Chapter V: Summary and Conclusion (1)

147. I have now examined protectionism impartially on its own grounds, assuming them to be true, and adversely from ground taken against it, and have reviewed a series of the commonest arguments put forward in its favor. If now we return, with all the light we have obtained, to test the assumptions which we found in protectionism, that the people would not organize their industry wisely under liberty, and that protective taxes are the correct device for bringing about a better organization, we find that those two assumptions are totally false and have no semblance of claim upon our confidence. At every step the dogmas of protectionism, its claims, its apparatus, have proved fallacious, absurd, and impracticable. We can now group together some general criticisms of protectionism which our investigation suggests.

148. We have taken the protectionist’s own definition of a protective duty, and have found that such a duty, instead of increasing national wealth, must, at every step, and by every incident of its operation, waste labor and capital, lower the efficiency of the national industry, weaken the country in trade, and consequently lower the standard of comfort of the whole population. We have found that protected industries, according to the statement of the protectionists, do not produce, but consume. If then these industries are _the_ ones which make us rich, _consumption is production and destruction produces_. The object of a protective duty is “to effect the diversion of a part of the capital and labor of the people out of the channels in which it would run otherwise, into channels favored or created by law” (§ 13). We have seen that the channels _into_ which the labor and capital of the people are to be diverted are offered by _the industries which do not pay_. Hence protectionism is found to mean that national prosperity is to be produced by forcing labor and capital into employments where the capital cannot be reproduced with the same increase which could be won by it elsewhere. If that is so, then capital in those employments will be wasted, and the final outcome of our investigation, which must be made the primary maxim of the art of national prosperity under protectionism, is that _Waste makes Wealth_. Such is its outcome when regarded as an economic philosophy.

149. As regards the social and jural relations which are established between citizen and citizen, protectionism is proved by a half-dozen independent analyses of it to be simply a device for forcing us to levy tribute on each other. If the law brings a cent to A it must have taken it from B, or else it must have produced it out of nothing, that is, it must be magic. Every soul pays protective taxes. If, then, anybody gets anything from them, he needs to remember what they cost him, and _he should insist on casting up both sides of the account_. If anybody gets nothing from them, then _he pays the taxes and gets no equivalent_.

150. During the anti-corn-law campaign in England, a writer in the _Westminster Review_ illustrated protectionism by the story of the monkeys in a cage, each of whom received for his dinner a piece of bread. Each monkey dropped his own piece of bread and grabbed his neighbor’s. The consequence was that soon the floor of the cage was strewn with fragments, and each monkey had to make the best dinner he could from these. It is a good and fair illustration. I saw a story recently in a protectionist newspaper about the peasants in the Soudan. Each owns pigeons, and at evening, when the pigeons come home, each tries to entice as many of his neighbors’ pigeons as he can into his own pigeon house. “All of them do the same thing, and therefore each gets caught in his turn. They know this perfectly well, but no Egyptian fellah could resist the temptation of cheating his neighbor.” They ought to _tax_ each other’s pigeons all around. Then they would put themselves at once on the level of free and enlightened Americans. The protectionist assures me that it is for the good of the community and for my good that he should tax me. I reply that, in his language, “these are fine theories,” but that whether it is good for the community or not, and whether it is good for me or not, that he should tax me, I can see that it is for his good that he should tax me. Then he says: “Now you are abusive.”

