Chapter V: Summary and Conclusion (5)

The consequences of the observations which have now been grouped together are familiar to us all. Population tends from the country to the city. Mechanical and technical occupations are abandoned, and those occupations which are easy and genteel are overcrowded. Of course the persons in question must be allowed to take their own choice, and seek their own happiness in their own way, but it is inevitable that thousands of them should be disappointed and suffer. If the young men abandon farms and trades to become clerks and bookkeepers, the consequence will be that the remuneration of the crowded occupations will fall, and that of the neglected occupations will rise; if the young women refuse to do housework, and go into shops, stores, telegraph offices and schools, the wages of the crowded occupations will fall, while those of domestic servants advance. If women in seeking occupation try to gain admission to some business like telegraphing, in competition with men, they will bid under the men. Similar effects would be produced if a leisure class in an old country should be compelled by some social convulsion to support themselves. They would run down the compensation for labor in the few occupations which they could enter.

Now the question is raised whether there is any remedy for the low wages of the crowded occupations, and the question answers itself: there is no remedy except not to continue the causes of the evil. To strike, that is, to say that the workers will not work in their chosen line, yet that they will not leave it for some other line, is simply suicide. Neither can any amount of declamation, nor even of law-making, force a man who owns a business to submit the control of it to a man who does not own it. The telegraphers have an occupation which requires training and skill, but it is one which is very attractive in many respects to those who seek manual occupation; it is also an occupation which is very suitable, at least in many of its branches, for women. The occupation is therefore capable of a limited monopoly. The demand that women should be paid equally with men is, on the face of it, just, but its real effect would be to keep women out of the business. It was often said during the telegraphers’ strike that the demand of the strikers was just, because their wages were less than those of artisans. The argument has no force at all. The only question was whether the current wages for telegraphing were sufficient to bring out an adequate supply of telegraphers. If the growing boys prefer to be artisans, the wages of telegraphers will rise. If, even at present rates, boys and girls continue to prefer telegraphing to handicraft or housework, the wages of telegraphers will fall. Could, then, a strike advance at a blow the wages of all who are now telegraphers? There was only one reason to hope so, and that was that the monopoly of the trade might prove stringent enough and the public inconvenience great enough to force a concession--which would, however, have been speedily lost again by an increased supply of telegraphers.

Now let us ask what the state of the case would be if it was really possible for the telegraphers to make a successful strike. They have a very close monopoly; six years ago they nearly arrested the transportation of the country for a fortnight; but they were unable to effect their object. More recently the freight-handlers struck against the competition of a new influx of foreign unskilled laborers, and in vain. The printers might make a combination, and try to force an advance in wages by arresting the publication of all the newspapers on a given day, but there are so many persons who could set type, in case of need, that such an attempt would be quite hopeless. In any branch of ordinary handicraft there would be no possibility of creating a working monopoly or of producing a great public calamity by a strike. If we go on to other occupations we see that bookkeepers, clerks, and salesmen could not as a body combine and strike; much less could teachers do so; still less could household servants do so. Finally, farmers and other independent workers could not do it at all. In short, a striker is a man who says: “I mean to get my living by doing this thing and no other thing as my share of the social effort, and I do not mean to do this thing except on such and such terms.” He therefore proposes to make a contract with his fellow-men and to dictate the terms of it. Any man who can do this must be in a very exceptional situation; he must have a monopoly of the service in question, and it must be one of which his fellow-men have great need. If, then, the telegraphers could have succeeded in advancing their wages fifteen per cent simply because they had agreed to ask for the advance, they must have been far better off than any of the rest of their fellowmen.

Our fathers taught us the old maxim: Cut your coat according to your cloth; but the popular discussions of social questions seem to be leading up to a new maxim: Demand your cloth according to your coat. The fathers thought that a man in this world must do the best he could with the means he had, and that good training and education consisted in developing skill, sagacity, and thrift to use resources economically; the new doctrine seems to be that if a man has been born into this world he should make up his mind what he needs here, formulate his demands, and present them to “society” or to the “state.” He wants congenial and easy occupation, and good pay for it. He does not want to be hampered by any limitations such as come from a world in which wool grows, but not coats; in which iron ore is found, but not weapons and tools; in which the ground will produce wheat, but only after hard labor and self-denial; in which we cannot eat our cake and keep it; in which two and two make only four. He wants to be guaranteed a “market,” so as not to suffer from “overproduction.” In private life and in personal relations we already estimate this way of looking at things at its true value, but as soon as we are called upon to deal with a general question, or a phenomenon of industry in which a number of persons are interested, we adopt an entirely conventional and unsound mode of discussion. The sound gospel of industry, prudence, painstaking, and thrift is, of course, unpopular; we all long to be emancipated from worry, anxiety, disappointment, and the whole train of cares which fall upon us as we work our way through the world. Can we really gain anything in that struggle by organizing for a battle with each other? This is the practical question. Is there any ground whatever for believing that we shall come to anything, by pursuing this line of effort, which will be of any benefit to anybody? If a man is dissatisfied with his position, let him strive to better it in one way or another by such chances as he can find or make, and let him inculcate in his children good habits and sound notions, so that they may live wisely and not expose themselves to hardship by error or folly; but every experiment only makes it more clear that for men to band together in order to carry on an industrial war, instead of being a remedy for disappointment in the ratio of satisfaction to effort, is only a way of courting new calamity.

