves mainly through French importations. The vast car- pet manufacture of Philadelphia, larger than in any city of Europe, has its chief occupation in furnishing carpets for the more modest houses." 'See the sketch of Mr. Bigelow's career up to 1854, in " Hunt's Mer- chants Magazine," xxx., pp. 162-170. 148 THE TARIFF, 183O-1860. once put the manufacture of carpets on a firm basis ; and in its most important branches, the manufacture of ingrain and Brussels carpets, it became independent of aid from protective duties. A similar development took place in the manufacture of woollen hose. The knitting-frame had been invented in England as early as the sixteenth century, but had been worked only by hand. It was first adapted to machinery in the United States in 1831, and was first worked by machinery at Cohoes in New York in I 1832. Other inventions followed ; and a prosperous in- ^) dustry developed, which supplied the entire domestic market, and was independent of protective duties.' On the other hand, hardly more than a beginning was made before the civil war in the manufacture of worsted goods. In i860 there were no more than three consider- able factories engaged in making worsteds, and the im- ports largely exceeded the domestic product.' Some ex- ' See the account of the history of the manufacture of knit goods in the " Census of i860," volume on Manufactures, pp. xxxix.-xlv. Compare the brief sketch by John L. Hayes in his address on " Protection a Boon to Con- sumers " (Boston, 1867), pp. 9-11. No attempt had been made before i860, in the United States or elsewhere, to make knit goods of cotton. "See the Introduction to the volume on Manufactures, "Census of i860," pp. xxxvi.-xxxix. From the figures of production in the "Census of i860," and from those of imports in the " Report on Commerce and Navigation " for the fiscal year 1859-60, we have the materials for a comparison of the domestic and the foreign supply of the most important kinds of woollen goods. The figures are : Production, Imports, i860. 1859-60. Woollens generally (including flannels, but not blankets, shawls, or yams) . . . $43,500,000 $13,350,000 Carpets 7,860,000 2,200,000 Worsteds 3,700,000 12,300,000 THE TARIFF, 1830-1860. I49 planation of this state of things may be found in the com- paratively low duty of 25 per cent, on worsteds under the tariff of 1846. Something was due to the fact that the worsted industry in England not only was long estab- lished, but was steadily improving its methods and ma- chinery. But the most important cause, doubtless, was the duty of 30 per cent, on the long-staple combing wool, which then was needed for making worsted goods, and which physical causes have prevented from being grown to any large extent in the United States. The greatest difference between the woollen industry as it stands to-day and as it stood before i860 is in the large worsted manufacture of the present, which has grown up almost entirely since the wool and woollens act of 1867. The high duties undoubtedly have been a cause of this development, or at least were so in the beginning ; but a further and important cause has been the great im- provement in combing machinery, which has rendered it possible to make so-called worsted goods from almost any grade of wool, and has largely done away with the dis- tinction between woollen and worsted goods. The result has been that the worsted makers, as well as the makers of woollens, have been able to use domestic wool ; and it is in the production of goods made of such wool that the greatest growth of recent years has taken place. The tariff act of 1857 reduced the duty on woollens to 24 per cent., but much more than made up for this by admitting wool practically free of duty. Wool costing 150 THE TARIFF, 1830-1860. less than twenty cents at the place of exportation was ad- mitted free, which amounted in effect to the exemption of almost all wool from duty. Moreover, dyestufis and other materials were admitted free or at low rates. The free admission of wool from Canada, under the reciprocity treaty of 1854, had already been in force for three years.' The remission of duties on these materials explains the willingness with which the manufacturers in general ac- ceded to the rearrangement of rates in 1857. I" i860, when the beginnings were made in re-imposing higher protective duties, it was admitted that no demand for such a change came from manufacturers." The only ex- ception was in the case of the iron-makers of Pennsyl- vania, who did not share in the benefits of the free list, ' Large quantities of combing wool were imported from Canada under the reciprocity treaty, and were used in making worsteds and carpets. In 1866, when the treaty was terminated, and high duties had been im- posed on wool in general, the manufacturers pleaded hard for the con- tinued free admission of Canada wool, though they were active in securing the general high duties of 1867 on wool and woollens. But they did not succeed in getting the Canada wools free. See the ' ' Statement of Facts Relative to Canada Wools and the Manufacture of Worsteds, " made by the National Association of Wool Manufacturers, Boston, 1866. ' Senator Hunter, who had been most active in bringing about the pas- sage of the act of 1857, said, during the debate on the Morrill bill of i860; " Have any of the manufacturers come here to complain or to ask for new duties ? If they have, I am not aware of it, with the exception, perhaps, of a petition or two presented early in the session by the Senator from Con- necticut. Is it not notorious that if we were to leave it to the manufacturers of New England themselves, to the manufacturers of hardware, textile fabrics, etc., there would be a large majority against any change? Do we not know that the woollen manufacture dates its revival from the tariff of 1857, which altered the duties on wool?" " Congressional Globe," 1859 -do, p. 301. Cp. the note to p. 160, below. THE TARIFF, 1830-1860. 151 and who opposed the reduction of 1857. So far as the manufacture of woollen goods was concerned, the ^ changes of 1857, ^^ might have been expected, served to stimulate the industry ; and it grew and prospered during the years immediately preceding the civil war. A remission of duty on materials obviously operatesx in the first instance mainly to the advantage of producers j and middle-men, and brings benefit to consumers only by a more or less gradual process. The experiment of free wool, with a moderate duty on woollens, was not tried long enough to make certain what would be its final re- sults. It is not impossible that, as is often asserted by the opponents of duties on wool, the free admission of that material would have led in time to a more varied development of the woollen manufacture. On the other hand,, it may be, in the case of woollens as in that of cot- tons, that the conditions in the United States are less favorable for making the finer qualities than for making ' those cheaper qualities to which the application of ma- chinery is possible in greater degree, and for which, at the same time, the domestic wool is an excellent material. The test of experience under conditions of freedom could alone decide what are the real causes of the comparatively limited range of both of the great textile industries ; but it is not improbable that general ca,uses like those just mentioned, rather than the hampering of the supply of wool, account for the condition of the woollen manufac- ture. However that may be, it seems certain that the 152 THE TARIFF, 183O-1860. practical remission of duty in 1857, whether or no it would in the long run have caused a wide development of the woollen manufacture, gave it for the time being a distinct stimulus ; it seems to have had but little, if any, effect on the prices of domestic wool ' ; and it must have tended at the least to cheapen for the consumer goods made in whole or in part of foreign wool. It would be possible to extend this inquiry farther," but enough has been said for the present purpose. In the ,main, the changes in duties have had much less effect on jthe protected industries than is generally supposed. i ITheir growth has been steady and continuous, and seems to have been little stimulated by "the high duties of 1842, and little checked by the more moderate duties of 1846 and 1857. Probably the duties of the last-mentioned years, while on their face protective duties, did not have in any important degree the effect of stimulating Indus- ' The price per pound of medium wool, averaged from quarterly quota- tions, was : cts. cls. In 1852 , ^^ In 1856 45 " 1853 . 53 " 1857 . 46 " 1854 . 42i " 1858 • 36 " 1855 • 38 " 1859 " i860 • 471 The prices of other grades moved similarly. The panic of 1857 caused a fall in 1858, but in the following year the old level was recovered. The figures are based on the tables of wool prices in the Bureau of Statistics' " Report on Wool and Manufactures of Wool," 1887, p. 109. The move- ment of wool prices abroad during these years seems to have been about the same. " In the Introduction to the volume on Manufactures of the " Census of i860," to which reference has been made before, there is a useful sketch of the history of various branches of manufacture up to that date. THE TARIFF, 1830-1860. I S3 tries that could not have maintained themselves under freedom of trade. They did not operate as strictly pro- tective duties, and did not bring that extra tax on con- sumers which is the peculiar effect of protective duties. The only industry which presents a marked exception to these general conditions is the manufacture of the cruder forms of iron. In that industry, the conditions of pro- duction in the eastern part of the United States were such that the protective duties of 1842 caused a return to old processes, and an enhanced price to the coun. try without a corresponding gain to producers. Even under the rates of 1846 and after the use of anthracite coal, the same effect can be seen, though in less degree. We often hear it said that any considerajDle reduction from the scale of duties in the present tariff, whose char- acter and history will be considered in the following pages, would bring about the disappearance of manufacturing industries, or at least a disastrous check to their develop- ment. But the experience of the period before i860 shows that predictions of this sort have little warrant. At present, as before i860, the great textile manufactures" are not dependent to any great extent on protective duties of the kind now imposed. The direction of their growth has been somewhat affected by these duties, yet in a less degree than might have been expected. It is striking that both under the system of high protection which has been maintained since the civil war, and under the more moderate system that preceded it, the cotton 1 54 THE TARIFF, 183O-1860. and woollen industries have been kept in the main to those goods of common use and large consumption to which the conditions of the United States might be ex- pected to lead them. Very heavy duties have indeed stimulated the manufacture of more expensive goods; and the gradual change in the general economic situation must in any case have had some effect in making the textile industries more diversified. The iron manufac- ture has advanced by leaps and bounds, chiefly through the development of great natural resources in the heart of the country — hardly touched during the period here under discussion. But even during this period itwld its own. Manufactures in general grew and flourished. The extent to which mechanical branches of production have been brought into existence by the protective system has been greatly exaggerated by its advocates ; and even the character and direction of their development have been influenced less than, on grounds of general reasoning, might have been expected. THE HISTORY OF THE EXISTING TARIFF. CHAPTER I. THE WAR TARIFF. TH^Civil War revolutionized the financial methods of the United States. A new monetary system was created, and tax resources before undreamed of were resorted to, at first timorously, in the end with a rigor that hardly knew bounds. The tarifif, which had long been the sole source of federal income, was supplemented by a series of extraordinary internal taxes, and was itself called on to yield more revenue and still more. The high duties which the war thus caused to be imposed, at first regarded as temporary, were retained, increased, and systematized, so developing gradually into a system of extreme protec- tion. For many years the tariff was spoken of, and ac- curately, as " the war tariff," — a name which faded out of use as the community became accustomed to the new regime, and forgot the various half-hearted and unsuc- cessful endeavors which were made from time to time toward reduction and reform. 155 156 HISTORY OF THE EXISTING TARIFF. Before the war we had a tariff of duties which, though The tariff "°* arranged completely or consistently on the before the principles of free trade, was yet very moderate in comparison with the existing system. For about fifteen years before the Rebellion began, duties on imports were fixed by the acts of 1846 and 1857. The act of 1846 had been passed by the Democratic party with the avowed intention of putting into oper- ation, as far as was possible, the principles of free trade. This intention, it is true, was by no means car- ried out consistently. Purely revenue articles, like tea and coffee, were admitted free of duty ; and on the other hand, articles like iron and manufactures of iron, cotton goods, wool, and woollen goods, — in fact most of the im- portant articles with which the protective controversy has been concerned, — were charged with a duty of thirty per cent. Other articles again, like steel, copper, lead, were admitted at a lower duty than this, not for any reasons of revenue, but because they were not then produced to any extent within the country, and because protection for them in consequence was not asked. Protection was by no means absent from the act of 1846; and the rate of thirty per cent., which it imposed on the leading articles, would be supposed, in almost any civilized country, to give even a high degree of protection. Nevertheless, the tariff of 1846 was, in comparison with the present tariff, a moderate measure ; and a return to its rates would now be considered a great step of reform by those who are op- THE WAR TARIFF. 1 57 posed to protective duties. The act of 1857 took away- still more from the restrictive character of our tariff legis- lation. Congress, it may be remarked, acted in 1857 'W^ith reasonable soberness and impartiality, and without being influenced by political considerations. The maximum protective duty was reduced to twenty-four per cent. ; many raw materials were admitted free ; and the level of duties on the whole line of manufactured articles was brought down to the lowest point which has been reached in this country since 1815. It is not likely we shall see, for a great many years to come, a nearer approach to the free-trade ideal. The country accepted the tariff acts of 1846 and 1857, and was satisfied with them. Except in the years imme- diately following the passage of the former act, when there was some attempt to induce a return to a more rigid protective system, agitation on the tariff ceased almost entirely. There is no doubt that the period from 1846 to i860 was a time of great material prosperity, in- terrupted, but not checked, by the crisis of 1857. It would be going too far to assert that this general pros- perity was due chiefly to the liberal character of the tariff. Other causes exercised a great and perhaps a predominant influence. But the moderate tariff presumably was one of the elements that contributed to the general welfare. It may be well to add that prosperity was not confined to any part of the country, or to any branches of industry. Manufactures in general continued to flourish ; and the 158 HISTORY OF THE EXISTING TARIFF. reduction of duties which was made in 1857 ^'^'^ the con- sent and approbation of the main body of the. manufac- turing class. The crisis of 1857 had caused a falling off in the reve- nue from duties. This was made the occasion for a reac- tion from the liberal policy of 1846 and 1857. I" 1861 the Morrill tariff act began a change toward a higher range of duties and a stronger application of protection. The Morrill act is often spoken of as if it were the basis of the present protective system. But this is by no means the The Morrill ^^^^- '^^^ tariff act of 1 861 was passed by the tariff act House of Representatives in the session of 1859-60, the session preceding the election of President Lincoln. It was passed, undoubtedly, with the intention of attracting to the Republican party, at the approaching Presidential election, votes in Penn- sylvania and other States that had protectionist lean- ings. In the Senate the tariff bill was not taken up in the same session in which it was passed in the House. Its consideration was postponed, and it was not until the next session — that of 1860-61 — that it received the assent of the Senate and became law. It is clear that the Morrill tariff was carried in the House before any serious expectation of war was entertained ; and it was accepted by the Senate in the session of 1861 without material change. It therefore forms no part of the finan- cial legislation of the war, which gave rise in time to a series of measures that entirely superseded the Morrill THE WAR TARIFF. 1 59 tariff. Indeed, Mr. Morrill and the other supporters of the act of 1861 declared that their intention was simply to restore the rates of 1846. The important change which they proposed to make from the provisions of the tariff of 1846 was to substitute specific for ad-valorem duties. Such a change from ad-valorem to specific duties is in itself by ho means objectionable ; but it has usually been made a pretext on the part of protectionists for a considerable increase in the actual duties paid. When protectionists make a change of this kind, they almost invariably make the specific duties higher than the ad-valorem duties for which they are supposed to be an equivalent, — a circumstance which has given rise to the common notion, of course unfounded, that there is some essential connection between free trade and ad-valorem duties on the one hand, and between protection and specific duties on the other hand. The Morrill tariff formed no exception to the usual course of things in this respect. The specific duties which it established were in many cases considerably above the ad-valorem duties of 1 846. The most important direct changes made by the act of 1 861 were in the increased-dtities on iron and on wool, by which it was hoped to attach to the Republican party Pennsylvania and some of the Western States. Most of the manufacturing States at this time still stood aloof from the movement toward higher rates. ' ' Mr. Rice, of Massachusetts, said in i860 : " The manufacturer asks no additional protection. He has learned, among other things, that the great- l6o HISTORY OF THE EXISTING TARIFF. Hardly had the Morrill tariff act been passed when Fort Sumter was fired on. The Civil War began. The need of additional revenue for carrying on the great strug- gle was immediately felt ; and as early as the extra session of the summer of 1861, additional customs duties were imposed. In the next regular session, in December, 1861, a still further increase of duties was made. From that time till 1865 no session, indeed, hardly a month of any session, passed in which some increase of duties on im- ports was not made. During the four years of the war every resource was strained for carrying on the great struggle. Probably no country has seen, in so short a time, so extraordinary a mass of financial legislation. A huge national debt was accumulated ; the mischievous expedient of an inconvertible paper currency was resorted to ; a national banking system unexpectedly arose from the confusion ; an enormous system of internal taxation was created ; the duties on imports were vastly increased and extended. We are concerned here only with the change in the tariff ; yet it must be borne in mind that est evil, next to a ruinous competition from foreign sources, is an excessive protection, which stimulates a like ruinous and irresponsible competition at home," — Congress. Globe, 1859-60, p. 1867. Mr. Sherman said: "When Mr. Stanton says the manufacturers are urging and pressing this bill, he says what he must certainly know is not correct. The manufacturers have asked over and over again to be let alone. The tariff of 1857 is the manu- facturers' bill ; but the present bill is more beneficial to the agricultural in- terest than the tariff of 1857." — Hid., p. 2053. Cf. Hunter's Speech, Ibid., p. 3010. In later years Mr. Morrill himself said that the tariff of 1 86 1 " was not asked for, arid but coldly welcomed, by manufacturers, who always and justly fear instability." — Congr, Globe, 1869-70, p, 3295. THE WAR TARIFF. l6l these changes were only a part of the great financial meas- ures which the war called out. Indeed, it is impossible to understand the meaning of the changes which were made in the tariff without a knowledge of the other legislation that accompanied it, and more especially of the extended system of internal taxation which was adopted at the same time. To go through the various acts for levying internal taxes and imposing duties on imports is not neces- sary in order to make clear the character and bearing of the legislation of the war. It will be enough to describe those that are typical and important. The great acts of 1862 and 1864 are typical of the whole course of the war measures; and the latter is of particular importance, because it became the foundation of the existing tariff system. It was not until 1862 that the country began to appre- ciate how great must be the efforts necessary to suppress the Rebellion, and that Congress set to work in earnest to provide the means for that purpose. Even in 1862 Con- gress relied more on selling bonds and on issuing paper- money than on immediate taxation. But xaxand two vigorous measures were resorted to for tariff acts of taxing the people immediately and directly. The first of these was the internal revenue act of July I, 1862. This established a comprehensive system of excise taxation. Specific taxes were imposed on the production of iron and steel, coal-oil, paper, leather, and other articles. A general ad-valorem tax was l62 HISTORY OF THE EXISTING TARIFF. imposed on other manufactures. In addition, licenses were required in many callings. A general income tax was imposed. Railroad companies, steamboats, express companies were made to pay taxes on their gross receipts. Those who have grown to manhood since the great strug- gle closed find it difficult to imagine the existence and to appreciate the burden of this heavy and vexatious mass of taxation ; for it was entirely swept away within a few years after the end of the war. The second great measure of taxation to which Con- gress turned at this time was the tariff act of July 14, 1862. The object of this act, as was stated by Messrs. Morrill and Stevens, who had charge of its passage in the House, was primarily to increase duties only to such an extent as might be necessary in order to offset the inter- nal taxes of the act of July ist." But although this was the chief object of the act, protective intentions were enter- tained by those who framed it, and were carried out. Both Messrs. Morrill and Stevens were avowed protec- tionists, and did not conceal that they meant in many cases to help the home producer. The increase of duties on articles which were made in this country was therefore, ' Mr. Morrill said, in his speech introducing the tariff bill : "It will be indispensable for us to revise the tariff on foreign imports, so far as it may be seriously disturbed by any internal duties, and to make proper repara- tion. * * * jf ^e bleed manufacturers, we must see to it that the proper tonic is administered at the same time." — Congr. Globe, 1861-62, p. 1196. Similarly Mr. Stevens said: "We intended to impose an additional duty on imports equal to the tax which had been put on the domestic articles. It was done by way of compensation to domestic manufacturers against foreign importers." — Ibid,, p. 2979. THE WAR TARIFF. 1 63 in all cases, at least sufficient to afford the domestic pro- ducers compensation for the internal taxes which they had to pay. In many cases it was more than sufficient for this purpose, and brought about a distinct increase of protec- tion. Had not the internal revenue act been passed, affording a good reason for some increase of duties ; had not the higher taxation of purely revenue articles, like tea and coffee, been a justifiable and necessary expedient for increasing the government income ; had not the increase even of protective duties been quite defensible as a temporary means for the same end ; had not the general feeling been in favor of vigorous measures for raising the revenue ; — had these conditions not existed, it would have been very difficult to carry through Congress a measure like the tariff of 1862. But, as matters stood, the tariff was easily passed. Under cover of the need of revenue and of the intention to prevent domestic producers from being unfairly handicapped by the internal taxes, a clear increase of protection was in many cases brought about. The war went on; still more revenue was needed. Gradually Congress became convinced of the necessity of resorting to still heavier taxation, and of the willingness of the country to pay all that was necessary to maintain the Union. Passing over less important acts, we have to consider the great measure that was the climax of the financial legislation of the war. The three revenue acts of June 30, 1864, practically form one measure, and that probably the greatest measure of taxation which the 164 HISTORY OF THE EXISTING TARIFF. world has seen. The first of the acts provided for an enormous extension of the internal-tax system ; the second for a corresponding increase of the duties on im^ ports ; the third authorized a loan of $4CXD,ooo,ooo. The internal revenue act was arranged, as Mr. David Internal ^- Wells has said, on the principle of the revenue act. Irishman at Donnybrook fair; "Whenever you see a head, hit it ; whenever you see a com- modity, tax it." Every thing was taxed, and taxed heavily. Every ton of pig-iron produced was charged two dollars ; every ton of railroad iron three dollars ; sugar paid two cents a pound ; salt, six cents a hundred-weight. The general tax on all manufactures produced was five per cent. But this tax was repeated on almost every article in different stages of production. Raw cotton, for instance, was taxed two cents a pound ; as cloth, it again paid five per cent. Mr. Wells estimated that the govern- ment in fact collected between eight and fifteen per cent. on every finished product. Taxes on the gross receipts of railroad, steamboat, telegraph, express, and insurance companies were levied, or were increased where already in existence. The license-tax system was extended to almost every conceivable branch of trade. The income tax was raised to five per cent, on moderate incomes, and to ten per cent, on incomes of more than $10,000. Tariff act of The tariff act of 1864, passed at the same time 1864. with the internal revenue act, also brought aboi}t a great increase in the rates of taxation. Like the tariff act THE WAR TARIFF. 1 65 of 1862, that of 1864 was introduced, explained, amended, and passed under the management of Mr. Morrill, who was Chairman of the Committee on Ways and Means. That gentleman again stated, as he had done in 1862, that the passage of the tariff act was rendered necessary in order to put domestic producers in the same situation, so far as foreign competition was concerned, as if the internal taxes had not been raised. This was one great object of the new tariff ; and it may have been a good reason for bring- ing forward some measure of the kind. But it explains only in part the measure which in fact was proposed and passed. In 1864 the men who were in charge of the national finances were as prompt in taxing heavily as in 1 861 they had been slow in taxing at all. Under the pressure of almost unlimited financial need, and with the conviction that a supreme effort was called for, they were willing to tax every possible article at the highest rate that any one had the courage to suggest. They carried this method out to its fullest extent in the tariff act of 1864, as well as in the tax act of that year. At the same time these statesmen were pro- tectionists, and did not attempt to conceal their protec- tionist leanings. What between their willingness to make every tax and duty as high as possible for the sake of raising revenue, and their belief that high import duties were beneficial to the country, the protectionists had an opportunity such as the country has never before given them. It would be unfair to say that Mr. Morrill, Mr, 1 66 HISTORY OF THE EXISTING TARIFF. Stevens, and the other gentlemen who shaped the revenue laws, consciously used the urgent need of money for the war as a means of carrying out their protectionist theories, or of promoting, through high duties, private ends for themselves or others. But it is certain that their method of treating the revenue problems resulted in a most unex- pected and extravagant application of protection, and moreover, made possible a subservience of the public needs to the private gains of individuals such as unfortunately made its appearance in many other branches of the war administration. There was neither time nor disposition to inquire critically into the meaning and effect of any proposed scheme of rates. The easiest and quickest plan was to impose the duties which the domestic producers suggested as necessary for their protection. Not only during the war, but for several years after it, all feeling of opposition to high import duties almost entirely disappeared. The habit of putting on as high rates as any one asked had become so strong that it could hardly be shaken off ; and even after the war, almost any increase of duties demanded by domestic producers was readily made. The war had in many ways a bracing and enno- bling influence on our national life ; but its immediate effect on business affairs, and on all legislation affecting moneyed interests, was demoralizing. The line between public duty and private interests was often lost sight of by legislators. Great fortunes were made by changes in legislation urged and brought about by those who were THE WAR TARIFF. 1 67 benefited by them ; and the country has seen with sorrow that the honor and honesty of public men did not remain undefiled. The tariff, like other legislation on matters of finance, was affected by these causes. Schemes for money- making were incorporated in it, and were hardly ques- tioned by Congress. When more enlightened and unselfish views began to make their way, and protests were made against the abuses and excessive duties of the war period, these had obtained, as we shall see, too strong a hold to be easily shaken off. Such were the conditions under which the tariff act of 1864 was passed. As in 1862, three causes v/ere at work: in the first place, the urgent need of revenue for the war ; in the next, the wish to offset the internal taxes imposed on domestic producers ; and finally, the protectionist leanings of those who managed our financial legislation. These causes made possible a tariff act which in ordinary times would have been summarily rejected. It raised duties greatly and indiscriminately, — so much so, that the average rate on dutiable commodities, which had been 37.2 per cent, under the act of 1862, became 47.06 per cent, under that of 1864. It was in many ways crude and ill-considered ; it established protective duties more extreme than had been ventured on in any previous tariff act in our country's history ; it contained flagrant abuses, in the shape of duties whose chief effect was to bring money into the pockets of private individuals. Nothing more clearly illustrates the character of this l68 HISTORY OF THE EXISTING TARIFF. piece of legislation, and the circumstances which made its enactment a possibility, than the public history of its passage through Congress. The bill was introduced into the House on June 2d by Mr. Morrill. General debate on it was stopped after one day. The House then pro- ceeded to the consideration of amendments. Almost without exception amendments offered by Mr. Morrill were adopted, and all others were rejected. After two days had been given in this way to the amendments, the House, on June 4th, passed the bill. In the Senate much the same course was followed. The consideration of the bill began on June i6th ; it was passed on the following day. That is to say, five days in all were given by the two houses to this act, which was in its effects one of the most important financial measures ever passed in the United States. The bill was accepted as it came from the Gommittee on Ways and Means, and was passed practi- cally without debate or examination. This haste was the natural result of the critical stage of affairs and the urgent need of revenue. As in other parts of the legislation of the war period, the recommendations of the Administration and of the party leaders were acted on promptly and with the minimum of debate. Ob- viously, it was not intended or expected that measures so enacted should become the foundation of a permanent economic policy. Yet in several directions this proved to be the result, and in none more strikingly than in the final outcome of the tariff changes. The legal-tender THE WAR TARIFF. 169 paper, resorted to as a war measure more distinctly than any other, was retained, it is true; but at least specie payments were resumed, even though after an interval unexpectedly long, and the greatest evils of inconvertible money were done away with. The national-banking system, from the first more clearly designed to be a permanent institution, was also retained, though with changes and vicissitudes not dreamed of at the time of its foundation. The national debt was reduced at a rate unexampled in history. Most of the internal taxes were repealed as fast as possible, leaving only those on spirits and tobacco as permanent parts of the federal fiscal system. The tariff was changed least of all. Some significant modifications in the revenue duties were in- deed made, as will be pointed out in the following chap- ters. But on almost all the articles with which the protective controversy is concerned the rates of the act of 1864 were retained, virtually without change, for twenty years or more; and when changes were finally made, they were undertaken as if these rates were not in any sense exceptional, but were the normal results of an established policy. The identical duties fixed in 1864 were left in force for a long series of years.' When a general revision came to ' It should be stated that the act of 1864 was not in form a general act, repealing all -previous statutes. It left in force, for instance, all provisions of the Morrill tariff of 1861 and of the act of 1862, not specifically affected by its provisions. But it changed so generally the range of import duties, ind especially the protective duties, that it had practically the effect of a tew general tariS act. I70 HISTORY OF THE EXISTING TARIFF. be made, in 1883, they had ceased to be thought of as the results of war legislation. The public, and especially the protected industries, had come to think of them as parts of a permanent policy. Thus habituated to high duties, it was not a difficult step for Congress, under the stress of political contention, to proceed to duties still higher. Hence the war tariff, though from time to time patched, amended, revised, not only remained in force in its important provisions for nearly twenty years, but be- came in time the basis for an even more stringent appli- cation of protection. The steps by which this unexpected transformation in the customs policy of the United States was brought about will be followed in the ensuing chap- ters. CHAPTER II. THE FAILURE TO REDUCE THE TARIFF AFTER THE WAR. When the war closed, the revenue acts which had been hastily passed during its course constituted a chaotic mass. Congress and the Secretary of the Treasury immediately set to work to bring some order into this chaos, by fund- ing and consolidating the debt, by contracting the paper currency, and by reforming and reducing the internal taxes.' The years between 1865 and 1870 are full of dis- cussions and enactments on taxation and finance. On some parts of the financial system, in regard to which there was little disagreement, action was prompt and salutary. The complicated mass of internal taxes was felt to be an evil by all. It bore heavily and vexatiously on the people ; and Congress proceeded to sweep it away with all possible speed. As soon as the immense floating debt had been funded, and the extent of the ' Those who wish to get some knowledge of the confused character of the financial legislation called out by the war, are referred to Mr. David A. Wells's excellent essay on " The Recent Financial Experiences of the United States " {1872). Those who wish to study more in detail the course of events after the war should read Mr. Wells's reports as Commissioner of the Pf venue, of 1867, 1868, 1869, and 1870. 171 172 HISTORY OF THE EXISTING TARIFF. annual needs of the government became somewhat clear, Congress set to work at repealing and modifying the excise laws. It is not necessary to enumerate the various steps ,, ,. . by which the internal-tax system was modi- Abolition •' of the fied. Year after year acts for reducing and internal taxes a^jjQjjgjjjjjg internal taxes were passed. By 1872 1866-1872. ,, , all those which had any connection with the , subject of our investigation — the protective duties — ■ had disappeared." The taxes on spirits and beer, those on banks, and a few comparatively unimportant taxes on matches, patent medicines, and other articles were retained. But all those taxes which bore heavily on the productive resources of the country — those taxes in compensation for which higher duties had been im- posed in 1862 and 1864 — were entirely abolished. Step by step with this removal of the internal taxes, a reduction of import duties should have taken place ; at the least, a reduction which would have taken off those additional duties that had been put on in order to offset the internal taxes. This, however, Congress hesitated to undertake. We have seen in the preceding chapter that the opportunity given by the war system of taxation was seized by the protectionists in order to carry out their wishes. It would not be easy to say whether at the time the public men who carried out this legislation meant the new system of import duties to be permanent. Certainly the war methods of finance as a whole were not meant to ' The most important acts for reduciiig the internal taxes were those of Julj II, 1866 ; March 2, 1867 ; March 31, i858 ; July 14, 1870 ; June 6, 1872. REDUCTION OF THE TARIFF. 1 73 remain in force for an unlimited time. Some parts of the tariff were beyond doubt intended to be merely tem- porary ; and the reasonable expectation was that the pro- tective duties would sooner or later be overhauled and reduced. Had the question been directly put to almost any public man, whether the tariff system of the war was to be continued, the answer would certainly have been in the negative, — that in due time the import duties were to be lowered.' During the years of confusion immediately after the war little was attempted ; but soon a disposition to affect some reform in the incongruous mass of duties began to be shown. Each year schemes for reduction and reform were brought forward. Commissions were ap- pointed, bills were elaborated and considered ; but the reform was put off from year to year. The pressure from the interested domestic producers was strong ; the power of the lobby was great ; the overshadowing problem of reconstruction absorbed the energies of Congress. Gradu- ' As late as 1870, Mr. Morrill said : " For revenue purposes, and not solely for protection, fifty per cent, in many instances has been added to the tari£E [during the war] to enable our home trade to bear the new but indis- pensable burdens of internal taxation. Already we have relinquished most of such taxes. So far, then, as protection is concerned * * * -vfe might safely remit a percentage of the tariff on a considerable share of our foreign importations. * * * It is a mistake of the ftiends of a sound tariff to insist on the extreme rates imposed during the war, if less will raise the necessary revenue. * * * Whatever percentage of duties was imposed on foreign goods to cover internal taxation on home manufactures, should not now be claimed as the lawful prize of protection, when such taxes have been repealed. There is no longer an equivalent. " — Congress. Globe, 1869- 70, p. 3295. These passages occur at the end of a long speech in favor of the principle of protection. 174 HISTORY OF THE EXISTING TARIFF. ally, as the organization of industry in the country adapted itself more closely to the tariff as it was, the feel- ing that no reform was needed obtained a strong hold. Many industries had grown up, or had been greatly extended, under the influence of the war legislation. As that legis- lation continued unchanged, still more capital was em- barked in establishments whose existence or prosperity was in some degree dependent on its maintenance. All who were connected with establishments of this kind asserted that they would be ruined by any change. The business world in general tends to be favorable to the maintenance of things as they are. The country at large, and especially those parts of it in which the protected industries were concentrated, began to look on the existing state of things as permanent. The extreme protective system, which had been at the first a temporary expedient for aiding in the struggle for the Union, adopted hastily and without any thought of deliberation, gradually became accepted as a permanent institution. From this it was a short step, in order to explain and justify the existing state of things, to set up high protection as a theory and a dogma. The restraint of trade with foreign countries, by means of import duties of forty, fifty, sixty, even a hundred per cent., came to be advocated as a good thing in itself by many who, under normal circumstances, would have thought such a policy preposterous. Ideas of this kind were no longer the exploded errors of a small school of economists ; they became the foundation of the polii'y REDUCTION OF THE TARIFF. 1 75 of a great people. Then the mass of restrictive legislation which had been hurriedly piled up during the war, was strengthened and completed, and made into a firm and consistent edifice. On purely revenue articles, such as are not produced at all in the country, the duties were al- most entirely abolished. A few raw materials, it is true, were admitted at low rates, or entirely free of duty. But these were exceptions, made apparently by accident. As a rule, the duties on articles produced in the country, that is, the protective duties, were retained at the war figures, or raised above them. The result was that the tariiif gradually became exclusively and distinctly a protective measure ; it included almost all the protective duties put on during the war, added many more to them, and no longer contained the purely revenue duties of the war. We turn now to a somewhat more detailed account of the process by which the reform of the tariff was pre- vented. To give a complete account of the various tariff acts which were passed, or of the tariff bills which were pressed without success, is needless. Every session of Congress had its array of tariff acts and tariff bills ; and we may content ourselves with an account of those which are typical of the general course of events. Of the at- tempts at reform which were made in the years imme- diately after the war, the fate of the tariff unsuccessful bills of 1867 is characteristic. Two proposals tariff bill were then before Congress: one a bill passed by the House at the previous session ; the other a bill 1/6 HISTORY OF THE EXISTING TARIFF. prepared by Mr. David A. Wells, then Special Com- missioner of the Revenue, and heartily approved by Secretary McCulloch. The great rise in prices and in money wages in these years, and the industrial embar- rassment which followed the war, had caused a demand for still higher import duties; the House bill had been framed to answer this demand, and proposed a general increase. Mr. Wells recommended a different policy. He had not then become convinced of the truth of the principles of free trade ; but he had clearly seen that the indiscriminate protection which the war tariff gave, and which the House bill proposed to augment, could not be beneficial. His bill reduced duties on raw materials, such as scrap-iron, coal, lumber, hemp, and flax ; and it either maintained without change or slightly lowered the duties on most manufactured articles. A careful rearrangement was at the same time made in the rates on spices, chemi- cals, dyes, and dye-woods, — articles of which a careful and detailed examination is necessary for the determina- tion of duties, and in regard to which the tariff contained then, as it does now, much that was arbitrary and inde- fensible. Mr. Wells's bill, making these reforms, gained the day over the less liberal House bill. It was passed by the Senate, as an amendment to the House bill, by a large majority (27 to 10). In the House there was also a ma- jority in its favor; but unfortunately a two-thirds majori- ty was necessary in order to suspend the rules and bring it before the House. The vote was 106 to 64 in favor of REDUCTION OF THE TARIFF. 1 77 the bill ; the two-thirds majority was not obtained, and it failed to become law. The result was not only that no general tariff bill was passed at this session, but the course of tariff reform for the future received a regrettable check. ■ Had Mr. Wells's proposals been enacted, it is not unlikely that the events of the liext few years would have been very different from what in fact they were. It would be too much to say that these proposals looked forward to still further steps in the way of moderating the protective system, or that their favorable reception showed any dis- tinct tendency against protection. There was at that time no free-trade feeling at all, and Mr. Wells's bill was simply a reform measure from the protectionist point of view. But the vote on it is nevertheless significant of the fact that the extreme and uncompromising protective spirit was not then all-powerful. The bill, it is true, had been modified in a protectionist direction in various ways before it came to be voted on ; but the essential reductions and reforms were still contained in it and the votes show that the protectionist feeling was far from being solidified at that time to the extent that it came to be a few years later. Had the bill of 1867 been passed, the character of recent tariff legislation might have been very different. A beginning would have been made in looking at the tariff from a sober point of view, and in reducing duties that were clearly pernicious. The growing habit of look- ing on the war rates as a permanent system might have been checked, and the attempts at tariff reform in subse- 178 HISTORY OF THE EXISTING TARIFF. quent years would probably have found stronger support and met with less successful opposition. From this time till the tariff act of 1883 was passed, there was no general tariff bill which had so good a chance of being passed. The failure of the attempt of 1867 encouraged the protec- tionists in fighting for the retention of the war duties wherever they could not secure an increase over and above them ; and in this contest they were, with few exceptions, successful.' Of the legislation that was in fact carried out, the act of Act of 1870. 1870 is a fair example. It was passed in compli- ance with the demand for a reduction of taxes and for tar- iff reform, which was at that time especially strong in the West, and was there made alike by Republicans and Dem- ocrats." The declared intention of those who framed it and ' Mr. Wells's bill and the rates proposed in the House bill may be found in his report for 1866-67, PP- 235-290. The principle of " enlightened protection " on which he proceeded is stated on p. 34. At this time Mr. Wells was still a protectionist ; it was not until he prepared his report for 1868-69 'l^^t he showed himself fully convinced of the unsoundness of the theory of protection. His able investigations and the matter-of-fact tone of all of his reports gave much weight to his change of opinion, and caused it to strengthen greatly the public feeling in favor of tariff reform. ' President Garfield (then Representative) said in 1870 : " After studying the whole subject as carefully as I am able, I am firmly of the opinion that the wisest thing that the protectionists in this House can do is to unite on a moderate reduction of duties on imported articles. * * * If I do not misunderstand the signs of the times, unless we do this ourselves, prudently and wisely, we shall before long be compelled to submit to a violent reduc- tion, made rudely and without discrimination, which will shock, if not shatter, all our protected industries." — Young's Report, p. clxxii. It is worthy of remark that Mr. Garfield had also supported earnestly the unsuc- cessful bill of 1867. He had appealed to his party to vote so as to make up the two-thirds majority necessary for its consideration, telling them that later REDUCTION OF THE TARIFF. 1 79 had charge of it in Congress was to reduce taxation. But the reductions made by it were, almost without exception, on purely revenue articles. The duties on tea, coffee, wines sugar, molasses, and spices were lowered. Other articles of the same kind were put on the free list. The only noteworthy reduction in the protective parts of the tariff was in the duty on pig-iron, which went down from $9.00 to $7.00 a ton. On the other hand, a very considerable increase of duties was made on a number of protected articles — on steel rails, on marble, on nickel, and on other articles.' We shall have occasion to refer to some of these indefensible exactions in another connection.' At present we are concerned only with the reductions of duty which were carried out. Among the protective duties the lower- ing of that on pig-iron was the only one of importance. This change, indeed, might well have been made at an earlier date, for the internal tax of $2.00 on pig-iron (in compensation for which the tariff rate had been raised to $9.00 in 1864) had been taken off as early as 1866.' The only effort to reform the protective parts of the tariff which had any degree of success, was made in they might "make up their record" by voting against it. — Congr, Globe, 1866-67, pp. 1657, 1658. ' An increase in the duties on bar-iron was also proposed in the bill as reported by the Committee on Ways and Means ; but this, fortunately, was more than could be carried through. See the speeches of Messrs. Brooks {Congr. Globe, 1869-70, part 7, appendix, pp. 163-167) and Allison (ibid,, p. 192 et seg.), which protest against the sham reductions of the bill. 'See chapter iii. ' See the list of reductions made by the act of 1870 in Young's Report, p. clxxvii. l8o HISTORY OF THE EXISTING TARIFF. 