151. _If protectionism is anything else than mutual tribute, then it is magic._ The whole philosophy of it comes down to questions like this: How much can I afford to pay a man for hiring me? How much can I afford to pay a man for trading with me? How much can I afford to pay a man to cease to compete with me in my production? How much can I afford to pay a man to go and compete with those who supply me my consumption? It is only _an expensive way to get what we could get for nothing if it was worth having_ (§ 89). It is admitted that one man cannot lift himself by his boot straps. Suppose that a thousand men stand in a ring and each takes hold of the other’s boot straps reciprocally and they all lift, can the whole group lift itself as a group? That is what protection comes to just as soon as we have drawn out into light the other side, the _cost side_ of it. Whatever we win on one side, we must pay for by at least equal cost on another. The losses will all be distributed as net pure injury to the community. The harm of protection lies here. It is not measured by the tax. _It is measured by the total crippling of the national industry._ We might as well say that it would be a good thing to put snags in the rivers, to fell trees across the roads, to dull all our tools, as to say that unnecessary taxation could work a blessing. Men have argued that to destroy machines was to do a beneficial thing, and I have recently read an article in a Boston paper, quoting a Massachusetts man who thinks that what we need is another war in the United States. Such men may believe that protective taxes work a blessing, but to those who will see the truth, it is plain that, when the whole effect of the protective system is distributed, it benefits nobody. It is a dead weight and loss upon everybody, and those who think that they win by it would be far better off in a community where no such system existed, but where each man earned what he could and kept what he earned.

152. There is a school of political science in this country in whose deed of foundation it is provided that the professors shall teach how “by suitable tariff legislation, a nation may keep its productive industry alive, cheapen the cost of commodities, and oblige foreigners to sell to it at low prices, while contributing largely toward defraying the expenses of the government.”[30] Is not that a fine thing? Those professors ought to likewise provide us a panacea, the philosopher’s stone, a formula for squaring the circle, and all the other desiderata of universal happiness. It would be only a trifle for them. The only fear is that they may write the secret which they are to teach in books, and that other nations to whom we are “foreigners,” may learn it. Then while Englishmen, Frenchmen, and Germans work for us at low prices and pay our taxes, we shall be forced to work for them at low prices and pay their taxes, and the old somber misery will settle down upon the world again the same as ever.

153. Some years ago we were told that protection was necessary because we had a big debt to pay. Well, we have paid the debt until we have reduced it from $78.25 per head to $28.41 per head. We, the people, have also raised our credit until the annual debt charge has been reduced from $4.29 per head to 95 cents per head. Now it is necessary to keep up the debt in order to keep up the taxes, and protectionism is now most efficient in forcing wasteful and corrupting expenditures to get rid of revenue, lest a surplus should furnish an argument for reducing taxation. This is right on the doctrine that waste makes wealth.

154. They tell us that protection has produced prosperity, and when we ask them to account for hard times in spite of the tariff, they say that hard times are caused by the free traders who will not keep still. Therefore _the prosperity produced by protection is so precarious that it can be overthrown by only talking about free trade_. They denounce _laissez-faire_, or “let alone,” but the only question is _when_ to let alone, _when_ to keep still. They do not let the tariff alone if they want to revise it to suit them, or want to make it “equitable.” When they get it “equitable” they will let it alone, but that insures agitation, and makes sure that they will cause it, for an indefinite time to come. On the other hand the victims of the tariff will not keep still. Their time to “let alone” is when it is repealed. If the tariff did not hurt somebody somewhere it would not do any good to anybody anywhere, and the victims will resist.[31] Mr. Lincoln used to tell a story about hearing a noise in the next room. He looked in and found Bob and Tad scuffling. “What is the matter, boys?” said he. “It is Tad,” replied Bob, “who is trying to get my knife.” “Oh, let him have it, Bob,” said Mr. Lincoln, “just to keep him quiet.” “No!” said Bob, “it is my knife and I need it to keep me quiet.” Mr. Lincoln used the story to prove that there is no foundation for peace save truth and justice. Now, in this case, _the man whose earnings are being taken from him needs them to keep him quiet_. Our fathers fought for free soil, and if we are worthy to be their sons we shall fight for free trade, which is the necessary complement of free soil. If a man goes to Kansas to-day and raises corn on “free soil,” how does he get the good of it, unless he can exchange that corn for any product of the earth that he chooses on the best terms that the arts and commerce of to-day can give him?