STRIKES AND THE INDUSTRIAL ORGANIZATION[42]

Anyone who has read with attention the current discussion of labor topics must have noticed that writers start from assumptions, in regard to the doctrine of wages, which are as divergent as notions on the same subject-matter well can be. It appears, therefore, that we must have a dogma of wages, that we cannot reason correctly about the policy or the rights of the wages system until we have such a dogma, and that, in the meantime, it is not strange that confusion and absurdity should be the chief marks of discussion carried on before this prime condition is fulfilled.

Some writers assume that wages can be raised if the prices of products be raised, and that no particular difficulty would be experienced in raising prices; others assume that wages could be raised if the employers would be satisfied with smaller profits for themselves; still others assume that wages could be raised or lowered according as the cost of living rises or falls. These are common and popular assumptions, and have nothing to do with the controversies of professional economists about the doctrine of wages. The latter are a disgrace to the science, and have the especial evil at this time that the science cannot respond to the chief demand now made upon it.

If the employer could simply add any increase of wages to his prices, and so recoup himself at the expense of the consumer, no employer would hold out long against a strike. Why should he? Why should he undertake loss, worry, and war, for the sake of the consumers behind him? If an employer need only submit to a positive and measurable curtailment of his profits, in order to avoid a strike and secure peace, it is probable that he would in almost every case submit to it. But if the employees should demand five per cent advance, and the employer should grant it, adding so much to his prices, they would naturally and most properly immediately demand another five per cent, to be charged to the consumers in the same way. There would be no other course for men of common sense to pursue. They would repeat this process until at some point or other they found themselves arrested by some resistance which they could not overcome. Similarly, if wages could be increased at the expense of the employer’s gains, the employer who yielded one increase would have to yield another, until at some point he decided to refuse and resist. In either case, where and what would the limit be? Whenever the point was reached at which some unconquerable resistance was encountered, the task of the economist would begin.

There is no rule whatever for determining the share which any one ought to get out of the distribution of products through the industrial organization, except that he should get all that the market will give him in return for what he has put into it. Whenever, therefore, the limit is reached, the task of the economist is to find out the conditions by which this limit is determined.

Now it is the character of the modern industrial system that it becomes more and more impersonal and automatic under the play of social forces which act with natural necessity; the system could not exist if they did not so act, for it is constructed in reliance upon their action according to ascertainable laws. The condition of all social actions and reactions is therefore set in the nature of the forces which we have learned to know on other fields of scientific investigation, and which are different here only inasmuch as they act in a different field and on different material. The relations of parties, therefore, in the industrial organism is such as the nature of the case permits. The case may permit of a variety of relations, thus providing some range of choice.

A person who comes into the market, therefore, with something to sell, cannot raise the price of it because he wants to do so, or because his “cost of production” has been raised. He has already pushed the market to the utmost, and raised the price as high as supply and demand would allow, so as to win as large profits as he could. How, then, can he raise it further, just because his own circumstances make it desirable for him so to do? If the market stands so that he can raise his price, he will do it, whether his cost of production has increased or not. Neither can an employer reduce his own profits at will; he will immediately perceive that he is going out of business, and distributing his capital in presents.

The difficulty with a strike, therefore, is, that it is an attempt to move the whole industrial organization, in which all the parts are interdependent and intersupporting. It is not, indeed, impossible to do this, although it is very difficult. The organization has a great deal of elasticity in its parts--an aggressive organ can win something at the expense of others. Everything displaces everything else; but if force enough is brought to bear, a general displacement and readjustment may be brought about. An organ which has been suffering from the aggression of others may right itself. It is only by the collision of social pressure, constantly maintained, that the life of the organism is kept up, and its forces are developed to their full effect.