1872. The tactics of the proctectionists in that year illustrate strikingly the manner in which attempts at tariff reform have been frustrated ; and the history of the attempt is, from this point of view, so instructive that it may be told somewhat in detail. The situation Situation in in 1 8/2 was in many ways favorable for tariff 1872. reform. The idea of tax and tariff reform was familiar to the people at large. It was not as yet openly pretended that the protective duties were to remain indefinitely as they had been fixed in the war. The act of 1870 had made a concession by the reduc- tion on pig-iron ; further changes of the same kind were expected to follow. Moreover, the feeling in favor of tariff reform was in all these years particularly strong in the West. So strong was it that, as has already been noted, it overrode party differences, and made almost all the Western Congressmen, whether Democrats or Repub- licans, act in favor of reductions in the tariff. The cause of this state of things is to be found in the economic con- dition of the country from the end of the war till after the panic of 1873. The prices of manufactured goods were then high, and imports were large. On the other hand, exports were comparatively small and the prices of grain and provisions low. The agricultural population was far from prosperous. The granger movement, and the agitation against the railroads, were one result of the depressed condition of the farmers. Another result was the strong feeling against the tariff, which the farmers REDUCTION OF THE TARIFF. l8l rightly believed to be among the causes of the state of things under which they were suffering." Their represen- tatives in Congress were therefore compelled to take a stand in favor of lowering the protective duties. The Western members being nearly all agreed on this subject, Congress contained a clear majority in favor of a reform in the tariff. Party lines at that time had little influence on the protective controversy, and, although both houses were strongly Republican, a strong disposition showed itself in both in favor of measures for lowering the pro- tective duties. Added to all this, the state of the finances demanded immediate attention. In 1872, as later in 1883 and in 1890, a redundant revenue compelled Congress to take action of some sort on the tariff as the chief source of federal income. In each of the fiscal years 1870-71 and 1871-72, the surplus revenue, after paying all appropria- tions and all interest on the public debt, amounted to about $ioo,cxx),ooo, a sum greatly in excess of any re- quirements of the sinking fund. The government was buying bonds in the open market in order to dispose of the money that was flowing into the treasury vaults.' ' No satisfactory investigation of the period preceding the crisis of 1873 has yet been made. Of the fact that the situation was especially depressing for the agricultural parts of the country, there can be no doubt. The speculative mania and the fictitious prosperity of those years were felt most strikingly in manufactures and railroad building ; exactly why so little effect of this appeared in agriculture has never been clearly explained. The whole period will repay careful economic study. ' On account of the low premium on bonds and the high premium on gold, 1 82 HISTORY OF THE EXISTING TARIFF. This being the state of affairs, the Committee on Ways and Means introduced into the House a bill which took decided steps in the direction of tariff Reform bill reform. Mr. Dawes, of Massachusetts, the in chairman of the committee, was opposed to the recommendations of the majority of its members, and therefore left the explanation and man- agement of the bill to Mr. Finkelnburg, of Missouri. That gentleman explained that the committee's measure was intended merely to " divest some industries of the superabundant protection which smells of monoply, and which it was never intended they should enjoy after the war." * The bill lopped off something from the protec- tive duties in almost all directions. Pig-iron was to be charged $6.00 instead of $7.00 a ton. The duties on wool and woollens, and those on cottons, were to be reduced by about twenty per cent. Coal, salt, and lumber were subjected to lower duties. Tea and coffee were also to pay less ; but the duties on them were not entirely abolished, — a circum- stance which it is important to note in connection with subsequent events. The bill still left an ample measure of protection subsisting ; but it was clearly intended to bring about an appreciable and permanent reduction of the war duties. This bill was introduced into the House in April. Be- fore that time another bill had been introduced in the it was cheaper for the government at that time to buy bonds in the open mark* than to redeem them at par. 'See Mr. Finkelnburg's speech, Congr. Globe, 1871-72, pp. 2826-?' REDUCTION OF THE TARIFF. 1 83 Senate, by the committee of that body on finance, which also lowered duties, but by no means in so Ten per incisive a manner as the House bill. The cent, reduc- Senate bill simply proposed to reduce all ''°" . . proposed. the protective duties by ten per cent. When the ten per cent, reduction was first suggested, it was strongly opposed by the protected interests, whose rep- resentatives, it is hardly necessary to say, were present in full force. They were unwilling to yield even so small a diminution. When, however, the House bill, making much more radical changes, was brought forward with the sanction of a majority of the Committee on Ways and Means, they saw that an obstinate resistance to any change might lead to dangerous results. A change of policy was accordingly determined on. Mr. John L. Hayes, who had been for many years Secre- _ .. tary of the Wool-Manufacturers' Association, the protec- and became President of the Tariff Commis- ti°°ists. sion of 1882, was at that time in Washington as agent for the wool manufacturers. Mr. Hayes has given an account of the events at Washington in 1 872, from which it appears that he was chiefly instrumental in bringing about the adoption of a more far-sighted policy by the protectionists.' Mr. Hayes believed it to be more easy to defeat the serious movement in favor of tariff reform by making some slight concessions than by unconditional ' See the speech which Mr. Hayes made, shortly after the close of the ses- sion of 1872, at a meeting of the wool manufacturers in Boston ; printed in the Bulletin of the Wool Manufacturers, vol. iii. , pp. 283-290. 1 84 HISTORY OF THE EXISTING TARIFF. opposition. The woollen manufacturers were first induced to agree to this policy ; the Pennsylvania iron makers were next brought over to it ; and finally, the whole weight of the protected interests was made to bear in the same direction. As a concession to the demand for reform, the general ten per cent, reduction was to be permitted. With this, however, was to be joined a sweeping reduction of the non-protective sources of revenue: the taxes on whiskey and tobacco were to be lowered, and the tea and coffee duties were to be entirely abolished. This plan of action was successfully carried out. An act for abolishing the duties on tea and coffee was first passed.' This being disposed of, the general tax and tariff bill was taken up in the House. The Senate had already indicated its willingness to act in the manner desired by the protectionists. It had passed and sent to the House a bill making the general reduction of ten per cent., and nothing remained but to get the consent of the House. But this consent was not easily obtained. A large num- ber of representatives were in favor of a more thorough and radical reform, and wished for the passage of the bill prepared by the Ways and Means Committee. But un- fortunately the reform forces were divided, and only a part of them insisted on the Ways and Means bill. The remainder were willing to accept the ten per cent, reduc- tion, which the protectionists yielded. On the other hand, ' The House had already passed, at the extra session in ' the spring of 1871, a bill for admitting tea and coffee free of duty. This bill was now taken up and passed by the Senate. REDUCTION OF THE TARIFF. 1 85 the protectionist members were united. Messrs. Kelley and Dawes led them, and succeeded in bringing their whole force to vote in favor of the horizontal reduction. The powerful influence of the Speaker, Mr. Blaine, was also on their side. They finally succeeded in having the original committee bill set aside, and in passing the bill for the ten per cent, reduction. Most of the revenue reformers in the end voted for it, believing it to be the utmost that could be obtained. It must be observed, how- Act of 1872. ever, to their credit, that the " horizontal " re- duction of the protective duties was not the only concession to the reform feeling that was made by the act of 1872. It also contained a number of minor but significant changes of duty. The duty on salt was reduced to one half the previous rates; for the feeling against the war-duty on salt, which very clearly resulted in putting so much money into the pockets of the Syracuse and Saginaw producers, was too strong to be resisted. The duty on coal was re- duced from $1.25 to 75 cents a ton. Some raw materials, of which hides and paper stock were alone of considerable importance, were admitted free of duty. The free list was also enlarged by putting on it a number of minor articles used by manufacturers. But the important change in the protective duties was the ten per cent, re- duction, which applied to all manufactures of cotton, wool, iron, steel, metals in general, paper, glass, and leather,— that is, to all the great protective industries. It is worth while to dwell for a moment on the abolition 1 86 HISTORY OF THE EXISTING TARIFF. of the duties on tea and coffee ; for this change may fairly be said to have been decisive in fixing the character of our tariff system. The question was whether the re- duction of the revenue should be effected by lowering the protective or the non-protective duties. As matters stood in 1872, the removal of the tea and coffee duties prevented a more extended reduction of the protective duties, and, as we shall presently see, eventually left these latter precisely at the point at which they had been before. The difference in effect between duties on articles like tea and coffee on the one hand, and articles like iron and wool on the other, is easily stated. Both are indirect taxes, reaching the consumer in the shape of higher prices on the commodities he uses. But when a duty is imposed on an article like tea and coffee, the whole increase in price to the consumer is offset by the same amount of revenue received by the government ; whereas when a duty is imposed on an article like iron or wool, the effect is different. In the latter case also the commodity is in- creased in price to the consumer, and he is thereby taxed. So far as the articles continue to be imported, the increased price, as in the case of tea and coffee, represents revenue received by the government. But when the consumer buys and uses an article of this kind made at home, he must pay an increased price, or tax, quite as much as when he buys the imported article, with the difference that the tax is not paid to the government, but to the home producer. The extra price so received by the home REDUCTION OF THE TARIFF. 1 8/ producer does not necessarily, or indeed usually, yield him exceptionally high profits. It is true that in some cases of more or less perfect monopoly he may make, permanently or for a l^ng time, exceptionally high profits ; and in these cases there is ground for saying that the protective system has jthe eff eci-oL-robbing Peter to pay PauL, But in the majority of cases, where the conditions of monopoly do not exist, the home producer, while get- ting a higher price because of the duty, does not make correspondingly high profits. It may cost more, for one reason or another, to make the article at home than it costs to make it abroad, and the duty simply serves to offset this disadvantage of the domestic producer. In not a few cases, while it may cost more to make the article at home than abroad, the duty is greater than the difference in cost. Domestic competition then will cause the price at home to fall to a point less than the foreign price plus the duty ; importation will cease ; and yet a virtual tax will still be levied in the shape of prices higher than those which would obtain if there were no duty. Whatever be the details of the working of a protective duty, it is prima facie less desirable than a revenue duty, on the simple ground that the tax serves not to yield revenue, but to offset the greater cost of making the commodity at home. Whether the stimulus to domestic production brings other benefits to the community, sufficient t<> compensate for this disadvantage of protective duties involves the whole problem of the operation of inter- national trade ; indeed, the discussion spreads over the 1 88 HISTORY OF THE EXISTING TARIFF. entire range of economic principles, and can be settled only by reasoning in which all those principles are taken into account. The history of the duties on tea and coffee is curious. In the early days of the Republic, when the need of revenue was pressing, they were subjected to duties which for those times were heavy. But in 1830, when the revenue became more than ample, and when there was also a strong feeling in favor of maintaining protective duties, tea, coffee, and cocoa were put on the free list. The situation in 1830 was not unlike that in 1872, except that the feeling through the North in favor of maintaining the protective duties was probably stronger at the earlier date. From 1830 to the Civil War, these revenue articles remained free of duty. The tariff acts of 1846 and 1857, though supposed to be based on revenue principles, made no attempt to secure revenue from this certain and simple source. Protective duties are as certainly taxes as are those on tea and coffee ; but in the latter case no domestic producers ask for the retention of the taxes; consequently the revenue duties, unsupported by any strong interest, are easy victims when a curtailment of the national revenue becomes convenient or necessary. For our present purpose it suffices to point out that the removal of the tea and coffee duties in 1872 served to fix for a long time the character of our legislation on the revenue articles of which they are the type. Step by step, in the various tariff acts passed since the war, all the non-protective duties have been swept away. By far REDUCTION OF THE TARIFF. 189 the most important recent legislation in this direction was the removal of the duties on sugar in the act of 1890, a change which, like the removal of the tea and coffee duties in 1872, emphasized the determination of the protectionists to give up the simplest and surest sources of revenue rather than yield an abatement of the protective duties. To return from this digression to the tariff act of 1872. The free-traders were on the whole satisfied with it ; they thought it a step in the right direction, and the beginning of a process of reform. The protectionists, however, believed that they had won a victory ; and, as events proved, they were right.' It is not within the purpose of this volume to discuss the intrinsic merits of a " horizontal reduction," such as was carried out in the act of 1872. Undoubtedly it is a simple and indiscriminating method of approaching the problem of tariff reform. The objections to it were very prominently brought forward when Mr. Morrison, during the session of 1883-84, proposed to take off ten per cent, from the duties, in exactly the same way that the tariff of 1872 had taken off ten per cent. It is certainly curious that this method, when proposed by Mr. Morrison in 1884, should be vehemently denounced by protectionists ^ Mr. Hayes, in the speech already referred to, spoke of " the grand re- sult of a tariff bill reducing duties fifty-three millions of dollars, and yet leav- ing the great industries almost intact. The present tariff (of 1872) was made by our friends, in the interest of protection." And again : "A reduction of over fifty millions of dollars, and yet taking only a shaving off from the protection duties." igo HISTORY OF THE EXISTING TARIFF. as crude, vicious, unscientific, and impractical, although, when proposed by Mr. Dawes in 1872, it received their earnest support. There is, however, one objection to such a plan which was hardly mentioned in connection with Mr. Morrison's bill, but was brought out very clearly by the experience of 1872. This is, that a horizontal re- duction can very easily be revoked. » The reduction made in 1872 was repealed with little difficulty in 1875. After the panic of 1873, imports greatly diminished, and Ten per with them the customs revenue. No further cent, reduc- thought of tax reduction was entertained ; tion re- , , . ■ ^ pealed in ^"^ ^0°" ^ need of mcreasmg the revenue was 1875- felt. In 1875 Congress, as one means to that end, repealed the ten per cent, reduction, and put du- ties back to where they had been before 1872.' The repeal attracted comparatively little attention, and was ' It was far from necessary, for revenue purposes, to repeal the ten per cent, clause. Mr. Dawes (who advocated in 1875 the repeal of his own measure of 1872) attempted to show the need of raising the tariff by assum- ing that a fixed sum of $47,000,000 per year was necessary for the sinking- fund, — that the faith of the government was pledged to devoting this sum to the redemption of the debt. But it was very clearly shown that the government never had carried out the sinking-fund provision in any exact way. In some years it bought for the sinking fund much less than the one per cent of the debt which was supposed to be annually redeemed ; in other years (notably in 1869-73) it bought much more than this one per cent. The same policy has been followed in recent years. There can be little doubt that the need of providing for the sinking fund was used merely as an excuse for raising the duties. See Mr. Wood's remarks, Congr, Record, 1874-75, PP- 1187, 1188, and <:/", Mr. Beck's speech, j^jV., pp.1401, 1402. It may be noted that in 1875 President Grant and the Secretary of the Treasury recommended, and men like Senators Sherman and Schurz sup- ported, a re-imposition of duties on tea and coffee as the best means of in- creasing the customs revenues. REDUCTION OF THE TARIFF. I91 carried without great opposition. If a detailed examina- tion of the tariff had been made in 1872, and if duties had been reduced in that year carefully and with discrimi- nation, it would have been much more difficult in 1875 to put them back to the old figures. If some of the duties which are of a particularly exorbitant or burdensome character had been individually reduced in 1872, public opinion would not easily have permitted the restitution of the old rates. But the general ten per cent, reduction, which touched none of the duties in detail, was repealed without attracting public attention. The old rates were restored ; and the best opportunity which the country has had for a considerable modification of the protective system, slipped by without any permanent result. Of the attempts at reform which were made between 187s and 1883, little need be said. Mr. Morrison in 1876. and Mr. Wood in 1878, introduced tariff bills into the House. These bills were the occasion of more or less debate ; but there was at no time any probability of their being enacted.' In 1879 the duty on quinine was abolished entirely, — a measure most beneficial and praise- worthy in itself, but not of any considerable importance in the economic history of the country. Of the tariff act of 1883 we do not purpose speaking in ' Those who are interested in the details of these measures will find the bill of 1876 explained in Mr. Morrison's speech, in Cong. Record, 1875-1876, p. 3321. The bill of 1878 was similarly explained by Mr. Wood, Cong. Record, 1877-78, p. 2398. It was at one time supposed that Mr. Wood's bill might be passed by the House ; but the enacting clause was struck out, after some debate, by a vote of 137 to 114. t92 BISTORY OF tHi: EXISTING TARIFF. this connection. It will be discussed in detail in the con. eluding pages. We have now completed our account of the attempts to reform the tariff which were made between the close of the Civil War and the general revision of 1883. It is clear that the duties, as they were imposed in the act of 1864, were retained substantially without change during the whole of this period. The non-protective duties were indeed swept away. A few reductions of protective duties were made in the acts of 1870 and 1872 ; but the great mass of duties imposed on articles which are pro- duced in this country were not touched. It is worth while to note some of the more important classes of goods on which the duties levied in 1864 remained in force, and to compare these duties with the rates of the Morrill tariff of 1861. The increase which was the result of the war will appear most plainly from such a comparison. In the appended table' it will be seen that the rates on books, chinaware, and pottery, cotton goods, linen, hemp, and jute goods, glass, gloves, bar- and hoop-iron, iron rails, steel, lead, paper, and silks, were increased by from ten to thirty per cent, during the war, and that the increase then made was maintained without the slightest change till 1883. That these great changes, at the time when they were made, were not intended or expected to be per- manent, cannot be denied. An example like that of the duty on cotton goods shows plainly how the duties were ' See table III., Appendix. REDUCTION OF THE TARIFF. 193 fixed during the war according to the conditions of the time, and without expectation of their remaining indefi- nitely in force. The duty on the cheapest grade of cotton tissues had been in 1861 fixed at one cent per yard. During the war the price of cotton rose greatly, and with it the prices of cotton goods. Consequently it is not sur- prising to find the duty in 1864 to be five cents per yard on this grade of cottons. But shortly after the war, raw cotton fell nearly to its former price ; and it does occasion surprise to find that the duty of five cents per yard should have been retained without change till 1883, and even in the act of 1883 retained at a figure much above that of 1 861. The duty on cheap cottons happens not to have been particularly burdensome, since goods of this kind are made in this country as cheaply as they can be made abroad. But the retention of the war duty on them, even after it became exorbitantly high, is typical of the way in which duties were retained on other articles on which they were burdensome. Duties which had been imposed during the war, and which had then been made very high, either for reasons of revenue or because of circumstances such as led to the heavy rate on cottons, were retained unchanged after the war ceased. It would be untrue to say that protection did not exist before the great struggle began, — the tariff of 1861, was a distinctly protectionist measure ; but it is clear that the extreme protectionist character of our tariff is an indirect and unexpected result of the Civil War. CHAPTER HI. HOW DUTIES WERE RAISED ABOVE THE WAR RATES. In the preceding chapter it has been shown how the duties levied during the war failed to be reduced after its close. But in many cases not only has there been a failure to diminish the war rates, but an actual increase over them. We have already noted how the maintenance of the tariff of 1864 brought about gradually a feeling that such a system was a good thing in itself, and desirable as a permanent policy. This feeling, and the fact that Con- gress and the public had grown accustomed to heavy taxes and high rates, enabled many measures to become law which under normal circumstances would never have been submitted to. In the present chapter we are con- cerned with the not infrequent instances in which, in obedi- ence to the demands of the protected interests, duties were raised over and above the point, already high, at which they were left when the war closed. The most striking instance of legislation of this kind is to be found in the wool and woollens act of 1867; a measure which is so characteristic of the complications of our tariff, of the remarkable height to which protection has been car- 194 1^0 fV DUTIES WERE RAISED. I9S ried in it, and of the submission of Congress and the people to the demands of domestic manu- ^^^^ ^^^ facturers that it deserves to be described woollen act in detail. Such a description is the more °^ '*^^" desirable since the woollen schedule of our tariff is the one which imposes the heaviest and the least defensi- ble burdens on consumers, and at the same time is the most difficult of comprehension for those who have noth- ing but the mere language of the statute to guide them. In order to understand the complicated system that now exists, we must go back to the Morrill tariff act of 1861. In that act specific duties on wool were substituted for the ad-valorem rates of 1846 and 1857. The cheaper kinds of wool, costing eighteen cents or less per pound, were still admitted at the nominal rate of five per cent. But wool costing between eighteen and twenty-four cents per pound was charged three cents per pound ; that costing more than twenty-four cents was charged nine cents per pound. The duties on woollens were increased correspondingly. An ad-valorem rate of twenty-five per cent, was levied on them ; in addition they paid a specific duty of twelve cents for each pound of cloth. This specific duty was intended merely to compensate the manufacturers for the duty on wool, while the advalorem rate alone was to yield them any protection. This is the first appearance in our tariff history of the device of exact compensating duties. Compensation for duties on raw materials used by domestic producers had indeed been provided for in 196 HISTORY OF THE EXISTING TARIFF. previous tariffs ; but it was not until the passage of the Morrill act and of its successors that it came to be applied in this distinct manner. As the principle of compensa- tion has been greatly extended since 1861, and is the key to the existing system of woollen duties, it may be well to explain it with some care. It is evident that a duty on wool must normally cause The ^^ price of all wool that is imported to compensating rise by the full extent of the duty. More- sys em. Qyer, the duty presumably causes the wool grown at home, of the same grade as that imported, also to rise in price to the full extent of the tax. It is clear that, if foreign wool continues to be imported, such a rise in the price of domestic wool must take place ; since wool will not be imported unless the price here is higher, by the amount of the duty, than the price abroad. It may happen, of course, that the tax will prove prohibi- tory, and that the importation of foreign wool will cease; in which case it is possible that the domestic wool is raised in price by some amount less than the duty, and even possible that it is not raised in price at all. Assum- ing for the present (and this assumption was made in arranging the compensating system) that domestic wool does rise in price, by the extent of the duty, as compared with foreign wool, it is evident that the American manu- facturer, whether using foreign or domestic wool, is com- pelled to pay more for his raw material than his com- petitor abroad. This disadvantage it becomes necessary ffOW DUTIES WERE RAISED. 1 9/ to offset by a compensating duty on foreign woollens. In 1861 the duty on wool of the kind chiefly used in this country (costing abroad between ten and twenty-four cents a pound) was three cents a pound. The compen- sating duty for this was made twelve cents a pound on the woollen cloth, which tacitly assumes that about four pounds of wool are used for each pound of cloth. This specific duty was intended to put the manufacturer in the same situation, as regards foreign competition, as if he got his wool free of duty. The separate ad-valorem duty of twenty-five per cent, was then added in order to give protection. The compensating system was retained in the acts of 1862 and 1864. During the war, it is needless to say, the duties on wool and woollens were considerably raised. They were increased, and to some extent properly in- creased, to offset the internal taxes and the increased duties on dye-stuffs and other materials; and care was taken, in this as in other instances, that -^^^j ^^^ the increase in the tariff should be sufficient woollen du- and more than sufficient to prevent the do- '^^ 014. mestic producer from being unfairly handicapped by the internal taxes. In the final act of 1864 the duties on wool were as follows : On wool costing 12 cents or less, a duty of 3 cents per pound. " " " between 12 and 24 cents, a duty of 6 cents per pound. " " " " 24 and 32 cents, a duty of 10 cents per pound, plus ten per cent. On wool costing more than 32 cents, a duty of 12 cents per pound, plus ten per cent.' ' Exactly how this duty on wool of ten per cent, on the value, in addition 198 HISTORY OF THE EXISTING TARIFF. The wool chiefly imported and chiefly used by our manufacturers was that of the second class, costing between twelve and twenty-four cents per pound, and paying a duty of six cents. The compensating duty on woollens was therefore raised in 1864 to twenty-four cents per pound of cloth. The ad-valorem (protective) duty on woollens had been raised to forty per cent. During the war the production of wool and woollens had been greatly increased. The check to the manufacture of cotton goods, which resulted from the stoppage of the great source of supply of raw cotton, caused some in- crease in the demand for woollens. The government's need of large quantities of cloth for army use was also an im- portant cause. After the war, a revolution was threatened. Cotton bade fair to take its former place among textile goods ; the government no longer needed its woollens, and threw on the market the large stocks of army clothing which it had on hand. In the hope of warding off the immi- nent depression of their trade, the wool growers and manu- facturers made an effort to obtain still further assistance from the government. A convention of wool growers and manufacturers was held in Syracuse, N. Y., in December, 1865. That both these classes of producers, as a body, un- derstood and supported the views of this meeting, is not at all certain. The mass of wool growers undoubtedly knew to the specific duty, came to be imposed, the writer has never seen satisfac- torily explained. It probably came into the tariff in connection with the ' discriminating duty of ten per cent, which was imposed on goods imported in the vessels of nations that had no treaty of commerce with us. ffOlV DUTIES WERE RAISED. 1 99 nothing of it ; they were represented chiefly by a few breed- ers of sheep. Among the manufacturers, many held aloof from it when its character became somewhat more plain. There is good evidence to show that the whole movement was the work of a few energetic manufacturers of New England, engaged chiefly in producing carpets and worsted goods, and of some prominent breeders of sheep.' The fact that the rates of duty, as arranged by the Syracuse convention, were especially advantageous to certain manufacturers — namely, those who made carpets, worsted goods, and blankets, — tends to support this view. On the surface, however, the movement appeared to be that of the growers and manufacturers united. The latter agreed to let the wool producers advance the duty on the raw materialto any point they wished ; they under- ' " This tariff (of 1867) was devised by carpet and blanket makers, who pretended to be ' The National "Woollen Manufacturers' Association,' in combination with certain persons who raised fine bucks and wished to sell them at high prices, and who acted in the name of ' The National Wool- Growers' Association.' * * * A greater farce was never witnessed * * * Many who took part in the proceedings of 1866, finding that the Association [of Wool Manufacturers] was used for the convenience of spe- cial interests, have since withdrawn." — Harris, " Memorial," pp. 22, 23. Mr. Harris says elsewhere : ' ' The carpet interest was predominant [in the Wool Manufacturers' Association]. * * * The President was, and is now (1871), a large carpet manufacturer ; and the Secretary was a very talented and astute politician, from Washington, chosen by the influence of the President." And again: "The Association having spent considerable sums in various ways peculiar to Washington (the italics are Mr. Harris's) increased the annual tax on its members very largely ; and at the present time (1871) it is hopelessly in debt to its President." — "Protective Duties,'' pp. 9, 10 ; " The Tariff," p. 17. See also " Argument on Foreign Wool Tariff before Finance Committee of Senate," New York, 1871. 200 HISTORY OF THE EXISTING TARIFF. took, by means of the compensating device, to prevent any injury to themselves from the high duty on the wool they used. The tariff schedule which was the result of this combination was approved by the United States Revenue Commission.' It was made a part of the unsuc- cessful tariff bill of 1867, already referred to' ; and when that bill failed, it was made law by a separate act, to whose passage no particular objection seems to have been made. The whole course of events forms the most strik- ing example — and such examples are numerous — of the manner in which, in recent tariff legislation, regard has been had exclusively to the producer. Here was an in- tricate and detailed scheme of duti^es, prepared by the producers of the articles to be protected, openly and avowedly with the intention of giving themselves aid ; and yet this scheme was accepted and enacted by the National Legislature without any appreciable change from the rates asked for." We turn now to examine this act of 1867, whose main provisions were retained in the acts of 1883 and 1890, and, after a brief period of radical change under that of 1894, ' Mr. Stephen Colwell, a disciple of the Carey protectionist school, was the member of this commission who had charge of the wood and woollens schedule. Mr. Wells, who was also a member of the commission, had nothing to do with this part of the tariff. " Ante, p. 21. ' The proceedings of the Syracuse convention may be found in full in the volume of "Transactions of the Wool Manufacturers"; also in " U. S. Revenue Report, 1866," pp. 360-419. Mr. Colwell's endorsement of the scheme is also in " U. S. Revenue Report, 1866," pp. 347-356. Mr. Wells, in his report of 1867, sharply criticised the act as passed. ffOW DUTIES WERE RAISED. 201 were once more reinstated in the tariff of 1897. In this examination we will follow the statement published in. 1866, in explanation of the new schedule, by the Execu- tive Committee of the National Association of Wool Manufacturers.' To begin with, the duties ^^^ ^f ^gg on wool were arranged on a new plan. Wool Duty on was divided into three classes : carpet, cloth- "'°° " ing, and combing wool.^ The first class, carpet wool, corresponded to the cheap wools of the tariff of 1864. The duty was three cents a pound if it cost twelve cents or less, and six cents a pound if it cost more than twelve cents. The other two classes, of cloth- ing and combing wools, are the grades chiefly grown in this country, and therefore are most important to note in connection with the protective controversy. The duties on these were the same for both classes. Clothing and combing wools alike were made to pay as follows : Value 32 cents or less, a duty of 10 cents per pound and 11 per cent. ad valorem. Value more than 32 cents, a duty of 12 cents per pound and 10 per cent, ad valorem.^ ' See " Statement of the Executive Committee of the Wool Manufacturers Association to the U. S. Revenue Commisson," printed in " Transactions," as above ; also printed in " Revenue Report for 1866,'' pp. 441-460. ' Clothing wool is of comparatively short fibre ; it is carded as, a preparation for spinning ; it is used for making cloths, cassimeres, and the other common wooUen fabrics. Combing virool is of longer fibre ; it is combed in a comb- ing machine as a preparation for spinning ; and it is used in making worsted goods, and other soft and pliable fabrics. 'Here again we have the rather absurd combination of specific and ad-va- lorem duties on wool. In the act of 1867, there is the further complication- 202 HISTORY OF THE EXISTING TARIFF. Comparing these figures with the rates of 1864, one would not, at first sight, note any great change. In 1864, wool costing between twenty-four and thirty-two cents had been charged ten cents per pound plus ten per cent, ad valorem ; and wool costing more than thirty-two cents had paid twelve cents a pound plus ten per cent. These seem to be almost exactly the rates of 1867. But in fact, by the change in classification, a very considerable increase in the duty was brought about. In 1867 all wool costing less than thirty-two cents was made to pay the duty of ten cents per pound and eleven per cent. In 1864 wool cost- ing (abroad) between eighteen and twenty-four cents had been charged only six cents per pound. This is the class of wool chiefly grown in the United States, and chiefly imported hither; and it was charged in 1867 with the duty of ten cents and eleven per cent. With the ad- valorem addition, the duty of 1867 amounted to eleven and a half or twelve cents a pound, or about double the duty of 1864. The consequence was that in reality the duty on that grade of wool which is chiefly used in this country was nearly doubled by the act of 1867 ; and the increase was concealed under a change in classification. The duty on clothing and combing wools, as fixed in that the ad-valorem duty is in the one case ten per cent., in the other eleven per cent. This difference resulted by accident, as the writer has been in- formed, from the need of complying technically with certain parliamentary rules of the House. It is hardly necessary to say that this mixture of specific and ad-valorem duties on wool has no connection with the compensating system. The compensating scheme accounts only for the two kinds of duties on woollen goods. /rOH^ DUTIES WERE RAISED. 203 1867, has been on the average more than fifty per cent, on the value abroad. The duty on wool being fixed in this way, that on woollens was arranged on the following ^j^^ ^^^ ^^ plan. It was calculated that four pounds woollen of wool (unwashed) were needed to produce a pound of cloth. The duty on wool, as has been ex- plained, amounted to about eleven and one half cents a pound, taking the specific and ad-valorem duty to- gether. Each of the four pounds of wool used in mak- ing a pound of cloth, paid, if imported, a duty of four times eleven and one half cents, or forty-six cents. If home grown wool was used, the price of this, it was assumed, was equally raised by the duty. The manufacturer in either case paid, for the wool used in making a pound of cloth, forty-six cents more than his foreign competitor. For this disadvantage he must be compensated. More- over, the manufacturer in the United States, in 1867, paid duties on drugs, dye-stuffs, oils, etc., estimated to amount to two and one half cents per pound of cloth. For this also he must be compensated. In addition he must have interest on the duties advanced by him ; for between the time when he paid the duties on the wool and other materials, and the time when he was reimbursed by the sale of his cloth, he had so much money locked up. Add interest for, say six months, and we get the final total of the duty necessary to compensate the manufacturer for what he has to pay on his raw materials. The account stands : 204 HISTOR V OF THE EXISTING TARIFF. Duty on 4 pounds of wool at 11^ cents ... 46 cents " " oils, dye-stuffs, etc. . . . . 2j " Interest 44 " Total 53 " Congress did not accept the exact figure set by the woollen makers. It made the compensating duty fifty cents per pound of cloth instead of fifty-three ; but this change was evidently of no material importance. The woollen manufacturers got substantially all that they wanted. It will be remembered that in 1864 the com- pensating specific duty on cloth had been only twenty- four cents per pound. The ad-valorem duty was fixed at thirty-five per cent. The woollen manufacturers said they wanted a " net effec- tive protection " of only twenty-five per cent.' This does not seem immoderate. But ten per cent ad-valorem was supposed to be necessary to compensate for the internal taxes, which were still imposed in 1867, though abolished very soon after. This ten per cent., added to the desired protection of twenty-five per cent, brought the ad-valorem ' ' ' All manufactures composed wholly or in part of wool or worsted shall be subjected to a duty which shall be equal to twenty-five per cent, net ; that is, twenty-five per cent, after reimbursing the amount paid on account of wool, dye-stuffs, and other imported materials, and also the amount paid for the internal revenue tax imposed on manufactures and on the supplies and materials used therefor." Joint Report of Wool Manufacturers and Wool Growers, "Revenue Report, for i856," p. 430 ; also in "Transactions," The Executive Committee of the Wool Manufacturers' Association said, in 1866 ; ' ' Independently of considerations demanding a duty on wool, the wool manufacturers would prefer the total abolition of specific duties, pro- vided they could have all their raw material free, and an actual net protec- tion of twenty.five per cent." Harris, " Memorial," p. g. HOW DUTIES WERE RAISED. 205 rate to thirty-five per cent. The final duty on woollen cloth was therefore fifty cents per pound and thirty-five per cent, ad valorem : of which the fifty cents was com- pensation for duties on raw materials ; ten per cent, was compensation for internal tax ; and of the whole accumu- lated mass only twenty-five per cent, was supposed to give protection to the manufacturer. This duty was levied on woollen cloths, woollen shawls, and manufactures of wool not otherwise provided for — • which included most of the woollen goods then made in this country. On other classes of goods the same sys- tem was followed. An ad-valorem duty of Duty thirty-five per cent, was imposed in all cases ; °" A^nn^ls, carpets, twenty-five per cent, being intended to be <)3), published by the Wool-Manufac- turers' Association, and in the volume on Wool and Manufactures of Wool (1894), issued by the Bureau of Statistics, Treasury Department. 220 HISTORY OF THE EXISTING TARIFF. stances would supply the United States with this metal more cheaply and abundantly than any other country; yet by virtue of our tariff policy these very mines caused us for many years to pay more for our copper than any other country. The increased production from these mines, with other circumstances, had caused copper to fall in price in 1867 and 1868; and their owners came before Congress and asked for an increase of duties. Cop- per ore was to pay three cents for each pound of pure cop- per, equal to twenty-five or thirty per cent., in place of the previous duty of five per cent. ; and ingot copper was to pay five cents per pound, instead of two and a half cents. The bill making these changes was passed by both houses. President Johnson refused to sign it, and sent in a veto message, which bore marks of having been composed by other hands than his own. But the President was then per- haps the most unpopular man in the country ; Congress had got a habit of overriding his vetoes, and the copper bill was passed in both Houses by the necessary two-thirds vote, and became law.' The effect of the higher duty was to accelerate the closing of the smelting establish- ' The veto message is in Congress. Record, i868-6g, p. 1460. It was written by Mr. David A. Wells, as that gentleman has informed the writer. The character of the bill was made clear enough in the course of the debate, at well as by the veto message. See Brooks's speech, ibid,, p. 1462. The manner in which this bill, and others of the same kind, were carried through Congress is illustrated by some almost naive remarks of Mr. Frelinghuysen : " My sympathies are with this bill, as they always are for any tariff bill. I confess, however, that I do not like this system of legislation, picking out first wool, then copper, then other articles, and leaving the general manu- facturing interests without that protection to which they are entitled, and thus dividing the strength which those great interests ought to have. Bi*-' HOW DUTIES WERE RAISED. 221 ments which had treated imported ores, and to aid the domestic producers of copper in pocketing large profits. The displacement of the imported copper by the Lake Superior product would have come in any case ; for, as events proved, the sources of supply in this country were rich enough not only to oust foreign competitors at home, but soon to invade the market abroad. With the aid of the duty, the mining companies were able to form a combination which fixed the price of copper within the country at a higher price than that ruling abroad. When it was impossible to dispose of the entire product within the country, large quantities were sent abroad and sold at whatever price could be got, — lower in any case than the domestic price. The great profits secured by those who were shrewd and fortunate in developing the mines were doubtless due in the main to the unsurpassed rich- ness of the copper deposits. But they were increased by the copper duty of 1869; and thus for a series of years the great natural resources of the country became a cause not of abundance and cheapness, but of curtailment of supply and dearness.' Still another instance of the increase of duties since the war is to be found in the case of steel rails. Before 1870 steel rails had been charged with duty under the head of still, if a bill is introduced which gives protection to copper, trusting to the magnanimity of the Representatives from the West who have wool and cop- per protected, I should probably vote for the h\\\."—Ibid., p. 161. ' On the effect of the copper act, see Mr. Wells's Essay, already referred to, in the Cobden Club series, pp. 518-521 Cf. the "Report of the Tariff Comm.," pp. 2554-2577. See also Appendix, V., where the total pro- duction of copper in each year, prices at home and abroad, etc. , are given. 222 HISTORY OF THE EXISTING TARIFF. "manufacturers of steel not otherwise provided for," and Steel rails, as such had paid forty-five per cent. The 1870. tariff act of 1870 changed this to a specific duty of \\ cents per pound, or $28 per gross ton. At the time, the change caused an increase, but no very great increase, in the duty. The Bessemer process of making steel had hardly begun to be used in 1870, and the price of steel rails at that time in England was about $50 per ton. The ad-valorem rate of forty- five per cent., calculated on this price, would make the duty $22.50 per ton, or not very much less than the duty of $28 per ton imposed by the act of 1870. Between 1870 and 1873, the price of steel rails advanced in Eng- land, and the specific duty of $28 imposed in the former year was not higher than the ad-valorem rate of forty-five per cent, would have been. But after 1873 the prices of Bessemer steel and of steel rails steadily went down. As they did so, the specific duty became heavier in propor- tion to the price. By 1877 the average price of steel rails in England was only a little over $3 1 per ton ; and since 1877 the English price has not on the average been so high as $28 per ton. The duty of $28, which this country imposed, therefore became equivalent to more than one hundred per cent on the foreign price. The result of this exorbitant duty was an enormous gain to the producers of steel rails in the United States.-ssThe patent for the use of the Bessemer process was owned by a comparatively small number of companies ; and these companies, aided by a JIOW DUTIES WERE RAISED. 223 patent at home and protected by an enormous duty against foreign competitors, were enabled for a time to ob- tain exceedingly high prices for steel rails. During the great demand for railroad materials which began on the revival of business in 1879, ^"^ continued for several years thereafter, the prices of steel rails were advanced so high that English rails were imported into this country even though paying the duty of one hundred per cent. During this time the price in England was on the average in 1880 about $36 per ton, and in 1881 about $31 per ton. In this country during the same years the price averaged %6'J and %6\ per ton. That is, consumers in this country were compelled to pay twice as much for steel rails as they paid in England. Any thing which increases the cost of railroad-building tends to increase the cost of transportation ; and a tax of this kind eventually comes out of the pockets of the people in the shape of higher railroad-charges for carrying freight and passengers. The domestic producers of steel rails secured enormous profits, of one hundred per cent, and more on their capital, during these years. These profits, as is always the case, caused a great extension of production. The men who had made so much money out of Bessemer steel in 1879-81 put this money very largely into establishments for making more steel. New works were erected in all parts of the country. At the same time the demand fell off, in consequence of the check to railroad-building ; and the increased supply, joined to the small demand, caused 224 HISTORY OF THE EXISTING TARIFF. prices here to fall almost to the English rates. But during the years of speculation and railroad-building the tariff had yielded great gains to makers of steel rails ; and popular feeling against this state of things was so strong that in 1883 Congress felt compelled, as we shall see, to make a considerable reduction in the duty.' Still another case, and one which bears some resem- M bl 186 t>lance to the woollen act of 1867, is to be and 1870. found in the change of the duty on marble, which was made in 1870. The duty on marble had been put in 1864 at fifty cents per cubic foot, and twenty per cent, in addition. This, it may be remarked, is one of the not infrequent cases in which our tariff has imposed, and still imposes, both ad-valorem and specific duties on the same article. No compensating principle, such as is found in the woollen schedule, ex- plains most of these mixed duties ; and it is hard to find any good reason for retaining them, and giving the customs authorities the task of assessing the duty both on value of the article and on its weight or measure. The cause of their retention, there can be little doubt, is that they serve to conceal the real- extent of the duties imposed. The duty on marble, for instance, had been thirty per cent, in 1861, and had been raised to forty per ' The effect of the steel-rail duty is discussed more in detail in Mr. J. Schoenhof's "Destructive Influence of the Tariff," ch. vii. On the profits made by the manufacturers, see Mr. A. S. Hewitt's speech in Congress, May, 16, 1882, Congress. Record, pp. 3980-83 ; also printed separately. Cf. infra, p. 94, and figures of production, prices, etc. in Appendix, VI, HOW DUTIES WERE RAISED. 225 cent, in 1862. The mixed duty put on in 1864 was equivalent to eighty per cent, and more.' A direct in- crease of the duty from forty to eighty per cent, would hardly have been ventured on ; but the adoption of the mixed duty veiled the change which was in fact made. One would have supposed that this rate of eighty per cent, would have sufficed even for the most ardent sup- porter of home industries; but in 1870 a still further increase was brought about. It was then enacted that marble sawed into slabs of a thickness of two inches or less should pay twenty-five cents for each superficial square foot, and thirty per cent, in addition ; slabs be- tween two and three inches thick should pay thirty-five cents per square foot, and thirty per cent. ; slabs between three and four inches thick should pay forty-five cents per square foot, and thirty per cent.; and so on in propor- tion. Marble more than six inches thick paid at the old rate of fifty cents per cubic foot, and twenty per cent. It is evident that the change made in the duty on marble in slabs caused a great increase. The duty on the thinnest slabs (two inches or less in thickness) became $1.50 per cubic foot, and thirty per cent, in addition ; this same ' The duty of 1864 was fixed, as Mr. Morrill then explained, in accord- ance with an arrangement made between the importing merchants and " the gentlemen in Washington in the marble-quarry interest. '' The latter were Mr. Morrill's constituents. It did not seem to occur to that gentleman that the persons who were to pay for the marble should be regarded at all. Originally Mr. Morrill had even proposed a duty of seventy-five cents per cubic yard, with twenty per cent, in addition. See Congr. Globe, 1863-64, pp. 2746-2747. 226 HISTORY OF THE EXISTING TARIFF. marble had hitherto been admitted at fifty cents per cubic foot, and twenty per cent. The new rates of 1870 were equivalent to between 100 and 150 per cent, on the value, and proved to be practically prohibitive. The effect of the marble duty and of the change made in it in 1870 can be understood only by those who know the cir- cumstances under which marble is produced and imported in this country. The only marble imported, and that which alone is affected by the duty, is fine marble used for ornamental purposes in mantel-pieces, furniture, grave- stones, etc. Such marble comes into use very largely in the shape of slabs of a few inches in thickness. The marble is imported, notwithstanding the heavy duty, from Italy, whence it is brought cheaply by ships that have taken olit grain and other bulky cargoes. It is produced in the United States in a single district in Vermont. The owners of the marble quarries in this district had their product raised in price almost to the extent of the duty of 80 or 150 per cent. The result was to make these quarries very valuable pieces of property, and to put very handsome profits into the pockets of their owners; profits which represent practically so much money which Congress ordered those who used ornamental marble to pay over to the quarry-owners.' Wool and woollens, copper, steel rails, marble, which we have now considered, are sufiScient examples of the man- ^ In regard to the duty on marble, see " Tariff Commission Report," pp. 227, 1560, 1648. HOW DUTIES WERE RAISED. 