155. The history of civil liberty is made up of campaigns against abuses of taxation. Protectionism is the great modern abuse of taxation; the abuse of taxation which is adapted to a republican form of government. _Protectionism is now corrupting our political institutions just as slavery used to do_, _viz._, it allies itself with every other abuse which comes up. Most recently it has allied itself with the silver coinage, and it is now responsible, in a great measure, for that calamity. The silver coinage law would have been repealed three years ago if the silver mining interest had not served notice on the protectionists that that was their share of protection, and the price of their coöperation. The silver coinage is the chief cause of the “hard times” of the last two or three years. In a well-ordered state it is the function of government to repress every selfish interest which arises and endeavors to encroach upon the rights of others. The state thus maintains justice. Under protectionism _the government gives a license to certain interests to go out and encroach on others_. It is an iniquity as to the victims of it, a delusion as to its supposed beneficiaries, and a waste of the public wealth. There is only one reasonable question now to be raised about it, and that is: How can we most easily get rid of it?

TARIFF REFORM[32]

A year and a half ago a gentleman who had just been reëlected, by Republicans, to the Senate of the United States, made a five-minute speech acknowledging the honor. In respect to public affairs he uttered but one opinion: that the people of the United States were confronted by a most serious problem, _viz._, how to reduce taxation. On the face of it, this was a most extraordinary statement, and the chronicler or historian might well take note of it as a new event in the life of the human race. Statesmen and historians are familiar enough with the difficulty of raising more revenue, and laying more taxes, but the solemn and calamitous position of a nation which is forced to reduce its taxes, and finds itself confronted by industrial disaster if it does it, is something new. Students of political economy are familiar with the question: What harm to industry may be done by levying taxes on it? But the problem of how to avert the economic disaster which may follow taking them off is new. Of course the state of mind revealed by the formulation of the above problem is the result of a long habit of regarding taxation as an industrial force, or, at least, as an effective condition of industrial success.

There is, however, a problem; in regard to that fact all concur. It is also a rare problem, one for which the only precedent is to be found in our own history, and when the case occurred before, it proved to be fraught with calamity. We are confronted by the dangers of a surplus revenue, and no proposal to do away with the surplus in extravagant expenditures can stand before the common sense of the people.

If the taxes are collecting more than the public necessities require, then the simple and obvious, and, in fact, the only solution, is not to collect the taxes; let the people keep their own products and do what they please with them. If we do not make a problem there will not be any; if we simply do in the most straightforward manner what the common sense of the situation demands, there will be no difficulty; the consequences will all take care of themselves, and all the imaginary calamities will fail to appear. If, however, we must have a grand scheme of national prosperity established in advance, then the case is different.

During the war a notion grew up here that, through some new dispensation of fate, it was possible for the American people to make war and prosper by it. After the war the notion grew up that the paper money was a condition of success and that we should be ruined if we resumed specie payments. Now we are met by the doctrine that we cannot repeal the taxes which were laid during the war, partly in order to carry it on, because our national prosperity is bound up in them. These notions, in fact, are all consistent, and all hang together; they all belong to a philosophy that men prosper by discord and war, not by peace and harmony. According to that philosophy we touched unawares the springs of prosperity when we engaged in a civil war, incurred an immense debt, and laid crushing taxes. Now, therefore, when we ask that the taxes which are no longer necessary may be taken off, the men who have fallen under the dominion of these fallacies tell us that it cannot be done; that our prosperity would be undermined by it. They have been assuring us for years past that the protective system was sure to produce a solid and stable prosperity; now, by their own statement, it has produced a state of things so weak and unstable that it must be maintained by heavy taxes. The industrial prosperity of the United States proves to be as burdensome to it as the armaments of the European nations are to them.

The notion seems to be that protective taxes, laid on imports, are the particular kind of taxes which make national prosperity, and which therefore ought not to be touched. It is proposed that internal taxes shall be reduced. If local taxes on real estate, etc., are reduced, every one rejoices; that is supposed to be a clear and simple gain. I have known the same man to exert himself very actively to scrutinize local expenditures, and reduce local taxes, and to boil with rage against free traders who want to reduce protective taxes. However, there is probably no tax of any kind whatsoever which does not interfere with the conditions of supply and demand, or industrial competition, in such a way as to give “protection” to somebody at the expense of somebody else. There are persons who are now enjoying great advantages in their business from the whisky and tobacco taxes which they would lose if those taxes were repealed. This is one of the incidental mischiefs of all taxation and one of the reasons for insisting that taxation shall be as slight as possible, and, to that end, that government functions shall be limited as much as possible.