Strikes are not necessarily connected with violence to either persons or property. Violence is provided for by the criminal law. Taking strikes by themselves, therefore, it may be believed that they are not great evils; they are costly, but they test the market. Supply and demand does not mean that the social forces will operate of themselves; the law, as laid down, assumes that every party will struggle to the utmost for its interests--if it does not do so, it will lose its interests. Buyers and sellers, borrowers and lenders, landlords and tenants, employers and employees, and all other parties to contracts, must be expected to develop their interests fully in the competition and struggle of life. It is for the health of the industrial organization that they should do so. The other social interests are in the constant habit of testing the market, in order to get all they can out of it. A strike, rationally begun and rationally conducted, only does the same thing for the wage-earning interest.

The facts stare us plainly in the face, if we will only look at them, that the wages of the employees and the price of the products have nothing to do with each other; that the wages have nothing to do with the profits of the employer; that they have nothing to do with the cost of living or with the prosperity of the business. They are really governed by the supply and demand of labor, as every strike shows us, and by nothing else.

Turning to the moral relations of the subject, we are constantly exhorted to do something to improve the relations of employer and employee. I submit that the relation in life which has the least bad feeling or personal bitterness in it is the pure business relation, the relation of contract, because it is a relation of bargain and consent and equivalence. Where is there so much dissension and bitterness as in family matters, where people try to act by sentiment and affection? The way to improve the relation of employer and employee is not to get sentiment into it, but to get sentiment out of it. We are told that classes are becoming more separated, and that the poor are learning to hate the rich, although there was a time when no class hatreds existed. I have sought diligently in history for the time when no class hatreds existed between rich and poor. I cannot find any such period, and I make bold to say that no one can point to it.

TRUSTS AND TRADES-UNIONS[43]

I have attempted to show, in foregoing essays,[44] what an immense rôle is played by monopoly throughout the whole social life of mankind in all its stages. There would not be any struggle for existence if it were not true that the supply in nature of the things necessary for human existence is niggardly. The struggle for existence consists in a contest against the constraints by which human life is surrounded; the process by which men have won something in that contest, in the course of time, has consisted in playing off one of nature’s monopolies against another--the process, namely, which we call “employing natural agents.” On its social and political side, the advance has consisted in securing for the individual a chance in some degree to control his own destiny; not to be at the sport of natural and social forces, but to bring his own energy to bear to enlarge his own conditions of enjoyment and survival.

At every stage of history, however, the natural monopolies have formed the basis of social and political monopolies. The possession of those powers which, under the circumstances, were most efficient for the acquisition of what men want has always given superiority and dominion in human society, whether those powers were physical force, beauty, learning, virtue, capital, or anything else. Where does any one find ground to believe that the fact will ever be different, and that those who have the powers which are most potent in the society in which they live will use those powers, not to get the things which all men want for themselves, but to get those same things for other people?

The fashion has always been in the past for those who possessed the essential powers to take control of the state and realize their monopoly in that way. If plutocracy should now prevail it would be simply a repetition of that experience. The only device which has ever given promise of wider and more humane organization of the state is constitutional liberty, which compels, by the intervention of institutions created to serve this purpose, the ruling class, whoever they were, to respect the recognized and defined rights of all the rest.

Now, democracy having sapped and dissolved all the inherited forms of social organization and reduced the social body to atoms, it is most interesting to observe the inevitable recurrence of all the old tendencies, in new forms fitted to the times. Some of us thought that liberty was won forever, and that the race was nevermore to be disturbed by its old problems, but it is already apparent that, when a society is resolved into its constituent atoms, the question under what forces, and upon what nuclei, it will crystallize into new forms, has acquired an importance never known before.

Just now public attention is all absorbed by the new name “trust” applied to one of these phenomena. I can see nothing new in a trust as compared with the rings, pools, etc., with which we have been familiar during this generation, except the guarantee which the trust secures to all the members of the same that no one inside of it shall play traitor to the rest. The greatest difficulty with modern combinations has been that there have been no sanctions by which the members could be bound, and that the profits of the insider who turned against his comrades have always been an irresistible temptation. In the mediæval guilds, which were “trusts” of the most solid construction, the sanctions were of the sternest kind--religious, political, and social--and yet they never succeeded in their purpose. In modern times, as is well known to all who are acquainted with the attempts which have been made, inside of various branches of industry, to arrange agreements which have not been large enough or public enough to get into the newspapers the difficulty of enforcing loyalty against those who felt strong enough to beat the rest if they should go alone, or against those who saw a chance to sell out on the rest, or against those who were in desperate straits for cash, has been the constant stumbling-block. Fifty years ago, in the last days of the United States Bank, Nicholas Biddle organized a cotton trust, to try to control the cotton market of the world. It was a complete failure. In general, combinations of this character are in constant dilemma: they must always grow bigger and bigger, in order to encompass a sufficient area to constitute a unit; but the bigger they grow, the less is their internal cohesion. The exception to this must be noted in a moment.