22/ ner in which duties, already raised to high figures during the war, were still further increased after the war, for the benefit of the domestic producers. Other instances could be given in which an equal disregard q^^^^ of the consumer and taxpayer has been examples, shown. The duty on flax, the raw material "' ""^ * ' of a manufacture not over-prosperous, had been $15 per ton in 1864; in 1870 it was raised to $20 on undressed flax, and to $40 on dressed flax. Nickel had been admitted free of duty in 1861, and had paid only fifteen per cent, by the act of 1864. In 1870 the duty was sud- enly made thirty cents per pound, or about forty per cent, on the value. Nickel, like marble, is produced in only one locality in this country. There exists a single nickel mine, in Pennsylvania, owned by a well-known ad- vocate of protection, and, with the aid of the tariff, this mine, doubtless, has yielded the owner very handsome re- turns." Examples need not be multiplied. Enough has ' Mr. Joseph Wharton, of Philadelphia, is the owner of the nickel-mine, and has appeared frequently before Congressional Committees in advocacy of this duty and of others. See the " Tariff Commission Report," pp. 201- 204. A heated controversy on this subject was raised by Mr. Wharton's pamphlet, "The Duty on Nickel" (Philadelphia: 1883), with which may be compared the remarks of Mr. D. A. Wells, in the Princeton Review, July, 1883, pp. 8-11. In the years after 1870, the nickel situation was affected, first, by the dis- covery of rich mines in New Caledonia, controlled by a French Company ; and next, about 1889, by the discovery of a rich mine in Canada. The Pennsyl- vania mine seems to have shown signs of exhaustion, and its owner advocated the admission of nickel ore and matte at a low rate of duty, with the reten- tion of the duty on nickel itself for the protection of the works which had been put up to refine the Pennsylvania nickel. See the statements of Mr. 228 HISTORY OF THE EXISTING TARIFF. been said to show how the increase of duties of which the war was the immediate occasion, continued after the war had ceased. The retention of the high duties of the war is to be explained by the pressure of other problems, the fear of infringing on vested rights and interests, the powerful opposition which is always met in withdrawing public bounty when once it has been conferred. To explain the additions to the protective system made after the war, by measures like the woollens act of 1867 and the copper act of 1869, some regard must also be had to the influence of private interests in Congress. The details of these acts, and of other acts passed since the war, have undoubtedly been settled in large part by men who had a direct pecu- niary interest in securing an increase of the duties. It is highly improbable that bribery, direct or indirect, was ever used to affect tariff legislation. But it may be fairly said that a general laxity of opinion on the duties of public men enabled provisions to find their way into tariff legislation which could not have been carried through in a more healthy state of affairs. The demor- alization has shown itself quite as strikingly in other parts of federal legislation as in tariff matters; it has shown itself most strikingly of all in some State legislatures and in municipal administration. During the period imme- diately after the war, the state of things was probably Wharton and others in the Senate "Tariff Testimony" of i888-8y, pp. 1347-64, and in the House " Report on the Revision of the Tariff," i8go, pp. 1153-1161. HOW DUTIES WERE RAISED. 229 worse than at any other time in our history. The redun- dant currency promoted speculation and gambling ; jobs were plenty and lobbyists strong ; some legislators thought it not improper to become " interested " in enterprises which their votes might affect, and few Congressmen hes- itated to advocate measures that would put money in the pockets of influential constituents. Conditions of this sort account largely for the higher duties of the years after the war. It cannot be said that there was any con- sistent policy or sustained public opinion in favor of ex- tending the protective system. CHAPTER IV. THE TARIFF ACT OF 1 883. The tariff act of 1883 made the first general revision since the Civil War, apart from the abortive horizontal reduction of 1872. After the crisis of 1873, little or noth- ing was heard about the tariff. Currency questions came into prominence during the period of depression. » The successful resumption of specie payments in 1879, and the revival of prosperity which set in at the same time, finally diverted public attention from the monetary situation; and the same set of causes contributed to centre attention once more on the tariff system. The revival of activity in 1879 and the years following caused a great increase in imports, and so a great increase in the customs revenue. For several years after 1879, the surplus revenue was on the average over a hundred millions annually. The redundant revenue compelled a revision of the customs duties, and it was inevitable that not only the financial but the economic aspects of the tariff should once more become prominent. The connection between tariff legislation and the state of the revenue has indeed been almost constant in our his- tory. In 1842 an empty treasury was followed by the pas' 230 THE TARIFF ACT OF 1 883. 23 1 sage of a high protective tariff. In 1857 ^n overflowing revenue caused a reduction of the duties. In 1861 the Morrill tariff was passed, partly in order to make good a deficit. During the war the need of money led to the act of 1864. The ten per cent, reduction of 1872 was called out largely by the redundant revenue ; s*'^''"" ,,...„ , , , , °° ^^ tariff its abohtion in 1875 was excused by the falhng ■' ° renewed. off in the government income. The protection- ist acts of 1824 and 1828 and the so-called revenue act of 1846, stand practically alone as general measures little affected by the state of the revenue at the time. Since the Civil War, the financial situation has usually given the occasion for changes in the tariff rates ; and this is true of the act of 1883, as well as of the acts of 1890 and 1897. :="In 1882 Congress passed an act for the appointment of a Tarifi^Comimssion, which was to report at - Tariff the nextsession of Congress what changes it Commission thought^desirable. The majority in Congress then was protectionist, and of the gentlemen appointed by the President on this commission a majority were advoca tes^ o f high protection ; while no member could be said to represent that part of the public which believed a reduction of the protective duties to be desirable. Mr. John L. Hayes, the secretary of the Wool Manufacturers' Association, was president of the commission. Its report was laid before Congress at the beginning of the session of 1882-83. At first no action on this report or on the tariff seemed likely to be taken ; for the House, in which rev- enue bills must originate, was unable to agree on any 232 HISTORY OF THE EXISTING TARIFF. bill. But the House having passed a bill for the re- duction of some of the internal taxes, the Senate tacked to this bill, as an amendment, a tariff bill, based, in the main, on the recommendations of the Tariff Com- mission. When this bill came before the House the protectionists again succeeded, as in 1872, in obtaining a parliamentary victory. By an adroit mancEuvre they man- aged to have it referred to a conference committee." In this committee the details of the tariff act were finally set- tled ; for the bill, as reported to the Senate and House by the conferees of the two bodies, was passed by them and became law. The object of the ma- "^ ° ^ ^ , how passed, noeuvre was to check the reduction of duties as it appeared in the Senate bill; and this object was attain- ed. The changes made by the conference committees were, as a rule, in a protectionist direction. The duties ' This manoeuvre was a curious example of the manner in which the rules of Congress are manipulated in order to ailect legislation. A two-thirds vote, by the existing rules, was required to bring the Senate bill before the House. A two-thirds majority in favor of the bill could not be obtained ; though it was probable that on a direct vote a majority in its favor could have been got. The protectionists wished to have the bill referred to a conference commit- tee, which would probably act in the direction desired by them. For this purpose a resolution was introduced by Mr. Reed, of Maine, providing for a new rule of the House, by which a bare majority was to have power to take up a bill amended by the Senate for the purpose of non-concurrence in the Senate amendments, but not for the purpose of concurrence. By the pas- sage of this rule a majority of the House could take up the tariff bill, and then refuse to concur in the Senate amendments ; but under this rule the amendments could not be concurred in. There was, consequently, no possibility of passing the tariff bill in the shape in which it came from the Senate. The bill had to be referred to a conference committee ; and in that committee, as the text states, the details of the bill were settled. The Reed rule, though made a permanent rule of the House, was passed merely in order to attain this object. THE TARIFF ACT OF 1883. 233 on a number of articles were raised by the committee above the rates of the Senate bill, and even above the rates which the House had shown a willingness to accept. The consequence was that the tariff act, as finally passed, contained a much less degree of reduction than the origi- nal Senate bill ; and it was passed in the Senate only by a strict party vote of 33 to 31, while the original Senate bill had been passed by a vote of 42 to 19.' In taking up the provisions of the act of 1883, it will be best to consider first those cases in which an increase in the duties was made. Changes of this sort were made in a considerable number of cases, and are significant of the general character of the measure. To begin with, the duties on certain classes of woollen goods were raised. ' Mr. Morrison, in 1884, said : " The office and duty of a conference com- mittee is to adjust the difference between two disagreeing houses. This House had decided that bar-iron of the middle class should pay $20 a ton ; the Senate that it was to pay $20.16 a ton. The gentlemen of the confer- ence committee reconciled this difference — how? By raising bar-iron [of this class] above both House and Senate to $22.40. The Tariff Commission reported that the tariff on iron ore should be 50 cents a ton. The Senate said it should be 50 cents a ton. The House said it should be 50 cents a ton. Gentlemen of the conference committee reconciled the agreement of the House, Senate, and Tariff Commission into a disagreement, and made the duty on iron ore 75 cents a ton. The gentlemen of the conference did a similar service for the great corporation of corporations, the Iron and Steel Association, by giving it a tax of $17 on steel rails, which the House had- fixed at $15 and the Senate at $13.68 per ton." Quoted in Nelson's " Un- just Tariff Law,'' pp. 22, 23. Cf. remarks to the same effect by Senator Beck, who was a member of the conference committee. — Cong. Record, 1883- S4, p. 2786. The conferrees for the Senate were Messrs. Morrill, Sherman, Aldrich, Bayard, and Beck ; for the House, Messrs. Kelley, McKinley, Haskell, Randall, and Carlisle. All but three (Bayard, Beck, and Carlisle) were strong protectionists. 234 HISTORY OF THE EXISTING TARIFF. On most woollens the figures were lowered ; though, as will be seen, the reduction in these cases was not such as to bring any benefit to consumers. But on certain classes of woollens, on which a reduction of duty, if made, would have been of real importance, the duties were advanced. This was the case with dress goods made wholly of wool. Under the act of 1867 such goods had paid a maximum duty of eight cents per yard and forty per cent. The forty per cent, rate on these goods had already been above the general ad-valorem duty of thirty-five per cent, estab- lished by the act of 1867. Nevertheless the act of 1883 increased the duty on these goods to nine cents a yard and forty per cent. The Tariff Commission had even recommended twelve cents a yard and forty per cent. Goods of this class were, and still are, the largest single item in the importations of woollens into the United States. They are made to no very great extent by the domestic manufacturers. The new duty was intended to enable the latter to engage profitably in making them ; since the old duty, though it amounted in all to more than sixty-five per cent, on the value of the imports, had not sufficed for this purpose. The increase in the specific duty was not supposed to be necessary to give more effective compensation for the wool duty ; in fact, as we shall see, the duty on wool was slightly lowered, so that the compensating duty, if changed at all, should have gone down. The new duty was a concession to the de- mand of the manufacturers for still further protection.' ' The Tariff Commission, in its "Report " (p. 31), said : " The new clause in relation to all-wool merino goods is a new provision, and has in view the THE TARIFF ACT OF 1883. 235 It did not attain its object ; all-wool dress goods con- tinued to be imported, and few, if any, were made at home ; and in time a still further increase of duty was asked, and at last was granted in the tariff act of 1890. Next to dress goods, such as were discussed in the preceding paragraph, the class of woollens of which the importations were largest were the finer grades of cloths and cassimeres. The importation of these went on stead- ily in large quantities. Their production was carried on in this country only to a limited extent. It is not sur- prising, therefore, to find here also a rise of the rates in the act of 1883. Cloths were divided into two classes : those costing more and those costing less than eighty cents per pound. The latter, costing less than eighty cents, were admitted, as before, at an ad-valorem duty of thirty-five per cent. But the former, costing more than eighty cents per pound, were made to pay forty per cent. The specific compensating duty was reduced somewhat in both cases, in connection with the lower duties on wool, which will presently be discussed ; but the ad-valorem rate, that which is avowedly protective, was increased. This increase also did not have the desired effect ; im- portations continued in large volume ; and here again a further advance in duties was asked and obtained in 1890. A change of almost the same kind was made in the introduction of fabrics never yet successfully made in this country. Many of these goods constitute staple fabrics * * * and their manufacture would be a desirable acquisition to our national industry." The duties of the act of 1883 on wool and woollens were discussed in detail by Mr, Hayes in Bulletin Wool Mf., xiii., 1-13, 89-128. 236 HISTORY OF THE EXISTING TARIFF. duties on cotton goods. Here also the duty was lowered on the common grades of goods ; and on these grades the reduction was again a purely nominal one. But on other grades of cotton goods, whose importation still continued, and on which a decrease in the duty would have caused some lowering of prices and relief from taxation, there was no reduction, but an increase. The duty on cotton hosiery, embroideries, trimmings, laces, insertings, had been thirty-five per cent, under the old law. In the act of 1883 it was made forty per cent. The duty of thirty- five per cent, had been imposed during the war, in 1864, at a time when raw cotton was taxed, and the manufac- tured cotton also paid a heavy internal tax. This rate had remained unchanged from 1864 till 1883, notwithstanding the abolition of the internal taxes. The importance of the new duty of forty per cent, is clear only when we know that imports of cottons consist chiefly of goods of the class on which the duty is raised. About two thirds of the cottons imported became subject to the increased duty. The process by which the protective system has gradu- ally been brought to include almost every article, what- ever its character, whose production in the country is possible, is illustrated by the history of the duty on iron ore. This most raw of raw materials had paid in 1861 a duty of ten per cent, as an unenumerated article ; and the rate had not been changed during the war, since the arti- cle was not one likely to be imported or to yield revenue. In 1870, when the protective principle, as we have seen, THE TARIFF ACT OF 1 883. 237 was applied with greater strictness in various directions, the duty was raised to twenty per cent. In later years iron ore began to be imported in considerable quantities, especially from Spain; and the duty was raised in 1883 to seventy-five cents per ton, or about thirty-five per cent, on the value. Still another instance of the advance of duties in the new act was in the rates on certain manufactures of steel. . Here, as has so often happened, the increase was concealed under what was in appearance merely a change in classification. The duties on steel ingots, bars, sheets, and coils had been, until 1883, those fixed in the tariff of 1864, — from two and one quarter cents to three and one half cents per pound, varying with the value of the steel. The act of 1883 reduced these duties slightly, making them from two to three and a quarter cents per pound. But previous to 1883 "steel, in forms not otherwise specified," had been admitted at a duty of thirty per cent. Under this provision, which had been in force since 1864, a number of articles, like cogged ingots, rods, piston-rods, steamer shafts, and so on, had paid only thirty per cent. The act of 1883, however, specificially enumerated these and other articles, and put them in the same schedule with steel ingots and bars, — that is, compelled them to pay a duty of from two to three and a quarter cents a pound. The effect was a consider- able rise in the duties on the newly enumerated articles. These examples indicate the mode and the extent in which the protective system was extended in the act of 238 HISTORY OF THE EXISTING TARIFF. 1 883. As a rule, duties were advanced on protected articles of which importations continued in considerable volume. The advance was by no means universal, being affected, as our tariff legislation so often has been, by the hap- hazard manner in which the details of the measure were finally settled. But it was made in so large a number of important cases as to give the act a distinctly protectionist flavor. Such extensions of the protective system prob- ably were not at that time expected or desired by the public. The Tariff Commission had been given the task of revising the tariff "judiciously." The rates recom- mended by it were declared to effect a general reduction of twenty per cent, or more, and the declared object of the leaders in the dominant party was to make a reform in the tariff system. Reform then was still understood to mean reduction, and real reduction, in the protective duties ; and an actual increase in rates, such as we have seen on cottons, woollens, and other articles, was no part of what the public expected or the act professed to do. In truth, these changes were made in good part without plan or consistency, as so many details have been settled in our statutes: a result inevitable from the absence, in our system, of concentrated responsibility for the details of legislation. Some advances were proposed by the Tariff Commission, others by the House and Senate Commit- tees; some by amendments in the House, others by amendments in the Senate; not a few, as was noted above, were finally settled in the Conference Committee. In many cases, they were half concealed by changes in -^ THE TARIFF ACT OF 1 883. 239 classification, or coupled with reductions of other articles in the same schedules. Had a separate bill been brought forward, proposing the higher duties contained in the act, it certainly could not have passed. We* may turn now to an examination of the cases in which duties were reduced in 1883. The schedules in the tariff which have the greatest effect on the welfare of the country are those fixing the duties on iron and wool ; and to these we will first give our attention. The change in the duty on wool was suffi- ciently simple. The ad-valorem rate was taken off. The duty of 1867, it will be remembered, had been, on wools costing less than thirty-two cents, ten cents per pound plus eleven per cent, ad valorem, and, on wools costing more than thirty-two cents, twelve cents per pound plus ten per cent, ad valorem. These ad-valorem rates of eleven and ten per cent, were taken off, and the rates left simply at ten and twelve cents per pound. In regard to the greater part of the wools raised in the United States, this reduction was purely nominal. It left the duty on the cheaper grades of wool, raised in Texas and in the Terri- tories, at a point where it was still entirely prohibitory. So far as concerns the higher grades of wools, such as are raised in Ohio and neighboring States, the reduction was real, though so small in amount that it practically left the situation unchanged.' On carpet wools the duty was ' The duty in the act of 1883 was ten cents on wool costing thirty cents or less, and twelve cents on that costing more than thirty cents. The change (in the line of division, according to value) from thirty-two to thirty cents was not without importance ; and, as far as it went, it evidently tended to neutralize the reduction. See the Bulletin Wool Mf., xiii., 11, log. 240 HISTORY OF THE EXISTING TARIFF. reduced from the former rates of six and three cents a pound, to five and two and a half cents. These wools are practically not raised in the United States at all ; and the reduction on them was again real, though slight. On the whole, the changes in the duty on this raw material indicated a desire to make concessions to the opponents of protection. Greater reductions would prob- ably have been made but for the fear of arousing among the wool growers a feeling of opposition to the protective system as a whole. Little can be said in favor of the duty on wool ; and even on strictly protectionist grounds much can be said against it. Notwithstanding the cum- brous machinery of compensating duties, it undoubtedly has a hampering influence on the wool manufacture, and has been one factor, though perhaps not the most im- portant, in confining this industry to the limited range that is so often complained of. As a tax on raw materials, it tends to bear with heavier weight than would be the case with the same duty on a finished product ; since it is advanced again and again by the wool dealer, the manu- facturer, the cloth dealer, the tailor, each of whom must have a greater profit in proportion to the greater amount of capital which the wool duty and the higher price of wool make it necessary for him to employ. So strong and so clear are the objections to duties of this kind that hardly another civilized country, whatever its general policy, attempts to protect wool.' ' Not only England, but countries like France, Germany, Austria, Italy, which have applied protective duties in recent years, admit wool free. THE TARIFF ACT OF 1883. 24I Moreover, the reduction of a duty of this kind can take place with exceptional ease. Wool is not produced, as a rule, in large quantities, by persons who devote themselves exclusively to this as a business. It is mainly produced by farmers, whose chief income comes from other sources, and on whom a reduction of duty and a fall of price would fall with comparatively little weight. In the Western States and Territories, it is true, wool is grown on large sheep ranches, by producers with whom it is not a subsidiary business. But the qualities of wool grown there are least affected by the duty. While the price of Territory wools is probably higher than the price of similar wools abroad, it is by no means higher by the full extent of the duty. The argument for the consideration of vested interests is consequently less strong than in the case of manufactures in which a large plant is invested, and where the interests of a large body of workmen are involved in the retention of things as they are. We turn now to the reductions of duty on woollen goods, which would naturally follow the lower duty on wool. It has been seen that the ad-valorem, or Woollens. protective, duty was not decreased at all, and that on the finer classes of woollens it was increased from thirty-five to forty per cent. But the specific, or compen- sating, duty was reduced from fifty cents to thirty-five cents a pound. The woollens duty of 1883 was thirty-five cents a pound and thirty-five per cent, on goods costing less than eighty cents per pound, and thirty-five cents 16 242 HISTORY OF THE EXISTING TARIFF. and forty per cent, on goods costing more than eighty cents. The lowering of the specific duty was in part called for by the reduction of the duty on wool ; but the decrease was somewhat larger than the reduced duty on the raw material made necessary. The compensating duty in the new act was fixed on the assumption that no more than three and one half pounds of wool are used in making a pound of cloth ; whereas the act of 1867, it will be remembered, was framed on the basis of four pounds of wool to the pound of cloth. This may be called a tacit confession that the compensating duty of 1867 had been excessive ; and the new arrangement took away some of the protection which was formerly given by the specific duty. But the changes were more nominal than real. So far as the finer grades of woollens were con- cerned, it was more than offset by the increase in the ad-valorem duty from thirty-five to forty per cent. So far as the cheaper grades of woollens were concerned, it had no real effect. The duty on these was prohibitory before, and it remained prohibitory. Such a change has no effect on trade or prices, and brings no benefit to con- sumers. Precisely similar is the state of things in regard to flannels, blankets, and similar goods. On these also the specific duty was reduced, on the cheapest grades from a rate of twenty cents a pound to rates of ten and twelve cents. But the new rates were still high enough to shut out importation, and brought about no change beyond that of the figures on the statute-book.' ' Complaint was made that the act of 1883 reduced the duties on goods more than the duties on wool, See Mr. Hayes's articles in Bulletin THE TARIFF ACT OF 1 883. 243 Changes of precisely this kind are to be found in other parts of the act of 1883. The rates on the cheap grades of cotton goods, for instance, show a considera- ble reduction. On the lowest class of unprinted goods the duty had been five cents per yard ; it was made two and one half cents. But the old duty had for many years ceased to have any appreciable effect on the prices of cotton goods. The common grades of cottons can be made, as a rule, as cheaply in this country as anywhere in the world ; in fact, some of them are regularly exported in large quantities. If the duty on such cottons were entirely abolished, it is probable that they could not be imported ; and it is certain that a very small duty would suffice to shut out from our market all foreign c'ompeti- tors in them. Under these circumstances a reduction of duty like that of 1883 could be of no effect whatever. The same holds good of almost all the various reductions in the specific duties on plain and printed cotton goods. Wool Mf,, vol. xiii. This was certainly the case with worsted goods, which were admitted at specific duties not sufficient to compensate for the duties on wool. The mistake in adjusting these duties was made by Mr. Hayes himself, in the bill framed by the Tariff Commission. It led to a long struggle on the part of the manufacturers to get a construction of the act of 1883 making worsteds dutiable as woollens. The Democratic admin- istration of 1885-89 refused to adopt such a construction ; the Republican administration in 1889 did so, but the courts, when a case was tried before them, promptly decided that the remedy was not to be found by miscon- struing the statute ; and in 1890 a special act was passed, in advance of the general tariff act of that year, making worsteds dutiable as woollens. A good brief statement of this episode is in the Report of the Secretary of the Treasury for 18S7, p. 35. The Bulletin Wool Mf. is full of it from 1886 to 1889, and a detailed account of the last steps in 1889 is in vol. xx. The special act is in 26 Statutes at Larjie, 105. ^44 HISTORY OF THE EXISTING TARIFF. These changes also were nominal. On the other hand, in the case of the finer cotton goods, laces, and trimmings, on which a lowering of the rates would have been of real effect, there was, as we have seen, no decrease, but an increase. The duty on pig-iron was reduced from $7.00 to $6.72 a ton. This change was insignificant, hardly two per cent, on the foreign price of iron. A greater Iron, could have been made without danger of any disturbance of the iron trade. The same was the case with the reduction on bar-iron, which, on the ordinary grade, lowered the duty from one cent a pound to eight tenths of a cent. The reduction still left the duty high enough to prevent any lowering of prices and any effect on trade. The duties on the various forms of manufac- tured iron — ^hoop, band, sheet, plate iron — ^went down in much the same way. The reductions were slight in all cases, and often merely nominal. In general, the new rates on iron and its manufactures were such as to have no appreciable effect on the trade and welfare of the country. The duty on steel rails showed a considerable reduction. The old rate had been $28 a ton ; the new one Steel rails. _ , , . , , , , , , was $17. If this change had been made four or five years earlier, it would have been of much practical importance ; but when made, it had no effect whatever. It has already been said that, after the enormous profits made by the steel-rail makers in 1879- 1881, ^^^ production in this country was greatly increased. At the same time THE TARIFF ACT OF 1883. 245 the demand from the railroads fell off, and the huge quan- tities which the mills were able to turn out, could be disposed of, if at all, only at prices greatly reduced. The consequence was that the price of rails, which in 1880 was higher than the English price by the full extent of the duty of $28, fell rapidly after 1881, and brought the American price in 1885 to a point but little above the English. The new duty of 1883 was under these circum- stances still prohibitory. In 1887, when a revival of railway building set in, the price of rails again went up. It is probable that at this time, when there was an active demand for rails, the decline of the duty to $17 was of real effect, preventing the American price from rising as high as it would have gone if the old duty had been retained. But the demand fell off quickly after 1887; the American price fell correspondingly, and soon became lower than the English price by an amount much less than the duty of $17. With the possible exception of the year 1887, the duty of $17 was as much a prohibitory one as the old duty of $28 had been, and the reduction on the whole was as much nominal as those in other parts of the iron schedule.* Analogous in its effects to the reduction on steel rails was that on copper. The duty on this article went down from five cents, the rate imposed in 1869, to four cents a pound. The duty on copper had enured to the benefit of the owners of the copper mines of Lake Superior, ' For figures as to the nroduction and prices of steel rails, see Ap- pendix VI. 246 HISTORY OF THE EXISTING TARIFF. aiding them to combine and fix the price of copper without fear of competition from abroad. The great profits of their mines caused them steadily to increase their product ; and although much of their surplus was disposed of abroad, at prices lower than those demanded at home, the growing supply caused the domestic price slowly to fall. The discovery of large deposits of copper, in latter years, in Montana and Arizona, and the ship- ment to market of a great deal of copper from these sources, broke for a while the monopoly of the Lake Superior combination, and caused the price to go down still farther. Importation of copper in any considerable quantities ceased many years ago. The steady increase in the domestic supply brought the price to a point but little above the foreign price. The maintenance of the duty still enabled the combined copper producers at times to secure a higher price than they could have got without the duty ; but under ordinary conditions the enormous quantities of copper yielded by the mines compelled a price to be accepted virtually as low as the foreign price. The cases of copper and steel rails are sometimes re- ferred to as successful applications of protection to young industries. On the surface, the object of such protection seems here to have been obtained. That the price of these articles fell after the duty was imposed, indeed proves nothing ; for their prices fell the world over. But their prices fell faster than in foreign countries, and fell nearly, if not quite, to the foreign level ; and a price as THE TARIFF ACT OF 1883, 247 low as the foreign price, or lower, is the object sought by protection to young industries. This result, however, was not the consequence, in the case of copper certainly, of any stimulus given by the duty to improved methods of production. It was the result of the extraordinary richness of the copper mines, whose discovery and use was not affected by the duty, and would have brought the price down even sooner had it not been for the duty. The duty, so far from stimulating the fall in price, checked it. Much the same is true of steel rails. To be sure, here there seems to have been some stimulus to invention, and some advance by American works over the processes in use abroad ; but in the main the decline in the price of rails has been due to improvements common to all coun- tries, to the discovery of rich beds of iron ore on Lake Superior, and not least to the decline in the cost of trans- porting and bringing together the coal and ore for making the Bessemer iron, — factors not perceptibly affected by the duty. Other reductions in the act of 1883 may be briefly noted. The duty on marble was fixed at sixty-five cents per cubic foot on rough marble, and at $1.10 per cubic foot on marble sawed, dressed, and in ^^^^ slabs. This was a slight decrease from the com- pound duties discussed in the preceding chapter." The duty on nickel was put at fifteen cents a pound, in place of the previous duty of twenty and thirty cents a pound. Practically all the nickel imported had come in at the duty • See p. 224. 248 HISTORY OF THE EXISTING TARIFF. of twenty cents ; consequently the reduction was less considerable than it appeared at first sight to be. A change of greater importance was the reduction of the duty on silks from sixty to fifty per cent. In part, it is true, this was again a merely nominal change, many silk goods being as effectually kept out by a duty of fifty per cent, as by one of sixty. But a large' quantity of silks were steadily imported ; on these, and on goods of the same sort made in the country, the lowering of the duty meant a real decline in the burden of taxation. The situa- tion as to silk goods is more fully discussed in later parts of this volume, and need not now further engage our attention. The reduction of 1883 was as great as could have been expected, and was in marked contrast with the advances made in the duties on finer cotton and woollen goods. The same contrast appears in the reduction of the duty on finer linens from forty to thirty-five per cent. On a considerable number of other articles also reductions were made; the reductions being usually slight, yet sufiScient in number to indicate a disposition to concede something to those who called for a curtailment of the protective duties. The duties on a number of agricultural or mainly agricultural products, such as beef and pork, hams and bacon, lard, cheese, butter, wheat, ^^ ' ' ' com, etc. corn, and oats were left unchanged in the act of 1883. The duty on barley was somewhat lowered at the request of the brewers of beer ; and that on rice also was slightly reduced. But almost all of these products were THE TARIFF ACT OF 1883. 249 charged with the same rates as in previous years. It is needless to say that the duties on them have no effect whatever, except to an insignificant extent on the local trade across the Canadian border. The duties were left unchanged in order to maintain the fiction that the agri- cultural population secured through them a share of the benefits of protection. The reductions in this schedule, on barley and on rice, affected almost the only products on which the duties in fact were of any advantage to the agricultural producer or of any disadvantage to the con- sumer. In this regard, as in others, there was a sharp contrast between the legislation of 1883 and that which followed it in 1890 and 1897. Enough has been said of the details of the act of 1883. Its general character cannot be easily described ; in truth, it can hardly be said to have any general character. On the whole, it may be fairly described as a half-hearted attempt on the part of those wishing to maintain a system of high protection, to make some concession to a public demand for a more moderate tariff system.' , Some duties were increased, some lowered ; nor was any consistent policy followed. Some raw materials, like ' Mr. John L. Hayes, the President of the Tariff Commission, writing more particularly of the new duties on wool and woollens, said, shortly after the passage of the act : ' ' Reduction in itself was by no means desirable to us ; it was a concession to public sentiment, a bending of the top and branches to the wind of public opinion to save the trunk of the protective system. In a word, the object was protection through reduction. We were willing to concede only to save the essentials both of the wool and woollens tariff. * * * We wanted the tariff to be made by our friends." — Bul- letin Wool Mf., xiii., 94. 2SO HISTORY OF THE EXISTING TARIFF. wool and pig-iron, were admitted at slightly lower rates ; others, like iron ore, were charged with higher rates. The same incongruities appear in the duties on more finished goods ; though as to these it may be said that the reductions were generally nominal, rarely of real effect. Looking at the tariff system as a whole, it retained, sub- stantially unchanged, the high level of duties reached during and after the Civil War. No new line of policy was entered on, in one direction or the other; and it remained for the act of 1890, the next step in our' tariff history, to begin a sharp and unmistakable movement in the direction of still higher protection. That measure will be the subject of the next chapter. CHAPTER V. THE TARIFF ACT OF 189O. After the passage of the tariff act of 1883 few per- sons would have expected, for a long series of years, a further extension of the protective system. Neverthe- less, a marked increase of duties was made, within a few years, in the act of 1890, familiarly known as the McKin- ley tariff act : a measure which marks a new phase in our tariff history and in the protective controversy. In the years immediately succeeding the passage of the act of 1883, several unsuccessful attempts were made to amend it.' In 1884, Mr. Morrison, of Illinois, introduced a bill by which a general reduction of twenty per cent., and the entire remission of duties on iron ore, coal, lum- ber, and other articles, were proposed. Mr. Morrison may have been moved to advocate the plan of a " horizontal " reduction by the example which had been set in 1872 ; and doubtless he was also influenced by the circumstance that the protectionists themselves had arranged the details of the act of 1883, ^"'1 could not complain of dispro- portionate reductions, or of a disturbance of relative rates, ' An account of these attempts is given by Mr. O. H. Perry in the Quar- Urly Journal of Economics for October, 1887, vol. ii., pp. 69-79. 251 252 HISTORY OP THE EXISTING TARIFF. under a plan which affected all articles equally. Never- theless, the proposal met with vehement opposition not only from the Republicans, but from a strong minority in Mr. Morrison's own party. It was disposed of on May 6, 1884, by a vote (156 to 151) striking out its enacting clause. Two years later, in the Forty-ninth Congress, a similar disposition was made of another bill introduced by Morrison.y The proposal of 1886, however, was differ- ent from that of 1 884, in that it made detailed changes in the duties. Lumber, salt, wool, hemp, flax, and other articles were put on the free list ; the duty on woollens was made thirty-five per cent., the specific duties on wool- lens being removed with the duties on wool ; and reduc- tions were proposed on cottons and on sugar. The bill never was discussed in Congress, for Mr. Morrison's motion to proceed to its consideration was defeated by a vote of 157 to 140, and during the rest of the session no further attempt was made to take it up. Early in the next session, in December, 1886, a motion was again made to proceed to the consideration of revenue bills, and again was defeated.' With the session of 1887-88, however, the tariff con- troversy entered on a new phase. President Cleveland's ' Some other measures of less significance were also introduced in these years, such as a bill of 1884, to restore the duties of 1867 on wool, which was defeated by a close vote of 126 to 119, and bills introduced by Messrs. Randall and Hiscock in 1886. Mr. Randall's bill proposed the removal of internal taxes on tobacco, fruit brandies, and spirits used in the arts, entire remission of duties on lumber, jute butts, and a few minor articles, and a slight reduction of some other duties. Mr. Hiscock's bill proposed similar changes in the internal taxes, and a large reduction of the duty on sugar, THE TARIFF ACT OF 189O. 253 annual message to Congress, in December, 1887, was de- voted entirely to the tariff, and urged vigorously a general reduction of duties, and more especially the removal of duties on raw materials. Mr. Cleveland's decided and outspoken attitude had the effect of committing his party unreservedly to a policy of opposition to the existing protective system, and so of making this question more distinctly a party matter than it had been at any time since the Civil War. It is true that in the campaign of 1884 the Republicans had put forward the tariff question as the main issue on which they wished to stand before the country ; but in that year the personal qualifications of Mr.. Blaine for the Presidency played an important part in the election, which therefore could not be said to turn simply on the tariff issue. Moreover, within the Demo- cratic party there was then an active minority opposed to the policy of tariff reduction favored by most of the Democrats. This minority had been strong enough to defeat Mr. Morrison's tariff bill of 1884. On the measure of that year, while 151 Democrats voted in the affirma- tive, 41 voted in the negative, and, with the aid of a compact Republican vote in the negative, put an end to the bill. The strength of this element in the Democratic party had declined somewhat in later years ; but in De- cember, 1886, at the opening of the short session 1886-87, with a bounty to American sugar-makers. Both of these bills, which indi- cated the manner in which the protectionists tried to grapple with the problem of reducing the revenue, were referred to the Committee of Ways and Means, and, not being reported from that body, never came to a vote in the House. 254 HISTORY OF THE EXISTING TARIFF. 26 Democrats out of 169 voting were still recorded in opposition to the tariff reform measure then under con- sideration.' In the new Congress, whose first session opened with Mr. Cleveland's message on the tariff, the situation was changed. The Mills bill, so-called, prepared during that session, was passed by the Democrats in the House distinctly as a party measure ; out of 169 Demo- crats voting all but four voted for it. The Republicans were as unanimous in voting against it, and, by way of counter manifesto, prepared in the Senate, where they had a majority, a bill for changing the tariff system in the direction of further protection. The position of both par- ties was in this way sharply defined, and in the campaign of 1888 the tariff question was the issue squarely presented. Neither the Senate bill prepared by the Republicans, nor the Mills bill prepared in the House by the Demo- crats, was expected to reach the stage of enactment. Both served simply to give concrete expression to the principles of the two parties. The Mills bill reduced the duty on pig-iron to $6.00 a ton, fixed the duties on cottons at 35 or 40 per cent, (all specific duties on cottons being abolished), and made reductions of a similar sort, not often great in themselves, but significant in principle, on other manufactures. The incisive changes were on raw materials. Hemp, flax, lumber were to be admitted free. Most important of all, wool was put on the free ' Tables on the votes, by States, on the bills considered between 1883 and 1887 will be found in Mr. Perry's article in the Quarterly Journal of Eco- nomics, just referred to. THE TARIFF ACT OF 189O. 255 list ; a change naturally accompanied by the proposal to abolish the specific or compensating duties on woollen goods. The Senate bill, on the other hand, proposed distinctly a further extension of the protective system. A considerable number of duties were raised, especially on manufactures of which imports continued in large volume, like finer cottons and woollens. On a few articles concessions were made, as in the free admission of Jute, and a small reduction of the duty on steel rails. In the crucial case of wool, the Senate bill provided for a slight increase above the rates of 1883, both on clothing and carpet wools, and for a corresponding advance in the specific duties on woollens ; these changes being accom- panied in some cases by an increase in the ad-valorem duties on these goods. The victory of the Republicans in 1888, and the election of President Harrison, were the results of the issue thus placed before the voters. The election was won by a narrow margin, and was affected by certain factors which stood apart from the main issue. The independent voters had been disappointed with some phases of Presi- dent Cleveland's administration of the civil service, and many who had voted for him in 1884, did not do so in 1888. In New York, whose vote was practically decisive, political intrigues helped to turn the scale. On the whole, however, the Republicans held their own, and even made gains, throughout the country, on the tariff issue; and they might fairly consider the result a popular verdict in favor of the system of protection. But their opposition 2$6 HISTORY OF THE EXISTING TARIFF. to the policy of lower duties, emphasized by President Cleveland, had led them not only to champion the exist- ing system, but to advocate its further extension, by an increase of^ duties in various directions. This they had proposed in^the Senate bill of 1888, and had pledged themselves toTeffect in the debates of the campaign. Ac- cordingly when the Congress then elected met for the session of 1889-90, the Republican majority in the House proceeded to pass a measure which finally became the tariff act of 1890. This measure may fairly be said to be the direct result of Mr. Cleveland's tariff message of 1887. The Republicans, in resisting the doctrine of that message, were led by logical necessity to the opposite doctrine of higher duties, and felt compelled, for the sake of party consistency and political prestige, to pass a tariff measure of some sort. But for the agitation which set in during the session of 1888, it is probable that they would have been disposed to leave the tariff as it stood in the act of 1883. As it was, notwithstanding grave misgivings on the part of some of their leaders, especially those from the northwest, the act known popularly as the McKinley bill was pushed through after long and wearisome debates, and finally became law in October, 1890. To some of the details of this important measure we may now turn. The wool and woollens schedule had become the most important and most sharply debated part of the tariff system, and the changes made in it by the act of 1890 deserve careful attention. On wool, the division into three classes, clothing, combing, and carpet wool, was TffE TARIPF ACT OF 189O. 257 retained, and the changes in duty were in the main signifi- cant from their direction rather than from their amount. The duties on clothing and combing wool, it will be remembered, had been slightly lowered in 1883 ; they were slightly raised in 1890. That on clothing wool went up from ten to eleven cents per pound ; on combing wool from ten to twelve cents. The change was meant to put the wool duties where they had been before 1883, and to placate certain malcontents who ascribed a fall in the price of wool to the reduction of duty of that year. The decline in price was undoubtedly due to other causes, and indeed was much greater than could have been accounted for by the slight reduction of 1883; while the change in duty in 1890 was too small to have any serious effect beyond emphasizing the determination of the Republi- cans to yield nothing on this part of the protective system. So far as the difference in rate between clothing and combing wool goes (eleven cents on the one, twelve on the other), it is difficult to see what was gained. The distinction between the two classes is largely nominal, many kinds of wool being available either for carding or for combing, and the difference in the duties was in any case too slight to have any appreciable effect. Appar- ently, it served simply to cause needless complication in administering the collection of duties. On carpet wools, a more radical change was adopted, more radical at least in form. As has been observed elsewhere, the conditions in regard to carpet wool are peculiar. Practically no wool of this grade is grown in 258 HISTORY OF THE EXISTING TARIFF. the United States. It is of a coarse quality grown mainly in countries like Asia Minor, India, Russia, and the Ar- gentine Republic, from which it is imported into the United States in large quantities. The reason why it is not grown in advanced communities like the United States, Australia, England, France, Germany, is very simple. With the same labor and attention required for carpet wool, the grower in civilized communities, by care and intelligence in the breeding and management of sheep, can secure a better quality of wool, commanding a higher price ; accordingly he confines himself to th6 more profit- able sorts. The demand for an increase in the duty on carpet wool was based on a suspicion that wool, properly belonging to the clothing or combing class, had been en- tered as carpet wool, and so had escaped the higher duty. Probably some part of the imported carpet wool is in fact used in making cloths ; but the fraction is small, and can have no appreciable effect on the price of domestic clothing wool. The endeavor to increase the duty natu- rally was opposed by the carpet manufacturers, and led to an acrimonious discussion in the committee-rooms be- tween them and the advocates of the supposed interests of the farmers. The result in the McKinley act was a compromise. The carpet-wool duty was made ad valo- rem instead of specific, varying from thirty-two per cent, to fifty per cent. ; the change to the ad-valorem method being intended to make the duty adjust itself automati- cally to the quality and value of .the wool. ' Obviously ' The change in duty is most easily explained by putting together the rates under the acts o£ 1883 and 1890. THE TARIFF ACT OF IbgO. 259 the change in one respect was objectionable : it brought with it the temptations to fraud and undervaluation which are inevitable under ad-valorem duties. With it there went some other provisions which made the new duties more rigorous than they seem to be on their face. Thus, if any carpet wool should be improved at all by an ad- mixture of merino or English blood, it became dutiable as clothing or combing wool. If any bale stated by the importer to be dutiable under one class, contained any wool of another class, the whole bale was dutiable at the highest rate. If any wool had been sorted or increased in value by the rejection of any part of the original fleece, it was subject to double duty. Some of these provisions were framed in ambiguous language, giving occasion for troublesome litigation and uncertainty as to the real effect of the legislation. But all were objectionable to those who imported and used carpet wool, and emphasized the policy of keeping that article within the protective sys- tem. Yet if there is any article as to which that system does not attain its object, it is carpet wool. None is grown in the country, and none is likely to be ; it is a raw material for an important manufacture ; its free ad- mission would harm no vested interest. Turning now to the duties on manufactures of wool. In 1883 carpet wool, if worth 12 cents or less per pound, paid 2% cents. " more than 12 cents, " 5 " In 1890 carpet wool, if worth 13 cents or less per pound, paid 32 per cent, ad valorem. " more than 13 cents, " 50 " " " Most carpet wool is worth ten cents a pound or more ; consequently the Jiew ad-vahrem rates meant, in almost all cases, an increase on the duty. 26o HISTORY OF THE EXISTING TARIFF. we find a further development in the direction taken in 1 883 ; namely, a development toward greater complica- tions in the already complicated scheme of duties built up in the act of 1867. It will be remembered that in 1883 the duty on woollen cloths proper, the central point in the wool and woollens schedule, had been changed from the uniform rate fixed in 1867 to rates varying with the value of the goods. In the act of 1890 the policy of varying rates was advanced still further. The mode in which these duties developed cannot be better exhibited than in tabular form, thus : DUTIES ON WOOLLEN CLOTHS. IN 1867, 50 cents per lb., plus 35 per cent. IN 1883, (i) If worth 80 cents or less per lb., 35 cents per lb., plus 35 per cent. (2) If worth more than 80 cents per lb., 35 cents per lb. , plus 40 per cent. IN iSgo. (i) If worth 30 cents or less per pound, 33 cents per lb. plus 40 per cent. (2) If worth between 30 and 40 cents per lb., 38 1 cents per lb., plus 40 per cent. (3) If worth more than 40 cents per lb., 44 cents per lb., plus 50 per cent. It will be seen that the act of 1890 reduced slightly the specific duty on the cheapest woollens, those costing 30 cents or less per pound. This is another tacit admission, similar to that made in the act of 1883, that on cheap goods the old compensating duty had been excessive. The ad-valorem rate on these goods was raised to forty per cent. No pretence was now made of limiting the net protection supposed to be given by the ad-valorem duty, to that mod- THE TARIFF ACT OF 189O. 261 crate rate of twenty-five per cent, which had been the nom- inal object of the original compound scheme of 1867. On the second class of goods, costing between 30 and 40 cents a pound, there was an increase over the rates of 1883 both in the specific and in the ad-valorem duties. Finally, on the third class under the new act, woollens costing over 40 cents, the increase in duties was marked : the specific duty was 44 cents a pound, and the ad-valorem duty went up to fifty per cent. On ready-made clothing the duties were higher still, being fixed at 49I- cents a pound, plus sixty per cent. There are two features in this rearrangement of the duties on woollens which call for comment. In the first place, the compensating duty on the cheaper goods was on the face of it made excessive. Thus, on goods valued at between 30 and 40 cents a pound the compensating duty was fixed at 38^ cents. The compensation was sim- ply for the rise in the price of wool used by the American manufacturers, due to our duty on imported wool. This extra expense to the domestic manufacturer, in the higher price of wool, was assumed, by the terms of the act, to be as great as the total cost of making the same woollen goods for the foreign manufacturer, — wool, wages, and everything else. But the foreign goods were valued at between 30 and 40 cents a pound, which means that they cost about so much ; while the duty which compensated the American producer was 38^ cents a pound. As will be presently explained, this extraordinary compensating duty was more nominal than reaL since no classes of 262 HISTORY OP THE EXISTING TARIFF. goods to which it would apply are likely to be imported. But it was none the less an anomaly. The second feature to be noted is connected with the first. It is the new dividing point in the valuation and classification of woollen cloths : the maximum duty being no longer on goods worth over 80 cents per pound, but on goods worth over 40 cents. The change obviously served to increase the duties more than would appear at first sight ; since goods worth between 40 and 80 cents now paid not the lowest, but the highest duty. The ef- fect of the new classification in fact was that all cloths imported must pay the highest rate. The imports of woollens are chiefly of the finer qualities. When the act of 1883 was passed, it was probably expected that few woollens of the lower class then provided for (namely, those worth less than 80 cents per pound) would be im- ported. In the first years after 1883, this was the case. But as time went on, a growing proportion of woollens came in at the lower value and the correspondingly lower duty ; until in 1889 a good part of the cloths imported were classified at the lower rate. This unexpected devel- opment was due partly to a decline in the price of wool after 1 883 ; partly to improveipents in manufacturing which made it possible to produce goods more cheaply ; and partly, no doubt, to the temptation to make goods, and perhaps also undervalue them at the custom-house, in such manner as to bring them in at the lower rate of duty. At all events, the act of 1890 was so arranged as to put an end to this importation of woollens at the lower end of the schedule. To all i-'— -^ -^ ^— -- ''<■ ^-"^ "^^^'^ THE TARIFF ACT OF 189O. 263 all woollen goods likely to be imported at all, subject to the mjiximum rate of duty.' Next we may consider the duties on women's and children's dress goods. The duties on these had already been raised in 1883 above the rates of 1867; in 1890 they were further raised. As in the case of cloths for men's wear, the increase took place partly by direct advance in the rates, partly by a shifting of the classification. The compensating duty on these goods, it will be remembered, had been from the first arranged by the yard, and not by the pound. The changes in duty can again be best pre- sented in tabular form. DUTIES ON DRESS GOODS. IN 1883. (i) Worth 20 cents a yard or less : duty, 5 cents a yard, plus 35 per cent. (2) Worth over 20 cents a yard : duty, 7 cents a yard, plus 40 per cent. (3) Made wholly of wool : duty, 9 cents a yard, plus 40 per cent. IN 1890. (i) Cotton warp, worth 15 cents a yard or less : duty, 7 cents a yard, plus 40 per cent. (2) Cotton warp, worth over 15 cents a yard : duty, 8 cents a yard, plus 50 per cent. (3) If the warp contains any wool ; duty, 12 cents a yard, plus 50 per cent. ' The imports of woollen cloths during the period in which the act of 1883 was in force were as follows (the figures denote thousands of dollars) : Worth 8o cents or Worth over less. 80 cents. Fiscal Year 1884, 1243,000 |l2, 974,000 1885, 213,000 9,867,000 1886, 314,000 9,151,000 1887, 713,000 9,309,000 1888, 1,073,000 9,778,000 1889, 1,125,000 8,133,000 During that part of the fiscal year 1890-91, when the duties of the act of 1890 were in force, the imports of woollen cloths were, 264 HISTORY OF THE EXISTING TARIFF. The specific duty on the lowest class went from 5 cents to 7; the ad-valorem duty from 35 to 40 per cent. In the middle class the rates advanced from 7 to 8 cents, and from 40 to 50 per cent. The line of division by value went down from 20 to 15 cents, so that a larger proportion of the goods come in under the middle duty of 8 cents plus 50 per cent. On the third class, the rates went up in similar proportions, — from 9 to 1 2 cents, and from 40 to 50 per cent. One other effective change was made, indicated in the tabular statement, but deserving more detailed description. In 1883 the third class, in which the duties were highest, included goods made wholly of wool, and these only. In 1890, certain goods of mixed materials were transferred to it. The first two classes included, in 1890, fabrics "of which the warp consists wholly of cotton or other vegetable material." Conse- quently the third class included such as have a warp containing any fraction of wool ; and these mixed goods, as well as goods made entirely of wool, become subject to the new maximum duty of 12 cents per yard, plus 50 per cent. The changes on dress goods are undoubtedly those of greatest practical effect in the wool and woollens schedule. (i) valued at 30 cents or less per pound .... $1,248 (2) valued at between 30 and 40 cents 49>925 (3) valued at over 40 cents . 