We are, therefore, face to face with the question whether we are able to reduce our own taxes, and whether we are free to do so. We may fairly ask: if not, why not? It is plain that this is a question of domestic policy and of our own interest altogether. All the attempts to prejudice it by talking about “England” are impertinent, and all allegations that those of us who want to reduce our own taxes are trying “to give away our market,” etc., belong to the worst abuses of political discussion. What is true is that we have built up a vast combination of vested interests, which in a few cases have, and in nearly all cases think they have, an interest in maintaining the taxes. These are among ourselves; what they gain, they gain from us; it is with them that we have to contend. They have thus far carried on the fight by all the methods dear to vested interests; they have put forth plausible fallacies, sought alliances, procured delays, appealed to prejudices.

Behind these selfish and sordid interests, however, there is the strong and sincere prejudice which still prevails among the civilized nations of to-day, and which is dividing them into hostile parties, carrying on tariff wars with each other. I call it “protectionism,” because it is not a policy, but a philosophy of national welfare. In the United States it takes the form of various fallacies about the home markets, diversification of industry, wages, etc. As these are all questions of political economy, and as all who talk on the subject at all are talking political economy of some sort or other, it seems that a great work of education is to be done here on the field of economic doctrine. Hitherto the attempt of the politicians has been not to perform this work of education but to thrust it aside.

As soon as the issue is formed, however, and the protectionists are forced to formulate their doctrine, as a doctrine, its absurdity becomes apparent. It is not capable of statement. If we are to have temporary protection, in order to start infant industries, then it will become imperatively necessary, so soon as public attention is occupied by the subject, to say how, and how far, and how long, the system is to be kept up, and the public will demand to know how it is getting on, and at what rate it is approaching its goal. For this reason those who have any logical directness of thinking, have already advanced to a more intense position; they advocate protectionism as a permanent and universal economic philosophy. In that form it flies in the face of common sense and civilization; in some of the latest forms which it has taken on in the hands of some professors of political economy, it is a kind of economic mysticism.

If, however, the United States could be cut off from all the rest of the world as regards trade and industry, then at least it should be plain that whatever material prosperity they could gain would be just what they, with their energy, enterprise, and capital, are able to extract from such soil and climate as nature has given to us here. What would be the difference if, then, there were no tax barriers? Certainly none whatever. The wealth which the American people get they must produce by applying their labor and capital to the natural advantages which they possess. With foreign trade open to them, they will not make use of it unless they find an advantage in it; that is, unless American labor and capital can attain more wealth through exchange than without it. The task of American producers will still be to attain the greatest possible wealth by expending their labor and capital on American soil, either directly, or with an intermediate step of exchange. Wages are only a part of the product of the country; if then, trade increased the amount of commodities at the disposition of the people, it would increase the amount of each share in the distribution. This is the simplest common sense of the matter, stripped of all technicalities, and to this the whole discussion must again and again return.

If now we begin to reduce and abolish the taxes which were laid during the war, we shall simply begin to free the American people from a clog on their energies and a waste of their industrial strength. Every step in this direction is an emancipation under which we may be sure that the national energy which is set free will spring up with the quickest response. The guarantee of this is in the character of the people, and in the natural advantages which they possess. Whatever chances we have, we have in the nature of the case; the tariff could not give us any; it could only divert in one way or another those which nature has given us. This diversion or perversion has now entered into the experience and education of our generation. We have no idea of the welfare we should enjoy if we were only free to use the chances which are within our reach, and a great many of us have spun out a kind of political economy to prove that the cords which bind us are the tools by which we work.

WHAT IS FREE TRADE?[33]

There never would have been any such thing to fight for as free speech, free press, free worship, or free soil, if nobody had ever put restraints on men in those matters. We never should have heard of free trade, if no restrictions had ever been put on trade. If there had been any restrictions on the intercourse between the states of this Union, we should have heard of ceaseless agitation to get those restrictions removed. Since there are no restrictions allowed under the Constitution, we do not realize the fact that we are enjoying the blessings of complete liberty, where, if wise counsels had not prevailed at a critical moment, we should now have had a great mass of traditional and deep-rooted interferences to encounter.