The great expansion of the market by modern inventions in transportation has broken up all the former local and petty monopolies, and is rapidly making of the industry and commerce of mankind a whole which cannot be divided by geographical lines. The conditions of competition in such a system are no doubt onerous to the last degree. The conditions that must be taken into account to win success are numerous and complicated. The nerve-strain of comprehending and of justly estimating the factors, and of following their constant variations, is too great for any one to endure. Foresight must be used, yet there are so many unknown quantities that foresight is impossible; if the attempt is made to master all the unknown quantities, then the task is so enormous that it cannot be accomplished. Furthermore, the relations with other persons in the industrial system are necessarily close. It is impossible to escape such relations, and it is impossible to avoid a share in the consequences of the mistakes and incompetence of the others. It must be added that, at a time when the advance in the arts has forced the whole industry of the globe into intimate relations which nothing can possibly cut off, legislative interferences have produced artificial and erratic currents in the industrial and commercial relations of all countries. The consequences are disappointing and disastrous incidents in the history of industry. At the same time the improvements in the communication of intelligence have made it possible for men farthest apart in space, language, and nationality, if they have confidence in each other’s business ability and command of capital, to coöperate by personal agreements.

Trusts are an attempt to deal with this state of things. It is, of course, a jest when the makers of a trust affirm that they make it for the benefit of consumers, and it may very well be doubted whether a trust is a feasible and beneficial device in the interest of either party; but it is wrong to overlook the fact that the trust, in its efforts to deal with the case, and to secure orderly and rational development, instead of heats and chills in industry, has a real and legitimate task on hand. It is certain that there is room for the introduction of intelligent method into modern industry, under forms which shall be germane to modern conditions, and it is certain that this will never be done properly by legislation, but only by the voluntary and intelligent coöperation of the parties interested. It is also by no means certain that this systematization of industry, under intelligent coöperation of the parties conducting it, would cost consumers anything, provided always that there was no legislation to prevent the recourse at any time to any other sources of supply which might be available. The economies of management under intelligent administration are a source from which gains may be made which will cost the consumer nothing. The expenses of industrial war constitute a big fund for dividends to which the consumer does not contribute.

It is worth while to notice, by some familiar examples, what the motive of a trust is; it will be found a far more everyday matter than most people suppose. A man who owns a house and lot buys the vacant lot adjacent in order to control it. He and his neighbors buy up all the vacant lots on the street in order to prevent undesirable contact with anything which would deteriorate their property. They have already fallen victims to the spirit of monopoly, and are subject to all the denunciations heaped upon aristocrats and exclusivists. In their case already the practical difficulty of defining the unit to be comprehended, in order to attain the object and no more, is apparent. Examples are furnished every day in which capital is refused for certain enterprises because it is seen that the investment might no sooner be made than its profits might be destroyed by another enterprise parallel with it. The thing cannot be done at all until it is done on a scale sufficiently large to constitute a complete unit. We are familiar enough with the dilemma offered to us when, on the one hand, railroads which consolidate put themselves in a position to serve us far more efficiently, yet on the other hand, railroads which consolidate cease to compete with each other for our benefit. Which do we want them to do? The railroads themselves are familiar with the experience that they are constantly forced to make extensions in order to secure a certain territory, that is, to establish a closed unit, and that every extension, instead of attaining a finality, only makes further extension unavoidable. This is the class of facts in the industrial development of our time which has produced the trusts, and it is certain that they offer another motive than that of simple desire to secure means of extortion.

I am not yet able to see that any trust can succeed unless it is founded on a natural or legislative monopoly, and furthermore on a monopoly whose product cannot be produced in an amount exceeding the demand at the price which has been customary before the formation of the trust; and I cannot see any chance for legislation to do any good unless it is in the repeal of all such laws as are found to furnish a basis for the organization of an artificial monopoly.

It cannot have escaped the attention of the reader that trades-unions are a monopolistic organization on the side of labor entirely parallel with the trusts on the side of capital, “a product of the same age and of the same forces,” and an endeavor to deal with the same problem from the standpoint of another interest. The motives of coercion, discipline, and strict internal organization are the same in both cases, and some of the sanctions are the same; for the pools and rings have tried the boycott until they have proved its worthlessness. There is a notion afloat that the modern trades-union is a descendant of the mediæval gild. It might, with equal truth, and equal futility, be asserted that the modern college, stock exchange, and joint stock company, are descended from the mediæval gild. The nineteenth-century trades-union is a nineteenth-century institution, as much or more so than the ring, pool, corner, or trust. They are all products of the same facts in the industrial development, and one is just as inevitable, and, in that sense, legitimate, as the other. There are some who, while vehemently denouncing trusts, offer us, with great complacency and satisfaction, as a solution of the “labor question,” the assertion that the employers and employees ought to combine or coöperate in some way; they do not appear to see at all that if any such thing should be brought about it would be the most gigantic “trust” that could possibly be conceived.