6,303,500 Practically all were valued at over 40 cents, and so paid the maximum rate of 44 cents per pound, plus 50 per cent. Reduced to an ad-valorem equivalent, this was a duty of about 92 per cent. On the few goods of the second class imported (worth between 30 and 40 cents) the duty was 143 per cent. THE TARIFF ACT OF 189O. 265 The importation of these goods into the United States is enormous: having ranged between fifteen and twenty milHons of dollars' worth annually in the years since the act of 1883. It is natural that those who held to the principle of protection should endeavor to check them. There had been a tendency, similar to that noted in the case of woollen cloths, though not so marked, for a grow- ing importation of the cheaper goods (valued at less than 20 cents a yard under the act of 1883) ; and this con- tributed to the change in valuation and description in the new act. By the act of 1890, these fabrics were subjected in almost all cases to the maximum duty, equivalent to over one hundred per cent, on their foreign value.' It is surprising that imports continue in face of a duty so very high ; yet continue they do, indicating that not only the imported fabrics, but the domestic fabrics of the same sorts, are raised in price for the consumer by the full extent of the duty. The explanation of the steady inflow of these goods, and the inability of the American manu- ' In that part of the fiscal year 1890-gi in which the new duties were in force, the imports of the three classes of dress goods were : (i) valued at 15 cents or less (duty 7 cents plus 40 per cent.) $768,000 (2) valued at more than 15 cents (duty 8 cents plus 50 per cent.) 845,000 (3) if the warp contains any wool (duty 12 cents plus 50 per cent.) $5,281,000 On goods of the third class, the duties collected were $5,423,000, making 103 per cent, of their value. It should be noted that dress goods exceeding a certain weight (four ounces a square yard) are treated like men's woollens and are subjected to the maximum duty on these, — 44 cents a pound plus 50 per cent. For a statement of the grounds from the protectionist point of view, for these very high duties, see an article by Mr. William Whitman, in the Bulletin of the Wool Manufacturers, vol. xx., pp. 283-304. 266 HISTORY OF THE EXISTING TARIFF, facturers to supplant them, is probably to be found largely in the peculiarities of their manufacture, and the difficulty of adapting it to American conditions: factors in our industrial situation which will be discussed in the closing chapter of this volume.' In other parts of the wool and woollens schedule there were similar changes. Some of the higher duties were merely nominal. Thus the duty on ingrain carpets, which had been 12 cents a yard plus 30 per cent, in 1883, went up to 19 cents plus 40 per cent. ; that on Brussels carpets, from 30 cents plus 30 per cent, to 44 cents plus 40 per cent. The duty on these had been prohibitory before ; the changes served simply to make them more prohibitory, and were of no practical effect whatsoever. Other changes were, like the higher duties on dress goods, of real im- portance, such as the increase in the duties on knit goods and underwear. Of these the imports also are consider- able, and a change in duties consequently has a material effect on industry and prices. The patience of the reader would be needlessly taxed by a further consideration of these details. Enough has been said to indicate the character of the wool and woollens schedule of the act of 1 890 ; we may pass to other parts of the measure. Among textiles cotton goods come next in importance to woollens in our tariff system. On the cheaper grades of cotton cloths, the duties, which had already been reduced in 1883, were still further lowered. Thus, on ' See below, pp. 299-315. THE TARIFF ACT OF 189O. 267 the cheapest grade of unbleached cottons, the duty- decreased from 2\ to 2 cents a yard. These, however, are goods which are manufactured in the United States as cheaply as in foreign countries, and which we are more likely to export than import. The duties were and are nominal, and the change went no further than a revision of certain unimportant figures in the statutes. On goods whose importation had continued under the act of 1883, and on which the duties had been of real importance, the changes were in the other direction. On the highest grade of cotton prints, the duty went up from 6 to 6J cents a yard ; with the further proviso that goods valued at over 15 cents a yard, on which the duty had before been 40 per cent., now became subject to one of 45 per cent. In the drag-net clause, fixing the duty on cotton manufactures not elsewhere provided for, the old rate of 35 per cent, was replaced with one of 50 per cent. Some duties were changed from ad-valorem to specific with the effect of raising them materially. Thus, on cotton cords and braids, the former rate of 35 per cent, became one of 35 cents per pound, equivalent to about 60 per cent. The most striking change, however, was in the case of knit goods and stockings. On cotton stockings, the act of 1883 had collected a uniform rate of 40 per cent. This was replaced in 1890 by a com- plicated system of graded duties, partly specific and partly ad-valorem, and varying with the assessed value of the goods. The new rates can again be best described by a statement in tabular form : 268 HISTORY OF THE EXISTING TARIFF. If the value is 6oc. or less a dozen, the duty is 20c. a dozen, plus 20 per ct " betw. 60c. &$2.oo " " " 50c. " " 30 " " " betw. $2.00 " $4.00 " " " 75c. " " 40" " " over $4.00 ' $1.00 " " 40 " " Knit goods of cotton, and more particularly cotton stockings, are imported in large amounts, the annual value of the imports having been hitherto between six and eight millions. Most of these were of the second class in the schedule just given, dutiable at 50 cents a dozen plus 30 per cent., — equivalent, on the average, to about 70 per cent, on the value. The raw material here is cheaper in the United States than abroad, and it is sur- prising that so heavy a duty should have been considered necessary to encourage the domestic manufacture. The explanation of the continued large imports is apparently to be found in part in a great advance in foreign methods of production, due to the newly invented or newly im- proved machinery, the use of which has not yet been in- troduced into this country. In part the explanation lies doubtless in the fact that the finer cotton stockings are made on knitting frames with a large use of hand labor. At all events, the changes just noted present as extreme a case of the application of protection as is to be found in our legislation. On linen goods, of which only the coarsest qualities have been made in the country, the finer being all obtained by importation, the duty went up from 35 to 50 per cent. Linen laces and embroideries were ad- vanced from 30 to 60 per cent. On silks the general duty remained as before, at 50 per cent. ; on silk laces TJIM TARIFF ACT OF 189O. 269 and embroideries it went up to 60 per cent. Plush goods of all sorts, whether made of silk, cotton, or wool, were subjected to very high rates. A complicated scheme of duties was adopted, partly specific and partly ad-va- lorem, and varying with the value of the goods ; the system being similar in its construction to that already described as to cotton hose, and bringing about duties of 60 and 70 per cent, on the value. The imports of velvets, plushes, and similar goods, are heavy, and the domestic production is inconsiderable ; the rates stand for another determined effort to establish a new manufacture under the shelter of very high duties.' One general characteristic of the McKinley act may here be discussed. It is the great development of the method of minimum valuations and minimum duties substantially similar to that adopted in the tariff act of 1828. This mode of grading the duties was adopted not only in the cases described in the preceding pages — woollen cloths, dress goods, cotton stockings, velvets and plushes — but in other cases also, such as blankets and flannels, boiler and plate iron, penknives and table-knives, shotguns, and pistols." On some of these articles the minimum system had already been adopted in earlier acts ; on others it was newly adopted in 1890. The object apparently was to avoid an ad-valorem duty, and yet to secure an adaptation of the rate of duty to the value of the article. But, in doing this • The provisions as to velvets and similar fabrics are in sections 350 and 411 of the act. • See sections 138, 165, 167, 170, 393. gJO HISTORY OF THE EXISTING TARIFF. the fundamental difficulty of ad-valorem duties — the temptation to undervaluation — is met, as was pointed out in the discussion of the act of 1828, in aggravated form." The foreign manufacturer is tempted to make goods so as to bring their value near the minimum points, and the importer is tempted to undervalue them. No doubt another object sought in the minimum system, in 1890 as in 1828, was to conceal the real extent and weight of the duties imposed : a result the more likely to be at- tained where the duties are not only graded by valuation, but are also mixed specific and ad-valorem duties. The duties on iron and steel would have been thought, in 1870, and even in 1880, the most important parts of the protective system. But in recent years the enormous de- velopment of the iron industry in the heart of the country has materially changed the situation. The bulk of the iron in the country is now made of ore mined on the shore of Lake Superior, smelted with bituminous coal mined west of the Appalachian chain. Pennsylvania also contributes its ore, and there has been a striking development of iron- making in the South. Iron smelted with anthracite coal, which played so important a part in our industrial history in the period from 1850 to 1870, has wellnigh disappeared. ' Most of the production now takes place far from the sea- board, and the greater part of the producers of pig-iron can disregard foreign competition. A lowering of the duty ' See pp. 93, 103, above. ' The great changes in the iron industry since 1878 can be followed in the Reports of the American Iron and Steel Association. A sketch of the es- sential features is in the (Quarterly Journal af Maonon^s, vg}, IV„ p 498. THE TARIFF ACT OF 189O. 2JX on pig-iron to $6.00, the rate which was proposed in the Mills bill of 1888, would have had no appreciable effect in any quarter. The effect of a complete abolition of the duty would be confined mainly to the sea-board districts. These are for all practical purposes nearer to England than they are to the central States, which are now the seat of the greatest domestic production of iron. In the McKin- ley act, no change in the duty on pig-iron was proposed, and it remains at the old rate, $6.72 a ton. The situation is much the same in regard to iron ore. The duty on ore is significant only in regard to those grades which contain little phosphorus, and are therefore available for the making of steel by the Bessemer process. The great rich beds of Bessemer ore on the shore of Lake Superior, having easy water communication with the heart of the country, can supply the larger part of the smelters more cheaply than foreign ore could. This ore has made its way far to the eastward, and has been used by establishments very near the sea-board, which, but for the duty, would be likely to use more or less of foreign ore. The eastern establishments which make steel must get their Bessemer ore either by long railway haul from the West, or by importing it subject to duty. Large works have already been established on the Atlantic coast, using ore from Cuba, Elba, and Spain, and therefore desirous of getting ore free." Notwithstanding a strong endeavor from these producers to secure a remission of the duty, it ' See the statement of Mr. L. S. Bent before the Ways and Means Com- Snittee of 1890, in their hearings " On the Revision of the Tariff,"i890, p. 39, 272 HISTORY OF THE EXISTING TARIFF. remained in the McKinley act at the old rate, seventy-five cents a ton. On steel rails the duty was reduced to six-tenths of a cent a pound, or $13.44 a gross ton. This reduction was of the same sort as that made in 1883 : it left the duty still at a prohibitory rate. The steady advance in the iron and steel manufacture in the United States, the growth of the West, the discovery of rich sources of iron and coal, above all, the enormous decline in the cost of bringing these materials together, due to the cheapening of rail- way rates, reduced the price of steel rails as well as of other manufactures of iron. As the figures given in the Appendix show, the price still remained higher in the United States than in England. But cost of transportation from the sea-board to the interior is such that even in the absence of the duty, steel rails would be imported only to supply railways near tide-water. In the main, the steel- rail duty has done its work, for good or ill : it is no longer of great economic importance. The same remark may be made of the duty on copper, which goes down in the act of 1890 to ij^ cents a pound. Copper would not be imported in any event ; its price at ordinary times is not higher in this country than it is abroad ; a duty serves only to make it possible for the combination of copper producers, in occasional times of exceptional demand, to keep up the price above the foreign price. A different aspect of the tariff of 1890 appears in the rise in the duty on tin-plates. This article had never been produced in this country, and had never been sub- THE TARIFF ACT OF 189a 273 jected to duties comparable to those on other manufac- tures of iron. In 1862 a duty of twenty-five per cent, had been imposed, and had been retained until 1872, when, at the time of the general reduction of that year, it was lowered to fifteen per cent.' In 1875, when the general reduction of 1872 was repealed, the rate was changed to a specific duty of \^ cents a pound, equiva. lent to about twenty per cent, at the prices then ruling. But this change did not have any effect in stimu- lating domestic production, and in 1883 the duty was reduced to one cent a pound, equivalent, at the prices of 1883, to an ad-valorem rate of about thirty per cent. At that rate the importations had been very large, twenty millions of dollars and more a year, and the domestic production had been nil. The question presented itself squarely whether a further and great extension of the protective system should be made. Those who believed that system to be wise, naturally maintained that this article had been unfairly singled out for a specially low rate of duty ; and in the act of 1890 a duty of 2^ cents a pound, equivalent to about seventy per cent., was im- posed. The continuance of this duty, however, was made subject to a curious condition, unprecedented in our tariff legislation: that after the year 1896, tin-plates should be ' See pages 182-185 above. The language of the acts of 1862 and 1875 was not entirely clear, and in 1878 an attempt was made to have tin-plates classified under another head in the tariff schedules, and so subjected to a higher duty. But Secretary Sherman maintained the interpretation of the statutes which had been followed since 1862, and the duties were collected as stated in the text. See a letter of Secretary Sherman's in the " Tariff Commission Report " of 1882, p. 208. 274 HISTORY OF THE EXISTING TARIFF. admitted free of duty, unless the domestic production for some one year before that date should have equalled one third of the importations during any one of the years between 1890 and 1896. In other words, the permanent maintenance of the duty was made conditional on a sub- stantial increase of the domestic production. Obviously, so long as there was no domestic production, the duty had been merely a revenue duty, — an indirect tax of the simplest type, not of the best sort doubtless, but sub- stantially similar in its effects to duties on tea or coffee. The alternative now presented is that it shall either become a protective duty, with the peculiar effects flow- ing from such, or that it shall cease to be a tax at all.' As to agricultural products, there were some innocuous changes, and some of real importance. The duty on wheat went up from twenty to twenty-five cents a bushel, and that on Indian corn from ten to fifteen cents ; changes which obviously could be of no consequence whatever. Equally insignificant in their general effects were the higher duties on potatoes and eggs, which might possibly have some slight effect in checking the border trade between Canada and the Northern States, but in the main must be of petty character. Among changes of greater importance was an increase of the duty on barley ' Another proviso of the act of 1890 was of the same sort. After July I, 1893, a duty of four cents a pound is imposed on tin ; with the proviso that this duty shall cease on July I, 1895, unless in some one year preceding, the domestic production of tin shall have been greater than 5,000 tons. No tin in appreciable quantity has hitherto been made in the country. The imports range between 15,000 and 20,000 tons a year. THE TARIFF ACT OF 189a 275 from ten to thirty cents a bushel ; a change meant to pro- tect the farmers of some Northern States against Canadian barley. Oddly enough, the duty on rice, which, like bar- ley, is imported in considerable quantities, was slightly reduced. On another set of agricultural products there are some changes in the direction of higher duties ; namely, on textile materials like hemp and flax. On flax the duty was increased from $20 to $22.40 a ton ; on dressed flax, from $40 to $67.20 a ton. On undressed hemp the duty remained unchanged ; on dressed hemp it went up from $25 to $50 a ton. For reasons which will be presently set forth, these changes are not likely to have the desired effect of stimulating the domestic production of these fibres. It should be noted that notwithstanding some attempts to get encouragement for the production of jute in the Southern States, that tropical commodity, which we import largely, was relieved from the former duty and admitted free. We may now turn to another phase of the act of 1890, the remission of the duty on sugar, which was important in its effects on the financial situation, and in its connec- tion with the reciprocity provisions of the act. The duty on sugar had been in the main a revenue duty ; for nine tenths of the consumption was and is supplied by impor- tation. Only one tenth of the sugar is made at home, almost exclusively in the sugar-cane district of Louisiana ; on this alone could the distinctive effects of a protective duty be felt. Substantially, therefore, the sugar duty presented the same questions as were presented by the 276 HISTORY OF THE EXISTING TARIFF. tea and coffee duties in 1872.' At the same time, the receipts from sugar were very large. They formed the most important single item in the revenue from customs, and in the period immediately preceding 1890 were on the average about fifty-five millions a year. In that period the United States were embarrassed by a large surplus in the revenue, the situation in this respect being again similar to that in 1870-72. At the same time the duty on sugar, averaging about two cents a pound on the grades chiefly imported, was high, considered simply as a tax and without regard to its connection with the general financial and economic situation. The Mills bill of 1888 had proposed a reduction of about fifteen per cent. ; the Senate bill of the same year proposed to cut the rate to about one half that then in force. There was general agreement that some reduction should be made. The McKinley act went further : it admitted all raw sugar free. On refined sugar a duty of one half cent per pound was retained, by way of protecting the domestic sugar refiners. This duty was open to the objection of playing into the hands of the Sugar Trust, which had just reached the stage of controlling practically the entire sugar refining of the country. Undoubtedly it did ; but the previous tariff system, by making the duty on refined sugar higher than that on raw sugar, had done the same ; and the act of 1890 left the situation as it was, simply maintaining for good or ill a policy as to the sugar refiners which had been followed for a generation or more. ' See above, pp. 186-189. THE TARIFF ACT OF 189O. 277 With the free admission of raw sugar came a bounty to the domestic sugar producers at the rate of the former duty, two cents a pound. There would have been an obvious inconsistency in leaving the sugar producers to their fate, at a time when other domestic producers were receiving increased protection. Moreover, there was a disposition to assist and stimulate the production of sugar in other ways, especially from beets. The bounty was accordingly given, at the rate of two cents a pound, on all domestic sugar, for the period from July i, 1891, to July i, 1905. The change in one sense is immaterial to the domestic sugar producer. He must sell his sugar at a lower price, but gets a bounty which makes up the loss. But so far as ease of collection goes, the bounty clearly is less ad- vantageous than the duty was. The benefit of the duty came to him without trouble, in the shape of a higher price. The benefit of the bounty he can secure only by a process, somewhat troublesome and not unattended with expense, of filing descriptions and statements at govern- ment oilfices, securing licenses, and submitting to the regulations which the government must of necessity pre- scribe to prevent fraudulent use of the bounty provisions. So far as the financial object in view was concerned, the sections on sugar accomplished their object. Indeed, perhaps they more than accomplished it. The remis- sion of the duty cut off fifty or sixty miUions of revenue ; the bounty called for an extra expenditure of six or eight millions. The act also reduced the internal tax on tobacco from eight cents to six cents a pound ; and the same Con- 278 HISTORY OF THE EXISTING TARIFF. gress that passed it increased the appropriations in several directions, especially for more liberal pension payments. It would certainly have been wiser financial policy to be content with a reduction of the sugar duty such as was proposed in the Senate bill of 1888-89. Those who op- pose the protective system on principle naturally objected to the financial effects of the sugar remission on still an- other ground — it left the hands of Congress less free to deal with the ihore distinctly protective duties. Such duties as those on wool, flax, hemp, lumber, iron ore, and similar materials, are more burdensome in character than was the sugar duty ; but the remission of these taxes is much more difficult in the face of a deficit than of a surplus. The complete remission of the duty on sugar was un- doubtedly determined on as a means of gaining popularity for the new tariff act in the West, where the higher duties on manufactured articles might be difficult to present in an attractive light. The same object was had in view in another set of provisions, closely connected with the new sugar schedule, — the reciprocity provisions. The trend of public opinion on the tariff bill, while it was under dis- cussion in the House, made some of the Republican leaders uneasy as to its effects on the party prospects in the West ; and this feeling was strong with Mr. Blaine, not the least shrewd of the Repubhcan leaders. The bill had passed the House of Representatives without the reciprocity provisions ; they were inserted at the last moment in the Senate, almost under pressure from Mr, THE TARIFF ACT OF 189O. 279 Blaine and those who shared his views. The effect of these provisions was to give the President power to impose by proclamation certain duties on sugar, molasses, tea, coffee, and hides, if he considered that any country export- ing these commodities to the United States "imposes duties or other exactions on the agricultural or other products of the United States, which, in view of the free introduction of sugar, molasses, tea, coffee, and hides into the United States, he may deem to be reciprocally unjust or unreasonable." ' This particular mode of reciprocal engagement has a distinct economic advantage over the ordinary form of reciprocity. The ordinary form consists in the simple remission of duties to a favored country, duties remaining on goods coming from countries not favored. Such a remission is likely not to redound to the advantage of the domestic consumer. Unless the favored country can easily supply the whole market, or other countries are quickly admitted to the lower duties, prices are not affected, and the foreign producer reaps the whole benefit of the remission. The United States has had one con- spicuous illustration of the workings of reciprocity of this sort, in the treaty of 1876 with the Hawaiian Islands. Under that treaty, sugar was admitted free from the islands ; but they were far from being able to supply all the sugar consumed ; other sugar was imported, paying duty ; the ' The duties authorized under these conditions were ; on coilee, three cents a pound ; on tea, ten cents a pound ; on hides, one and a half cents » pound ; on the grades of raw sugar chiefly imported, a trifle over one cent per pound, — about one hii.f the duty which was in force before i8go. 28o HISTORY OF THE EXISTING TARIFF. price remained as high as before, and the Hawaiian planters reaped the benefit of the remission. But the re-imposition of duties on articles coming from a particular country, if it leaves enough of other countries in the field, not paying duty, to supply the domestic consump- tion, brings a pressure to bear on the enemy without injuring the consumers at home. It is true that if one of the countries on whose goods duties were re-imposed, should supply a very large part of our consumption, the result would not be so innocuous. If, for example, the duty of three cents a pound were imposed on coffee from Brazil, all coffee would go up in price, not only that from Brazil, but that from other countries ; and the producers from other countries would gain three cents a pound on their coffee, which the consumers in the United States would pay. But it was not probable that the power given by the reciprocity provisions would ever be exercised in a case of this sort. The simple threat of re-imposing duties would usually be relied on as a means of securing concessions from other countries, in the way of lower duties on goods sent them from the United States. Concessions so obtained may or may not be advanta- geous to the countries making them ; and they may or may not be of real importance and advantage to the United States. The countries from which concessions were asked were chiefly the South American countries. So far as agricultural commodities imported into them from the United States were concerned, a lowering of duties meant lower prices to the South American consumers, and THE TARIFF ACT OF 189O. 28 1 very probably an enlarged demand for such commodities sent from the United States. Grain, flour, provisions, are sent to these countries by the United States alone, and a remission of duties on them operates as a remission of the duty on English tin-plate would operate in the United States: it is practically a complete remission. Such changes bring about a real reduction of the burdens of taxation, and a real enlargement of the international division of labor. But if the South American countries lower their duties on manufactured goods from the United States, the result may be different. Many of these goods are not made as cheaply in the United States as in European countries ; as to others, the United States might not be able to •• supply the whole consumption of the country which gave it favors. Under such conditions, the lower duties would not mean lower prices to the South American consumer. The United States would then be in much the same rela- tion to them, as the Hawaiian Islands were to the United States under the reciprocity treaty of 1876. Concessions of this sort, however, which do not redound to the ultimate advantage of the communities giving them, are not likely long to remain preferential. Sooner or later, they are likely to be granted to all comers. The experience of European countries under commercial treaties, espe- cially under the net-work of treaties which spread over Europe after the conclusion of the treaty of i860 between England and France, shows that a remission of duty in favor of one country soon is extended to others, and 282 HISTORY OF THE EXISTING TARIFF. becomes practically equivalent to a general lowering of the customs scale. This is likely to be the outcome of any concessions secured to the United States from South American countries under the reciprocity provi- sions ; a result no doubt advantageous to all concerned, but less peculiarly advantageous to the United States than more limited concessions would be.' As a whole, the tariff act of 1890 presented to the American people without disguise the question whether they wished a large extension of the protective system beyond the point to which it had developed by the legis- lation of the war period. The act of 1883, as we have seen, did indeed raise not a few of the protective duties ; but other duties it lowered, and the advances were neither so great nor so conspicuously put forward as in the act of 1890. A retention of the existing state of things, such as ' In the course of 1892, treaties were concluded with the following coun- tries : Great Britain, for Jamaica, Trinidad, Barbadoes, and British Guiana ; Spain, for Cuba and Porto Rico; Salvador; the Dominican Republic; Nicaragua ; Honduras ; Guatemala ; and Brazil. The remissions or re- ductions of duty secured by these treaties were chiefly on agricultural articles and others produced abundantly and cheaply in the United States. Duties had been imposed by proclamation, up to May, 1892, under the authority conferred by the reciprocity section, on sugar, tea, coffee, hides, coming from Venezuela, Colombia, and Hayti. The only country of considerable importance among these is Venezuela, which sends to this country about one tenth of the coffee imported. With Germany, an arrangement was made by which the United States got the benefit of the slightly lower rates of duty conceded by Germany to Austria and Hungary by the treaties of 1892 with these countries. With France, a similar arrangement was made, by which American commodities were admitted at the minimum tariff of the French legislation of l8g2. But these arrangements with European countries are in the main of only nomi- nal importance. THE TARIFF ACT OF 189O. 283 on the whole the act of 1883 amounted to, might be urged on the ground that vested interests should not be dis- turbed, and that the inevitable disadvantages of any far- reaching change would outweigh "any ultimate gain. The act of 1890 boldly proposed something more : a radical extension of the protective system. The question of principle never was so squarely presented. CHAPTER VI. THE TARIFF ACT OF 1 894. The question of principle which was presented to the American people by the tariff act of 1890, was answered with remarkable promptness, and, to all appearances, in unmistakable terms. Immediately after the passage of the act, the party which had thus espoused the extreme protective policy suffered a crushing defeat ; and, after two years of discussion and deliberation, the verdict at the polls was again overwhelmingly against it. The McKinley tariff had become law in October of 1890. In November, the Congressional elections were held, and the Republicans were defeated as they had never been defeated before. In the new Congress which was to suc- ceed that which had passed the act of 1890, they secured only one quarter of the Representatives ; their opponents outnumbered them three to one. Even States like Massa- chusetts, Ohio, Illinois, Michigan, long supposed to be stanchly Republican, returned Democratic majorities. The tariff question, which had been uppermost in public debate at this election, was again uppermost two years later, in the election of 1892. President Cleveland, who had made the tariff question the political issue of the day, 284.. THE TARIFF ACT OF 1 894. 285 was once more nominated by the Democrats ; and Presi- dent Harrison was renominated by the Republicans. Again the result was a triumph for the Democrats, whose candidate received nearly twice as many electoral votes as his opponent. Again a row of Western States joined the ranks of the Democrats, — Indiana, Illinois, Wisconsin ; while Ohio was retained on the Republican side by a slender majority of a bare thousand votes. The Congres- sional elections, while less dramatically one-sided than those of 1890, told substantially the same story. The Democrats had an overwhelming majority in the House ; and in the Senate, as the elections in the various State legislatures were gradually held, they secured a working majority. The result was to assure them of full control of all branches of the federal legislature in the Fifty-third Congress, for the term of 1893-95.' The Democrats, twice victorious, might fairly claim an emphatic declaration of the people in favor of their policy. How clear the popular verdict may really have been, is as ' For convenience of reference, the strength of the two parties in Congress in 1889-95 is here summarily stated : House. Senate. Republicans. Democrats. Republicans. Democrats. 51st Congress, 1889-91, 166 159 39 37 52d Congress, 1891-93, 88 236 47 39 53d Congress, 1893-95, 126 220 38 44 In addition to the 44 Democrats and 38 Republicans in the Senate of the 53d Congress, there were three Populists. These might be expected ordi- narily to vote with the Democrats on tariff questions ; but their support could not be implicitly relied on. 286 HISTORY OF THE EXISTING TARIFF. difficult to say as it must always be to interpret the mean- ing of a general election. The demoralization of the civil service, the scandals which that demoralization is sure to bring on every administration, the usual reaction of public favor, defections to the Populist Party — all these played their part. On the tariff itself, there was little in public discussion to indicate that the true questions at issue were fairly before the popular mind. A vague uneasiness about trusts and monopolies, which the protective duties were supposed to promote, clearly had much effect in strengthening the hands both of Democrats and of Popu- lists; and the comparatively simple questions which at bottom are involved in the protective controversy were obscured by a cloud of talk about pauper wages and monopolist manufacturers, British free trade and Ameri- can patriotism. Yet the tariff certainly had been squarely presented as the issue in these compaigns, and the Demo- crats were justified in acting on the theory that the popular will had declared itself against the policy of high protection. But the enthusiasm which the victory at first aroused among the Democrats was dampened almost at once by the events of the extra session of the summer of 1893. The silver question had not been at issue between the parties in 1892. President Cleveland had repeatedly de- clared himself to be opposed to the policy of enlarging the silver currency. The Republicans also, even though they had tried to placate the silver element by passing the silver purchase act of i8go, had none the less declared THE TARIFF ACT OF 1 894. 287 themselves in favor of keeping the silver issues at par with gold. But the silver question, pushed aside by the tariff question in 1890-92, came suddenly to the front in 1893, when the commercial crisis, ascribed (with sufficient reason) to the excessive issues of silver currency, com- pelled action on the financial situation. President Cleve- land called an extra session, for the one purpose of repealing the silver purchase act and discontinuing silver coinage and silver issues. The strong element in his party which was in favor of the free coinage of silver fought this proposal, vigorously in the House, desperately in the Senate. The administration succeeded ; its policy was carried out ; the silver purchases were brought to an end. But the bitter struggle within the ranks of the Democrats did much to shatter their cohesion, and to deprive them of that spirit of determination in their own ranks, and that respect and prestige in the community, which are secured by a united and single-minded party. Another factor that weakened the effect of the victories of 1890 and 1892 was the narrow Democratic majority in the Senate. The slowness with which, under our political system, the composition of the Senate responds to changes in the popular vote, is shown by the precarious hold which the dominant party had in that body. In the House, with a majority of nearly two to one, it could pro- ceed without regard to discontent or dissent on the part of a fraction of its own members. But in the Senate the defection of a very few among the majority would des- troy its control of legislation. As it happened, for one 388 HISTORY OF THE EXISTING TARIFF. reason or another there was danger of such defections. Some Democratic Senators were half-hearted on the gen- eral question of tariff reduction ; others came from States which had strong interest in particular duties, — especially the Louisiana Senators. Old quarrels and bickerings, dating back to President Cleveland's first administration, and due chiefly to petty squabbles over appointments to office, caused still others to take a spiteful pleasure in blocking the movement for tariff reform which the Presi- dent had so much at heart. The administration made some endeavor, both during the extra session of 1893 and during this regular session, to restore unity and discipline, and to bring all the Senators to the support of the party policy, by putting offices at the disposal of the sulky few. But this move availed little. It threw back for the time being the all-important cause of reform in the machinery of the government ; and yet did little or nothing to remove the difficulties that arose from the narrow and uncertain majority in the Senate. Thus, for one cause and another, there was danger of defection in that body, and a need, based on more or less serious grounds, of con- ciliation and of careful management ; a need which, as it turned out, had a great and unexpected effect on the final shape of the tariff act. Such were the political conditions under which the regular session of 1 893-94 began. At the extra session of 1893, no attempt had been made to deal with the tariff ; but the committees had been arranged, and among them the Committee of Ways and Means, which had thus THE TARIFF ACT OF 1 894. 289 been able to begin its preparations at an early date. Progress with the tariff bill was accordingly easy in the House. The committee reported its bill as early as December 19. That bill proposed some important remis- sions of duty, and in all directions made considerable reductions ; not enough, indeed, to make it a revolution- ary measure, yet enough to bring about, if enacted, a real and unmistakable change in the general tariff policy of the United States. Its specific provisions will be more conveniently discussed as we follow one by one the dif- ferent phases of the proposed legislation, and the final outcome of the whole. The House acted with reason- able promptness : the bill was passed on February i, sub- stantially in the shape given it by the party leaders on the Ways and Means Committee. Matters went more slowly in the Senate. There the finance committee did not report the bill until March 20, and then with many and important amendments. The changes were all in the same direction, — toward moder- ating the reductions, and taking the edge off the meas- ure as passed by the House. When the bill came from the committee to the Senate, still further amendments of the same sort were added. Hence when, after long delays, it was finally passed by the Senate, on July 3, it was a very different measure, in spirit and in details, from that which had been passed by the House. The House and Senate disagreeing, the bill went to a conference committee. Almost without exception, dur- ing the last thirty-five years, the details of tariff bills have 290 HISTORY OF THE EXISTING TARIFF. been finally adjusted in such committees ; and it was to be expected that in this case, as in others, the act as passed would be half-way between the House bill and the Senate bill. This expectation was disappointed. In the Senate the bill there had been passed by a vote of thirty- nine to thirty-four, and among the thirty-nine were two or three Populist Senators who owed no allegiance to the Democratic Party. The votes of all the Democratic Sena- tors were felt to be necessary for its final passage. Sev- eral among them insisted on amendments admitted to be distasteful to the mass of their party associates ; and the close balance of parties in the Senate enabled them to command the situation. President Cleveland's letter to Mr. Wilson, the chairman of the House Committee of Ways and Means, urging resistance to the Senate amend- ments, had no effect beyond that of making clear to the country what were his own views. Whether better man- agement in the Senate would have secured a result more in consonance with the party pledges and principles is not easy to say : beyond question, the leadership of the Demo- crats in the upper branch was lamentably unskilful. In the end, the House accepted all the amendments of the upper body, and the bill as shaped in the Senate became the act of 1894. President Cleveland signified his justi- fiable discontent with its provisions by permitting it to become law without his signature. It finally went into effect on August 28. So much as to the immediate history of the act. We may proceed now to consider its main provisions. THE TARIFF ACT OF 1 894. 29 1 First and foremost was the removal of the duty on wool, and with it an entire change in the duties on woollen goods. Wool and woollens had been for years the central part in the protective system. The change here was an important — almost revolutionary one ; and it may be remarked at once that in the whole act no other articles of large importance were thus incisively dealt with. Free wool was important in its political and in its eco- nomic aspects. The duty on wool had been the most significant feature in the policy of all-inclusive protection which the Republicans had emphasized in the McKinley act of 1890. It had been almost the only article through which protection could be promised and given to agricul- tural voters. There were duties, to be sure, on wheat, corn, and meats — articles which were continuously ex- ported and obviously could not be affected by an import duty. But wool was imported, and was really affected by the duty; and it could be fairly maintained that here the farmers got some share of the benefits of the protective system. Moreover, some of the central States of the country, like Ohio, where there was much wool-growing, were closely divided in politics. Here the wool duty played a prominent part ; and it required some courage among the Democrats to present themselves squarely on the platform of free wool. In its economic aspects the removal of the duty on wool was important as a crucial application of the prin- ciple of free raw materials. In that advocacy of protec- tion which has gained the most respectable hearing from 292 HISTORY OF THE EXISTING TARIFF. serious students of economics, — the advocacy, namely, of what goes by the names of developing protection, educa- tional protection, protection to young industries, — it has usually been explained that crude materials are beyond the scope of the protective policy. Even in the political arguments which we 'often hear from German writers of the present time, and in which national dependence and self-sufificiency play a large part, the line has usually been drawn against the inclusion of articles of this sort in the protective regime. The desire to encourage the manu- facture of woollens has probably been quite as effective as these more theoretical considerations in preventing the extension of the protective policy to wool, even in the countries which in late years have gone so far in the direction of protection. At all events, no country of advanced civilization has maintained any duty on this material, and the retention of such a duty in the United States was perhaps the most characteristic feature of our protective system. President Cleveland had specifically advocated the free admission of wool in his message of 1887; the Democrats had put it on the free list in the Mills Bill, in which they outlined their policy in 1888; the Republicans had emphasized their adherence to the opposite policy by increasing the duty on wool in the McKinley act. Now, at last, it went on the free list. Equally great, at least in form, was the change in the duties on woollen goods. Here the curious system of compound duties was completely swept away. Its his- tory and development, from the first germs in 1861 to the THE TARIFF ACT OF 1 894. 