Our intercourse with foreign nations, however, has been interfered with, because it is a fact that, by such interference, some of us can win advantages over others. The power of Congress to levy taxes is employed to lay duties on imports, not in order to secure a revenue from imports, but to prevent imports--in which case, of course, no revenue will be obtained. The effect which is aimed at, and which is attained by this device, is that the American consumer, when he wants to satisfy his needs, has to go to an American producer of the thing he wants, and has to give to him a price for the product which is greater than that which some foreigner would have charged. The object of this device, as stated on the best protectionist authority, is: “To effect the diversion of a part of the labor and capital of the people out of the channels in which it would run otherwise, into channels favored or created by law.” This description is strictly correct, and from it the reader will see that protection has nothing to do with any foreigner whatever. It is purely a question of domestic policy. It is only a question whether we shall, by taxing each other, drive the industry of this country into an arbitrary and artificial development, or whether we shall allow one another to employ each his capital and labor in his own way. Note that there is for us all the same labor, capital, soil, national character, climate, etc.,--that is, that all the conditions of production remain unaltered. The only change which is operated is a wrenching of labor and capital out of the lines on which they would act under the impulse of individual enterprise, energy, and interest, and their impulsion in another direction selected by the legislator. Plainly, all the import duty can do is to close the door, shutting the foreigner out and the Americans in. Then, when an American needs iron, coal, copper, woolens, cottons, or anything else in the shape of manufactured commodities, the operation begins. He has to buy in a market which is either wholly or partially monopolized. The whole object of shutting him in is to take advantage of this situation to make him give more of his products for a given amount of the protected articles, than he need have given for the same things in the world’s market. Under this system a part of our product is diverted from the satisfaction of our needs, and is spent to hire some of our fellow-citizens to go out of an employment which would pay under the world’s competition, into one which will not pay under the world’s competition. We, therefore, do with less clothes, furniture, tools, crockery, glassware, bed and table linen, books, etc., and the satisfaction we have for this sacrifice is knowing that some of our neighbors are carrying on business which according to their statement does not pay, and that we are paying their losses and hiring them to keep on.

Free trade is a revolt against this device. It is not a revolt against import duties or indirect taxes as a means of raising revenue. It has nothing to say about that, one way or the other. It begins to protest and agitate just as soon as any tax begins to act protectively, and it denounces any tax which one citizen levies on another. The protectionists have a long string of notions and doctrines which they put forward to try to prove that their device is not a contrivance by which they can make their fellow-citizens contribute to their support, but is a device for increasing the national wealth and power. These allegations must be examined by economists, or other persons who are properly trained to test their correctness, in fact and logic. It is enough here to say, over a responsible signature, that no such allegation has ever been made which would bear examination. On the contrary, all such assertions have the character of apologies or special pleas to divert attention from the one plain fact that the advocates of a protective tariff have a direct pecuniary interest in it, and that they have secured it, and now maintain it, for that reason and no other. The rest is all afterthought and excuse. If any gain could possibly come to the country through the gains of the beneficiaries of the tariff, obviously the country must incur at least an equal loss through the losses of that part of the people who pay what the protected win. If a country could win anything that way, it would be like a man lifting himself by his boot straps.

The protectionists, in advocating their system, always spend a great deal of effort and eloquence on appeals to patriotism, and to international jealousies. These are all entirely aside from the point. The protective system is a domestic system, for domestic purposes, and it is sought by domestic means. The one who pays, and the one who gets, are both Americans. The victim and the beneficiary are amongst ourselves. It is just as unpatriotic to oppress one American as it is patriotic to favor another. If we make one American pay taxes to another American, it will neither vex nor please any foreign nation.