AN OLD “TRUST”[45]

In the year 1579, Conrad Roth, a merchant of Augsburg, who had been interested in the trade in spices between Lisbon and Germany, proposed to an officer of the treasury of the Elector of Saxony a scheme for a company to monopolize the pepper trade. The Elector was one of the most enterprising and enlightened princes of his time, and the proposition was really intended to be made to him as the only person who could command the necessary capital and had, at the same time, courage and energy to undertake the enterprise.

A company was formed of officers of the treasury, called the Thuringian Company, and a warehouse was prepared at Leipzig. It was reckoned that if the company could raise the price of pepper one groschen per pound, the profits would be over 38,000 florins per annum. Roth and the Thuringian Company were to participate in the enterprise equally, but the Prince was to put up all the capital, and Roth was to do all the work. The latter also owned a very valuable contract with the King of Portugal, according to which he was, for five years, to send to India money enough to buy up all the pepper produced, so that none could come into Europe through Egypt and Italy. Before that time the Portuguese officers had illegally sold some of it, so that it did get into Europe that way; but by buying in India this was now to be stopped.

Roth proposed to divide Europe into three sections: Portugal, Spain, and the West; Italy and the South; Germany and the North. The Saxon company was to have the last as its share of the monopoly. It was hoped that the gains might be forced up to a much higher figure than the one above given, if only all pepper then in Frankfort, Venice, Nuremberg, and Hamburg could be bought up.

No sooner was the plan formed, however, than Roth began to reach out after extensions to it. He wanted to include the trade in other spices. He also proposed that the Elector should provide the capital for an exchange bank to do the exchange business between Leipzig and Lisbon. Next he found that the existing postal arrangements were entirely inadequate to the requirements of his business, and he proposed to the Elector a complete plan for a postal service between Italy, Germany, France, Spain, and Portugal. Then, having found the shipping facilities unsatisfactory, he proposed that the Elector should enter into a contract with the King of Denmark, by which the latter, who owned ships, should provide a regular service between Lisbon and the Elbe.

These plans all show the grand energy of this projector, and the Elector entered into them all. He could not carry out the postal service without the consent of the Emperor, and this he was unable to get. Roth and the Elector were ahead of their time; the Emperor was not; he said that the plan proposed “something new, which had never been in use in the time of their ancestors.” The attempt to unite private merchants in the speculation also failed at Leipzig, and elsewhere the attitude toward it was extremely unfriendly.

When the stock of pepper began to accumulate at Leipzig, it was found that the article did not begin to be scarce elsewhere. Although the advances of the Prince were already far greater than he had promised when the plan was formed, it was found impossible to begin sales until all the pepper on the European market elsewhere could be bought up; and at the same time reports came that, in spite of Roth’s contract, any one who had money could buy all the pepper he wanted in India, and that it was coming into Europe freely through Egypt and Venice. In the spring of 1580 the supply in the cities of Holland and Germany was ample. It appeared that Roth could not prevent the contractors for other parts of Europe from shipping to Germany, and the price was falling there; instead of being at fifteen groschen, where the speculators hoped to hold it, it was below twelve. At this point Roth’s creditors began to put attachments on his property. All this led the Elector to say: “We fear that there has been a great mistake in Roth’s original and still repeated assertion that all the pepper which comes into Europe comes through Lisbon.”

In April Roth committed suicide upon hearing of the death of the King of Portugal. It was known that the King of Spain intended to claim the succession, and that the Portuguese would resist; this war and the possibility of a Spanish succession meant ruin to the speculation. The Elector was obliged to send agents in every direction to get possession of the assets of the company, in order to recover his funds. In the end it appears that he escaped without very serious loss; he sold the whole stock to a syndicate of South German merchants, at a price which restored all his capital. After moralizing on his experience he declared: “Inasmuch as I am now weary and sick, and am anxious to pass the remaining time which God vouchsafes me in quiet, I have firmly determined to have done with commerce, whether it would bring me gain or loss.” “I have,” he says again, “strengthened my head and I will have done with false commerce.”[46]