293 elaborate rates in the tariff act of 1890, have been suffi- ciently detailed in the preceding chapters. No part of the tariff was more intricate ; in none was it more difficult to ascertain the real degree of net protection finally given the manufacturers ; in none were the duties higher. In place of these old complex rates a simple system of ad- valorem duties was established. In the bill as passed by the House the rate (on the important classes of woollen goods) was made forty per cent, in the first year, with a reduction of one per cent, each year for five years, until eventually a definitive rate of thirty-five per cent, should be reached. But among the many changes made by the Senate was the adoption of a much more conservative policy as to woollens, and a considerable advance beyond the House rates. The rate was fixed at fifty per cent., once for all, on the more important classes of goods. Certain cheaper sorts of blankets and flannels, it is true, were subject to no more than twenty-five per cent. ; and the cheapest kinds of materials for men's and women's wear were to pay but forty per cent. But, as in former tariff acts, these lower rates were applicable only to goods which had not been imported in the past, and would not be imported under the new rates. On all men's clothes and women's dress-goods which were valued at more than 50 cents a pound, — that is, on practically the whole mass of such articles really subject to foreign competition, — and on all manufactures of wool not specially provided for, the ad-valorem duty was that of the McKinley act, — fifty per cent. Similarly, on the important classes of 294 HISTORY OF THE EXISTING TARIFF. carpets, while the old specific or compensating duty dis- appeared, the ad-valorem duty was left at forty per cent. In general, the higher ad-valorem rates established by the tariff act of 1890 remained untouched: the change on woollen goods was limited to a simplification of the sys- tem of duties by the abolition of those specific rates which had previously been levied as an offset to the duties on the raw material. Theoretically, therefore, the manufacturers of woollen goods lost nothing by the change. They were treated, in the act as finally passed, with marked tenderness: a ten- derness further emphasized by the fact that, while wool was admitted free at once, the new duties on woollens did not go into effect until January i, 1895. For a sea- son they thus got their material free, yet had the benefit of the old duties on their goods. Practically, however, even with this aid toward adjusting themselves to the new conditions, the manufacturers had to face a trying period of transition. We have seen, in the preceding chapters, that the specific duties on woollens, though nominally a simple offset for the increased price of wool due to the duty on that material, contained in many cases a large amount of disguised protection. This was lost under the new system. Even where the case was different, and where the specific duties had done no more than to compensate, the gain from the abolition of the duties on wool did not inure to the manufacturers by any automatic process. They had to learn to take advantage of the lower price at which they could buy the imported THE TARIFF ACT OF 1 894. 295 wool, now free ; and only by taking full advantage of it could they be in a position to meet the competition of the foreign makers, whose products were coming in at the simple ad-valorem duty on woollens. To do this, the domestic manufacturers, long confined to the use of do- mestic wool and of a very small range of foreign wool, had to learn to adjust or improve their machinery, to use new qualities of wool, and to make new kinds of cloths. The advocates of the remission of the duty on the raw materials had always maintained that the change would vivify the woollen manufacture, widen its range, and in- crease its prosperity. On the other hand, among the manufacturers and their representatives, there had been a natural aversion to the abandonment of a system, how- ever complicated and confused, to which the industry had been compelled to accommodate itself by a quarter-cen- tury of legislation. What the final outcome would be, could appear only after a considerable trial of the new system, continued over some years at least. But the general public had not been trained by either side in the controversy to await the results with any patience. The protectionists had predicted immediate disaster; their opponents immediate prosperity. 'This mode of dealing with controverted questions is perhaps inevitable in popu- lar discussion : certainly the/(?j^ hoc, propter hoc argument has been applied to the protective controversy, both in its larger aspects and in its relation to particular indus- tries, with astonishing readiness. No critical observer could expect the change in the duties on wool and wool- 296 HISTORY OF THE EXISTING TARIFF. lens to show its real effects in one season, or in several seasons, or to work out its results without more or less uneasiness and embarrassment for the domestic producers. That its ultimate result — considering how tenderly the manufacturers were dealt with in the act of 1894 — would be harmful to the woollen industry as a whole, seems highly improbable. So far as the general question of protection was concerned, the wool and woollen schedule in the act of 1894, while it made a sharp break with the past, in putting on the free list at least one important raw material, evidently left the principle of protection, as applied to manufacturers, absolutely untouched, and affected the operations of the woollen manufacturers no more than was inevitable in view of the radical policy fol- lowed with regard to wool.' On other textile materials and products the changes in duties were by comparison unimportant. On most manu- factures of cotton there was some change, but in few cases an effective change. On a few of the cheaper grades there was on the surface a considerable reduction. Thus the cheapest class of unbleached and unprinted cotton goods became subject to a duty of one cent per yard, in place of the old duty of two and one-half cents. But these ' For some consideration in detail of the effects of the old system on wool and woollens, and the probable effects of the new, see an article by the present writer in Quarterly Journal of Economics for October, 1893 ; a criticism of this article by Mr. S. N. D. North in the Bulletin of the Wool Manufacture} s, for December, l8g3 ; and a pamphlet by Mr. E. D. Page, on The Woollen Tariff {i'ievf Y ork, 1893), containing papers reprinted from the American Gotten and Wool Re for ter. Compare also what is said of the act of 1897, infra, pp. 328-335 THE TARIFF ACT OF 1 894. 297 goods are made as cheaply in the United States as in foreign countries, if not more cheaply ; they would not be imported in any event ; and the change in duties was merely nominal. On finer cotton goods, more than likely to be imported, the changes in rates were not great. Where the duty had been fifty per cent, in 1890, it became forty per cent, in 1894; where it had been forty percent., it became thirty-five per cent. On knit goods there was a more considerable reduction, at least as compared with the rates of 1890. These goods, as we have seen, had been subject in 1890 to a complicated series of mixed specific and ad-valorem duties. They were now subject to a simple duty of fifty per cent. This, while a reduc- tion from the rates established in 1890, was higher than the duty in force before that date. Here, as in not a few other cases, the reform movement of 1894, as checked and pruned in the Senate, did not even succeed in wiping out all the effects of the extreme protective movement that preceded it. Silk manufactures, on which the protective duties of the last generation had very important effects, were hardly touched. The duties on some silks went down from sixty to fifty per cent, on others from fifty to forty-five per cent. The changes were hardly worth mentioning. Much the same was the case with linens. Raw flax was admitted at i^ cents per pound, just half the duty of 1890. Manufactures of flax were admitted at reduc- tions of duty very similar to those just noted as to silks. Since virtually no linens of finer quality were (or 298 HISTORY OF THE EXISTING TARIFF. are) produced in this country, and those of coarser quality were as effectually shielded by the new duty as by the old, matters remained very much as they had been. One change was an exception. Bagging of jute, flax, or hemp, for grain or cotton, was admitted free of duty — a direct concession to the farmers and planters. Next we may turn to the duties on minerals and min- eral products. Here the articles to which public attention was chiefly given were coal and iron ore. These are by no means the most important articles in the tariff schedule relating to minerals and metallic products ; but they are em- phatically raw materials, the question of principle in deal- ing with such was hotly raised as to them. The two.houses of Congress here disagreed sharply : the House put both articles on the free list, while the Senate insisted on the re- tention of duties, even though reduced duties. The dispute drew to this part of the tariff system a share of public at- tention disproportionate to the real industrial significance of the duties, and brought into full relief the failure of the act as finally passed to carry out with steady consistency the Democratic Party policy. Free coal would be of some consequence on the north Atlantic coast and on the Pacific coast. Both districts happen to be far from the domestic sources of supply, and comparatively near to mines across the border. The Pacific coast got coal from British Columbia and from Australia, and felt the duty on coal as an undesirable bur- den. But with few manufactures, and a mild climate, the burden was not a serious one. In New England, essen- THE TARIFF ACT OF 1894. 299 tially a manufacturing community, the case might be dif- ferent. Some Canadian mines are geographically a bit nearer than the mines of West Virginia and Virginia which feel their competition. It was a question, to be sure, how serious that competition would be, how good the quality of the Canadian coal would prove, how effectively the transportation of this coal could be organized. But it was difficult to give any good reason for not allowing New England every opportunity for cheapening its supply of coal. The opposition to the repeal of the duty was a clear and simple case of an attempt of certain producers to make a levy on consumers. Coal had been made free by the House ; the act left it subject to a duty of forty cents per ton. The old rate had been seventy-five cents. The amendment made by the Senate was felt in all quar- ters to mean a conspicuous failure to carry out consistently the program of the Democratic Party. The result was similar with the duty on iron ore. The essential facts as to the working of this duty have already been stated. ' Here too the question of duty or no duty was immaterial so far as the great bulk of domestic pro- duction and consumption was concerned. The question was simply whether certain iron and steel establishments near the seaboard should get their iron ore free, or should be induced by a duty to buy domestic ore produced at a distance. Directly, the issue was between the great cor- porations which mined the ore in the West, and the other great corporations which had iron and steel plants on or ' See above, p. 271 300 HISTORY OF THE EXISTING TARIFF. near the Atlantic seaboard. It might be argued, indeed, that this was the only issue. In view of the long series of producers and middlemen whose operations must inter- vene before the finished product of industry can reach the consumer, still more in view of the hindrances to unfet- tered competition among the middlemen, it might be plau- sibly maintained that not only the immediate question, but the ultimate question, was between two sets of producers, not between the producers and the public. But here, as on many other questions, it is safe to proceed on the general ground that the wider the sources of supply and the cheaper the raw materials of production, the greater the chances that the benefits will filter through the layers of milk- men, and that the public as consumers will eventually ^in. Hence, so far as any question of principle was concerned, everything was in favor of free ore. Arguments as to the development of struggling industries or the fostering of na- tional independence could not be to the point ; since the great bulk of our iron ore, and the great bulk of our iron and steel, were sure to be produced within the country under any circumstances. The fate of the iron-ore duty was the same as that of the coal duty. The House repealed it ; the Senate restored the duty, but at forty cents instead of seventy-five cents per ton. Again the principle of free raw materials was set aside. The duty on pig iron was brought down in the act from $6.72 to $4 a ton. In the House of Representatives the duty had been made twenty per cent., which would have meant a much more considerable reduction on most quali- THE TARIFF ACT OF 1894. 3OI ties of iron. Twenty years earlier, even ten years earlier, such a change as 'was proposed by the House would have been of great importance : even that enacted would have been of moment. As matters stand in the closing years of the century, the reduction did not signify much. The production of crude iron advanced at an enormous rate after 1880. With the discovery of new sources of supply, with improvements in production and transportation, the great bulk of the iron would be produced at home, even if there were no duties at all. Some parts of the Atlantic and Pacific seaboards, which are distant from the domestic centres of production, would import iron, if free of duty, rather than buy it at home. But in the main, the days in which the duty on pig iron could exercise very wide reaching effects, were gone by. The change made in 1894 encountered little opposition, because it could be no longer of great effect. The duty on steel rails, that old bone of contention, was lowered from $13.44 to $7.84 a ton. From 1883 to 1894, each tariff act had taken a slice from this duty : each time in such manner that no direct effect was felt on prices, the decline in the duty following and not preced- ing the decline in prices. The steady fall in the prices of iron and steel products during the past generation has been due to a variety of causes. Partly they have been of world-wide operation, bringing about a tendency to lower iron prices in all countries ; partly they have been of spe- cial effect in this country, in the discovery of new sources of supply, and their utilization through great improve- 302 HISTORY OF THE EXISTING TARIFF. ments in transportation. No small factor has been the remarkable application of American enterprise, invention, and engineering skill to the production on a vast scale of Bessemer ore, Bessemer iron, and Bessemer steel. Through it all, the prices of steel and of steel rails have been steadily- higher than they would have been without a duty ; and the tariff system has contributed to the maintenance of monopoly profits. The lowering of the duty on steel rails in 1894, like the earlier reductions, had no immediate results, the duty being still left at the prohibitory point. But, as in the case of previous reduction, the lower rate set a limit to possible future advance in prices. Nothing could have been lost, and something would probably have been gained, by a more incisive change. On one other much disputed article a change was made, of greater practical importance than in the case of steel rails, but again of less extent than might have been ex- pected. The duty on tin-plate was reduced to exactly one-half that which had been levied in the act of 1890: it had been 2\ cents per pound, and it was made i^ cents. The reduced duty is still higher than that in force before 1890; so that here again the legislation of that year was allowed to leave its mark on the statute-book. In most of these cases specific duties were retained by the Senate, in place of the ad-valorem duties which had been adopted by the House.' In some cases, it is true, ' In the case of tin plates, the House had already adopted the specific duty ; doubtless on the ground that the tin-plate establishments built up under the act of i8go deserved consideration as having vested interests. THE TARIFF ACT OF 1 894. 303 the Senate simply raised the ad-valorem rates which the House proposed ; and here the outcome was usually a substantial reduction from the old specific rates. Thus the duties on chains, guns, and some sorts of cutlery re- mained in ad-valorem form, and were considerably lowered. The general retention of specific duties by the Senate was among the changes which most disappointed the advo- cates of lower duties ; and this for the simple reason that it was made the occasion for higher rates than had been proposed in the other form. So far as the direct question of administrative advantage goes, everything speaks in favor of specific duties ; and our tariff reformers have usually been curiously blind to the difficulties inevitable in the collection of ad-valorem duties. But these latter have the unquestionable advantage of telling their own tale. What the meaning and effect of a specific duty is, can often be known only to a few persons familiar with the details of some minute branch of trade. In fixing them, the legislator necessarily seeks the advice of ex- perts, who are likely enough to have wishes and interests opposed to those of the public. Wittingly and unwit- tingly, these duties have often been arranged in a manner to promote the interests of particular enterprises, and so to justify the charge that they tax the many for the bene- fit of the few. Hence the natural repugnance of those who are opposed to the principle of protection ; hence their disappointment when the comparatively simple scheme of ad-valorem duties adopted in the House was transformed by the Senate into a system of specific 304 HISTORY OF THE EXISTING TARIFF. duties intricate, bewildering, and not unfairly open to suspicion. Among other manufactured articles, earthen-ware and china-ware were dealt with least tenderly. Here it is some- what surprising to find a real and effective change in the duty. Finer qualities of china-ware went down from sixty to thirty-five per cent., the cheaper qualities from fifty to thirty per cent. The finer qualities had always been imported in very considerable quantities ; it was very possible that under the reduced duty large quantities of the cheaper grades might also be imported.' On what principle these articles should have been selected for special reduction, it is difficult to say ; but certainly there was here a substantial change. Glassware of all sorts remained very much as it was. Questions in many ways different from those which arose with regard to manufactures and raw materials, were presented by the duty on sugar. That article came into sudden and surprising prominence in the debates of 1894. It is true that it had played an important part in 1890, when the remission of duty on raw sugar had been an essential part of the general policy of the McKinley tariff act. But attention had then been given mainly to the burden which the tax on raw sugar imposed on con- sumers, and to the benefits which its remission would bring to them. In 1894, however, the tax on refined sugar, and its effect on the sugar-refining industry, ' See what is said of earthen-ware and china-ware in the concluding chap- ter of this volume. THE TARIFF ACT OF 1 894. 3OS received the greater share of attention. This change in the point of view was due to the fact that between the two dates the monopoly conditions in the refining of sugar had become a matter of common knowledge. Hence the question of protection as fostering monopoly was brought home to the public, uneasy at best at the de- velopment apparently on all sides of combinations and trusts. The sugar duty, in its various forms, involved a great variety of economic and social questions. That on raw sugar involved both fiscal questions and questions as to the social effects of taxation. That on refined sugar pre- sented at once a phase of the protective controversy and a phase of the new and portentous problem of monopoly combinations. It will be advantageous to consider sepa- artely the very different questions presented by the two parts of the sugar tax. The reasons for and against a duty on raw sugar may be summarized as follows. In favor of the duty it is to be said that it would yield at once a large, certain, steady reve- nue. Some increase in the revenue was agreed on all hands to be necessary. No one change in the McKinley act had done so much to upset the federal budget as the removal of the duty on sugar, and no one change was so certain to bring an additional revenue as the re-imposition of this tax. In view of the position of the federal Treas- ury as the holder of the metallic reserve for virtually all the paper money outstanding, it was of prime importance to put it in a secure financial position. 306 HISTORY OF THE EXISTING TARIFF. Next, while the sugar tax is a tax, it is in the main (set- ting aside the comparatively small domestic production of sugar) a simple tax, bringing none of the diversion of domestic industry and none of the ulterior consequences which flow from protective duties. It is commonly as- serted by Protectionists that a remission of revenue duties, like those on tea, coffee, and sugar, is in a peculiar sense a remission of taxation ; the implication being that protective duties on commodities made at home are not really taxes, but in some roundabout way are pure gain. It would be the part of courage and honesty for those op- posed to protection to act on the ground that, while both alike are taxes, the revenue duties are the less burden- some and the less harmful of the two. They should, therefore, where opportunity arises, maintain revenue duties boldly and remit protective duties freely. As between duties on raw wool, coal, and iron ore on the one hand, and a duty on sugar on the other, the party opposed to the principle of protection should unhesitat- ingly choose the latter. Thirdly, the Louisiana sugar producers were fairly en- titled to some consideration. Unlike wool-growing, their industry involved a considerable plant ; and it offered no easy opportunity for a change to something else. An im- mediate abolition of the duty, or of the equivalent bounty, which had been granted in 1890, would unquestionably work hardship to them. In view of the tenderness with which most of the protected industries were treated, they might reasonably complain of any sudden and uncondi- THE TARIFF ACT OF 1 894. 307 tional withdrawal of the aid which they had had for gen- erations. The strong argument against the duty on raw sugar is that which bears against almost all indirect taxes produc- tive of a large revenue. To be productive, such taxes must be imposed on articles of wide consumption ; and articles of wide consumption are always of the sort con- sumed proportionately more by the poor than by the rich. The tax is socially unjust. The full weight of this objec- tion can be fairly judged, to be sure, only on a considera- tion of the incidence of an entire system of taxation, — in the present case, not only of the federal taxes, but of the State and local taxes as well. It might conceivably be maintained that the State and local taxes, which are chiefly direct, serve to offset the injustice of an indirect tax like the sugar duty. They are levied in the first in- stance chiefly on the well-to-do ; and though their ultimate incidence is in the highest degree complex, it is at least doubtful whether they bear with proportional weight on those classes in the population which would be most affected by a duty on sugar. It is probable, too, that other parts of the tariff schedule, notably the duties on textiles, bear most heavily on commodities consumed by the richer classes. But a comprehensive inquiry of this sort would almost certainly fail of a satisfactory conclu- sion; and it is inevitable that Congress should have an eye solely to the federal taxes which are under its control. Here there is the clear social injustice of a sugar duty, considered per se. Add to this its visible and unmistak- 3o8 HISTORY OF THE EXISTING TARIFF. able payment by consumers, and the pressure against it in a democratic community becomes formidable. The conflict between sober counsels in favor of the pro- ductive revenue duty, and popular suspicion of its effects in aggravating inequalities in taxation and so in the dis- tribution of wealth, was emphasized by the income tax proposal. Obviously the income tax, which was made a part of the tariff act of 1894, was precisely what the sugar duty was not. The revenue from it was uncertain in amount, and in any case would come in but slowly, afford- ing no prompt relief to the Treasury. Moreover, levied as it was only on incomes exceeding $4000 a year, it was a tax on the rich alone, and, thus precisely the opposite in social effect from the sugar tax. The income tax was popular in the South and West, where it was most strongly felt that the burden of taxation did not bear sufficiently on the rich, and where the strength of the Treasury was a matter of indifference, not to say hos- tility ; while the sugar tax (barring the exceptional case of Louisiana) was strongly opposed in those regions. Curiously enough, the outcome of the action of Con- gress was that both of these taxes were put into opera- tion. In the bill as passed by the House, sugar had been made free, and the bounty abolished. But in the Senate the two Louisiana Senators were among those whose votes were needed if the tariff bill was to pass that branch, and they insisted on some concession to their constituency. The Administration, anxious for a sub- stantial balance in the right direction at the Treasury, THE TARIFF ACT OF 1 894. 309 also brought its influence to bear in favor of the sugar duty. Consequently it was inserted by the Senate; while the income tax, which in the House had been in a manner a substitute for it, was also retained in the Senate. Later, the decision of the Supreme Court as to the un- constitutionality of the income tax as levied by the act, wiped out that part of the measure, and left the duty on raw sugar without an offset, to the bitter disappointment of those who had opposed both this tax in itself and the tax on refined sugar which it brought in its train. As it became law, the act imposed a duty on raw sugar of forty per cent, ad valorem. The bounty of 1890 was abolished. The new duty was equivalent roughly to one cent a pound, or about one-half the duty in force before 1890, and one-half the bounty granted in that year. Its ad-valorem form was peculiar. Never before, except under the general policy of ad-valorem rates in the acts of 1846 and 1857, had sugar been subjected to any other than a specific duty. The form now adopted served to cut a Gordian knot : it was a short cut out of the difficul- ties which were met in the endeavor to arrange varying rates on different grades of raw sugar in such manner as to satisfy both the Treasury officials, the sugar producers, and the refiners. It connects itself with the discussion of the extra rate on refined sugar : to which we may now turn. The salient facts as to the sugar refiners and their rela- tions to the tariff system were simple and familiar. Sugar refining had been, almost as a matter of course, within 3IO HISTORY OF THE EXISTING TARIFF. the protective pale, and had been aided by a duty on re- fined higher than that on raw sugar. The poHcy of dis- criminating in this way in favor of the domestic refiners would probably not have been questioned, except in the matter of degree, had it not been for the development of monopoly conditions in the industry by the formation of the Sugar Trust, which later grew to be the American Sugar Refining Company, still popularly known as the Trust. This put a new phase on the matter in the public eye, the more so as the sugar combination had been the first of the original trusts, and had been more prominently before the community than any other. The more ardent free-traders have always contended that protective duties are the chief cause of combinations and monopolies, or trusts. It needs no great acquaintance with economic history, and no great skill in general reasoning, to show that the tendency to combination has deeper causes than protective legislation, and presents problems more com- plicated, and in their social importance more weighty, than those involved in the tariff controversy. But it is undoubtedly true that in some cases the drift toward monopoly conditions has been promoted by favoring duties. Sugar refining happened to be a case of mo- nopoly familiar to all the world ; the monopoly in this case had in fact been both easier to bring about and a source of greater profit, because of the protective duty; while the nature of the article made a tax in favor of the mono- poly producer particularly odious. With all sugar free, whether raw or refined, the Ameri- THE TARIFF ACT OF 1 894. 311 can refiner would be at some slight disadvantage, since freights would amount to a trifle more on raw sugar than on the less bulky refined sugar which might have been imported from foreign quarters. But this disadvantage would be insignificant. Hence when the House passed the tariff bill with both raw and refined sugar free of duty, it practically left the refining monopoly to stand on its own legs, neither helped nor substantially hindered by the tariff. When, however, a duty on sugar was resolved on in the Senate, the difficult question at once was raised how to adjust the rate on refined sugar to that on the crude form. A level duty, at the same rate on raw and on refined, would put the refiners to some real disadvan- tage. From 100 pounds of raw sugar something less (95 to 98) of refined sugar is obtained, and a level duty would operate distinctly to the advantage of the foreign refiner. H.ence, if a revenue duty were imposed on raw sugar, and if it were desired to treat the refiners with absolute indif- ference, a slight additional duty should be put on refined. Exactly how great this additional duty should fairly be, it was not easy to calculate. The data for the calculation must come chiefly from the refiners ; and any figures fur- nished by them must be received with caution. But a very small difference would sufifice to prevent refiners from having any ground for complaint. If a duty of one cent a pound were put upon raw sugar, an additional duty of one-twentieth of a cent would be ample to offset the loss in weight on refined sugar made from the dutiable raw sugar. 312 HISTORY OF THE EXISTING TARIFF. Naturally, the sugar refiners wanted something more than bare equality. They wanted a continuance of the favors which the legislature had granted them for genera- tions in the past. In 1890, when raw sugar had been admitted free, refined sugar had been subjected to a duty of one-half a cent per pound. It is probable that the processes of refining are carried on at least as cheaply in the United States as in any foreign country, and that even without any protection at all the sugar-refining in- dustry could maintain itself, and the sugar monopoly make handsome profits. With a barrier against foreign competitors such as the tariff of 1890 gave, the profits were enormous. It was inevitable that great efforts should be made to preserve them. Briefly, the changes which the sugar schedule under- went during the session were as follows. In the tariff bill as first reported to the House by the Committee of Ways and Means, raw sugar was left free, and a duty of one-quarter of a cent per pound was put on refined sugar. In other words, the largess given to the monopoly by the act of 1890 was to be reduced one-half. In the House, however, the feeling was in favor of a more radical change. The provision for a duty on refined sugar was struck out ; and all sugar, raw and refined, was put on the free list, so depriving the trust of all legislative favors. In the Senate, the finance committee amended the sugar schedule by imposing specific duties on raw sugar, roughly at the rate of one cent per pound, with an additional duty of one- eighth of one cent per pound on refined sugar. The duty THE TARIFF ACT OF 1 894. 3IJ on raw sugar was inserted partly to gain revenue, partly to secure the votes of the Louisiana Senators for the bill. But when final action came to be taken in the Senate, still another change was made. The duty on raw sugar was changed from specifice to ad valorem, and was made forty per cent. Over and above this, the duty of one-eighth of one cent on refined sugar was retained. Still further, a provision which had been introduced into the tariff act of 1890 was also retained, by which an extra duty of one- tenth of a cent per pound was imposed on refined sugar coming from countries that gave an export bounty. In this form the sugar schedule was passed by the Senate, had finally to be accepted by the House, and so became law. The final outcome was more than satisfactory to the Sugar Trust. There was the duty of one-eighth of a cent on refined sugar ; and there was an extra one-tenth of a cent on refined sugar coming from those continental countries, especially Germany, which give an export bounty, and whose competition was alone to be seriously dreaded. The ad-valorem form of the duty was also advantageous, bearing as it did less heavily on lower grades of sugar than on higher.' On the whole, the re- ' Ad-valorem duties are assessed on the value of the imported commodities at the time and place of purchase. Raw sugar comes largely from distant countries, or from countries with which transportation is not highly organ- ized, as from Cuba, Java, Brazil, and the Hawaiian Islands. The value at the place of purchase is comparatively low, and freight is comparatively high. On the other hand, refined sugar would be imported, if at all, only from the more advanced European countries. Freight charges from these are low, and the value at the time and place of purchase does not differ very greatly from the value at the American ports. Virtually, therefore, the ad' 314 HISTORY OF THE EXISTING TARIFF. fining monopoly, while it lost something, came out of the struggle victorious, and was left in little less secure con- trol over the trade under the act of 1894 than under the act of 1890. Much was said during the session and after the session of influences brought to bear by the trust on certain Senators. An investigation held during the course of the session brought out some facts freely suspected before, and not creditable to our political life. It was admitted that the trust had made contributions to the chests of both political parties, although nominally to the State organizations only. No bargains are ever made in these too familiar cases, but it is expected and understood that what is called " fair consideration " will be given to the interests of the obliging donor. It was proved also that some Senators had speculated in sugar stock. No pro- test as to the absence of connection between such dealings and the legislator's vote can save them from the taint of dishonor. It would appear also that the success of the trust was promoted by the position of the Louisiana Senators, who were anxious to secure a duty on raw sugar, and who seem to have entered into some sort of bargain for supporting the higher duty on refined sugar in exchange for aid to their own efforts. In any case it is clear that the sort of manipulation by which the refiners succeeded in retaining their favors from valorem duty is less heavy on raw sugar than on the refined, and so yields to the refining monopoly an advantage, not easy to calculate, yet probably sub- stantial. It is certain that this form of duty was advocated by the represen- tatives of the trust — in itself a reasonable ground for suspicion. THE TARIFF ACT OF 1 894. 3IS the tariff was possible only because of the narrow majority which the Democrats had in the Senate. Where one or two votes would have sufficed to block the whole measure, the opportunity for dishonest or selfish pressure on legis- lation was easy. It is possible to bribe or convince or entangle a few legislators, and so bring them to throw to the winds party consistency and public Justice ; but for- tunately our conditions are not so corrupt as to make it possible to bribe a whole party or overturn a strong majority. In the House, where the Democratic majority was greater, the manipulation of sugar duties was impos- sible. It was in the Senate, where a change of one or two votes meant failure to the whole measure, that the un- savory result was achieved. No part of the tariff legislation of 1894 was more dis- appointing to those who were earnest in their advocacy of tariff reform than the outcome of the sugar imbroglio. None, too, did more to damage the prestige of the Democrats. They had posed as the champions of the public against the monopoly ; yet the trust had conquered. It is true that the extra duty on refined sugar — the part of the schedule which alone was of real advantage to the trust — ^was less than it had been in 1890, and that the pub- lic in reality was better off than it had been before. But the intricacies of the case were too complicated to be readily understood by the average voter. The imposition of any duty at all on sugar was probably thought to be a surren- der to the trust. The revenue tax on raw sugar, fairly open to objection on grounds of social injustice, was sup- 3l6 HISTORY OF THE EXISTING TARIFF. posed in many quarters to be much more objectionable, — to be levied in toto for the benefit of the monopolists. The effect of a simple sweeping away of all duties on sugar, whether raw or refined, would have been transpar- ent to the popular mind ; but the impression left by the long and unsuccessful struggle, and the complicated out- come, was mainly that the promises of the Democrats had not been kept. No doubt the strong feeling which the surrender to the sugar monopoly aroused rested largely on a blind opposi- tion to combinations in general, and to the corporations which are supposed, rightly or wrongly, to have a monop- oly position. Whether the tendency to combination is to be welcomed or regretted, has not often been soberly con- sidered by the American public. The usual assumption is that it is an unquestionable evil, to be fought in every way by legislation. That disposition which shows itself, both among the welcomers of socialism and among many critical economists, to accept combinations and consolida- tions and to use them as instruments of social reform, finds hardly an echo in the United States. Doubtless the popular instinct here is right. The drift to consolidation and monopoly presents problems with which a democratic community can deal only under great disadvantages. To regulate it, to use it, to secure from it the possible bene- fits, requires a degree of nicety and consistency in legisla- tion which our American communities could reach only by slow and arduous steps. Legislation to check consoli- dation may be unwise, and probably is futile ; but legis- THE TARIFF ACT OF 1 894. 317 lation directed to encourage it, still more legislation to augment the profits of a monopoly, is surely of the worst. The revulsion against the extreme protective system which showed itself in the elections of 1890 and 1892 was probably in a large degree a consequence of the popular feeling just described. While the essential question as to protective duties is comparatively simple, the intricate reasoning which is needed to follow the effects of such duties into all the ramifications of international and domes- tic trade can have but little influence on the average citizen. He reasons from few premises, and is affected by simple catch-words. The outcry against trusts and monopolies, though in fact it describes an exception rather than the normal working of protective duties, was proba- bly the most effective argument in bringing about the public verdict against the McKinley act. It is expressive of the general feeling of unrest as to the power of great corporations, the growth of plutocracy, the gulf between the few very rich and the masses of comparatively poor, which is becoming a stronger and stronger political force, and is destined in the future to have larger and larger effect on legislation. It is clear that the new tariff act made no deep-reach- ing change in the character of our tariff legislation. The one exception was the removal of the duty on wool. Barring this, there was simply a moderation of the pro- tective duties. A slice was taken off here, a shaving there ; but the essentially protective character remained. 3l8 HIS TOR y OF THE EXISTING TARIFF, This would have been the case even had the Wilson Bill, as originally proposed to the House or as passed by that body, become law. That less anxiously conservative measure was of course alleged by its opponents to por- tend ruin to American manufacturers and prostration to American labor. In fact, while it might have affected some industries, it would have caused no considerable disturbance of industry and no considerable rearrange- ment of the productive forces of the nation. The act as finally passed was even less potent for good or for evil. In not a few cases, the duties, while lower than those enacted in the McKinley act of 1890, were still higher than under the tariff act of 1883. As far as it went, it began a policy of lower duties ; but most of the steps in this direction were feeble and faltering. Whether such a measure be good or bad, must be decided in the main on general principles. To follow out its influence on the prosperity of the community requires time for the observation of effects, and great skill and caution in the interpretation of industrial phenomena. Even had the new legislation been much more drastic, its final effects on general welfare could have shown them- selves only after the lapse of a considerable period, and then might easily have been concealed or obscured by the operation of other causes. To judge a very moderate measure like that of 1894 by its visible fruits is so difficult as to touch the bounds of the impossible. The effects on any particular industry, — which are but a fragmentary bit of evidence as to the promotion of general prosperity, — THE TARIFF ACT OF 1 894. 319 are sufficiently difficult to trace. We have seen how the one radical change made by the act, in abolishing the duty on wool, required time to show how it might affect the wool and woollen industry. Even after the lapse of time, there could hardly be such an unmistakable result one way or the other as to prevent doubt and dispute. When all the evidence on this point was in, it could still be of little avail toward answering the fundamental question, — whether the productive forces of the com- munity were applied to better effect with a low tariff than without it. But the general public has been taught to expect immediate, almost magical effects. Both parties in the protective controversy have preached the same gospel, and made the same promises. For high duties and for low duties alike it has been claimed that they would convert depression into prosperity. This has been the case, in more or less degree, throughout our tariff history ; and the inevitable disappointment with the expectations so raised has had its effect in bringing about the vacillations in public feeling and the frequent changes in policy. The act of 1894 was defended and attacked on the same superficial grounds ; and it happened to suffer from the contingencies of the moment. It went into effect shortly after an acute commercial crisis, and in the worst stage of a period of severe depression. The crisis and the de- pression, were due, in this case as in all others, to a long and complex set of causes, some of them still obscure even to the best informed and most skilled observers. 320 HISTORY OF THE EXISTING TARIFF. That the tariff act played any serious part in bringing them about, would not be maintained by any cool and competent critic. But the great mass of the public judged otherwise. The act had been followed by hard times ; at best, it had done nothing to remedy them. Half-hearted in its provisions, unlucky in the time of its enactment, it could make no warm friends, and earn no general approval. Thus, whether in its effects on legislation or on public opinion, the movement for tariff reform from 1887 to 1894 was in its outcome disappointing. The decisive victories in the elections of 1890 and 1892 had led the free-traders to form high hopes : the real beginning of the long de- ferred reform seemed at last at hand. But the victorious party was soon split by internal dissensions. With the acute crisis of 1893 and the growing accentuation of differing opinions on the currency, that issue forced itself forward. The session of 1893-94, as it progressed, wit- nessed slackened enthusiasm, inept leadership, and an inglorious result. President Cleveland's action in per- mitting the new tariff act to become law without his signature, put the final stamp of indifference and dis- appointment on the measure. CHAPTER VII. THE TARIFF ACT OF 1 897, At the time of the passage of the tariff act of 1894 nothing seemed more improbable than an early return to the policy of high and all-embracing protection. That policy, as embodied in the act of 1890, had met with ap- parently unquestionable rebukes at the polls in 1890 and 1892. Nor was there anything in the legislation of 1894 to invite a reaction. As we have seen, the act of that year, so far from being radical, had been, with the single exception of the free admission of wool, anxiously con- servative. Once it was passed, the community heaved a sigh of relief and dared to hope that from this quarter at least there would be for a space no further cause of in- dustrial uncertainty and disturbance. If this reasonable expectation was disappointed, the ex- planation is to be found, not in any demonstrable change in public feeling, but in the complete overturn in the gen- eral political situation. Suddenly and unexpectedly, the tariff was shoved aside as the party issue, and the cur- rency took its place. The stormy session of 1893, in which the silver-purchase act of 1890 had been repealed, foreshadowed the coming change ; the commercial crisis of 1893, and the years of depression which followed, 321 322 HISTORY OF THE EXISTING TARIFF. completed it with surprising quickness. Ever since the demoralizing days of the excessive paper issues of the civil war, periods of depression have favored the growth of the party of cheap money. The free-silver party, now the party of cheap money, found its hold strengthening in the South and West, and finally captured the Demo- cratic organization. In the South, always the main seat of the political strength of the Democrats, the tariff question had for some time been holding its dominant place largely as a matter of tradition. The opposition to protection had been inherited from the political tenets of ante-bellum days, and the tariff issue was easily dis- placed by the new and burning question. The majority of the Democrats of the new generation were won to the free-silver side ; the old leaders were contemptuously dis- carded ; the political centre of gravity suddenly shifted. The Democrats being pledged defiantly to one side, the Republicans had no choice but to take the other. Thus the election of 1896 turned directly on the question of the free coinage of silver. The popular verdict was clear on that question, and on that only. It was not to be expected, however, that the Republi- can party would desert its old faith, or turn suddenly with whole and single heart to the new issue forced upon it. For years — almost for generations — the Republicans had been fencing and compromising on the various phases which the currency question from time to time assumed. Moreover, the depression which set in after the crisis of 1893 made an opportunity for the apostles of high pro- THE TARIFF ACT OF 1897. 323 tection as well as for those of free silver. Both parties in the newspaper tariff controversy of 1890-94 had pre- dicted a general rush of prosperity, the one from high duties, the other from low duties. As the years succeed- ing 1893 grew blacker and blacker, the stanch protection- ists had the opportunity to cry : " We told you so ; let us return to the policy of prosperity." In the early part of 1896, before the silver question had forced itself to the front, the Republicans had resolved to stake the issue once more on protection ; and it had accordingly been settled that Mr. McKinley was to be the party candidate for the Presidency. What might have been the outcome of a campaign in which the tariff was the single issue cannot be said; though the general conditions at the moment certainly were favorable to the party not in power. Fate willed it that the campaign centred on silver. But here, after all, the Republicans were on the defensive. As to the currency, they undertook only to maintain the status quo ; while on the tariff, though it might be in the back- ground during the campaign, they had resolved to take the offensive, and had engaged to legislate afresh at the first opportunity. This difference in disposition as to the two problems became more pronounced when the smoke of battle cleared away, and the next move was in order. While the popular and electoral votes had been clearly for the Republicans, the complexion of the national legislature was not so altered as to give them a free hand on the currency. In the Senate they had no controlling major- 324 HISTORY OF THE EXISTING TARIFF. ity without the aid of silver votes. On the currency question the party, as such, could do nothing, — certainly nothing without dissension and recrimination. But on the tariff question something could be done at once. The occasion for action was the more urgent because of the state of the finances. For several years there had been a deficit in the current operations of the Treasury. The first fiscal year in which the balance had been on the wrong side was 1893-94; and then followed several years similarly unfortunate.' The very circumstance that the deficit appeared, and indeed had been most serious, while the tariff act of 1890 was still in force, indicated that it was due, not to the particular provisions of the act of 1890 or of its successor of 1894, but to the general industrial con- ditions of the period after 1893. The great crisis of 1893, itself the result of a complexity of causes, among which reckless monetary legislation was the chief, had been fol- lowed, as such revulsions must be, by a sharp falling-off in the imports and a consequent heavy decline in the customs revenue. The deficit which resulted was often alleged to be due to specially inadequate legislation in 1894. The •Fiscal Year. Ordinary Revenue. Expendi- tures. 1892-93 461.7 459-4 2.3 Surplus 1893-94 372.8 442.6 69.8 Deficit. 1894-95 390-4 433-2 42.8 " 1895-96 409.5 434-7 25.2 " 1896-97 430.4 448.4 18.0 " The figures indicate millions of dollars. The deficit really began to ap- pear in the second half-year of the fiscal year 1892-93 ; but the receipts in the first half-year had been large, so that this fiscal year as a whole showed a small surplus. THE TARIFF ACT OF 1897. 32$ act of 1894 had indeed failed to make rigorously careful provision for the needed revenue; but the same had been the case with the act of 1890, and was again the case, as we shall presently see, with that of 1897. The looseness of our federal legislation, so far as careful cal- culation of income and outgo is concerned, is an old and familiar phenomenon, the result partly of general politi- cal conditions and partly of the reliance on so variable a \ source of revenue as protective customs duties. But in partisan discussion, much was made of the failure of the act of 1894 to yield the revenue needed at the time; and at all events some measure of relief for the Treasury was called for. Hence President McKinley, in calling the extra session of 1897, asked Congress to deal solely with the import duties and the revenue. The two questions of industrial policy and of legislation for revenue ought, indeed, to be considered separately. But in the history of tariff legis- lation in the United States, as in that of most other countries, they have been constantly interwoven ; and so they were in this case. What with the undeniable need of revenue, the comparative ease with which party strength could be consolidated on the question of pro- tection, the old predilection of all the leading spirits among the Republicans for that issue, and the clearly expressed wish of the President, the tariff at the extra session received exclusive consideration. Thus the first fruits of the election of 1896 were legislation, not on the question which had been uppermost in the campaign, but 326 HISTORY OF THE EXISTING TARIFF. on the tariff question, on which no clear and unequivocal evidence of popular feeling had been secured. The legislative history of the measure was instructive, and in some respects showed striking contrasts with that of its predecessor of 1894. In the House the bill was reported by the Committee on Ways and Means as early as March i8th, within three days after the session began. This extraordinary promptness was made possible by methods that paid scant respect to the letter of the law. Strictly, so long as the new Congress had not met, no one was authorized to take any steps towards legislation at its hands. But, long before this, it was settled that Mr. Reed was to be once more Speaker, and he was able to intimate that the existing Committee on Ways and Means was to remain substantially unchanged in the next Congress; and, during the hold-over session of 1896-97, that committee accordingly was at work on the tariff bill, and was able to present it to the new Congress immediately on its assembling. Mr. Dingley, already chairman of the committee in the Fifty-fourth Congress (1895-97), was again to be chairman for the next; and his name was attached in popular discussion to the new measure which he was able to present with such celerity. The action of the House was as prompt as that of its committee. Within less than two weeks, on March 31st, the bill was passed. Only a comparatively small part of it had been considered in the House: no more than twenty -two of the one hundred and sixty-three pages were taken up for discussion. In the main, the com- THE TARIFF ACT OF 1897. 