The protectionists speak of trade with the contempt of feudal nobles, but on examination it appears that they have something to sell, and that they mean to denounce trade with their rivals. They denounce cheapness, and it appears that they do so because they want to sell dear. When they buy, they buy as cheaply as they can. They say that they want to raise wages, but they never pay anything but the lowest market rate. They denounce selfishness, while pursuing a scheme for their own selfish aggrandizement, and they bewail the dominion of self-interest over men who want to enjoy their own earnings, and object to surrendering the same to them. They attribute to government, or to “the state,” the power and right to decide what industrial enterprises each of us shall subscribe to support.

Free trade means antagonism to this whole policy and theory at every point. The free trader regards it as all false, meretricious, and delusive. He considers it an invasion of private rights. In the best case, if all that the protectionist claims were true, he would be taking it upon himself to decide how his neighbor should spend his earnings, and--more than that--that his neighbor shall spend his earnings for the advantage of the men who make the decision. This is plainly immoral and corrupting; nothing could be more so. The free trader also denies that the government either can, or ought to regulate the way in which a man shall employ his earnings. He sees that the government is nothing but a clique of the parties in interest. It is a few men who have control of the civic organization. If they were called upon to regulate business, they would need a wisdom which they have not. They do not do this. They only turn the “channels” to the advantage of themselves and their friends. This corrupts the institutions of government and continues under our system all the old abuses by which the men who could get control of the governmental machinery have used it to aggrandize themselves at the expense of others. The free trader holds that the people will employ their labor and capital to the best advantage when each man employs his own in his own way, according to the maxim that “A fool is wiser in his own house than a sage in another man’s house”;--how much more, then, shall he be wiser than a politician? And he holds, further, that by the nature of the case, if any governmental coercion is necessary to drive industry in a direction in which it would not otherwise go, such coercion must be mischievous.

The free trader further holds that protection is all a mistake and delusion to those who think that they win by it, in that it lessens their self-reliance and energy and exposes their business to vicissitudes which, not being incident to a natural order of things, cannot be foreseen and guarded against by business skill; also that it throws the business into a condition in which it is exposed to a series of heats and chills, and finally, unless a new stimulus is applied, reduced to a state of dull decay. They therefore hold that even the protected would be far better off without it.

PROTECTIONISM TWENTY YEARS AFTER[34]

I think it must be now nearly twenty years since I have made a free-trade speech or been able to take share in a free-trade dinner.

When I was invited here this evening I thought I would try to come for the pleasure of hearing the gentlemen, especially the members of Congress, who were announced to speak here. I have been so out of health that it has been impossible for me to sit up evenings or to attempt public speaking in the evenings, but things are going a little better and I will make an attempt to say a little--not very much, as the hour is now late.

Thirty-five or forty years ago I became a free trader for two great reasons, as far as I can now remember.

One was because, as a student of political economy, my whole mind revolted against the notion of magic that is involved in the notion of a protective tariff. That is, there are facts that are accounted for by protectionism through assertions that are either plainly untrue or are entirely irrational. The other reason was because it seemed to me that the protective tariff system nourished erroneous ideas of success in business and produced immoral results in the minds and hopes of the people.

I cannot say that I have got any more light on the matter within the last twenty years; it looks to me still as if the great objections to protectionism were these two. No man who enjoys the benefit of a protective tariff, as he believes, can ever tell whether he gets back anything for the taxes which he pays or not. He never has any analysis of the operation and never knows whether or not he really recovers from the action of the tariff what he pays in.

I say now the taxes which he pays, because--let us not make any mistake about this--the matter we are talking about is one entirely of Americans and between Americans. If the protective tariff operates so as to perform what is attributed to it, it prevents things from being imported into this country. That may be a disadvantage to the foreigner, it may disappoint him in his hopes, but we may leave him out of account. Then the increase of the cost of these commodities for the American consumer at home is the source from which the American protected manufacturer must obtain his benefit, if he ever obtains any. Therefore he has to pay also taxes to the other protected industries on account of the operation of the system. Therefore he is both paying and receiving, but whether or not he gets back the part that he hoped to receive is a question which he never can sift and never can know.