This enterprise was plainly an attempt to exploit a natural monopoly, and to do it by an operation which should embrace the whole world; it was a purely money-making scheme, unrelieved by any social or industrial advantage. It shows how erroneous it is to suppose that the merchants of the fifteenth and sixteenth centuries were inferior in boldness to those of to-day, or superior to them in disposition to sacrifice themselves for the public good; it would be easy to accumulate any amount of evidence that they were, on the contrary, entirely unscrupulous in the pursuit of gain, and that they were bold beyond anything known to modern merchants. They might well be so. This story shows what great risks, dangers, perplexities, and disappointments they were subject to. The risk element was plainly enormous, but the gains corresponded, of course, and hence we find some of these men enormously rich; but it is plain that there was no routine to help the man who had less natural ability. There was no regularity in any of the contributory operations, such as shipping lines and post-office; there were no regular and adequate banking facilities. If by “trust” we mean a combination to exploit a monopoly, either natural or artificial, the men of that period had made an art of that sort of undertaking, and had a skill in it of which the moderns have no conception.

One cannot help admiring the courage and energy of this Roth. He had everything to contend with; he was far in advance of his age. If he had lived in our time he would have been a great captain of industry--we could have given him something better to do than making a corner on pepper.

In our current social discussions there is a special kind of fallacy which consists in quasi-historical assertions. For instance, it is said that the power of capital is increasing and is greater than it ever has been. This is in form an historical assertion, but those who make it never expect to be held to an historical responsibility for it. They throw it out with a kind of risk, because they are not very accurately informed as to the power of capital in former times, and have not heard that it used to act as it does now. Capitalists never had less _irresponsible_ power than now. It is said that monopoly is growing evil; that it never was so great. If people choose to pass laws to make monopolies, they must, of course, take the consequences; but there never was a time when the control of natural monopolies was so rational as now, and there never was a time when the efforts of cliques to make artificial monopolies could be so easily frustrated as now. It is said that trusts embracing the whole world are a new and threatening danger, never heard of before. It has seemed to me that, if we are to have history, it might be well for once to see some facts which illustrate “the good old times” as they really were. Of course nothing is thereby proved as to the good or ill of trusts; but something is proved as to the fallacy of that class of quasi-historical assertions which I have described.

SHALL AMERICANS OWN SHIPS?[47]

Since the war, public attention has been drawn more or less to the marked decline in American shipping. It has been generally assumed and conceded that this was a matter for regret, and some discussion has arisen as to remedies--what to do, in fact, in order to bring it about that Americans should own ships. In these discussions, there has generally been a confusion apparent in regard to three things which ought to be very carefully distinguished from each other: ship-building, the carrying trade, and foreign commerce.

1. As to ship-building--Americans began to build ships, as an industry, within fifteen years after the settlement at Massachusetts Bay. Before the Revolution they competed successfully as ship-builders with the Dutch and English, and they sold ships to be used by their rivals. Tonnage and navigation laws played an important part in the question of separation between the colonies and England, and the same laws took an important place in the formation of the Federal Constitution. One generation was required for the people of this country to get over the hard logical twist in the notion that laws which were pernicious when laid by Great Britain were beneficial when laid by ourselves. The vacillation which has marked the history of our laws about tonnage and navigation is such that it does not seem possible to trace the effects of legislation upon ship-building. In the decade 1850–1860 a very great decline in the number of ships built, especially for ocean traffic, began to be marked. Sails began to give way to steam, but the building of steamships required great advantages of every kind in the production of engines and other apparatus--that is, it required the presence, in a highly developed state, of a number of important auxiliary and coöperating industries. As iron was introduced into ship-building, of course the ship-building industry became dependent upon cheap supplies of iron as it had before been dependent on cheap supplies of wood. No doubt these changes in the conditions of the industry itself have been the chief cause of the decline in ship-building in this country, and legislation has had only incidental effects. It is a plain fact of history that the decline in ship-building began before the war and the high tariff. Of course the effects produced by changes in the conditions of an industry are inevitable; they are not to be avoided by any legislation. They are annoying because they break up acquired habits and established routine, and they involve loss in a change from one industry to another, but legislation can never do anything but cause that loss to fall on some other set of people instead of on those directly interested. Within the last few years it has become certain that steel is to be the material of ocean vessels--a new improvement which will not tend to bring the industry back to this country. On the whole, therefore, the decline in ship-building of the last twenty-five years seems to indicate that somebody else than ourselves must build the world’s ships for the present. We have, by legislative devices, forced the production of a few ocean steamers, but these cases prove nothing to the contrary of our inference. If this nation has a hobby for owning some ships built in this country, and is willing to pay enough for the gratification of that hobby, no doubt it can secure the pleasure it seeks. A fisherman who has caught nothing sometimes buys fish at a fancy price; he saves himself mortification and gets a dinner, but the possession of the fish does not prove that he has profitably employed his time or that he has had sport.