327 mittee scheme was adopted as it stood, being accepted once for all as the party measure and passed under the pressure of rigid party discipline. The whole procedure was doubtless not in accord with the theory of legislation after debate and discussion. But it was not without its good side also. It served to concentrate responsibility, to prevent haphazard amendment, to check in some measure the log-rolling and the give-and-take which beset all legislation involving a great variety of interests. Under the iron rule of Speaker Reed, the House gave the session to the enactment of a deliberately planned tariff bill, and to that only. In the Senate progress was slower, and the course of events showed greater vacillation. The bill, referred at once to the Senate Committee on Finance, was reported after a month, on May 8th, with important amendments. There was an attempt to impose some purely revenue duties; and, as to the protective duties, the tendency was towards lower rates than in the House bill, though on certain articles, such as wool of low grade, hides, and others (of which more will be said presently), the drift was the other way. The Senate, however, paid much less respect than the House to the recommendations of the committee in charge. In the course of two months, from May 4th to July 7th, it went over the tariff bill item by item, amending without restraint, often in a per- functory manner, and not infrequently with the outcome settled by the accident of attendance on the particular day ; on the whole, with a tendency to retain the higher 328 HISTORY OF THE EXISTING TARIFF. rates of the House bill. As passed finally by the Senate on July 7th, the bill, though it contained some 872 amendments, followed the plan of the House Com- mittee rather than that of the Senate Committee. As usual, it went to a Conference Committee. In the various compromises and adjustments in the Senate and in the Conference Committee there was little sign of the deliberate plan and method which the House had shown, and the details of the act were settled in no less haphaz- ard fashion than has been the case with other tariff meas- ures. As patched up by the Conference Committee, the bill was promptly passed by both branches of Congress, and became law on July 24th. In what manner these political conditions affected the character of the act will appear from a consideration of the more important specific changes. /^ First and foremost was the re-imposition of the duties on wool. As the repeal of these duties had been the one important change made by the act of 1894, so their res- toration was the salient feature in the act of 1897. On clothing and combing wool the precise rates which had been imposed in the tariff act of 1890 were restored. Clothing wool was subjected once more to a duty of eleven cents a pound, combing wool to one of twelve cents. On carpet wool there were new graded duties, heavier than any ever before levied. If its value was twelve cents a pound or less, the duty was four cents ; if over twelve cents, the duty was seven cents. In 1894, when the duties on wool were removed, the THE TARIFF ACT OF 1 897. 329 general expectation alike of the advocates and opponents of protection was that this change had come to stay. The political and economic probabilities in 1894 were such as to justify the expectation. The astonishing growth of all manufactures, uninterrupted before and after that date, made it certain that the United States under any tariff conditions would be a great manufactur- ing country, and seemed to warrant the belief that the desire for freedom in the use of materials would become stronger, the prospect of an expanding foreign trade more tempting, the demand for protection to domestic industries less insistent. The need of foreign wool for clothing the people of the United States and the inade- quacy of the domestic supply were clear then, and in- deed became more clear in the intervening years. In the woollen manufacturing industry itself it was to be ex- pected with confidence that, once the transition to free wool accomplished, the manufacturers would oppose a return to the old rigime. And, as it proved, the manu- facturers expressed themselves in terms surprisingly strong on the disadvantages, from their point of view, of a return to the wool duties.' If, nevertheless, the change was made, the explanation is to be found mainly in the unexpected turn of the political wheel. ' ' ' Never until he had experience under free wool did the manufacturer realize the full extent of the disadvantages he suffers by reason of the wool duty, and the impossibility, by any compensating duty, of fully offsetting these disadvantages." So much was said in the statement made before the Ways and Means Committee by the secretary of the Wool-Manufacturers' Association. Bulletin of the Wool Manufacturers, March, 1897, p. 84. 330 HISTORY OF THE EXISTING TARIFt. Wool is the article as to which it can be said with greatest truth and greatest plausibility that the farmer gets his share of the largesses of protection. It is true that in 1892 the farmers of Ohio and of other central States seemed to show that they were indifferent to the attraction ; for in that year a whole row of central States had voted against the party of protection, and in Ohio itself the victory of that party had been so narrow as to be equivalent to a defeat. It is true also that the main effects of the duty on wool would certainly be to stimu- late the activity and increase the profits of the large wool-growers in the thinly settled trans-Missouri region, rather than to benefit substantially the farmers proper.' But the determination to give evidence of fostering care for the farming interest was too strong to be affected ' In a formal communication to the Ways and Means Committee the Wool-Manufacturers' Association used the following language : ' ' The real explanation of these extraordinary demands lies in the fact that the wool- growers of the Middle West find themselves in need of protection against their American competitors west of the Mississippi River. It was not the ■imports under the McKinley law, but the cheaper-grown wools of the Far West, which made wool-growing relatively unprofitable on the high-priced lands of Ohio, Michigan, Pennsylvania. Every further expansion of the ranch industry must increase the effects of this competition. An enormous tariff on wool, such as is proposed, would overstimulate this ranch industry, by its promise of excessive profits, and would thus still farther increase the difiSculties of the Middle-West farmer.'' Bulletin of the Wool-Manufac- turers, June, 1897, p. 133. The wool-growers had at first asked a duty of fifteen cents a pound on clothing and combing wool, and finally had pro- posed, as an "ultimatum,"' twelve cents. The manufacturers had offered to join in recommending duties of eight and ten cents (graded by value) on clothing wool, and of nine and eleven cents on combing wool. In the act the growers got substantially their ultimatum, — eleven cents on clothing wool, twelve cents on combing wool. THE TARIFF ACT OF 1897. 33 1 by such considerations. The silver party had posed ostentatiously as the special friend of the debtor and the farmer. The Republicans, having pushed forward the tariff as their first strong card, must needs do something for the farmer; and heavy duties on wool were the natural result, consistent at once with the established party policy and with the long-continued and earnest contention of President McKinley himself. One other part of the wool duties served to show how the general political complications affected the terms of the tariff act. The duties on carpet wool, as has already been noted, were made higher than ever before. In the House the rates of the act of 1890 had been retained; but in the Senate new and higher rates were inserted, and, though somewhat pruned down in the Conference Committee, were retained in the act. They were de- manded by the Senators from some States in the far West, especially from Idaho and Montana. These Senators, though Republican, were on the silver side in the mone- tary controversy, and so by no means in complete accord with their associates. They needed to be placated ; and they succeeded in getting higher duties on the cheap carpet wools, on the plea of encouragement for the com- paratively coarse clothing wool of their ranches. It had been shown time and again, on the very principles of protection, that carpet wools were not grown in the country, and that those imported did not affect to any appreciable extent the market for domestic wool. But the Western Senators, who held the balance of power, 332 HISTORY OF THE EXISTING TARIFF. were able none the less to secure this concession to their demands. It deserves to be noted, on the other hand, that the Senate had been disposed to lower the duties on cloth- ing and combing wool. The Finance Committee had pro- posed rates of eight and nine cents a pound, and the Senate itself had voted rates of ten and eleven cents ; the reduction being due to the influence of the manufacturers, who were opposed to the high duties not only because of the price ad- ded on the raw material, but also because of the still higher duties on their own products which would be entailed.' But in the Conference Committee the House rates of eleven cents on clothing wool and twelve cents on combing wool were restored, and so appeared on the statute book. The same complications that led to the high duty on carpet wool brought about a duty on hides. This rawest of raw materials had been on the free list for just a quarter of a century, since 1872, when the duty of the war days had been repealed. It would have remained free of tax if the Republicans had been able to carry out the policy favored by the great majority of their own number. But here, again, the Senators from the ranch- ' " It is not pleasant for the American wool manufacturer to be told that the average ad-valorem rate upon woollen goods, under the tariff of 1890, was 98 per cent. It does not particularly help the case from the consumer's point of view to reply that the actual protective duty accorded him under that law did not exceed 45 per cent. The public looks at the fact — 98 per cent." So spoke the Secretary of the Wool-Manufacturers' Association to the House Committee. Bulletin of the Wool Manufacturers, March, 1897, p. 83. None the less, the manufacturers in 1897 secured, and pre- sumably asked for, an increase of the protective (j. e. , ad-valorem) duty on woollens to 55 per cent., — a rate higher than any imposed before. THE TARIFF ACT OF 1 897. 333 ing States were able to dictate terms. In the House bill, hides had still remained on the free list. In the Senate a duty of 20 per cent, was tacked on. The rate was reduced to 15 per cent, in the Conference Committee, and so remained in the act. The restored duties on wool necessarily brought in their train the old system of high compensating duties on woollens. Once more we find the bewildering com- bination of ad-valorem duties for protection and specific duties to compensate for the charges on the raw material. In the main, the result was a restoration of the rates of the act of 1890.' There was some upward movement almost all along the line ; and the ad-valorem duty alone, on the classes of fabrics which are most largely imported, crept up to 55 per cent. Just thirty years before, in 1867, when the system of compound duties on woollens was first carefully worked out, it rested on the assumption that a " net " protection of 25 per cent, was to be secured. But the ad-valorem rate, designed to give this net protection, had advanced steadily in the acts of 1883 and 1890, and in the act of 1897 reached 55 per cent. ! ' The drift of the changes from the rates of 1890 is shown by the follow- ing figures as to the two classes of goods most largely imported : DUTIES ON WOOLLEN CLOTHS. 1890. (1) If worth 30 cents or less per pound, 33 cents per pound plus 40 per cent. (2) If worth between 30 and 40 cents per pound, 38^ cents per pound plus 40 per cent. 1897. (i) If worth 40 cents or less per pound, 33 cents per pound plus 50 per cent. 334 HISTORY OF THE EXISTING TARIFF. The experiment of free wool and of moderated (though but slightly moderated) duties on woollens, was thus tried under the act of 1894 for three short years, and these, moreover, years of great general depression. As has been already said, even under normal business con- ditions the transition from the system of high duties must have been for a while disturbing and trying, and the full effects of the change, alike for consumers and producers, could not have worked themselves out for several years.' (3) If worth more than 40 cents pei pound, 44 cents per pound plus 50 per cent. i8go. (i) Cotton warp, worth 15 cents a yard or less, 7 cents a yard plus 40 per cent. (2) Cotton warp worth more than 15 cents a yard, 8 cents a yard plus 50 per cent. (2) If worth between 40 and 70 cents per pound, 44 cents per pound plus 50 per cent. (3) If worth over 70 cents per pound, 44 cents per pound plus 55 per cent. DUTIES ON DRESS GOODS. 1897. (3) If the warp has any wool, 12 cents a yard plus 50 per cent. (i) and (2) the same ; but with the proviso that the ad-valorem duty shall be 55 per cent, if the value is over 70 cents per pound. ' - (3) If the warp has any wool, 11 cents per yard plus 50 per cent. ; but with the proviso that the ad-va- lorem duty shall be 55 per cent. if the value exceeds 70 cents per pound. It will be observed that, under the act of 1897, on dress goods (of which some $20,000,000 worth was imported in 1896), the customs officers must ascertain, first, whether the warp consists "wholly of cotton or other vege- table material " ; if so, whether the goods are worth more or less than 7 cents a yard ; if not, whether they are worth more or less than 70 cents a pound. All these circumstances affect the rate of duty, and obviously in- crease the difficulties of administration and the opportitnUie; (or evasion. ' See above, pp. 294-296. THE TARIFF ACT OF 1 897. 335 While the manufacturers had cheaper wool and unlimited choice in the use of it, they had to learn to avail them- selves of this advantage. The wool-growers, especially in the central districts, had to face a fall in the price of wool, and had hardly time to make the change (more or less inevitable under any conditions) of raising sheep for mutton rather than for wool. As it happened, all this distressing transition was made the more trying because it took place in a period when all industry was de- pressed. Just as the general revulsion of the years 1893- 97 was ascribed by the protectionists to the tariff act of 1894, so the special difficulties of the wool manufacturers and wool-growers were ascribed to that measure, and here with some show of reason. Given a reasonable time, with general economical conditions of a normal sort, and it is more than probable that the new regime in the wool in- dustry would have won its way to general acceptance. But the general depression of these first years made the result of the new policy seem disastrous; the sudden political shift brought the old party again into power, though on a new issue ; and so the experiment of free wool and of simple duties on woollens was tried for too short a time to enable the results to prove the wisdom of the change. On cotton goods the general tendency was to impose duties lower than those of 1890. This was indicated by the drag-net rate, on manufactures of cotton not other- wise provided for, which had been fifty per cent, in 1890, and was 45 per cent, in 1897. There was, again, as in 336 HISTORY OF THE EXISTING TARIFF. 1890, a rigorously elaborate system of combined specific and ad-valorem duties on certain sorts of goods selected for especially heavy rates, such as cotton stockings and hose, and plushes, velvets, corduroys.' In the main, the cotton manufacturers held aloof from the new measure. The rates of the act of 1894 had been not unsatisfactory to them ; and they may have feared some such policy in regard to their material as befell the wool manufacturers. In fact, the Senate, in the course of its tortuous amend- ments, inserted in the bill (apparently somewhat to its own surprise) a duty on raw cotton, designed to check the importation of certain kinds of Egyptian cotton whose fibre fits it for some special uses. But here no po- litical complication within the Republican party bolstered up the change ; and this proviso, absurd enough, but no more absurd than those relating to carpet wool and to hides, disappeared in the Conference Committee. On two large classes of textile goods new and distinctly higher duties were imposed, — on silks and linens. Of the duties on silks and their effects, something is said in another part of this volume." From the time of the ' Compare pp. 267-269 above, where the duties on these articles under the act of 1890 are referred to. The same objectionable method of specific duties, graded by value, was applied in the act of 1897, and in general with higher rates ; thus by paragraphs 315, 318, 319, 386 of the act of 1897. On cotton hose, to give a single example, the lowest classes (t. f., the cheapest goods) and the rates on them were : Class. Duty. In 1890 — Value 60c. or less per dozen 20c. a dozen plus 20j{ In 1897 — Value $1 or less per dozen 50c. a dozen plus I5!{ Clearly, the duty of 1897 was very much higher than that of 1890 had been. ' See below, pp. 376 seq. THE TARIFF ACT OF 1 897. 337 civil war, silks had been subject to heavy ad-valorem duties — 60 per cent, from 1864 to 1883, and 50 per cent, from 1883 to 1897. These duties had caused a great silk-manufacturing industry to grow up, with results that were in some respects surprising, and might perhaps be cited as showing the possibility of successful applica- tion of protection to young industries. But the measure of apparent success thus attained, and the degree of pro- tection thus afforded, did not satisfy the manufacturers or the dominant protectionists. An increasing compe- tition from silk goods produced in Japan was feared, the spectre of " cheap labor " being invoked once more. Moreover, the fraud and undervaluation inevitable under any high ad-valorem duty had long suggested the de- sirability of arranging some schedule of specific duties on silks. Unquestionably the administration of the ad- valorem duty had been unsatisfactory, and the rates of 50 and 60 per cent, had been less effective in checking imports than they would have been without the almost systematic undervaluations by consignees and agents. On the other hand, the difficulties of framing a schedule of specific duties were great, and indeed had hitherto been thought insuperable. In view of the greatly vary- ing qualities of the goods, and the difficulty of grading them by any external marks, duties by the pound or yard would be too high on the cheaper goods, disproportion- ately low on the dearer. The act of 1897 boldly at- tempted to grapple with the difficulties of the case, and for the first time imposed specific duties on silks. The 338 HISTORY OF THE EXISTING TARIFF. mode of gradation was to levy the duties according to the amount of pure silk contained in the goods. The duties were fixed by the pound, being lowest on goods containing a small proportion of pure silk, and rising as that proportion became larger ; with the proviso that in no case should the duty be less than 50 per cent. This plan brought about an unquestionable increase in the rates, especially on the cheaper silks. How great the in- crease was, could be judged only by a person minutely conversant with the trade, and might be difficult to cal- culate in advance even by such a person. On the other hand, it was doubtful whether the administrative difficul- ties encountered under the high ad-valorem duties of previous acts would not appear in full force under this one. The exact determination of the percentage in weight of pure silk in any given piece of so-called silk goods could hardly be an easy matter. Yet this had to be precisely ascertained for the satisfactory administra- tion of the duties of 1897. Thus, the duty on certain kinds of silks was $1.30 per pound, if they contained 45 per cent, in weight of silk; but advanced suddenly to $2.25, if they contained more than 45 per cent. The same sort of gradation, bringing sudden great changes in duty as an obscure dividing line was crossed, ran through the whole schedule ; and the temptation to false statement at the hands of the importer would seem to be as great as the difficulty of detection at the hands of the customs examiner. Both in the high range of rates and in the attempt at rigorous enforcement the new act here THE TARIFF ACT OF 1 897. 339 went far beyond the act of 1890, making a new and im- portant advance in the application of extreme protection.' On linens another step of the same kind was taken, specific duties being substituted here also for ad-valorem. In 1890, the ad-valorem rate on linens had been raised to 50 per cent., to be reduced in 1894 to 35 per cent. In 1897, a compound system was adopted: specific duties imposed with ad-valorem supplements, such as had already been tried on cotton hose, velvets, and other fabrics. Linens were graded somewhat as cottons had been graded since 1861, according to the fineness of the goods as indicated by the number of threads to the square inch. If the number of threads was sixty or less per square inch, the duty was one and three fourths • The important part of the silk schedule in the act of 1897 is paragraph 387, which fixed the duties on ' ' woven silk fabrics in the piece, not specially provided for." The same rates are applicable, under section 388, to silk handkerchiefs. The method of grading is exemplified by the foUovring summary statement of some of the rates first enumerated. Duties on silk piece goods : (i) containing 20^ or less in weight of silk, if in the gum $0.50 per lb. if dyed in the piece .60 " (8) containing 20 to 30^ in weight of silk, if in the gum 65 " if dyed in the piece .80 " (3) containing 30 to 45^ in weight of silk, if in the gum 90 " if dyed in the piece 1. 10 " (4) containing 30^ or less in weight of silk, if dyed in the thread or yam, black 75 " other color 90 " (5) containing 30 to 45^ in weight of silk, if dyed in the thread or yam, black 1. 10 " other color 1.30 " So the schedule goes on, the duties advancing by stages as the per cent, in weight of silk becomes greater, as the goods are dyed in the thread or yam, 340 HISTORY OF THE EXISTING TARIFF. cents a square yard ; if the threads were between sixty and one hundred and twenty, the duty was two and three fourths cents; and so on, — ^plus 30 per cent, ad- valorem duty in all cases. But finer linen goods, unless otherwise specially provided for, were treated leniently. If the weight was small (less than four and one half ounces per yard), the duty was but 35 per cent. On the other hand, linen laces, or articles trimmed with lace or embroidery, were dutiable at 60 per cent., — an advance at 10 per cent, over the rate of 1890. The new specific duties on linens were expected to induce some cotton mills to turn to cheaper grades of linens, such as towel cloth ; but the general conditions of the manufacture of finer linens made it doubtful here, as in the case of finer silks and woollens, whether the imported fabrics would be supplanted.* as the goods are " weighted in dyeing so as to exceed the original weight of the raw silk,'' and so on. Goods of lighter weight (less than ij ounces per yard) are subject to still higher duties ; those of lightest weight (^ ounce per yard or less), to the highest duty of all, the maximum being $4.50 per pound. It deserves to be noticed that the woollen manufacturers, confronted with the undervaluation problem under the ad-valorem duties on woollens, found it impossible to frame a scheme of specific duties. A special committee from their number, which attempted to devise such a scheme, found that ' ' a wholly specific schedule is impossible, because of the thousands of varia- tions — in weave, in texture, in materials, in finish — which distinguish wool- len goods from those of all other textile manufactures." See Bulletin of the Wool Manufacturers, March, i8g7, p. 72. In the tariff bill as passed by the House the duties on woollens (over and above the compensating duty) had been made partly ad valorem and partly specific with gradations by value. But this additional complication in the woollens schedule was struck out in the Senate. ' See what is said as to these articles below, at pp. 389 seg. THE TARIFF ACT OF 1 897. 34 1 It was inevitable, under the political conditions of the session, that in this schedule something should again be attempted for the farmer; and, accordingly, we find a substantial duty on flax. The rate of the act of 1890 was restored, — three cents a pound on prepared flax, in place of the rate of one and one half cents imposed by the act of 1894. Here, too, no appreciable economic change was likely to result. Bagging for cotton, which had been admitted free under the act of 1894, was sub- jected to a duty, but a lower duty than that of 1890: the rate being ^ cent per square yard in 1897, as compared with ly'^ cents in 1890. This compromise may also be regarded as making some concession to the planter of the South. On chinaware the rates of 1890 were restored. The duty on the finer qualities which are chiefly imported had been lowered to 35 per cent, in 1894, and was now once more put at 60 per cent. ■ On glassware, also, the general ad-valorem rate, which had been reduced to 35 per cent, in 1894, was again fixed at 45 per cent., as in 1890. Similarly the specific duties on the cheaper grades of window-glass and plate-glass, which had been lowered in 1894, were raised to the figures of 1890; though on some of the more expensive kinds of plate-glass the lower rates of 1894, being still sufficient to prevent importation, were left substantially unchanged. The metal schedules in the act of 1897 showed in the main a striking contrast with the textile schedules. Im- portant advances of duty were made on many textiles, 342 HISTORY OF THE EXISTING TARIFF. and in some cases rates went considerably higher even than those of 1890. But on most metals, and especially on iron and steel, duties were left very much as they had been in 1894. Indeed, Mr. Dingley, in introducing the bill in the House, said that, " the iron and steel schedule, except as to some advanced products, had not been changed from the present law, because this schedule seemed to be one of the two of the present law [the other being the cottons schedule] which are differentiated from most of the others, and made in the main pro- tective." Hence we find, as in the act of 1894, iron ore subject to duty at forty cents a ton, and pig iron at four dollars a ton. On steel rails there was even a slight reduction from the rate of 1894 — $6.72 per ton instead of $7.84. On coal there was a compromise rate. The duty had been seventy-five cents a ton in 1890, and forty cents in 1894; it was now fixed at sixty- seven cents. On the other hand, as to certain manufactures of iron and steel farther advanced beyond the crude stage, there was a return to rates very similar to those of 1890. Thus, on pocket cutlery, razors, guns, we find once more the system of combined ad-valorem and specific duties, graded according to the value of the article. It is not easy to unravel the meaning and probable effects of the complicated duties imposed in these cases ; but it is clear that they were framed with a view to imposing a very high barrier to imports, and yet were arranged on the system, vicious from the administrative point of view, of THE TARIFF ACT OF 1 897. 343 bringing sudden changes in duty as a given point in ap- praised value is passed.' Some other items in the metal schedule deserve notice. Copper remained on the free list, where it had been put in 1894. Already in 1890 the duty had been reduced to one and one fourths cents per pound. As the copper mines, almost alone among the great enterprises of the country, had been enjoying uninterrupted prosperity, even during the period of depression, and had been ex- porting their product on a great scale, no one cared a straw for the duty. For good or ill the copper duty had worked out all its effects years before. On the other hand, the duties on lead and on lead ore went up to the point at which they stood in 1890. Here we have once more the signs of concession to the silver Republicans ■ Pocket cutlery supplies a good example of the methods applied in the acts of 1890 and 1897 to the articles here mentioned. The rates of duty were : 1890. Class. Duty, (i) Value (per dozen) 50 cents or less. I2 cents (per dozen) plus 50 per cent. (2) Value 50 cents @ I1.50. 50 cents plus 50 per cent. (3) Value $1.50 @ $3.00. $r.oo plus 50 per cent. (4) Value over $3.00. $2.00 plus 50 per cent. 1897. Class. Duty, (a) Value (per dozen) 40 cents or less. 40 per cent, (i) Value 40 @ 50 cents. 12 cents plus 40 per cent. (2) Value 50 cents @ $1.25. 60 cents plus 40 per cent. (3) Value $1.25 @ $3.00 per dozen. $1.20 plus 40 per cent. (4) Value over $3.00. $2.40 plus 40 per cent. It will be seen that on the cheapest knives there was a reduction in duty as compared with l8go ; while on the higher classes, and especially on the sec- 344 HISTORY OF THE EXISTING TARIFF. of the far West. A considerable importation from Mexico of ores bearing both lead and silver had brought some competition with American mines yielding the same metals — competition which could not well be helped as to the silver, since that would find its way to the international market in any case, but which could be impeded so far as the domestic market for lead was con- cerned. Accordingly there was a substantial duty on lead, and on lead-bearing ore in proportion to the lead contained.' In general, the duties in the metal schedule ceased to excite controversy, and even to arouse attention. Whether or no as a result of the application of the pro- tective system, the iron and steel industry had in fact ond, there was an increase. The most effective change was that by which the line of classification by valu4 was shifted from $1.50 to $1.25, — a shift which caused many goods to come under class 3 in 1897 which were in class 2 in 1890, and so caused a great advance in the duty chargeable. It may be noted incidentally that the figure of $1.50, to mark the dividing line be- tween classes i and 2, had been retained both in the House bill and in the Senate bill : the change to $1.25 was made at the last moment in the Con- ference Committee. It needs only a glance at the duties under these classes in 1897 to show how great will be the temptation to manufacture knives, and to juggle with their value, in such manner as to bring them below the divid- ing line of $1.25. The same vicious method of grading the duties on pocket- knives had been followed in the act of 1894, though with somewhat lower rates. In 1890 and 1897 (not in 1894) the method was also applied to razors, table-knives, and guns, and in 1897 to shears and scissors. The pertinent paragraphs of the act of 1897 are numbers 153 to 158. 'The duties from i8go to 1897 were : "-Ifler/crnS"' Leadperpound. 1890 i^ cents. 2 cents. 1894 \ cent. I cent. 1S97 i^ cents. 2| cents. THE TARIFF ACT OF 1 897. 345 passed the period of tutelage, and had become not only independent of aid, but a formidable competitor in the markets of the world. The extraordinary development of this industry during the period between 1870 and 189S is one of the most remarkable chapters in the remarkable economic history of our century. The discovery of the wonderful beds of iron ore on Lake Superior ; the fever- ish development of the coal deposits of the middle West ; the amazing cheapening of transportation by water and rail; the bold prosecution of mining, transportation, manufacturing, not only on a great scale, but on a scale fairly to be called gigantic — all these revolutionized the conditions of production. They called for resource and genius in the captains of industry; enabled the bold, capable, and perhaps unscrupulous to accumulate fortunes that rouse the uneasy wonder of the world; and gave rise to new social conditions and grave social problems. Something of the same sort happened in the growth of copper mining; though here the richness of the natural resources counted far more, and the situation in general was more simple. Among the forces which were at work in these industries protective duties probably counted for much less than is often supposed. An eagle eye in divining possibilities, boldness and resource in developing them, skill and invention in designing the most effective mechanical appliances, — these forces of character and of brains, developed by the pressure of competition in a strenuous community, and applied under highly favoring natural conditions, explain the prodigious advance. 346 HISTORY OF THE EXISTING TARIFF. The forces which so completely changed the situation of the iron and steel industry were most actively at work through the decade from 1880 to 1890. By 1890 they had worked out their effects on such a scale as to com- mand general attention. In that year, for the first time, the production of pig iron in the United States exceeded that of Great Britain. The enormous output, and the cheapened cost, must soon have brought a sharp fall in prices. The crisis of 1893, and the depression which followed, precipitated the fall, and soon, as is the com- mon effect of such revulsions, intensified it. Prices of all the crude forms of iron and steel went down to the foreign level and even below it. After a long period of gradual but rapid change, the results of the new condi- tions in the industry now suddenly worked themselves out. Not only was the domestic market fully supplied, but the beginnings of an export movement appeared. Imports of the cruder forms of iron and steel ceased en- tirely; and the more highly manufactured forms which continued to be brought in were mainly " specialties," made by unusual processes or affected by exceptional conditions. Perhaps the most striking consequence of these changed conditions was the new situation as to steel rails. With the aid of cheaper pig iron, and by means of improved methods, rails were made as cheaply as in Great Britain, if not more cheaply. The combination which had succeeded for so many years in keeping the price of rails above the normal point, was still able to THE TARIFF ACT OF 1 897. 347 hold together for some years after 1893. But the stress of continued depression, slackened demand, and sharper rivalry, finally caused it to give way in 1897, and the price of rails dropped abruptly. The duty imposed in the act of 1897 ($6.72 per ton) was nominal; for domestic prices were as low as foreign. Doubtless, in the future, such a duty, like those of former acts, might facilitate another combination and another period of inflated prices. But for the time, steel rails were exported, not imported, and at all events the period when protection could be said in any sense to be needed had clearly passed.' Another consequence of the changed conditions in the iron and steel industry was that the duty on tin plate, a bone of contention under the act of 1890, was dis- posed of, with little debate, by the imposition of a com- paratively moderate duty. The higher duty on that article in the act of 1890 (2^ cents per pound) had been advocated by protectionists and attacked by their oppo- nents with equal bitterness. Yet the reduction in 1894 (to i^ cents) had aroused little comment; while in 1897, with the protectionists in full command, it was raised to no more than \\ cents, again with little comment. In the intervening period the prices of the steel sheets from which tin plates are made (tin plates being simply sheets of steel coated with tin) had fallen in the United States in sympathy with the prices of all forms of iron and steel ; and this not only absolutely, but as compared ' See the figures in Appendix VI. 348 HISTORY OF THE EXISTING TARIFF. with the prices of similar articles in Great Britain. Hence even the duty of 1894 was as effective for the purposes of promoting the manufacture of this particular article, as had been the higher duty of 1890; while that of 1897, which was a trifle higher than that of 1894, was more than sufficient to maintain the protectionist sup- port for the industry. The episode was certainly a curious one. The much-contested duty of 1890 went into effect just at a time when the general development of the iron and steel industry was preparing the way for the immediate effectiveness of the duty in stimulating do- mestic production ; while the rapid fall in iron and steel prices after 1890, and especially after 1893, enabled the tin plate manufacture to hold its own, after a brief space, with a much lower duty than it had so insistently de- manded in 1890. A part of the act which aroused much public attention and which had an important bearing on its financial yield, was the sugar schedule — the duties on sugar, raw and refined. It will be remembered that the act of 1890 had admitted raw sugar free, while that of 1894 had imposed a duty of 40 per cent, ad valorem. This ad-valorem rate had produced a revenue much smaller than had been ex- pected, and, indeed, smaller than might reasonably have been expected. Notwithstanding the insurrection in Cuba and the curtailment of supplies from that source, the price of raw sugar had maintained its downward ten- dency ; and the duty of 40 per cent, had been equivalent in 1896 to less than one cent a pound. In the act of THE TARIFF ACT OF 1 897. 349 1897 the duty was made specific, and was practically- doubled. Beginning with a rate of one cent a pound on sugar tested to contain 75 per cent., it advanced by stages until on sugar testing 95 per cent, (the usual con- tent of commercial raw sugar) it reached 1.65 cents per pound. The higher rate thus imposed was certain to yield a considerable increase of revenue. Much was said also of the protection now afforded to the beet sugar industry of the West. That industry, however, was still of small dimensions and uncertain future. The pro- tection now extended to it, moreover, was no greater than had been given by the sugar duty, even higher than that of 1897, which had existed from the close of the civil war to 1890. No doubt the changed conditions of agriculture and of the methods of beet sugar manufacture might cause the same duty to have a greater effect at the close of the century than during the earlier period. But this effect could come but slowly, and for many years the sugar duty would not fail to yield a handsome revenue to the Treasury ; while at the same time it en- abled the protectionist party to pose once more as the faithful friend of the farmer. On refined sugar, the duty was made 1.95 cents per pound, which, as compared with raw sugar testing 100 per cent., left a protection for the domestic refiner, — i. e., for the Sugar " Trust," — of one eighth of one cent a pound. Some intricate calculation would be necessary to make out whether this "differential" for the refining in- terest was more or less than in the act of 1894 ; but, having 3 so HISTORY OF THE EXISTING TARIFF. regard to the effect of the substitution of specific for ad- valorem duties, the Trust was no more favored by the act of 1897 than by its predecessor, and even somewhat less favored." The changes which this part of the tariff act underwent in the two Houses are not without signifi- cance. In the bill cis reported to the House of Repre- sentatives by its committee, and as passed by the House, the initial rate on the crudest sugar (up to 75 degrees) was the same as that finally enacted, one cent ; but the rate of progression was slower (.03 cent for each de- gree instead of .035), and the final duty on the important classes of raw sugar in consequence somewhat less. The so-called differential, or protection to the refiners, was one eighth of a cent per pound. In the Senate there was an attempt at serious amendment. The influence of the Sugar Trust in the Senate had long been great. How secured, whether through party contributions, entangling ' The rates of 1897 were : On raw sugar testing up to 75 degrees 1 cent per lb. For each additional degree tott " " Hence raw sugar testing 95 degrees pays 1.65 " " And raw sugar testing roo degrees pays 1.825 " " Refined sugar pays 1.95 " " Leaving a difference between the refined sugar rate and that on raw sugar at the 100 degree rate of 125 " " In regard to sugar coming from countries paying an export bounty, the act of 1897 made a change from the methods of 1890 and 1894, when a fixed additional duty of ^ cent per pound had been imposed on bounty-fed sugar. It was now provided in general terms (in section 5 of the act of 1897) that on any article on which a foreign country paid an export bounty, an additional duty should be imposed " equal to the net amount of such bounty or grant " ; the Secretary of the Treasury being required to ascertain this amount in each ease. THE TARIFF ACT OF 1 897. 35 1 alliance, or coarse bribery, the public could not know ; but certainly great, as the course of legislation in that body demonstrated. The Senate Finance Committee reported an entirely new scheme of sugar duties, partly specific and partly ad valorem, complicated in its effects, and difficult to explain except as a means of making conces- sions under disguise to the refiners. But here, as on other points, the Senate treated its committee with scant respect, threw over the whole new scheme, and re-inserted the rates of the House bill on raw sugar, but with an in- creased differential, amounting to one fifth of a cent, on refined sugar. So the bill went to the Conference Com- mittee, with the differential alone in doubt. What de- bates and discussions went on in that committee is not publicly known. It is one of the curious results of our legislative methods that the decisive steps are often taken in star chamber fashion. But it was credibly re- ported that the sugar schedule was the sticking-point, — that on this schedule, and this only, each branch was obstinate for its own figures. Finally, the Senate gave way. By slightly increasing the duty on raw sugar, and leaving that on refined at the point fixed by the Senate, the House secured virtually the retention of the status quo as to the differential in favor of the Sugar Trust. The result certainly was in striking contrast to that of 1894. Then, too, there was a struggle between the House and the Senate on the protection of the Trust, — not indeed on that alone, but on that conspicuously. Then the House had proposed to wipe out all duties, 352 HISTORY OF THE EXISTING TARIFF. and so all protection ; while the Senate had proposed a substantial largess to the Trust. After a struggle much longer than that of 1897, the House had given way, and its leaders had been compelled to make a mortifying concession to an unpopular policy. The outcome in 1897 was, it is true, in substance not different. The differential was the same under the act of 1897 as it had been under that of 1894; and the increase in the duty on raw sugar once more enabled the refining monopoly, as the one large importer, to make an extra profit, tem- porary but handsome, by heavy imports hurried in before the new act went into force. But the moral effect was very different. The House in 1897 had adopted the plan of leaving things as they were, and had successfully resisted the effort of the refining monopoly to secure more. The result was due mainly to greater party co- hesion and more rigid party discipline, enforced by the genial despotism of the autocratic Speaker of the House. The tariff act of 1894 had repealed the provisions as to reciprocity in the act of 1890, and had rendered nugatory such parts of the treaties made under the earlier act as were inconsistent with the provisions of its successor.' The act of 1897 now revived the policy of reciprocity, and in some ways even endeavored to enlarge the scope of the reciprocity provisions.' One of its sections recited, in almost the exact phraseology of the act of 1890, that the ' Section 71 of the act of 1894. ' Sections 3 and 4 of the act of 1897. THE TARIFF ACT OF 1 897. 353 President, if satisfied that other countries imposed duties that were " reciprocally unequal and unreasonable," might suspend the free admission of certain specified articles — tea, coffee, tonka beans, and vanilla beans — and that these articles should thereupon be subject to duty, coffee at three cents a pound, tea at ten cents, and so on. The act of 1890 had held out the threat of duties as to some other important articles — sugar and hides. But these could not now be easily used for the reciprocity clauses, being dutiable in any case. Tonka beans and vanilla beans, even though imported mainly from the tropical parts of South America, were hardly weighty substitutes. Quite different in purpose, and designed to reach countries of the same rank in power and civilization as the United States, were some provisions which contem- plated not fresh duties, but a reduction of those imposed by the new act. In the first place the President was authorized, " after securing reciprocal and reasonable concessions," to suspend certain duties, and to replace them by duties somewhat lower. The articles on which reductions could thus be made were argol (crude tartar), brandies, champagne, wines, paintings, and statuary. The country aimed at was France. The higher duties on silks in the new act would especially affect this country, and might tempt her to reprisals. Her system of maximum and minimum duties, adopted in 1892, was expressly devised as a means of securing concessions in commercial negotiations. Now the United States fol- lowed suit, and arranged her own system of duties in such 354 HISTORY OF THE EXISTING TARIFF. manner that concessions were provided for in advance. The whole had somewhat the effect of a comedy, each country enacting high duties which it did not really care to enforce, and offering concessions which it did not re- gard as real concessions. More important in its scope, but so limited as regards time and conditions as to promise little practical result, was the next section, which contemplatedi commercial treaties for general reductions of duties. Tne President was authorized to conclude treaties providing for reduc- tions of duty, up to 20 per cent., on any and every article. But the treaties must be made within two years after the passage of the act; the reductions could be arranged only through a period not exceeding five years ; and the treaties must be ratified by the Senate, and further " approved by Congress," that is, by the House as well as by the Senate. The other reciprocity arrange- ments, described in the preceding paragraphs, did not need the consent even of the Senate. The arrangement for a possible general reduction of duties by 20 per cent, was not contained in the House bill, but was inserted by the Senate in the course of its amendments. Restricted as it was, the chance of its leading to any change in the rates of duty was of the slightest. An important aspect of the new act, and one much dis- cussed, was its fiscal yield. Designed to give protection to domestic industries, it was expected also to bring to the Treasury a much-needed increase of revenue. This combination of industrial and fiscal policy is too common THE TARIFF ACT OF 1 897. 355 in the history of the United States, as indeed in that of other countries, to have aroused much comment. Yet it was certainly unfortunate that so little attention was given to the simple question of revenue, without regard to protection or free trade. Additional taxes on beer or on tobacco (not to mention duties on tea and coffee), even though so moderate in rate as to have been Httle noticed and easily born by consumers, would have yielded a large, steady, and easily collected revenue. Proposals for taxes of this sort were indeed made by the Senate Finance Committee; but most of them were struck out by the Senate itself, and hardly a trace re- mained in the act as passed. A slight increase in the tax on cigarettes and a modification of certain rebates in the taxes on beer alone remained as simply fiscal measures. Barring these minor changes, protective duties, and these only, were relied on to convert the deficit into a surplus. There was much heated discussion immediately after the passage of the act as to its effect on the public finan- ces; it being predicted with equal confidence that it would fail to secure the desired revenue, and that it would convert the deficit into a surplus. It was cer- tainly to be expected that, — once the heavy imports rushed in just before the passage of the act were out of the way, — the increased duties on sugar, on wool and woollens, and on other articles, would swell the revenue considerably. But how much ? On this subject the only thing certain was that the financial effect was en- tirely uncertain. All calculations as to the fiscal results of 3S6 HISTORY OF THE EXISTING TARIFF. such customs legislation as the United States undertook in 1883, in 1890, in 1894, and in 1897, rest simply on guesswork. Supposing the imports to remain the same as in some previous year, it is possible to state what a given rate of duty will yield ; but no one can foretell with any approach to accuracy what the imports will be. This is more particularly the case with imports of pro- tected articles, and so with the revenue derived from them. Such an article as sugar, indeed, once the rate of duty is fixed, yields a fairly regular amount. Barring sugar, we have in the main dutiable imports that fluctuate greatly and unexpectedly from year to year. Even with rates unchanged, it is impossible to know in advance with any degree of certainty what the revenue will be. In times of activity imports tend to rise, and the revenue swells ; in times of depression they tend to fall, and the revenue shrinks. He who could foretell the oscillation of the industrial tides would have something on which to base an estimate of the direction at least, if not of the rate, in the movement of the national revenues. But even for the most experienced observer and under stable rates of duty, there must always be a large margin of un- certainty in estimates of the future tariff revenue. With rates much changed, no estimate can be more than a guess. The discussions as to the revenue to be expected from the act of 1897 served to bring into vivid relief not only the haphazard character of our fiscal methods, but the need of reform in the general financial and monetary THE TARIFF ACT OF 1897. 357 system. One of the arguments urged in favor of its passage was that an increase of revenue was necessary in order to enable the Treasury to fulfil its obligations for the maintenance of gold payments; and it was even maintained that a surplus was the one thing needful to bring about a sound and stable monetary situation. No doubt, as things have stood ever since the resumption of specie payments in 1879, i* is not only desirable on grounds of every-day prudence that the revenue should at least equal the expenditure, but so much is important for the monetary duties which have been imposed on the Treasury of the United States. It is equally clear, how- • ever, that a continuing surplus, and the unfailing avoid- ance of a deficit, are not to be expected. A large accumulated surplus tempts to reckless expenditure, as it did in 1890 ; while the inevitable periods of depression recurrently cut down the revenue, and make occasional years of deficit more than probable. It is unfortunate enough that the questions of protection to domestic in- dustries and of revenue for the government should be intertwined. But certainly the monetary system should be extricated from the confusion, and put on some well- defined basis of its own. The monetary problem, brought into fresh prominence by the new turn which political history took in 1896, has no proper relation with the pro- tection controversy, and ought to have none with the fluctuations in the fiscal needs and resources of the Treas- ury. Difificult enough in itself, this question should not be further complicated by being attached to the question 3S8 HISTORY OF THE EXISTING TARIFF. of protection and free trade, or the more immediate question whether the system of protection should be made heavier and more extreme, or simpler and less rigorous. The tariff of 1897, like that of 1890, was the outcome of an aggressi\^e spirit of protection. As in 1890, much was said of the " verdict of the people " in favor of the protective policy. Yet the election of 1896 turned on the silver question; and the Democrats in 1894 certainly had much more solid ground for maintaining that the popular verdict had been against high-handed protection than the Republicans in 1897 that it had been in favor of such a policy. Given the political complications of 1896- 97, it was no doubt inevitable that a measure imposing higher- duties should come. But the act of 1897 pushed protection in several directions farther than ever before, and farther than the political situation fairly justified. It disheartened many who had supported the Republi- cans on the money issue in 1896; and even good party members, loyal to the general policy of protection, doubted whether that policy had not now been carried too far. The new and unexpected turn thus given the tariff history of the United States was the more regrettable because the general trend of the country's develop- ment made a liberal policy at once easier and more inviting. The closing years of the century found new economic conditions, which must become of greater and greater consequence for our customs policy as the next THE TARIFF ACT OF 1 897. 