I should myself suppose that possibly the Pennsylvanian on his coal and iron might stand a good chance of winning something. The operation is direct and simple in that case, and coal and iron are to-day the very first conditions of industry. They must be obtained as raw material, because they enter into everything, and it is possible that under those circumstances the game might be sufficiently direct so that its effect could be felt and perceived. But the Connecticut manufacturer has to pay taxes on coal and iron and copper and the other metals, and he has to pay also the taxes on wool and the other raw materials, and then comes the question whether he ever gets it back again or not. He never knows; he cannot know; he cannot feel it and he cannot possibly know whether the operation of the system is to bring him back a return for his outlay or not.

We hear a great deal about a rightly adjusted tariff. It is a constant ideal that is presented, whenever the tariff subject comes up again for discussion in Congress, that it ought to be rightly adjusted, and when it is, it is going to perform its beneficial operation.

How can a tariff ever be rightly adjusted unless the industry will stand still? The taxes stand still for years without change. The industries never stand still. There are new inventions in machinery, there are new raw materials brought into use, there are new processes developed, and all that changes the character of the industry. These inventions and improvements and processes are all ignored by the protective system. It contains no allowance for them at all. But our people are full of enterprise, they are fond of improvements, they like novelties, and they adopt changes. The consequence is that the industry changes, and then again the decisions that are made by somebody or other as to the doubtful questions in the interpretation of the law are also constantly changing, and then by and by we find a lot of people who want the tariff changed. They say it needs to be adapted to the time, it is out of date, it has fallen behind, it does not fit the requirements of the moment, and they would like to have a tariff revision; but they are told then that they ought to keep still and not make a disturbance which will bring up a discussion of the entire tariff system, and that they ought to allow it to go on for the sake of the “system.”

What is the system then? The system means that the import duties that we have in this country have raised the prices of all commodities in our market, I may say thirty or forty per cent on a very low calculation. Is not that a very extraordinary thing when you stand off and try to realize it for a minute--that we have raised the prices in the United States thirty or forty per cent--perhaps more nearly fifty per cent--above the level of the prices for the same commodities in the other civilized countries of our grade; and that we believe that we have done a grand and noble thing by raising these prices, putting the whole level of life in this country on an artificial plane that much above the level of the world’s market? In fact, if you should listen to a protectionist he would make you believe that this continent would not be habitable if it was not for the protective tariff that is here working this operation all the time on the American market.

I am of the opinion--I am not very confident about it--but it looks to me as if it were true that a protective tariff wears out in a little while--I mean, so far as its expected beneficial effect is concerned. Its effects are distributed, they are taken up and they are allowed for all around the market until the expected benefit to the protected people is lost and there remains nothing but the dead weight of the system itself as an interference with the industries. There is then a call for a new tariff in order to get another impulse or another fillip, as I have heard it called, to give things a new impulse, to start them on again.

That has been the history of our tariff now for one hundred years, that it has been restarted, reinvigorated from time to time in order to give a new impulse. Then in the very nature of the case, therefore, it seems to me that a new impulse is constantly required.

As I said at the outset, the tariff system seems to me to teach us to believe that a man needs a “pull” of some kind or other to make any industry a success. It is an idea that there must always be a provision of easy profit in connection with the industry that shall demand no labor or no expenditure of capital to get it. That is the pure doctrine of graft. The tariff teaches us to look for a fee or a gratuity or a rake-off which will be a pure and net profit. People are told that tariff taxes are a rightful gift to the beneficiary. Those who do not get that gain seek another one of the same kind somewhere, and when they do that they have recourse to graft.

It is a shameful fact that this notion of graft, and this word, should have come to us, as it has within the last four or five years, and should have extended so far and become so familiar to us in connection with a great many of the operations of business. It is customary, as we have known for a long time, in some nations, for instance in Russia, China, and Turkey; and with us it has seemed to spread and win acceptance and currency in a most astonishing manner. I cannot believe but what the tariff system has educated us in this direction and prepared us to tolerate and accept the development of this idea. It also seems to me that now, after one hundred years of this system, the tariff is no longer properly an economic question. It is a practical political question. The politics and the business are interwoven in it inextricably. There is no economic discussion possible of the propositions that are made, economic in form, in connection with the tariff system. There is only a war of partial views and of superficial inferences.