2. The carrying trade differs from ship-building as carting differs from wagon-building. Carrying is the industry of men who own ships; their interests are more or less hostile to those of the ship-builders. Ship owners want to buy new ships at low prices; they want the number of competing ships kept small; they want freights high. In all these points the interest of the ship-builder is the opposite: the ship owner is indifferent where he gets his ships; he only wants them cheap and good. There is no sentiment in the matter any more than there is in the purchase of wagons by an express company, or carriages by a livery-stable keeper.

3. Foreign commerce is still another thing. It consists in the exchange of the products of one country for those of another. The merchant wants plenty of ships to carry all the goods at the lowest possible freights, but it is of no importance to him where the ships were built, or who owns and sails them.

A statement and definition of these three industries suffices to show what confusion must arise in any discussion in which they are not properly distinguished. It is plain that there are three different questions: (1) Can the farmer build a vehicle? (2) Can he get his crop carried to market? (3) Can he sell his crop? It is evident that a country which needs a protective tariff on iron and steel must give up all hopes of building ships for ocean traffic. For the country which, by the hypothesis, needs a protective tariff on iron and steel cannot produce those articles as cheaply as some other country. Its ships, however, must compete upon the ocean with those of the country which has cheap iron and steel. The former embody a larger capital than the latter, and they must be driven from the ocean. If, then, subsidies are given to protect the carrying trade, when prosecuted in ships built of protected iron, the loss is transferred from the ship owners to the people who pay taxes on shore. These taxes, however, add to the cost of production of all things produced in the country, and thereby lessen the power of the country to compete in foreign commerce. This lessens the amount of goods to be carried both out and in, lowers freights, throws ships out of use, and checks the building of ships; and the whole series of legislative aids and encouragements must be begun over again, with a repetition and intensification of the same results. As long as the system lasts it works down, and the statistics show, very naturally, that fewer and fewer ships are built in the country, and that less and less of the carrying trade is carried on under the national flag. In view of the three different and sometimes adverse interests which are connected by their relation to the shipping question, it is not strange that when the representatives of those interests meet to try to consider that question, there should simply be a scramble between them to see which can capture the convention. The last convention of this sort was captured by the owners of a lot of unsalable and unsailable old hulks, who had hit upon the brilliant idea of getting the nation to pay them an annual bounty for the use of their antiquated and dilapidated property. Strange to say, in a country which is charged with being too practical and hardheaded, this proposition received respectful attention and consideration. It is also strange that our people should believe that taxing farmers to force the production of iron, taxing farmers again to force the production of ships out of protected iron, and taxing farmers again to pay subsidies to enable protected ships to do business, is a way to make this country rich.

So soon as the three different industries, or departments of business, which I have described are distinguished from each other, it is apparent that the fundamental one of the three is foreign commerce. If we have no commerce we need no carrying, and it would be absurd to build ships; if we have foreign commerce its magnitude determines the amount of demand there is for freight and for ships. The circle of taxation which I have mentioned, and which is obviously only a kind of circuit, described from and upon the farmer as a center and fulcrum to bear the weight of the whole, is necessarily and constantly vicious, because it presses down on the foreign commerce, which is the proper source of support for carrying and ship-building. On the other hand, the emancipation of foreign commerce from all trammels of every sort is the only means of increasing the natural, normal, and spontaneous support of carrying and ship-building, assuming that the carrying trade and ship-building are ends in themselves.

It is, however, no object at all for a country to have either ship-building industry, or carrying trade, or foreign commerce; herein lies the fundamental fallacy of all the popular and Congressional discussions about ships and commerce. It is only important that the whole population should be engaged in those industries which will pay the best under the circumstances of the country. For the sake of exposing the true doctrine about the matter, we may suppose (what is not conceivable as a possible fact) that a country might not find greater profit in the exportation of any part of any of its products than in the home use of the same. If this could be true, and if it were realized, the proof of it would be that no foreign trade would exist. There would be no ground for regret since the people would be satisfied and better off than as if they had a foreign trade. Carrying trade and ship-building would not exist.

If a country had a foreign trade of any magnitude whatever, it would not be any object for that country to do its own carrying. The figures which show the amount paid by the people of the United States to non-American ship owners for freight, and the figures which show the small percentage of our foreign commerce which is carried under the American flag, in themselves prove nothing at all. The only question which is of importance is this: are the people of the United States better employed now than they would be if engaged in owning and sailing ships? If they were under no restraints or interferences, that question also would answer itself. If Americans owned no ships and sailed no ships, but hired the people of other countries to do their ocean transportation for them, it would simply prove that Americans had some better employment for their capital and labor. They would get their transportation accomplished as cheaply as possible. That is all they care for, and it would be as foolish for any nation to insist on doing its own ocean transportation, devoting to this use capital and labor which might be otherwise more profitably employed, as it would be for a merchant to insist on doing his own carting, when some person engaged in carting offered him a contract on more advantageous terms than those on which he could do the work.