359 century is seen to open a new era. The United States is a great manufacturing country ; not only this, but one in which the bulk of the manufacturing industries is no longer seriously dependent on protection. The changes in the metal industries, to which reference was made in the preceding pages, are not only important in them- selves, but are of far-reaching consequence for the gen- eral industrial future of the United States. Iron and steel, on which the material civilization of the modern world rests, are produced more abundantly than any- where else, and at least as cheaply, — soon, if not yet, will be produced more cheaply. With the wide diffusion of a high degree of mechanical ingenuity, of enterprise, of intelligence and education, it is certain that the' United States will be, and will remain, a great manu- facturing country. The protective system will be of less and less consequence. The deep-working causes which underlie the international division of labor will indeed still operate, the United States will still find her advan- tages greater in some directions than in others, and the ingenuity of legislators will still find opportunity to direct manufacturing industry into channels which would not otherwise be sought. But the absolute effect, still more the proportional effect, of such legislation on the industrial development of the country will diminish. The division of labor within the country will become more and more important, while international trade will be confined more and more to what may be called specialties in manufac- tured commodities, and articles whose site of production is 360 HISTORY OF THE EXISTING TARIFF. determined mainly by climate. Not only sugar (for the present), tea, coffee, and the like, but wool also belong in the class last mentioned, as to which climatic causes domi- nate ; and the duties on wool, with those on woollens in their train, are thus the most potent in bringing a substan- tial interference with the course of international trade. But, on the whole, protective duties, however important they may be in this detail or that, cannot seriously affect the general course of industrial growth, and will affect it less and less as time goes on. In any case, the question for the future will be, even more than it has been in the past, not whether the United States shall be a manufac- turing country, but in what directions her manufactures shall grow, — whether in those where aid and protection against foreign competition are constantly sought, or in those where natural resources and mechanical skill enable foreign competition not only to be met, but to be over- come on its own ground. SOME ASPECTS OF THE TARIFF QUESTION. In discussing the effects of the tariff legislation of the period from 1830 to 1860/ I have intimated my opinion that historical and statistical study is of httle aid in reach- ing conclusions on the fundamental questions which underlie the protective controversy. In the years which have elapsed since the Civil War, the general prosperity of the community has been affected, as it was in the period before the war, by a great number of causes, some favor- able, some unfavorable. An enormous public debt was incurred in a few months, and was paid off with unprece- dented rapidity ; paper money was issued to excess, and specie payments resumed after a long struggle ; great sums were borrowed abroad and then repaid on a large scale in the years after the crisis of 1873 ; railways were built on an enormous scale, and with portentous rapidity ; vast new tracts of land were opened for settlement ; new and rich mineral resources were dis- covered ; the arts have advanced in all directions, many branches of industry being revolutionized ; immigra- tion has taken place on a larger scale than ever before ; 6nally, international trade has been affected not only by our high import duties, but by the rapid advance in land ' See pp. 1 16-122. 361 362 HISTORY OF THE EXISTING TARIFF. and ocean transportation. Under all these varying forces the community has undoubtedly prospered as a whole ; but how disentangle the effects of any one of them ? It may be reasoned that high duties, such as those im- posed by our tariff legislation must have the effect of checking imports ; and that the decline in imports must have the effect of checking exports. In this direction, then, we might look for traceable effects of this one cause. But the high duties of the period from 1865 to 1890 did not prevent international trade from growing. No doubt it did not grow as rapidly as did the population ; and no doubt it did not grow as much, taking into account the rate at which population has grown, as did the interna- tional trade of England, France, and Germany, during the same period. But a country like the United States, of great and diversified territory, cannot be expected to have so extended an international trade as one like Eng- land, or even France ; it has a greater range of resources, and greater possibilities for the division of labor, within its own limits. To say with any certainty what would have been the development of international trade in the absence of high duties^ is impossible. In fact, here, as in almost all economic reasoning, no one can prove inductively what would have been ; a quandary inevitable in a subject where all the direct knowledge attainable must come from the observation of what has taken place in fact. We are reduced to reasoning from analogy and from general prin- ciples as to what must be and must have been. When it comes to ascertaining not only the effects of SOME ASPECTS OF THE TARIFF QUESTION. 363 protective duties on the growth of international trade, but on the more remote and also more important question of general prosperity, we are still more compelled to rely- on general reasoning alone. We can answer in any posi- tive fashion only a few questions of a limited sort : what the duties have been, in what manner they have gone up and down, what has been the relation of imports to domestic production, sometimes (but by no means al- ways), what has been the effect of duties on domestic prices and the domestic producer and consumer. But whether the community as a whole is better off with them than without them, involves at once a reference to the general principles of economics. Thus, we may ascertain that the duties on pig-iron for a number of years caused the prices of all forms of iron to be higher in the United States than they would have been other- wise, and so caused the people to pay more for this in- dispensable instrument of civilization than they would have paid without the duties. But when it is alleged that those who make the domestic iron create a home market for other products, which would disappear if the duty on iron were taken off, we must inquire what is the nature of exchange, and what at bottom makes a "market"; whether this domestic market is really a new and additional one, or a substitute for another market abroad, which is lost when the home market is created. Or when it is said that but for the duties, the wages of the iron-makers would go down, and that this fall would tend to bring with it a general reduc- 364 HISTORY OF THE EXISTING TARIFF. tion in wages, we must inquire what are the conditions that determine the general rate of wages, and how far they are affected by changes in tariff rates. These inquiries inevitably lead to a discussion of fundamental principles, and to general reasoning of a more or less abstract and theoretic sort. No one can expect to have a well-grounded opinion on the protective controversy who is not trained in general economic reasoning ; and any conclusions he may reach on general reasoning cannot be proved by facts and figures. If his general conclusions are once firmly fixed in his mind, he can simply illustrate them by facts derived from history and statistics. There are, however, some aspects of the tarifif question on which the inductive and historical mode of inquiry is more helpful. The protective policy of the United States has had unexpected successes and surprising failures. By successes here I mean that sometimes the duties have brought about a considerable development of the pro- tected industry ; while by failures, I would describe those cases in which there has been an absence of such development. It need not be repeated that success or failure in this sense does not necessarily imply advantage or disadvantage to the community at large: it indicates only whether the immediate object in view has been at- tained by the protective measures. There have been curious differences in the extent to which this primary object of protection has been attained ; and the results have varied, not only in different branches of manu- factures, but, what is more surprising, in different sorts of SOME ASPECTS OF THE TARIFF QUESTION. 365 agricultural production. The history of some cases of this kind throws light at least on some important ques- tions bearing on the protective controversy. It helps in ascertaining what would probably have been the general character of our industries if there had been no protec- tion ; whether, for example, without high duties the United States would be an exclusively agricultural coun- try. It serves, moreover, to illustrate, if not to prove, a familiar economic principle, — the doctrine that compara- tive costs determine the range of international trade. Some experiences bearing on these questions will form the subject of the present chapter. The first case to which I will turn is that of the produc- tion of flax fibre. In general, agricultural commodities are exported from the United States on a large scale, and protective duties on them, while they have been frequently imposed, are nominal : agricultural products would not be imported in any event. But with flax we find the reverse of the usual conditions. Flax has been imported into this country for generations, and import duties have had no perceptible effect in checking importation or in stimu- lating the production of flax at home. During the colo- nial times, when the great textile inventions were yet to be perfected, and when household clothing was almost univer- sally used, flax was raised and home-spun linen produced ; and this would probably have been the case even without the bounties and premiums which were common during the colonial period.' But, when the great inventions had ' Notices of these bounties are in Bishop's " History of Manufactures," '■ee HISTORY OF THE EXISTING TARIFF. caused the disappearance of household industry, flax and linen practically disappeared from the industry of the United States. The manufacture of cotton and woollen goods from domestic raw material arose, but that of linens hardly exists even in our own time. Only twine, thread, and a few coarse linen fabrics are now made in the United States. Duties on flax were imposed in 1828, again in 1842, again in 1846; during the Civil War the duty was maintained, and was increased in 1870. During the war, the deficiency in the cotton supply caused a temporary stimulus to flax-raising ; and the increase of duty in 1870 was probably due to the wish of the farmers to continue growing flax in face of the renewed supplies of cotton. But the production of flax fibre steadily declined never- theless. The census figures show very clearly what is the situation. The production of flax fibre in the United States in the census years was : [n 1850 3,850 tons « i860 2,35° ** « 1870 13,600 " " 1880 800 " " 1890 120 " The small quantity of flax now raised is of coarse quality, quite unsuited to the making of linen cloth. Mean- while, importation continues steadily. The imports of flax fibre were in 1886 3,700 tons, and in 1890 about 5,500 vol. I., and are also collected in Mr. E. A. Whitman's " Flax Culture in the United States," which contains an excellent brief account of the flax industry. SOME ASPECTS OF THE TARIFF QUESTION. 367 tons. The act of 189a made a further attempt to check imports and stimulate home production by again increaa ing the duty, but the same causes which made earlier efforts of this sort futile remain in force to check this one.' What, now, is the explanation of a state of things so different from that which prevails as to most agricultural products? We get hints towards a solution of the problem by examining the conditions under which flax is raised in foreign countries. In the first place, flax is emi- nently a product of intensive culture, grown in countries like Belgium and France, whose agriculture is typical of intensive culture.* A laborious and careful prepara- tion of the ground is required. Several ploughings and harrowings are called for ; for the best flax, the land is trenched by spade. The ground must be carefully ' In the " Bulletin of the Eleventh Census on Flax and Hemp "(No. 177, April 19, 1S92), Mr. Hyde, the special agent, remarks that "but little of the so-called ' fibre ' produced in the United States within recent years has been fit for spinning, or has really been entitled to the designation that for convenience has been given it in census and other statistical reports. * * * The 'fibre * reported at the various censuses up to and including i860 was an excellent grade of scutched flax, fit for spinning, and able to hold its own against all but the finest imported varieties. The ' fibre' reported in 1870, which was raised to meet the enormous demand for bagging, was, on the other hand , only a very common quality of ' tow.' * * * The ' fibre ' of the present day is likewise, with few exceptions, only a coarse bi-product, and mainly an upholstery tow." » The best full account of the methods of cultivating flax and hemp is given in the report of the commission appointed by Congress during the Civil War. The report is in "Senate Executive Documents" (1864-65), No. 35. A briefer and useful account, from which we quote in the following pages, has been condensed from this source and others by Mr. Whitman in his "Flax Culture." ~ 368 HISTORY OF THE EXISTING TARIFF. weeded, and " in Belgium the weeding is done by hand, when the plants are a few inches high, "by women and children who crawl about on their hands and knees, with cloths to protect them from the ground, working always towards the wind, so that the plants may be at once blown back to an upright position." From twenty-five to thirty tons of manure per acre are ploughed in, and, in addition, liquid manure is applied. The harvest is as laborious as the preparation. The plants are pulled by the roots; for cutting by machine or by scythe spoils the fibre, and, moreover, the part of the plant nearest the ground, which is lost by cutting, contains the best fibre.' The process of preparing flax for market, however, is by no means completed when it has been taken from the ground. It must first be rotted, then scutched, finally hackled. Rotting consists in immersing the plants in water, and thereby loosening the coarse external covering from the inner fibre which is to be converted into linen. In the United States, this has been done for both flax and hemp by " dew-rotting," — that is, leaving the plants ex- posed to the dew in the fields ; but this method, while simple and easy, makes poor fibre. Fibre of good quality can only be made by immersion for between five and ten days in water, which becomes foul and noisome from the decomposition of the plants. "The flax is then removed from the pools, and in this operation too much ' In reaping flax, ' ' a careful hand, who carries his scythe low and cuts a level swath, may do excellent work, but many workmen will waste too much of the best portion of the stalk by leaving a high and uneven stubble." — " Report of the Commission of 1865." p. 29. SOME ASPECTS OF THE TARIFF QUESTION. 369 care cannot be used. Hooks or pitchforks injure the fibre, and the bundles must be handed out by a man who stands in the now disgusting pool." These bundles, when dried, are ready for the next opera- tion, scutching, by which the inner woody pith of the plant is removed. The ancient method of doing this was simply to beat the stalks with clubs, and the reader of Tourgu^neff's novels need not be told that this method is still used in Russia. Elsewhere, machines are in use, but only to a slight extent. Machines for breaking up the pith seem easy to get, and are simple enough ; in Ireland, this part of the process is carried out by putting the stalks under cart-wheels. But scutching proper, the removal of the broken pith, is generally done by hand, " by beating the fibre with a blunt knife while it is held over the edge of a sharpened board." ' Finally, after scutching, comes hackling, which corresponds to the carding or combing of wool and cotton, and which leaves the clean flax fibre ready for spinning. This again was done universally by hand at the time when the Commission of 1865 reported ; and Mr. Whitman tells us it is still done " mostly by hand ' " Report of 1865," p. 32. Very recently (1885), a machine for scutching has been invented in France, which is said to work well. A process for rotting with warm water has also been invented in the same country, which is said to save time, to dispose of large masses of fibre at once, and to produce good quality. ' ' Report of Flax and Hemp Spinners' and Growers' Associationfori887,'' pp. 12-15, 25. Attempts to supersede the old methods have been numerous and hitherto unsuccessful, and it remains to be seen what will be the working of these new processes. If successful, they may serve, perhaps, with the aid of other inventions, to bring about changes in the character and distribution of the culture of flax and hemp. 370 HISTORY OP THE EXISTING TARIFF. even in large mills." The nature of the fibre apparently prevents that use of machinery for which wool and cotton are so wonderfully adapted. Hemp and flax are much alike, and what has been said in regard to flax applies in the main to hemp. Hemp of good quality must also be heavily manured, should be pulled or cut close to the ground, water-rotted, scutched, and hackled. Bounties on hemp as well as on flax were given in colonial times, and duties have been imposed on it without interruption since the formation of the Union ; yet hemp of the finer sort has never been raised, and has always been imported in considerable quantities. It should be noted, however, that the preceding re- marks apply only to the cultivation of flax and hemp for the purpose of obtaining good fibre. Flax is grown in large quantities in the United States for the seed, and hemp of coarse quality is grown in considerable quantities. Flax for seed need not be heavily manured, nor need the seed be thickly sown ; weeding is unnecessary ; the plants may be cut by scythe or machine ; the seeds are easily and quickly separated from the fibre. Seed is produced plentifully under these conditions, and is sold to oil mills ; but the flax straw becomes coarse and almost useless, and is generally burnt on the fields or sold for a trifle. Hemp cultivated in the same way, and then dew-rotted, yields a coarse fibre, suitable for bagging and other coarse fabrics ; and it has been grown for such uses in consider- able quantities, mainly in Kentucky. In recent years, however, jute and other tropical substitutes have dis SOME ASPECTS OF THE TARIFF QUESTION. 371 placed it even for these purposes, and its cultivation seems to be unprofitable.' The cases of flax and hemp are not unfamiliar, for gen- eral attention has been called to them by the present discussion of the tariff question. There is another in- stance, in many respects similar, to which reference is rarely, if ever, made. This is the failure of our high duties on imported sugar to stimulate the cultivation of the sugar beet and the manufacture of beet sugar. We have always had duties on sugar, and they have generally been high. Since the Civil War, they have ranged about fifty, sixty, even seventy per cent, on the value. In con- tinental Europe, beet sugar, while originally much stimu- lated by protection, has been able for many years to hold its own in competition with cane sugar. In France, the import duty on cane sugar and the excise tax on beet sugar are the same. In Germany, the excise is but little less than the duty ; and in both countries beet sugar sup- ' The census figures of the production of hemp are : For 1850 35,oootons. i860 74,000 " 1870 13,000 " 1880 S.ooo " 1890 11,500 " The " Flax and Hemp Association Reports " state the production to have been. In 1884 3,500 tons. 1885 6.000 " 1886 10,000 " The " Census Bulletin on Flax and Hemp," quoted from a few pages back, says that "though the crop reported by the census of 1890 was more than double that reported by the census of 1880, hemp production is regarded by those engaged in it as a declining industry." 372 HISTORY OF THE EXISTING TARIFF. plies the bulk of the consumption.' The processes for making beet sugar are public property, and our climate and soil are as well suited to the cultivation of the beet as are those of Central Europe. Nevertheless, the produc- tion of beet sugar in the United States, with hardly an exception, has never got beyond the experimental stage. Most experiments have failed completely ; and not even a fair beginning has been made in displacing cane sugar. For an explanation of this phenomenon also we may turn to the conditions under which beets are raised. These conditions are in many ways similar to those under which flax and hemp are cultivated.' The ground must be thoroughly prepared, deeply ploughed, and frequently hoed. " The more the culture approaches that of a gar- den, the more the quantitative and qualitative yield will be increased." Between ten and fifteen tons of manure to the acre are applied, and are supplemented by other fer- tilizers. The roots are not ploughed up, but only loosened ' The excessive drawbacks or direct bounties which have been granted in recent years on the exportation of beet sugar from Germany, France, and other countries, have given an extraordinary stimulus to the production of beet sugar. But this episode does not affect the point considered in the text ; for, before the artificial stimulus began, the beet-sugar industry had reached a position of independence. ' See a " Report on the Culture of the Sugar Beet " made to the Depart- ment of Agriculture in 1880, by Mr. William McMurtrie. Quotations in the text are from this report, unless credited otherwise. Much of it is reprinted in Mr. H. W. Wiley's report on " The Sugar Beet Industry," published as Bulletin No. 27 by the Department of Agriculture (1890). An excellent brief account is given by E.W. Hilgard in the Overland Monthly, vol.VIII., pp. 561-574. An account of the beet culture, designed to aid in its intro- duction in this country, is given in Mr. L. S. Ware's " The Sugar Beet" (Philadelphia, 1880). SOME ASPECTS OF THE TARIFF QUESTION. 373 by a plough run between the furrows. They are pulled by hand, and care must be taken to prevent any bruise or cut, which may cause them to decay when stored. The leaves are cut off in the field by a knife. Ten or twenty laborers are needed to pull and prepare for transportation in one day the roots on an acre of land. So far there is an obvious analogy to the cultivation of flax and hemp ; but, with beets, we have a still further characteristic of intensive culture. The beet cake which is left over in the sugar factory after the saccharine matter has been ex- tracted is a valuable food for cattle, who again supply manure for further cultivation. In Germany it is com- mon to combine the processes of beet-raising, sugar-mak- ing, and cattle-feeding in one large undertaking. Where this is not done, the beet cake is often exchanged by the sugar factories, weight for weight, for beet roots. Obvi- ously, the beet cake can have so high a value only in countries where stall-feeding is universal, or very common, and where grazing land is scarce. In a country like the United States, having a comparatively thin population, grazing land is plenty, and cattle-food correspondingly less in demand.' The characteristics of the branches of agriculture which we have been considering are, obviously, intensive cultiva- • In recent years, renewed endeavors to raise beets and extract sugar from them have been made. In California, a small factory was put in operation at Alvarado, some years ago, and has maintained itself with profit. A much larger factory was begun in 1888 at Watsonville, and has been in operation since that time, it is said, with success. The extraordinary combination of soil and climate in California may bring about a development which could 374 HISTORY OF THE EXISTING TARIFF. tion and little use of machinery. The American farmer spreads his labor and capital thin over a large surface of land; and he uses machinery and labor-saving devices vastly more than the peasant or the landed proprietor of continental Europe. It is generally implied, in discus, sions of our international trade, that the extent and fer- tility of our soil explain our great agricultural exports. This is true, as far as it goes. But it should be qualified by adding that the products for which we have the most decided advantage and which we export in largest quan- tity are those suited not only for extensive cultivation, but suited also for the liberal use of agricultural machinery. Wheat and corn are the readiest examples of such pro- ducts, and it is mainly for growing and harvesting these that we have achieved our triumphs in agricultural machinery. Flax, hemp, and beets, on the other hand, require intensive culture, and admit of little aid from labor-saving devices. The causes, therefore, of the agri- cultural competition of America, which has had so great an effect on the economic history of the last twenty years, are to be found not only in physical conditions of soil and climate, but also in those moral and intellectual differ- ences which lead the American to use better tools and more machinery than his European competitor. A keen and disinterested observer has gone so far as to refer the not be attained in other parts of the country. Along the upper Missouri valley, especially in South Dakota and Nebraska, a vigorous effort is now being made, under the stimulus o£ State and city subsidies, to encourage beet-raising and sugar-making. An appreciable beginning has been made, but it remains to be seen what the final outcome will be. SOME ASPECTS OF THE TARIFF QUESTION. 3/5 severity of American competition solely to this latter class of causes.' The American farmer, he tells us, uses lighter and better tools ; he works more intelligently and strenuously ; his wagons are lighter by half, and his horses better and more easily harnessed ; the mowing machine is used where the German peasant still uses the scythe or even the sickle ; ploughs are better ; reapers, binders, threshers, are used ; time and labor are saved by riding instead of walking, by windmills and piping in place of the constant drawing and carrying of water which exhaust the German agricultural laborer. Every exertion, more- over, is more active and strenuous ; the German laborer and farmer becomes another man when he has lived in the United States for a year or two. If greater use of machinery, more intelligent use of time, and steadier exertion were of equal advantage in all branches of agriculture, they would not affect interna- tional trade ; but they tell more in some branches than in others. The American farmer tends to confine his agri- culture to those products for which they tell, and the country imports agricultural products for which they do not tell. The rule does not, of course, hold good in all branches of agriculture. Peculiar advantages of soil and climate sufifice in some cases, of which cotton and tobacco ' H. Semler, "Die wahre Bedeutung und die wirklichen Ursachen de nordamerikanischen Concurrenz," Wismar, 1881. The preface, by another hand, tells us that Mr. Semler is a German of San Francisco, ' ' who has lived for many years in various parts of North America, and has observed its condi- tions with the eyes of a man of wide experience." The book was written with the object of conveying a lesson to German agriculture. 376 HISTORY OF THE EXISTING TARIFF, are the most obvious and important, to give a superiority little affected by greater efficiency or intelligence. But the most striking features in our agricultural situation seem to be explained by this sort of reasoning ; not indeed by this solely, but by this taken together frith the effects of a wide extent of virgin and fertile soil. We may now turn to another set of cases, in manufac- turing industry, where a similarly uneven working of pro- tection has shown itself. The first case of this kind is in the silk manufacture, which I will examine with some detail. The manufacture of silk goods in the United States is in the main of recent date, having come into being since the Civil War. To this general statement, however, there are two exceptions. Sewing silk has been made, in one way or another, for over a century. For fifty years after the Revolution, its manufacture was carried on, chiefly in Connecticut, as a household industry. About 1829, machinery began to be invented, was continually improved, and made the industry a manufacture in the modern sense of the term. In 1852, a new step was taken in the production of machine-twist for the Sewing- machines which were coming into general use. A very large development of this branch of the industry took place, and the Census of i860 reported the value of sewing-silk made to be no less than $3,600,000.' The ' See the sketch in Mr. Wyckoff's ' ' Silk Manufacture in the United States," pp. 32, 42-46. See also a curious anonymous volume, " Silk Culture in tlie SOME ASPECTS OF THE TARIFF QUESTION. 377 second branch of the silk manufacture which sprang up before the Civil War, was the making of fringes and trim- mings. We have little information as to its early history, but in i860 its products were found by the census to be worth $2,800,000. Neither the manufacture of sewing- silk nor that of trimmings received during this period any special encouragement from import duties. Sewing-silk had been admitted between 1833 and 1841 at a duty which gradually went down from forty to twenty per cent. Other silk manufactures were admitted free of duty. The tariff act of 1842 imposed higher specific duties for a few years, but the act of 1846 imposed a duty of thirty per cent, on sewing-silk and one of twenty-five per cent, on other silk manufactures. These rates were reduced to twenty-four and nineteen per cent, respectively in 1857. Notwithstanding these moderate duties,— mod- erate, at least, in comparison with those of later years, — there was a marked growth in the manufacture of sew- ing-silk and of trimmings between 1850 and i860. Other branches of the silk manufacture, however, did not exist. Almost all silk goods were obtained by importation from abroad. The duty on them was a simple revenue duty ; and no question arose as to domestic production or pro- tective duties. After the Civil War, the situation changed completely. During the war an increase in the silk duties was a natural United States," New York, 1844, which gives interesting information as to the early history both of silk culture and silk manufacture. In the intro- duction to the volume on manufactures in the " Census of i860" there is % good sketch of the history of the silk manufacture to that date. 378 HISTORY OF THE EXISTING TARIFF. resource for securing greater revenue; and in 1864 the general duty was sixty per cent. Like so many other of the duties imposed at that time, it remained substantially unchanged after the war closed. For more than a gener- ation the protective policy has been applied vigorously and continuously to this industry. The high duty has brought into existence a considerable and varied silk man- ufacture. The effect in this case, unlike that of some other duties, was not intentional. The high duties on silks were imposed during the war with little thought of protection and without solicitation from domestic producers. In this respect they differ from avowedly protective duties, like those on wool and woollens. But they have been followed by more marked effects; they have created an entirely new industry. The development of the silk manufacture was comparatively slow before 1870. It proceeded more rapidly in the years of activity preceding 1873. A new stimulus seems to have been given by the Centennial Exposition of 1876. The manufacture of trimmings on a wider scale was first undertaken ; then that of ribbons came ; soon afterwards that of brocaded and colored silks and satins, followed by that of plain piece-goods. The manufacture of silk handkerchiefs received a remarkable impulse from the Exposition.' At the present time, the domestic silk products are at least equal in value to the imported.' Many kinds of silk goods are no longer im- ' See the sketch in Mr. Wyckoff's " Silk Manufacture," especially pp. 42-51. ' Mr. Wyckoff estimated the value of silk goods made in 1886 at about $60,000,000, probably a liberal estimate. The declared value of the im. SOME ASPECTS OF THE TARIFF QUESTION. 379 ported. This is the case not only with sewing-silks and trimmings, but with many articles of which the domestic production did not begin before the war, such as handker- chiefs and most kinds of ribbons. Other articles, again, are made little or not at all, especially the iinest piece- goods. Between these classes comes the debatable ground, on which foreign and domestic silks compete. Here may be placed most dress silks, but the domestic producers in recent years have been steadily increasing their hold on goods of this sort, and now supply much the greater part of their consumption. This brief sketch of the history of the silk manufacture shows how different has been its development from that of other textile industries. The manufactures of cotton and wool attained a large growth and a firm position long before the Civil War, while that of silks is, in the main,' of very recent date. Silks are still imported more largely than other textile goods. The explanation of these facts must be sought in the character and processes of the industry. The peculiarities of the silk manufacture are the result of the qualities of silk fibre.' Raw silk is not made in ports in recent years has ranged between $30,000,000 and $35,000,000. Making allowance for duties and for undervaluation of imports (said to average at least twenty-five per cent.), we may conclude that the American public pays out about as much money for domestic as for foreign silks. ' The description of the silk industry in the following paragraphs is de- rived largely from Mr. Wyckoff 's instructive book on ' ' The Silk Goods of America " ; and the quoted passages are taken thence, unless credited to other sources. This volume is not to be confounded with the same writer's " Silk Manufacture,'' to which reference has been previously made. 380 HISTOR Y OF THE EXISTING TARIFF. the United States. Spasmodic attempts to encourage its production have been made, by bounties during the colo- nial period, by premiums in the early years of our national existence. At the present time there is a feeble attempt to establish it in California. The hopelessness of these attempts has permitted raw silk to remain on the free list, and the entire supply is obtained by importation. The raw silk so imported differs in marked ways from cotton and wool. In the first place, it corresponds not so much to raw cotton as to cotton carded and spun. It has been reeled from the cocoons, perhaps rereeled ; and on the character of the reeling depends mainly the qual- ity of the fibre. " There is found on the outside of every cocoon a consider- able amount of light thread, containing more or less roughness and impurity, and, in general, unfit for reeling. This ought to be stripped off entirely, and accounted as ' waste silk ' ; but some of it finds its way occasionally to the reel, in inferior grades of the raw material. When a filament that is fit for the reel has been reached, it is found that this filament is itself un- even in strength and thickness, the exterior layers being weaker and thinner than those nearer the insect. It is the business of the experienced reeler to put a thread of an even thickness and strength on his reel. To do this, he may have to unite four, five, or more filaments, from different cocoons, on a single thread, the number of filaments depending on their compara- tive thickness and the size of the thread required." But, even after this laborious preparation, — ^which, it may be noted here, goes far to account for the failure to produce raw silk in this country, — the fibre is by no SOME ASPECTS OF THE TARIFF QUESTION. 381 means of homogeneous quality, and by no means ready for the machine. " There are about a dozen distinct processes which raw silk must undergo to prepare it for the loom. ... In each of these processes, except dyeing, imperfections in the thread cause loss of time and material. Suppose, for instance, that the raw silk, as imported, is uneven. That is to say, the con- tinuous thread which is to be wound on a spool is found to be of irregular thickness as it unwinds from the reel. Such a thread is stronger in some parts and weaker in others. What happens ? Probably the thread breaks in the first winding from the reel. The winding machine stops automatically, and per- haps a portion of the thread which is weaker than the rest has to be pulled off and thrown aside as waste silk. Then a knot must be tied, and the winding goes on again. But, if the raw silk is very irregular in thickness, a similar accident can happen in any of the subsequent processes ; a loom may have to be suddenly stopped. It is always the same story, — breakage, stoppage, waste of time (labor), and material. The loss of time when machinery, running at high speed, has to be stopped, becomes a serious matter, from the mere fact that there is no production during the stoppage. ' It costs,' said a manu- facturer, ' fully five times as much to tie a knot in this country as in France.' " To eliminate, as far as possible, defects of this class, silk is subjected to a series of sortings between the steps of its progress from the cocoon to the loom. * * * Our manufacturers take more pains than formerly to make their own sorting of the raw material fairly accurate, previous to the first winding. Moreover, at a later stage, before they are dyed, the threads are weighed with exactness by a mechanical process called ' drumming,' and sorted again. * * * " One of the preparatory processes that precede weaving has been mentioned as ' picking.' This consists of spreading out 382 HISTORY OF THE EXISTING TARIFF. every thread of the warp separately, examining it with the utmost minuteness, and removing all knots, slugs, and irregu- larities. A large number of slowly moving threads are spread out like a huge fan ; while keen eyes are bent upon them, and nimble fingers seize and extract the imperfections. * * * In Europe, where weaving is done mostly by hand, picking is part of the business of the weaver : he stops his loom at any moment to remove a knot or slug from the thread as it is woven. He is expected to turn out goods free from defects of this character. The system here is entirely different, and it is necessary to have all the threads of warp and woof as perfect as possible, so that there shall be no stoppage of the power-loom." The concluding words of this passage point to the striking contrast between the methods of the silk manu- facture in this country and in those parts of France and Germany which still remain its chief seats. This instruc- tive difference cannot be better described than by quoting again from Mr. Wyckoff ; " The system of manufacture in Europe is entirely different from that which has grown up in this country. Judged from our point of view the European manufacturer seems rather to be a mere contractor. He buys tram and organzine — i. e., filling and warp, — which have been made at a separate factory. He sends this material to another establishment, a dye-house. Finally, he puts it out to weavers who have looms in their own homes. He has no factory and no machinery. Under such circumstances, it is not surprising that there is little improve- ment in machinery and methods from year to year. Our manufacturers have been obliged, on the contrary, to concen- trate the work, so as to keep every portion of it under direct supervision. In several of our large silk mills, all the different processes are conducted under a single roof. * * * There SOME ASPECTS OF THE TARIFF QUESTION. 383 is a marked disposition to try improvements in this country ; and it is the general experience that the very best machinery, though at first far more costly, is in the end decidedly the cheapest. * * * The American system is largely a conse- quence of substituting machinery for hand labor." A struggle thus seems to be going on in the silk indus- try between large factories and machinerj', on the one hand, and household industry and manual labor, on the other. The same contest went on in the cotton and woollen manufactures at the close of the last century and the beginning of the present, but with the conditions much more favorable to the survival of the old-fashioned system. Silk fibre is much less adapted to the com- plicated and rapidly moving machinery of textile manu- factures than are cotton and wool. It is not surprising, after reading Mr. Wyckoff's description, to learn that four fifths of the looms in the city of Lyons are still hand- looms,' and that Crefeld, the chief seat of the silk manu- facture in Germany, is a town of household operatives. The necessities of the situation compel the silk manu- facturers of this country to attempt the substitution of machinery for hand labor, and the use of more elaborate and more efficient methods. Such a change alone will enable the manufacture of an article as easily transport- able as silks to hold its own side by side with-the agricul- tural industries in which by far the greater part of our population is engaged. The endeavor shows itself not ' The United States consul at Lyons wrote in 1883 that, ol 120,000 looms in that city, but 20,000 were power-looms. — " Reports of the Consuls of the United States," July, 1883, p. 77. 384 HISTORY OF THE EXISTING TARIFF. only in the concentration of the manufacture, in the invention and increasing application of labor-saving machinery, in the use of power-looms instead of hand- looms, but also in the strenuous efforts to secure raw silk of more even and uniform quality.' The preference of American manufacturers for the best grades of raw silk, and their willingness to ^ ay good prices for it, are not the result, as one might infer from some allusions to it, of any special virtue on their part. Their policy is due simply to the necessities of the situation. The more uniform the material, the more can machinery be used ; the greater the use of machinery, the better the chance of the Ameri- can producer. Hence we find that the various branches of the silk manufacture have been put in a firm position in propor- tion to the possibility of using machinery. Sewing-silk, ' " In Italy and in France there are two classes of silk produced : • country silk,' which is reeled in households and by primitive methods ; ' filature silk,' which has been reeled with skill and sedulous care in filatures. The ' country silk ' is, of course, inferior, and very little of it is sent to this country, because it requires much labor to be expended on it in manufacturing processes. The factories in Europe, where labor is cheap, can use inferior silk to better advantage than is possible in America. The silk produced in China is, in the first instance, ' country silk ' ; and, to prepare it for this market, it has to be rereeled. The Japanese now have filatures, and send us silk equal to the best of European. In Asia, as in Europe, the coarser and inferior silks are kept at home ; America gets the finest and best." — Wyckoff, " Silk Goods," p. II. On the same page, we are told that " reels for this purpose [rereeling] were in the first instance made here and sent to China ; their use was brought about by the earnest and repeated representations of American merchants there." The large growth of Japanese shipments of silk to this country is said to be due to the intelligence and adaptability which the Japanese have shown in improving the reeling of silk. SOME ASPECTS OF THE TARIFF QUESTION. 38$ the earliest branch and the most firmly established, is the product of American inventions. It is not surprising that machinery should be readily adapted to the com- paratively simple processes of twisting several fibres to- gether, and then winding and spooling them, — which are the essential processes in making sewing-silk and ma- chine-silk. Another illustration of the same tendency, and a most instructive one, is in the successful manu- facture of "spun-silk" goods. These are made from waste silk ; that is, from the fibres of damaged or in- complete cocoons, from those which are thrown aside as unfit for reeling in the filatures, and from the tangled waste left in the earlier operations of the silk mill. These fibres are carded and spun by methods very similar to those used for cotton, and they produce " a material of such perfect uniformity that the thread to be made from it can be produced with absolute mathematical accuracy of any required size." The silks made from it were the original " American silks " ; they are made with abundant use of machinery ; they are cheap, durable, and good. But, unfortunately, they lack a certain lustre, an agreeable softness, and a peculiar rustling sound much prized by our better-halves. We are told that they are "hard." Those qualities in the fibre which make silks agreeable to their chief consumers seem to be lost in the processes of carding or rapid spinning, and sptin-silk goods fail to displace the more insinuating articles which come from the reel. Yet their consumption has steadily in- creased. By mixture with reeled silk, and by other 386 HISTORY OF THE EXISTING TARIFF. improvements, their quality has been made more agree- abie. They are said to be specially well adapted for silk prints, and in the production of these the characteristics of American manufactures are again illustrated. "In Europe, printing is don6 with little blocks, a few inches square, which are slowly and more or less imperfectly used in handwork. Here, ingenious machinery is em- ployed, printing many colors at once. A machine for this purpose requires a special engine to drive it, in order to have it under absolutely accurate control as to speed, pressure, and registry. Patterns that cannot be perfectly matched by hand may be turned out faultlessly by such machinery." The answers to the questions presented by our sketch of the history of the silk manufacture now suggest them- selves. The nature of the silk fibre was an obstacle to that extensive use of labor-saving machinery which is charac- teristic of American industry. The field is not promising for the ingenuity and inventiveness which give American manufactures their distinctive advantages. The same reason, no doubt, explains why in Europe the silk manu- facture has its chief seats in France and in Germany, and not in England. While England's textile manufactures have in general maintained their superiority over those of the Continent, the silk manufacture continued to call for protection long after the general policy of free trade had been entered on, and, in fact, suffered under the reduction and final repeal (i860) of duties on silks. The conditions on the Continent are more favorable to SOME ASPECTS OF THE TARIFF QUESTION: 387 industries in which there is comparatively little use of machinery. It may indeed happen that Yankee ingenuity will revo- lutionize the conditions of this industry. The attempts of the American manufacturers to get a more even supply of raw silk, and to apply machinery to its conversion into silk goods, may prove successful, if not throughout the industry, at least in many parts of it. The progress of the silk manufacture in recent years has been extraordinary. Ten or fifteen years ago, American dress silks were hardly heard of, and such as existed were of harsh and poor quality. At present, much the larger part of the dress silks which are used are of American make, and they are inferior in quality to none but the choicest imported goods. The dress silks which continue to be imported are largely figured silks. Of such goods, no great quantity of any one piece can be made with profit ; there are not likely to be many purchasers whose tastes will be hit by any particular pattern. It does not pay to make goods of this sort on the power-loom, which, like all expensive machinery, is profitable only when it works continuously and turns out large quantities at a time. The hand-loom turns out less at a time, and is more easily transferred to a new pattern. Figured silks are therefore more often made in the old way, and for that reason, again, are largely imported. Probably the same conditions hold good, in greater or less degree, of other imported silk goods. The very finest qualities of dress goods, such as require much individual attention from the workman,— laces, some sorts 388 HISTORY OF THE EXISTING TARIFF. of embroideries, velvets, and goods which are half silk half cotton, or wool, — make up the greater part of the importations.' But with dress goods, as with handker- chiefs, ribbons, upholstery silks, the American manufac- turers have wellnigh driven out their foreign competitors. They would continue to hold their own, even if duties were considerably reduced. What the position of the silk manufacture might be if duties were entirely swept away, it is impossible to say. Some branches of the manufacture would probably hold their own, while others would disappear. Should there continue in the future a progress such as has undoubtedly been made in recent years in the American silk manufac- ture, it may happen in the end that most sorts of silks will be made here as cheaply as abroad, and that the abolition of protective duties would affect the silk manufacture as little as it would now affect the bulk of the cotton manu- facture. If this proves to be the case, we shall have an example, and a striking one, of the successful application of protection to young industries. It is unlikely that any attempts at silk-making would have been made here but for the high duties of the war, and such progress as the manufacture has made may be fairly ascribed to the stim- ulus of protection. It remains to be seen whether this progress will be continued so far as to attain the true end of protection to young industries, — the supply of the com- ' I must confess that I have found no clear explanation of the continued imports of some silk goods ; e. g., goods of mixed materials. Possibly it is simply a matter of habit and of inexperience among domestic producers ; but I suspect there is some deeper reason. SOME ASPECTS OF THE TARIFF QUESTION. 