Furthermore, the people of a country which had little foreign commerce might find it very advantageous to prosecute the carrying trade. In history, the great trading nations have been those which had a small or poor territory at home: the Dutch were the great carriers of the seventeenth and eighteenth centuries, when the foreign commerce of their own territory was insignificant; the New Englanders of the last century and of the first quarter of this century became the carriers of commodities to and fro between all parts of the world, especially between our middle and southern states and the rest of the world. They took to the sea because their land did not furnish them with products which could remunerate their capital and labor so well as the carrying trade did. They won a high reputation for the merchant service, which was in their hands, and they earned fortunes by energy, enterprise, promptitude, and fidelity. The carrying trade is an industry like any other; it is neither more nor less desirable in itself than any other. In any natural and rational state of things it would be absurd to be writing essays about it. If any one thought he could make more profit in that business than in some other he would set about it. When the census was taken he would be found busy at that business, would be so reported, and that would be the end of the matter as a phenomenon of public interest.

If a nation had foreign commerce, and some of its citizens found the carrying trade an advantageous employment for their labor and capital as compared with other possible industries in the country, it would not follow that some other citizens of that country ought to engage in ship-building. It is no object to build ships, but only to get such ships as are wanted, in the most advantageous manner. If a man should refuse to carry on a carting business unless he could make his own wagons, it would be such a reflection on his good sense that his business credit would be very low. If some Americans could buy and sail ships so as to make profits, what is the sense of saying that they shall not do it because some other Americans cannot build ships at a profit? Only one answer to this question has ever been offered by anybody, and that is the prediction that, some day, if we go without ships long enough, we shall, by the mere process of going without, begin to get some--a prediction for which the prophets give no guarantee, in addition to their personal authority, save the fact that we have fewer ships and worse ones every year.

I have said above that, if there were no restraints or interferences, we should simply notice whether any Americans took to the carrying trade or not, and should thence infer that they might or might not be better employed in some other industry. It is impossible, now, to say whether, if all restrictions were removed, the carrying trade or ship-building would be a profitable industry in the United States or not. Any opinion given by anybody on that point is purely speculative. The present state of the iron and steel industries, and of the manufacture of engines and machinery, is so artificial that no one can judge what would be the possibilities of those industries under an entirely different state of things. It is, however, just because the present state of things prevents a free trial that it is indefensible; we are working in the dark and on speculation all the time and have none of the natural and proper tests and guarantees for what we are doing. We are controlled by the predictions of prophets, the notions of dogmatizers, the crude errors of superficial students of history, the wrong-headed inferences of shallow observers, and the selfish machinations of interested persons. We can distinguish many forces which are at work on our ship-building and on our carrying trade, but none of them are genuine or respectable. We are submitting to restraints and losses, and we have no guarantee whatever that we shall ever win any compensation. The teaching of economic science is distinctly that we never shall win any. We are expending capital without any measurement or adjustment of the _quid pro quo_; we are spending without calculation, and receiving something or nothing--we do not know which. The wrong of all this is not in the assumption that we have not certain industries which we would have (for we cannot tell whether that is so or not), but the wrong is in the arbitrary interference which prevents us from having them, if any man wants to put his capital into them, and which prevents us from obtaining the proper facts on which to base a judgment about the state and relations of industries in the country.

Whenever the question of ships is raised, the clamor for subsidies and bounties is renewed, and we are told again that England has established her commerce by subsidies. It would be well if we could have an understanding, once for all, whether England’s example is a good argument or not. As she has tried, at some time or other, nearly every conceivable economic folly, and has also made experiment of some sound economic principles, all disputants find in her history facts to suit them, and it needs only a certain easily acquired skill in misunderstanding things to fashion any required argument from the economic history of England. Some of our writers and speakers seem to be under a fascination which impels them to accept as authoritative examples the follies of English history, and to reject its sound lessons. In the present case, however, the matter stands somewhat differently. England is a great manufacturing area; it imports food and raw materials, and exports finished products; it has, therefore, a general and public interest in maintaining communication with all parts of the world. The analogy in our case is furnished by the subsidized railroads in our new states, or, perhaps even better, by the mail routes which we sustain all over our territory, from general considerations of public advantage, although many such routes do not pay at all. Subsidies to ships for the mere sake of having ships, or ocean traffic, when there is no business occasion for the subsidized lines, would have no analogy with English subsidies.