389 modity at a price below that of the foreign article. The nature of the fibre makes it improbable that there will ever be any such complete application of machinery as in the manufacture of cotton and wool ; but no man can say it will not be done, for the march of invention brings many surprises. The question turns, however, on this: unless there is continued application of machinery and continued invention of labor-saving processes, such as will make labor here more efficient than abroad, then, so long as our gen- eral economic conditions bear their present relations to those of Europe, we cannot expect the growth of a varied and independent silk manufacture." I suspect that conditions similar to those of the silk manufacture would be found to exist in other textile in- dustries, whose products continued to be imported not- withstanding high duties. Linens, for example, were subject to a duty of thirty-five per cent, from 1864 to 1890; ' Before leaving this topic, a word may be said on another explanation of the silk situation. Mr. J. Schoenhof, in his volume on " The Industrial Sit- uation," chapters VI. and VII., has come to the conclusion that the real cause of the continued imports of silks is to be found not in the conditions of the industry, but in the practice of adulteration by foreign manufacturers. He gives striking illustrations of the extent to which foreign silks are loaded with dye-stuffs. Sometimes four fifths of the weight of a pifece of black silk is dye, and but one fifth silk fibre. No doubt silks often are greatly adul- terated, and very likely the practice has been more widely resorted to be- cause of the desperate efforts of the French and German manufacturers to keep their hold on the American market, in face of the high duty and the growing domestic manufacture. The practice is a phase, perhaps temporary, of the struggle between the old and the new methods of manufacture. But, if unadulterated American silks really satisfy the wants of consumers, and, quality for quality, are cheaper, they v.ill hold their own in the long run, and will conquer the market, even thoiirjh the change in the direction of con- sumption may take place slowly in the case of an article so much affected by 390 HISTORY OF THE EXISTING TARIFF. in the latteryear, the rate was raised to fifty per cent. Some sorts of coarse linen goods, such as shoe-thread and coarse towel linens, are made in this country; but by far the greater part of our linen is obtained by importation. Flax fibre, like the ordinary reeled silk, is not adapted to the use of rapid-running machinery. Most fine goods are made on the continent of Europe, on hand-lodms. Where machinery is used, it is applied to less advantage than for making cotton and woollen goods, and, moreover, is applied with unpleasant surroundings. For fine flax-spinning, the fibres must be moist ; " the atmosphere of a fine flax mill is steaming hot, and the operatives in the best English mills wear waterproof capes and overalls." ' In other words, the fibre must not only be produced, but manipulated, by methods which do not give scope to the faculties which make American producers efificient, while they entail hard- ships for which American laborers would have to be com- pensated by exceptionally high wages. fashion and prejudice. If, on the other hand, foreign silks, adulteration and all, prove permanently more pleasing to the consumers, whose tastes must in the long run decide what is wanted, American manufacturers will hardly hes- itate — and, in fact, do not hesitate — to resort to similar adulteration. It may be, indeed, that there is a greater possibility of adulterating successfully un- der European than under American methods. Mr. Wyckoff tells us that ' ' all the processes from first to last by which an inferior article can be made to appear equal to that of a higher grade are costly in labor" (" Silk Goods,'' p. 26). This is a significant circumstance, and very likely goes far to explain the alleged greater purity of American silks. On the whole, while adultera- tion is one of the things that must be taken into account in explaining the present situation, the fundamental explanation seems to me to lie in those conditions of the industry which were described in the text, and of which for that matter, Mr. Schoenhof's interesting account supplies excellent illus- trations. ' I quote from a private letter. SOME ASPECTS OF THE TARIFF QUESTION. 39I The manufacture of fine dress goods seems to present another case of the same sort. Fine woollen goods for women's wear have never been made in the United States, notwithstanding successive advances in the duties on them in 1867, 1883, and in 1890. The imports flow in over the barrier of the high duties in a large and steady stream. Some clew toward the explanation of this phenomenon is probably to be found in the following description, by an American manufacturer, of the mode in which fine dress goods are made : " The finer we spin yams, the greater becomes the cost of their manufacture, because the smaller becomes the product of a given amount of labor. Thus the proportion of labor cost in a fine yam, as compared with the cost of the raw material in that yam, increases very rapidly as the fineness of the yam increases. * * * In the weaving of the superfine fabrics which are the special characteristics of French dress goods, the finest yams are required ; and the amount of labor to the material represented in a yard of these goods is therefore much greater than in a simple quantity of any other woollen fabric. . . . These goods require at every stage in their fabrication the utmost attention to details, and the most expert operatives that can be obtained. They stand by themselves." ' Doubtless these reasons, which were urged in favor of the high duties imposed in the tariff act of 1890, explain ' Mr. William Whitman, President of the Association of Wool Manufac- turers, in the " Bulletin" of the Association, vol. XX., pp. 299, 301. It is fair to add that Mr. Whitman argues that " the obstacles to be overcome in the silk industry were greater than in the field that now invites our entry," and prophesies that the high duties will not enhance the cost of these goods to the consumer. 392 HISTORY OF THE EXISTING TARIFF. not only why these goods have not been made in the United States, but why the French have made them to the exclusion of the English. The glass manufacture presents a set of phenomena analogous to those just discussed, and in some respects even clearer and simpler. Some sorts of glass are imported steadily in large quantities, nothwithstanding laigh duties; other sorts are not imported at all, though the duties on them are comparatively low. As a glance at the table will show, imports of plate-glass and window-glass con- tinue on a large scale, notwithstanding heavy duties.' High protection has indeed caused a rapid growth of the domestic manufacture, especially in the case of plate- glass. On both these kinds of glass the duties are spe- cific, and are equivalent in some cases to more than loo per cent, on the value. Yet the imports of plate-glass seem to remain virtually stationary, while those of ' The figures which follow state the value (in thousands of dollars) of the domestic product of the more important sorts of glass in the United States according to the census returns for 1880 and for 1890, and the imports of the glass of similar kinds for the fiscal years 1879-80 and 1890-91. Where the duties are specific, as on plate- and window-glass, they have been stated in terms of their general ad-valorem equivalents. In comparing the value of the imports with that of the domestic product, it must of course be re- membered that the price of the imports, as they reach the consumer, is doubled (more or less) by the duties : Value of Imports. Rate of Duty. Value of Domestic Product. Plate-Glass, 188a " i8go Window-Glass, j88o.. " 1890., Glassware 'Plain, moulded, pressed, 1880 '* " " i8go Cut, engraved, stained, 1880 " " " 1890 Other, 1880 " 1890 I1715 1,65a ii427 3,010 38 47 722 1,007 951 til4S 6a@ioo;( 40® 45® 2 4S® 60JJ 4,870 5,047 9,059 1880— 9,568 1890 — x8,6ox SOME ASPECTS OF THE TARIFF QUESTION. 393 window-glass increased, between 1880 and 1890, as rapidly as did the domestic production. Similarly, glassware that is cut, engraved, stained, or ornamented, is steadily imported in large quantities, in face of heavy duties,— duties which in the acts of 1890 and 1897 were raised to 60 per cent. On the other hand, the imports of ordi- nary pressed glassware are practically nil, while the domes- tic production of articles of this sort, chiefly table-ware, is enormous. The census returns of 1880 and 1890 do not distinguish, as do the customs returns, between the differ- ent qualities of "glassware " ; but the bulk of the very large quantity of glassware produced in the country was cheap pressed glass, very little being cut or ornamented glass of an expensive sort. Yet the duty on plain glassware is only thirty.flve per cent., and that on other glassware only forty per cent. The situation is much the same with glass bottles, the domestic product being large, the imports small, and the duty comparatively low. As we might expect from these facts, the methods of production are very different for the different sorts of glass. Window-glass — to begin with an important and typical article — continues now to be made in very much the same way as in past generations, nor is there any appreciable difference between the methods of manufac- ture in this country and in Europe. The most important operation is that of blowing the glass. The molten mate- rial is gathered on a block of wood, and then blown into a cylindrical shape having walls of the thickness desired for the glass. The cylinder is then loosened from the blow-pipe, split open, flattened, annealed, polished, and 394 HISTORY OF THE EXISTING TARIFF. cut into regular shapes. In all these operations "there has not been a single inch of progress since the day when cylinder-glass was first made." Moreover, " from the very nature of the business, it is absolutely impossible to use machinery in it. The inventive genius of the American people cannot be brought to bear effectively in making window-glass. The business has to be a pure manufac- ture, — manual labor." ' If the processes are the same as in Europe, and the capacity and energy of the American laborers are not much greater, obviously the lower wages which the foreign manufacturer pays will enable him to offer window-glass at lower prices than his American competitor can afford. It is not surprising, therefore, that window-glass continues to be imported in face of a very high duty. ' I quote from the argument of Mr. E. L. Day, a glass manufacturer who appeared as the representative of the American Association of Window. Glass Manufacturers before the Committee of Ways and Means in 1884 " Congressional Documents, House Reports, i883-84,"pp. 256, 257. Remarks of the same tenor are in Mr. Charles Colne's excellent reports on glass in " Reports of the UnitedStates Commissioners to the Paris Exhibition of 1878," vol. III., p. 347. Indeed, it would seem that in one respect the methods of manufacture are more advanced in Europe than in this country. The American manufacturers themselves tell us that they generally carry on their business on a smaller scale than do their foreign competitors. See Mr. Day's statement, as cited above, p. 256. Before the Tariff Commission of 1882, the spokesman of the window-glass manufacturers said that the concerns in the United States were, on the average, only one seventh a large as in European countries, and pleaded that " the general expenses of conducting the business of such large establishments, as is well known, make an enormous difference in the cost, enough for a fair profit to the foreign manufacturer." " Tariff Commission Report of 1882," p. 2000. It maybe noted, also, that the use of gas-furnaces, a great improvement in the in- dustry, came much earlier in Europe than in this country. — Colne's ' ' Report," p. 352 ; " Census Report of 1880 on Glass," p. 37, SOME ASPECTS OF THE TARIFF QUESTION. 395 On the other hand, the manufacture of pressed glass is distinctively an American industry. " In glass-making, as in other industries, the scarcity of skilled labor drove our people to devise means for accomplishing work without its aid. We were naturally driven to machinery. To obviate hand-blowing, a process which is very difficult to master, shaping with press and iron moulds was substi- tuted. The beneficial results of this invention are incal- culable. It placed our manufacturers in a position to make regular and cheap wares, while skilled labor became no longer necessary. The simplicity of the operation of pressing glass was such that in a very short time men could be trained to perform the work. » * * Then came improvements fast and thick in combinations of the differ- ent pieces of moulds, — improvements in presses, and tools for holding the pieces while being fire-polished." ' The invention of the process goes back to 1827, when the first press, for moulding tumblers, was made.' Since that time, the manufacture of flint-glass, which is chiefly tableware made by pressing, has flourished. Before the Civil War, no permanent success was attained along the seaboard in the manufacture of window- and bottle-glass. In Pittsburgh and other places west of the Alleghanies, window-glass works were established at an ' Colne's " Report," as referred to above, p. 377. See also Mr. J. D. Weeks's report on glass, in the volume on manufactures in the " Census of 1880," p. 47. Accounts of the various improvements in the pressing pro- cess are given by these writers. » Report on glass, " Census of 1880," p. 58. Presses for simple articles seem to have been in use in England and Holland before this date. Jarves, " Reminiscences of Glass-making," p. 93. 39^ HISTORY OF THE EXISTING TARIFF. early date. Fuel and materials were abundant ; and the heavy cost of inland transportation, before the days of low railroad freights, prevented any effective competi- tion from imported glass. Near the seaboard, however, no window-glass or bottle-glass was made.' The manu- facture of pressed-glass, on the -other hand, grew and pros- pered. From the beginning, the United States have led all countries in this branch of the industry. Many arti- cles which elsewhere are made by blowing and subsequent shaping with simple slow-working tools, are here made, as well or better, by pressing. So far has that process been perfected that it requires a practised eye to distinguish the best pressed-glass from cut-glass. Mr. Coln^, in his report on the glassware exhibited at the Paris Exhibition of 1878, repeatedly commented on the superiority of American pressed-glass.' It is regularly exported in con- siderable quantities to Canada, the West Indies, South America, and even to Europe. If our tariff system were made more liberal, the general lowering of the scale of prices which might be expected to ensue would no doubt ' Mr. Jarves, in his " Reminiscences," p. 65, alludes to " the repeated failure of permanently establishing window- and bottle-glass works in this vicinity " (New England). ^ ' ' The American pressed-glass drew from the European manufacturers exclamations of astonishment when they saw the clearness, smoothness, and brilliancy of this glass, the freedom from mould marks, and the superior execution in general. Frequent inquiries were made as to the mode of working. This was a positive proof that they consider us superior in that line. In fact, many manufacturers frankly acknowledged to me our un- contested superiority in pressed-glass. Nothing could be seen elsewhere equalling our samples." — " Report," p. 365. Compare also p. 387 of the " Report." SOME ASPECTS OF THE TARIFF QUESTION. 397 cause the exports of pressed-glass, as of other manufac tured articles, to increase rapidly." The manufacture of plate-glass presents a curious case, typical of one phase of the operation of the heavy duties imposed during the Civil War. Before i860, plate-glass was not made in this country at all. During the war, high duties were imposed on it, properly enough ; for plate-glass is as purely an article of luxury as could be found. These duties were retained after the war closed, and, like so many others, remain now substantially as they were fixed in 1864. At first, they operated simply as revenue duties. As they were retained, however, and the price of imported glass was kept high, capital was at- tracted to the domestic production of plate-glass. In 1869, a factory was built in Indiana, and a few years later another was built in Missouri.' A few others have since been added, and at present a large amount of capital is sunk in them. The business is one which must be con- ducted on a large scale, and requires much fixed capital, ■ The exports of glassware, which consist almost exclusively of pressed- glass, range between $750,000 and $850,000 a year. Mr. Colne, in his " Report," p. 255, said that, " were it not for the difficulties created by the French tariff, American pressed-glass could be exported to France with advantage. " ' See the statements made in 1884 before the Committee of Ways and Means by Mr. E. A. Hitchcock, for the Crystal Plate-Glass Company of Missouri, and by Mr. W. C. DePauw, the owner of large works at New Albany, Indiana. " House Tariff Reports," 1883-84, pp. 279-287. Mr. Hitchcock argued with much force that, since the duties on plate-glass had remained unchanged for thirteen years preceding the date (1876) when his corporation engaged in the business, it would be a breach of faith to reduce the duties in such way as to cause the loss of their capitrf. 398 HISTORY OF THE EXISTING TARIFF. in the shape of buildings, furnaces, ovens, and machinery for handling the plates. The process consists, in essen- tials, of casting the glass in plates, which are then ground, smoothed, and polished. The conditions seem to be somewhat different from those of manufacturing window- glass, where hand labor plays a large part : there seems to be greater opportunity for the use of machinery. But the machinery in this country is the same as that used abroad, and the skilled laborers have been brought hither from foreign countries. The conditions of production are essentially the same as in Europe ; and, so long as this is the case, the lowef wages paid thefe enable plate-glass to be put on the market at a lower price. Imports to this country therefore continue, notwithstanding our high duties. It is not impossible that American ingenuity will find in this industry a congenial field, and that im- provements in methods and machinery will eventually enable plate-glass to be made here as cheaply as abroad. But, if it be true, as the manufacturers state, that they cannot submit to any reduction of the present very high rates, no steps in this direction have yet been taken. The duty so far has operated purely and simply as a pro- tective duty. The manufacturers assert that the price of plate-glass has been reduced by their competition. The price of plate-glass has undoubtedly gone down very much in re- cent years ; but, since imports have continued regularly, the price here has been presumably higher throughout than the price abroad. I say " presumably," because it SOME ASPECTS OF THE TARIFF QUESTION. 399 is also asserted that the foreign producers of plate-glass have combined ; that prices are not governed by competi- tion and cost of production, but are fixed under condi- tions of monopoly ; and that lower prices are offered in the United States because of our heavy duties. No doubt it is true that, where an article is monopolized and yields unusual profits, a duty, whether it stimulates domestic production or not, may cause the foreign producer to content himself with lower prices and lower profits. Under such circumstances, it may happen that the foreign producer rather than the domestic consumer bears a part or the whole of a duty. Whether this has been the result of the duty on plate-glass is not clear. On the one hand, the foreign manufacturers are few in number, produce on a large scale, and might well combine effectually. On the other hand, there are establishments in various countries, — France, Belgium, Germany, England ; and an inter- national combination is less likely to hold together than one between persons in the same country. Statements as to combinations abroad, when made by protected competitors here, must be received with a good deal of caution. In the manufacture of glass bottles, the general condi- tions are similar to those already described for window- glass. The glass is blown. Moulds are used to some extent, but little machinery.' No doubt the characteristic ' " There is no machinery used in the making of bottles, nothing but hand labor is used." Statements made in 1884 before the Committee of Ways and Means, as cited above, pp. 29a, 295. 400 HISTORY OF THE EXISTING TARIFF. differences between European and American processes show themselves in this industry. For example, the older method, still in general use abroad, was to apply a mould only for shaping the lower part of the bottle, the neck being separately shaped with pincers and forming blocks. Recently, metallic moulds, into which the whole bottle is blown at once, have been invented, and are in general use in this country ; but in Europe the old process was still common when Mr. Coln6 reported on the glass manufacture in 1878.' On the whole, however, the indus- try does not seem to be one adapted to American methods of production. If we find, nevertheless, that few bottles are imported and many are made within the country, the explanation probably is to be found in the heavy cost of transportation, which gives what we may call a natural protection to the manufacture of articles so cheap and bulky as glass bottles. Even in earlier years, when duties were low, bottles were regularly manufactured, especially in places distant from the s'eaboard. Before the days of railroads, the heavy expense of inland trans- ' See that gentleman's " Report," as cited above, pp. 358-366. Mr. W. E. Smith, a manufacturer of glass bottles on a large scale, remarked in his testimony before the Ways and Means Committee of 1889-go : "Their workmen [Germans] are more careful than ours. They work more slowly. They make a better article than we can make. We have as fast workmen as there are in the world, but our American hurry and aggressive- ness show in their work, and we, in endeavoring to excel one another in a day's work, do not get as good a product * * « The Germans work slowly and will produce a finer average quality of bottles than we do." " Report on the Revision of the Tariff," iSgo, p. 450. May it not be said that industries in which " hurry and aggressiveness" ar? ijqdcsirable ar« pot adapted to Aineric«n conditions ? SOAfM ASPECTS OF THE TARIFF QUESTION. 40t portation gave a stimulus to the manufacture of bottles, as well as of window-glass, at places like Pittsburgh and Wheeling, which were near the sand, fuel, and other needed materials. In our own time, the expense of in- land freight is still a premium to establishments in these places. The use of natural gas iij recent years has given them a great advantage ; and it is probable that they would now be little affected by a reduction of duties, except in their sale in the seaboard markets. It would be possible to present many other illustrations of the principle which has been brought out in the dis- cussion of silks and glassware. Earthenware continues to be imported into the United States, nothwithstanding a very heavy duty. Under the low duties that prevailed before the Civil War (the duty was thirty per cent, under the Act of 1846), only the cheapest and heaviest sorts of earthenware were made, such as stone jugs, drain-pipes, brown and yellow ware. The heavy cost of transporting chese articles, no doubt, explains why they too were not imported. Table-ware was supplied exclusively by importation. During the Civil War duties were raised to forty-five per cent, on plain ware and fifty per cent, on decorated ; and, in the act of 1883, these rates were again increased to fifty-five and sixty per cent, respectively. Under these duties, a considerable manufacture of pottery and earthenware has developed ; and, at the present time, common white ware is no longer imported. But there is still a large importation of colored and decorated ware and of all sorts of finer porcelain and 402 HISTORY OF THE EXISTING TARIFF. china. The domestic producers of table-ware supply no more than half of our consumption of china and earthen- ware, and most of them would probably have to go to the wall if the duties were removed.' The explanation of this state of things, strikingly in contrast with the early and assured growth of the manufacture of pressed glass, is that the potter's art has had little share in the improve- ments which have revolutionized so many branches 6f industry within the last hundred years. The potter's wheel is still the basis of the industry. The cheapening of transportation has caused the manufacture to be con- centrated in larger establishments, and perhaps in fewer places, than could be found fifty or a hundred years ago ; but there has been little introduction of machinery and no essential change in processes. The very mixing of the materials, which might be expected to give a good field for using power and machinery, is still done mainly by hand, attempts to use machinery having failed to yield the exact qualities wanted. Earthenware of a cheap and bulky sort is more likely to be made in large quanti- ties of a single pattern, and affords more opportunities for using moulds, some little machinery, and labor-saving devices ; it is, besides, more expensive to transport ; the ' The reader will find the materials on which this sketch is based in the report on pottery in the " Reports of the United States Commissioners to the Paris Exposition of 1878," vol. III. pp. 190-195 ; an account of the pottery manufacture in Bradstreets, March 6, 1886 ; statements of manu- facturers in " Tariff Commission Report of 1S82," pp. 613, 743, 1949 ; and in the statements made in 1S84 before the Ways and Means Committae, "House Reports," I883--84, pp. 241, 244, SOME ASPECTS OF THE TARIFF QUESTION. 403 cheaper qualities of table-ware are consequently produced in the United States under the present high duties. The finer goods, however, where each individual piece needs more attention and requires more labor, are made in Eng- land, France, Bohemia, and are imported in face of the duties. They will doubtless continue to be imported unless our industrial conditions change greatly, or the future brings forth a series of inventions that will make the industry suited to our present conditions. The manufacture of cutlery supplies another illustration of the uneven development of industries apparently similar. The duty on cutlery for many years was fifty per cent. ; yet there is a large and regular importation of pocket-knives. On the other hand, table cutlery, subject to the same duty, is practically not imported at all. There is a slight importation of table-knives made by certain English firms, whbse products some well-to-do people, from habit or prejudice, persist in preferring; but the bulk of the table-knives used are of American make, and are as cheap as goods of the same quality are abroad. The industry being concentrated in a few large establish- ments, there is a strong temptation to combinations ; and every few years there is a combination of the American manufacturers, which advances prices, keeps them high for a while, and then goes to pieces. But the knives are made as cheaply as they are in England or other countries, and are usually sold at prices as low. Pocket-knives and razors however, although made to a considerable extent, cannot be made so cheaply as in England and Germany. 404 HISTOR V OF THE EXISTING TARIFF. and continue to be imported in the face of the duty. The explanation is again that machinery can be applied to the one much more than to the other. Table-knives are made in large quantities of a single pattern ; they have comparatively few pieces ; the blades need no very care- ful grinding, — and grinding is still done largely by hand. A pocket-knife is a more complex thing ; the pieces need to be put together by hand, they must be made to fit neatly, the blades must be carefully ground. If the vari- ous parts of a pocket-knife could be struck off by ma- chinery, in hundreds or thousands, perfect, and complete, and then easily put together, pocket-knives would doubt- less be made in this country with complete success. Watches can be made after that fashion, and afford a striking example of American enterprise, ingenuity, and success. But pocket-knives need to be of numberless patterns. The jobbers and retailers, who presumably know the likings of consumers, want few knives of any one style, and want new patterns every season. Obviously, production on a small scale and with little machinery, in the German fashion, accommodates itself to such a capricious demand much more readily than the American plan of using large plant, expensive machinery, and an inflexible process. That the American manufacturers have not succeeded in getting command of the domestic market is indicated by the fact that in 1890 and 1897 they asked, and in the tariff acts of those years obtained, a marked increase in the duties. Most smaller articles of hardware, however, seem to SOME ASPECTS OF THE TARIFF QUESTION. 40$ afford favorable opportunities for the inventive talents of American workmen and business men. All sorts of complicated articles — door-knobs, locks, hinges, house hard-ware and household utensils, spades, axes, agri- cultural implements, tools of all sorts — are not only made cheaply and successfully at home, but, in spite of the higher price of the materials of which they are made, are regularly exported in large quantities. Where a massive kind of production is called for, a huge plant, a steady routine, a rigid economy of materials, the organization rather than the saving of labor, the English in general excel. This was probably one cause of the commanding position they held so long as the great producers of the crude forms of iron; though much was also due to the great advantage of having rich supplies of coal very near the iron ore. In manufactures of a more delicate and re- fined character, if I may use such adjectives in this con- nection, the Americans excel. Where the nature of the material or of the product gives opportunity for the deft use of labor-saving devices, the ingenious adaptation of a tool to just the use desired, the constant application of new inventions, American manufacturers are likely to hold their own, tariff or no tariff. In the course of the reaction which has taken place in political economy in recent years, the disposition to ques- tion the merits of the classic school has extended, first and last to nearly all of its doctrines. Doubts have been ex- pressed, not only on the theory of distribution, where there was perhaps most occasion for restatement and re- 4o6 HISTORY OF THE EXISTING TARIFF. vision, but also on the principles of international trade, which, on the whole, needed less remodelling than any- other part of the classic structure. Dr. Ingram — to take an English representative of the reaction — admits Ri- cardo's theory of comparative costs to be "just and inter- esting " ; but, when Cairnes describes it as " sounding the depths " of international trade, Dr. Ingram finds the phrase magniloquent.' Professor Held,' eminent and la. mented among the Germans of the new school, considered the theory a curiosity in economic literature, and handled it with very scant respect ; though it is but fair to add that, as is often the case with the protesting economists, his own discussion showed, in its details, less real diver- gence from the classic doctrine than his depreciation of it would lead us to expect. To the present writer, it seems clear that the phases of our economic history which have been examined in the preceding pages, can be explained at bottom only on the theory of comparative costs, which, as he ventures to assert even at the risk of being thought magniloquent, sounds the depths of the international trade of the United States. The reason why the Ameri- can farmer does not produce flax fibre is not to be found in any obstacles from climate or physical conditions. His labor would yield as much flax, absolutely, as that of the European cultivator. He simply finds that his labor yields ' Ingram's " History of Political Economy," p. 134. ' In the " yahrbuch fUr Geseizgebung, III., pp., 179-182. The essay on " Protection and Free Trade," in which the reader will find the passage here referred to. is in general conservative. SOME ASPECTS OF THE TARIFF QUESTION. 407 more in other branches of agriculture. His case is the same with beet culture. Silks, earthenware, window- glass, continue to be imported, not because of any inferior productiveness of American labor in making them ; it is because of a lack of that superiority which existed in other directions. Both in manufactures and agriculture account must be taken of moral and intellectual as well as of physical causes of a comparative advantage. The classic econo- mists did not often trouble themselves to analyze the causes of the diflering effectiveness of labor in different countries, and perhaps reasoned too much as if these causes were all of a physical and unalterable sort. The late Professor Cairnes discussed the relative importance of personal aptitudes on the one hand, physical and geo- graphical differences on the other, in determining the international division of labor, and concluded that per- sonal aptitudes counted for little, except in the commerce of nations occupying different grades in civilization.' The facts presented in this chapter point to a different conclu- sion personal aptitudes count for much in the trade of the United States with European countries. Adam Smith ' shrewdly perceived that the causes of the advan tages one country has over another are not all of the same kind ; but he pointed out with truth that, given the ad- I Leading Principles of Political Economy," book III., ch. i., sec. 1. ' " Whether the advantages one country has over another be natural or acquired, is in this respect of no consequence. As long as the one country has those advantages, and the other wants them, it will always be more advantageous for the latter to buy j)f the former than to make. It is an 408 HISTORY OF THE EXISTING TARIFF. vantages, they determine the course of trade. The nature and the cause of an advantage become material only when we begin to inquire whether it is likely to persist indefin- itely, and whether it can be affected by legislation. Obvi- ously, a comparative advantage, which rests not only on physical causes, but on differences in skill, knowledge of the arts, mechanical training, qualities of character and intelligence, may be influenced, within limits, by a stim- ulus in the way of premium or protection. The argument for protection to young industries applies only under conditions of this latter sort. Given those conditions, it may apply more widely than English economists have been disposed to grant. Protection to young industries, which Mill believed to be of positive advantage only in a young country in the earlier stages of growth, may have had occasional and unexpected successes even within the last thirty years. The history of the silk manufacture illustrates the possible turn of events ; and the application of protection in the Uflited States has been so sweeping since the Civil War that this case, while by no means typical of the usual effects, probably does not stand alone. But such exceptions serve here, as they do in all scientific investigations, to bring out the foundation of a general rule rather than to modify it. In the present case, they suggest a more careful analysis of the causes of corn- acquired advantage only which one artificer has over his neighbor *ho exercises another trade ; and yet they both find it more advantageous to buy of one another, than to make what does not belong to their particular trades."—" Wealth of Nations," book IV., chap. iL SOME ASPECTS OP THE TARIFF QUESTlOl^. 4^9 parative advantages in different countries, but do not affect the doctrine that these comparative advantages determine the sort of trade and division of labor that will take place between them. Such phenomena as have been described in the preceding pages still reduce themselves, in the last analysis, to illustrations of the doctrine of comparative costs. APPENDIX. TABLE I. Imports, Duties, and Ratio of Duties to Imports, 1860-1895. {From the " Statistical Abstract.") (00,000 omitted.) Imports. Fiscal Yeai Ending June 30. Free. Dutiable. Total. Duties Collected. Per cent, of Duties to Dutiable Im- Percent, of Duties to Total Im- ports. ports. l86o 68.4 267-9 336.3 52.7 19.67 15.67 I 67.4 207.2 274.6 39.0 18.84 14.21 2 49.8 128.5 178.3 46.5 36.19 26.09 3 30.0 195.3 225.4 63.7 32.62 28.28 4 38.2 262.9 301.1 96.5 36.69 32.03 5 40.1 169.6 209.6 80.6 47-56 38.46 6 57-1 366.3 423.5 177.0 48.93 41.81 7 17.0 361.1 378.2 168.5 46.67 44.56 8 151 329-7 344-8 160.5 48.63 46.49 9 21.7 372-7 394-4 176.5 47.22 44.65 1870 20.2 406.1 426.3 191-5 47.08 42.23 I 40.6 459-6 500.2 202.4 43.95 38.94 2 47-7 512.7 560.4 212.6 41.35 37.00 3 178.4 484.7 663.1 184.9 38.07 26.95 4 151-7 415-7 567.4 160.5 38.53 26.88 5 146.5 379.8 526.3 154.5 40.62 28.20 6 140.6 324.0 464.6 145-2 44.74 3?-'3 7 140.8 299.0 439-8 128.4 42.89 26.68 8 141-3 297.1 438.4 127.2 42.75 27.13 g 142.5 296.7 439-3 133-4 44.87 28.97 1880 208.0 419.5 627.5 1S2.7 43.48 29.07 I 202.5 448.1 650.6 193.8 43.20 29.75 2 210.7 505.5 716.2 216.1 42.66 30.11 3 4 5 6 206.9 493-9 700.8 210.6 42.45 29.92 211. 3 456-3 667.6 190.3 41.61 28.44 192.9 386.7 579-6 178. 1 45.86 30.59 211. 5 413.8 625.3 189.4 45-55 30.13 7 8 233-1 244.1 450.3 468.1 683.4 712.2 214.2 216.0 47.10 45.63 31.02 29.99 9 1890 I 256.6 266.1 388.1 484.8 507.6 466.4 741.4 773-7 854-5 220.6 226.5 216.9 45.13 44.41 46.28 29.50 29.12 25-25 2 458.1 355-5 813.6 1 74- 1 48.71 2:. 26 3 4 5 6 444.2 400.3 844.4 199. 1 49-58 23-49 379.0 257.6 636.6 129.6 50.06 20.25 3769 354-3 731.2 149.4 41.75 20.23 368.9 390.8 759-7 157.0 40.18 20.67 7 381.9 407.3 789.2 172.7 42.41 21.89 411 412 APPENDIX. This table is taken from the "Statistical Abstract of the United States." The figures given in different edi- tions of the " Statistical Abstract " have not always been consistent. Those given in the table are derived from the edition of 1891 for the earlier years (1860-68), and from the edition of 1895 for later years. They indicate " net imports," i.e., imports less re-exports, for 1860-66; from 1867 on, they indicate " imports for consumption." Substantially, these two forms of statement come to nearly the same thing. The significant changes will be easily noted. The sharp rise in the average rate (per cent, of duties to imports) between 1861 and 1865 shows the extent to which the legislation of the war affected the general character of the tariff system. The average rate on dutiable articles, after reaching its war maximum in 1866, declines somewhat for a few years thereafter. From 1872 to 1875, there is a further fall, in consequence of the ten per cent, reduction of 1872 ; after 1875 the rate goes up again, and then remains fairly steady until 1883. The act of 1883 brings a distinct rise in the average rate on dutiable articles; the act of 1890 a still further rise, bring- ing in 1894 the maximum for the whole period (50.06 per cent.). The abrupt increase in the free imports in 1873 is the result of the abolition of the tea and coff-ee duties in 1872, which causes also the fall in the average per cent, of the duties collected as compared with the total imports. The abolition of the sugar duty in 1890 brings a similar abrupt increase of the free imports in 1891 and 1892, and a similar fall in the ratio of duties collected to total imports. APPENDIX. 413 TABLE II. Duties on Some Important Articles, Raised during the War, and Retained without Reduction till 18S3. A Tf 1 fl **C Duty under the Morrill Duty of 1864, in Force in £\.\ Liuica. Tariff of 1861. 1883. Books 15^ n* Chinaware, plain . . 30 i^ AS% Cotton goods, not other- wise provided for . 30^ 3i% Cottons, coarse, un- bleached .... I ct. per yard. 5 cts. per yard. Cotton spool-thread . ^o% 6 cts. per dozen, plus 30 % (= 60 to 70 %). Cottons, fine printed . 4i cts. per square yard 5^ cts. per square yard plus 10^ plus 20 % Manufactures of flax. jute, or hemp, not otherwise provided for ^oi 40^ Glass, common window I to -s.\ cts. per square 1 to 4 cts. per square foot. foot. Gloves, of kid or leather 30^ S0% Bar-iron' fct. per ton t to i^ cts. per lb. $12 per ton $14 per ton Steel, in ingots, bars. etc \\ to 2 cts. per lb. 2\ to 3j cts. per lb. Pig lead I ct. per lb. 2 cts, per lb. Paper Silks 30^ 30^ 35^ • On all forms of bar-iron, band-, hoop-, and boiler-iron, on chains, anchors, nails and spikes, pipes, etc., etc., the duties of 1864 were in force till 1883. 414 APPENDIX. TABLE III. Duties on Certain Articles^ Raised since iZd^ above the War Rates, Articles. Duty of 1861. Duty of 1864. Duty as fixed in 1865-70. Bichromate of potash Copper, ingot . , . Flax Marble in slabs . , . Nickel Steel rails Umbrellas Wool Woollens : Carpets (Brussels) Cloths Dress-goods , , , Flannels . . . . 3C. lb. 2C. lb. $15 ton 30 i Free 30 i 30 % 3C. lb. 40c. sq. yd, I2C. lb. + 25 Jtf I2C. lb. + 23 ^ 30^ 3C. lb. 2j^c. lb. $1^ ton 50c. cub. foot -{- 20 i, ^S% 45^ 6c. lb. 70c. sq. yd. 24c. lb. -|- 40 ^ 24c. lb. -{- 40 ^ 24c. lb. + 35 ^ 4C. lb. C1875) 5c. lb. $20 to $40 ton $1.25 to $1.50 cub. foot + 3oi«„ 20c. to 30c. lb. $28 ton so to 60 si 10c. lb, + II j^ 44 to 70c. sq. yd. + 33 ^ 50c. lb. + 3S ^ ( 6c. sq. yd. + 35 ^ I 8c. sq. yd. + .10 ^ 20c. to 50c. lb. 4" 3S ^ TABLE IV. Revenue from Customs Duties and Internal Revenue, 1861-1891, (00,000 omitted.^ Year. Internal Revenue, Customs Revenue. 1861 None, 39-6 a '* 49.1 3 37-6 6,.! 4 109.7 102.3 1 «>9.S 84.9 309.2 179.0 2 a66.o 176.4 igi.i J64.S 9 158.4 180.0 1870 184.9 •194-5 I I43-I 206.3 2 130.6 216.4 3 "3-7 188.1 4 102.4 163.1 5 110. 157-2 6 116.7 148.1 \ 118.6 131.0 110.6 130.2 -.9 113.6 137-2 1880 124.0 . 186.S J 135.3 198.2 3 146.5 220.4 3 144-7 214.7 4 121.6 195-1 1 112-5 181.5 116. 8 192.9 \ 118.8 217.3 124.3 219.1 „ 9 130.9 223.8 1890 142.6 229.7 I 145.7 219. s 2 154.0 >77-S 3 116.0 203.4 4 147.1 131-8 5 '43-4 152.2 6 Id6.8 i6o.a 7 APPENDIX. 415 TABLE V. Prodiution, Imports, and Exports of Copper, and Foreign and Domestic Prices. (Quantities in gross tons.) Imports. Price per It .in cents. | Domestic Product'n. Ex- ports. Difference in Price. Year. Copper ia Pigs. Copper New Yorl£ London 1 Ore. LakeCop'r. CliiliBars.l 1875 18,000 41S 2,300 2,280 23 18 5 6 19,000 777 910 6,430 21.5 16.5 5 7 2I,0C0 750 15 6,050 19 14.6 4.4 U 2r,5oo 165 399 5,040 16.5 13-5 3 9 23,000 70 100 7,680 17-5 12.2 5-3 1880 27,000 2,350 2,000 1,880 20 13-5 6.5 I 32,000 320 4,420 2,160 18,5 133 5-2 2 41,000 334 8,igo 1,490 18.7 14.4 4-3 3 52,000 148 500' 3,890 16.1 13.7 2.4 4 63,500 65 980 7,610 13.7 11.8 1.9 <^ 74,000 35 1,630 19,900 II 9-5 1.5 6 70,000 IS 1,840 10,850 II 8.8 2.2 Figures are from " Mineral Resources of the United States," pp. 214, et seq. The production is for the calen- dar year, the imports and exports for the fiscal year (end- ing June 30th). The annual average prices are from the monthly prices given in " Mineral Resources." The fig- ures given in " Mineral Resources" seem to contain con- siderable understatements, so far as exports are con- cerned. See Eng. and Min. Journal, Jan. 26, 1884, p. 59. These tables show the price in New York to have been higher than that in London by from \\ to 5^ cents. In recent years the great increase in domestic production 1 jeginning with 1883, this column states the quantity of copper con- tained in imported ore, not the gross amount of ore. The 8,igotons of ore imported in 1882 contained about 600 tons of copper. 4i6 APPENDIX. has forced down the price here, and the difference in price is not more than i|- cents. The better quality of domestic Lake copper would cause it to bring \\ cents more tftaii Chili bars under any circumstances, Cost of transporta- tion (from London to New York) is insignificant. It is safe to say that any difference in price over and above l^ cents per pound could not exist if it were not for the duty on copper. TABLE VI. Production, Imports, and Foreign and Domestic Prices of Besse- mer Steel Rails. Year. 1871 2 3 4 5 6 7 8 9 1880 I 2 3 4 5 6 7 8 9 i8go I 2 3 4 5 6 7 Product in U. S., Gross Tons. 34,100 84,000 115,200 129,400 259,700 368,300 385,900 499,800 618,800 864,300 1,210,300 1,304,400 1,156,900 999,400 963,700 1,579.400 2,119,000 1,391,000 1,531,000 1,871,400 1,298,900 1,541,400 1,130,400 1,017,100 1,300,300 1,117,600 1,630,000 Imports, Gross Tons. 505,500 474,000 231,000 96,700 17,400 39.400 259,500 344,900 200,000 34,800 2,800 2,200 41,600 137,800 63,000 6,200 2,900 1,400 7,800 Average Price in U. S. Average Price in Kngland. $91.70 99.70 95.90 84.70 59-70 53-10 43-50 41.70 48. 20 67.50 61.10 48.50 37-75 30-75 28.50 34.50 37.10 29.80 29.25 31-75 30.00 30.00 38.00 24.00 24.00 28.00 19.60 $57.70 67.30 74.40 57-50 44.10 37-70 31.90 27.20 24.70 36.00 31.20 30.00 25.40 22.90 23.65 20.65 20.65 19.20 24.15 27.30 22.00 20.00 18.50 17.50 20.00 21.00 21.00 Average Excess of American Price. Duty. 4.UU 2.40) 1-50 > 7.20) $34-00 32 21 27 15.60 15.40 11.60 14-50 23.50 31-50 29.90 18.50 12.35 7-85 4-85 13-85 1645 10.60 5.10 4-45 8.00 10.00 9.50 6.50 4.00 ■ 7.00 — 1.40 f28.00 $25.20 Aug., '72, to March, '75. $28.00, Mar., '75, to July, '83. $17.00, July, '83, to Oct., '90- $13-44. Oct., '90, to Aug., '94. $7.84, Aug.. '94, to July, '97. $6.72, from July. '97- APPENDIX. 417 The figures for production and importation are from the Reports of the American Iron and Steel Association. The American prices are from the same source, but have been reduced to a gold basis for the years 1871-78. The English prices have been secured partly from occasional tables given in the Iron and Steel Association reports, partly from English sources. The American prices are those for rails at the mills, in Pennsylvania; the English are for rails free on board. Prices by yearly averages can indicate only the general fluctuations; but they suffice for purposes of comparison. Where the imports are less than 1000 tons in any one year, they have been omitted. Since 1888 the imports have been sporadic, and signify Httle. Cost of transportation from England to the United States has been usually somewhere between two and four dollars a ton. But sometimes it has been considerably less than two dollars ; and carriage by water from Eng- land to places on the seashore in the United States has not infrequently been cheaper than carriage by land from the American rail-mills to such places. It will be observed that there were three periods of active railway building and of heavy imports of rails: 1871-74, 1879-82, 1886-88. During these years or parts of them, prices of rails in the United States were higher than those in England by the full amount of the duty for the time being. In most other years they were higher, but by an amount less than the duty, and imports ceased, except for sporadic shipments of special sizes or kinds. 41 8 APPENDIX. In the later years, the American prices came nearer and nearer the English prices. In 1897, prices fell abruptly in the first two months of the year, in consequence of a " steel-rail war," marking the breaking up of the com- bination which had so long kept prices up. For that year, prices were lower in the United States than in England. Considerable quantities of steel rails were ex- ported from the United States, both in 1896 (72,000 tons) and in 1897 (143,000 tons). INDEX. Ad-valorem duties, 159. Ad-valorem duty on woollens, 207, 293, 333, 340 Agricultural products, duty of 1883, 248 ; of T890, 274 Bar-iron, duty of 1883, 244 ; in 1864-83, 413 Beet sugar, why not 'nade in United States, 371 Blankets, duty of 1867, 205, 214; of 1883, 242 Carpets, duty of 1867, 214 ; of 1890, 266 Carpet wool, duty of 1867, 201 ; of 1883, 239 ; of l8go, 257 ; of 1897, 331 Charcoal iron, 54, 131 Clay and the tariff, 74, 85, 96 Cleveland, on the tariff, 253, 256 ; does not sign act of 1894, 290, 320 Coal, duty in 1872, 185 ; in 1894, 298 ; in 1897, 342 Coffee, free in 1846, 114; duty re- duced, 179 ; repealed, 183 ; ex- pediency of, 186 Colonies, industrial state of, 8 Comparative cost, doctrine of, 406 Compensating system on wool and woollens, 196 ; abolished, 292 Compromise tariff of 1833, no Conference committee on tariff in 1883, 233 ; in 1897, 328 Copper, duty of 1869, 219 ; of 1883, 245 ; of 1890-92, 272, 343 Cotton goods, duty of 18 16, 30; of 1864, 193 ; of 1883, 236, 243 ; of 1890, 266 ; of 1897, 335 Cotton manufacture, 1789-1824, 25; under tariff of 1833, 134 ; in 1846-60, 139 Cotton stockings, duty of 1890, 267 Crisis, of 1818, 20, 69, 74 ; of 1837, 116 ; of 1857, 118 ; of 1893, 322, 324 Cutlery, duty and manufacture, 343, 403 Dawes on tariff of 1872, 182, 185 Democratic party, on tariff in 1883- 90, 253 ; victorious in 1890-92, 284 ; divided in 1896, 321 Dress goods for women, duty of 1883, 234 ; of 1890, 263 ; char- acter of manufacture, 391 Earthenware, methods of manufac- ture, 401 ; duties in 1890-97, 341 Finkelburg introduces bill of 1872, 182 419 420 INDEX. Flannels,' duty of 1867, 205, 214 ; of 1883, 242 Flax, duty of 1828, go, 105 ; of 1870, 227 ; of 1890, 275 ; of 1894, 297 ; of 1897, 341 ; character of culture, 365 Foreign trade, in 1792-1815, 11; after 1816, 20, 23 ; under tariff of 1846, 121 Frelinghuysen on copper act of 1869, 220 Garfield on tariff in 1870, 178 Glass, product and imports, 392 ; methods of manufacture, 393 ; duties in 1890-97, 341 Hardware, 405 Harrisburg convention of 1827, 83 Harris, E., on woollen duties, 199 Harrison, elected in 1888, 255 ; de- feated in 1892, 285 Hayes, J. L., on act of 1872, 183, 189 ; President of Tariff Com- mission of 1882, 231 ; and tariff of 1883, 243, 249 Hemp, protected in 1789, 15 ; duty of 1828, 90, 105 ; character of culture, 90, 370 Hides admitted free in 1872, 185 ; subject to duty in 1897, 332 Home market argument after 1818, 67, 70 Horizontal reduction, in 1833, iii ; in 1872, 189 ; proposed in 1884, 251 Hosiery manufacture before i85o, 148 Imports, 1860-95, 411 Imports affected by duties ? 120, 185 Imports and exports, 1791-1814, 12, 23 Internal-revenue acts of 1862 and 1864, 161, 165 Internal taxes repealed, 172 '*^^on, duties of i8i6, 50 ; of 1818, 51 ; of 1824, 52 ; of 1828, 52, 89 ; of 1846, 124 ; of 1870, 179 ; of 1883, 244 ; of 1890, 271 ; of 1894, 300 ; of 1897, 342 Iron manufacture, in the colonies, 47 ; in 1789-1838, 49 ; under acts of 1842 and 1846, 129 ; since 1870, 270, 301, 344 Iron-ore, duty in 1861-83, 236 ; in 1890, 271 ; in 1894, 299 ; in 1897, 342 Iron rails free in 1833, 56 Jackson party and tariff of 1828, 85 Jefferson on protection, 14 Jute free in 1890, 275 Knit-goods, duty in 1890, 267 Lead, duty in 1890-97, 343 Linens, duty in 1890, 268 ; in 1894, 297 ; in 1897, 339 ; character of manufacture, 389 Lowell founded, 32 Madison on protection, 14 Mallory and the tariff of 1828, 83, 87 Marble, duty of 1864-70, 224 ; of 1883, 247 Mills bill of 1888. 254 Minimum duties, of i8i6, 30, 76 ; proposed in 1820 and 1824, 77 ; in 1827, 80, 83 ; in 1828, 93, 103 ; in 1890, 269; discussed, 81, 104, 270 INDEX. 421 Molasses, duty of 1828, 93, 100 Morrill, J, S., on tariff of i86i, 160; of 1864, 65, 173; on marble duties, 225 Morrison, bill of 1876, 191 ; of 1884-86, 251 ; on act of 1883, 233 Nickel duty, 227, 247 Pig-iron, see Iron Plate-glass, duties and manufacture, 341, 397 Politics and the tariff of 1828, 84 Power loom introduced, 31, 42 Prosperity affected by tariff ? 286, 318 Protection feeling, in 1789, 14, 68 ; after i8o8, 17 ; in 1816, 18, 68 ; strong after 1818, 23, 69 ; decline after 1832, 64, 106 ; after the Civil War, 173, 190 Protection to young industries, argu- ment for, I ; applicable to steel rails and copper ? 246 ; when ap- plicable, 408 Reciprocity provisions of i8go, 278; of 1897, 352 Reed rule of 1883, 232 Revenue duties abolished, 189, 275 Revenue from customs and internal taxes, 414 Revenue from tariff uncertain, 355 Rice, A. H., on tariff of 1861, 150 Rolled bar-iron, duty on, 59, 62, 126 ; first made in U. S., 132 Salt duty reduced, 185 Schoenhof on silk manufacture, 312 Seward on tariff of 1857, 115 Sherman, on tariff of 1861, 160 ; on tea and coffee in 1875, 190 Silk manufacture, history, 376 ; character, 379 Silk, raw, 391 Silks, duty in 1883, 248 ; in 1890, 268 ; in 1894, 297 ; in 1897, 336 Silver question and the tariff, in 1896, 322 Sinking fund in 1875, 190 South against protection after 1820, 73 Specific duties, under act of 1833, III ; in 1861, 159 ; in 1894, 304 Steel duty in 1883, 237 Steel rails, duty of 1870, 221 ; of 1883, 244 ; of 1890, 272 ; of 1894, 301 ; of 1897, 342 ; growth of manufacture, 346 ; statistics, 416 Sugar, duty repealed in 1890, 275 ; bounty on, in 1890, 277 ; on raw sugar restored in 1894, 309 ; in 1897, 348 ; reasons for and against, 305 ; on refined sugar, and the Sugar Trust, 310, 350 Tariff act, of 1789, 14 ; of 1816, 18, 68 ; of 1824, 74 ; of 1828, 89 ; of 1832, 103, no; of 1833, III; of 1842, 113 ; of 1846, 114, 156 ; of 1857, 115. 157; of 1861, 158; of 1862, 162 ; of 1864, 164 ; of 1870, 178 ; of 1874, 185 ; of 1875, 190 ; of 1883, 233, 249 ; of i8go, 256, 282 ; of 1894, 284, 317 ; of 1897, 321, 328 Tariff bill, of 1820, 70, 72 ; of 1827 (woollens), 80 ; of 1867, 175 ; of 1872, 182 ; of 1878, 1879, 191 ; of 1882, 266 ; of 1884, 1886, 251 ; of 1888, 254 422 INDEX. Tariff commission of 1882, 231 Tea, free in 1846, 114; duty re- duced, 179 ; repealed 1872, 183 ; policy of, 186 Ten per cent, reduction of 1872, 183, 190 Tin plates, duty in 1861-90, 272 ; in 1894, 302 ; in 1897, 347 Van Buren and tariff of 1828, 96, 100, loi Wages argument appears about 1840, 65 Walker, R. J., and tariff of 1846, 114 War finances, 161, 177 Webster and tariff of 1828, 100, loi Wells, D. A., on internal taxes, 164 ; prepares bills of 1867, 176 ; on copper veto of 1869, 220 Wharton J., on nickel duty, 227 Wheat, exports of, 1803-20, 23 Wood, F., introduces bill of 1878, igr Wool and woollens, duties of 1816, 40, 75 ; of 1824, 40, 75 ; of 1828, 91, 93 ; of 1832, 103, 105 ; of 1846, 114 ; of 1857, 150 ; of 1861, 195 ; of 1864, 197, 198 ; of 1867, 201, 203 ; of 1883, 235, 239, 241 ; of 1890, 256, 259 ; of 1894, 291 ; of 1897, 328, 333 Wool, cheap, admitted at low rates, 91 Wool duty, economic aspects of. In United States, 239, 258, 291, 329 Wool, duty in England repealed 1824, 79 Woollen dress-goods, duty of 1883, 234 ; of 1890, 264 ;of 1897, 324 Worsted manufacture, 148 Wright, Silas, on tariff of 1828, 96 Young industries argument, i, 64, 408