Our American protectionism has grown out of the peculiar circumstances of this country. It is an old idea that has come down to us from Europe, and, indeed, from the Middle Ages in Europe, and here it found a chance for a new and very remarkable development. There were new conditions here, and the chances were so big and grand that, as a matter of fact, the protective system has never done more than exact a certain tribute from us on these chances. It has never really touched us in an acute and sensible way, and in spite of it we have enjoyed marvelous prosperity which is due really to the circumstances of advantage and favor which we have enjoyed here.

In the year 1892 we got an issue on this matter and went to the electorate with it, with the result that we all know. But the mandate of the people was neglected and disobeyed by the government and the purpose that the people showed at that time was defied.

We have also had opportunity to notice the great power of the protected interests in Congress. The fact is that we are being governed at the present time by a combination of these protected interests which have got control of the machinery of government, and have control of the personnel of the government to such an extent that it is almost impossible, practically, to make any breach in this system at all. That is because the political combinations have been so thoroughly wrought out and so ingeniously developed that they look at present as if they were impregnable.

I look around to see if I can find some encouragement. I thought that it was something of an encouragement when Mr. Dalzell made this speech in Congress that Mr. Williams has referred to, in which he poured such scorn on the idea of “incidental protection.” I have never said anything so severe about any protectionist idea as that which he said about incidental protection. But suppose that the people of 1850, the middle of the nineteenth century, could come to life again, the old protectionists of that time. What would they think to hear a man speak with scorn of incidental protection? It was what they believed in; it was the whole business to them. When an old protectionist like Mr. Dalzell can turn around and pour scorn upon incidental protection I feel as if we never could tell what they might throw overboard next time, in some paroxysm of some kind or other, of fear or hope or something else, and we might get a chance that we have not been able to get in the past.

Then, as has been well said by other gentlemen to-night, there has been within the last year or two a very great revolt in the public mind against graft and political and business corruption. How far will this go? We do not know, but it is, at any rate, an opening in the public mind that is full of chances. It may go very far; it may have very great effects; it is certainly something to be noticed and taken advantage of.

Then, again, there are new conflicts of interests arising. We have become very great people in the world’s commerce, with a billion dollars’ worth of exports and imports in a year, and we are so interwoven with the whole world that it will not be possible for us to go on with our old policy of discouraging commerce and rejecting it, and trying to stop it, and paying no attention at all to the remonstrances of our neighbors. In future we shall be obliged to pay some attention to these remonstrances. They are just, they are reasonable, and they will command our attention; and then we shall have to make concessions to them. In other words, we cannot any longer afford to reject and neglect these remonstrances.

It may be, therefore, that in the time that is now before us we shall have better chances for a practical war upon this system than we have had hitherto. As long, however, as I can remember, and as long as I have had any share in it, we have got along without any encouragement in it at all. We have done what we could without that. We got so we did not expect it. We knew that we should be neglected and treated as persons whose opinions in these matters were not of any importance or worthy of any attention, and so we went on and kept up our arguments, as we considered them, to the best of our ability and without very much result.

Now, it may be that we are on the eve of a different time, when the circumstances will be more favorable, more hopeful, more full of opportunities, and I certainly, for my part, most profoundly hope that that is so.

I have noticed with some discouragement the efforts that Mr. Williams has made on the floor of Congress to get some modifications of the tariff made, or some argument even opened up there that might give the matter activity and life in the legislative domain. They did not seem any more encouraging than what we used to see in the old times. But it is certainly in the nature of things that the difficulties and absurdities of this system must come out in practice more and more distinctly as we go on, and the need for reform will therefore force itself in the shape of a play of interests that will bring new and counteracting forces into operation to which we may look for help in the overthrow of the system.

PROSPERITY STRANGLED BY GOLD[35]

Some of the silver fallacies were stated by Mr. St. John, in his address before the silver convention, with such precision that his speech offers a favorable opportunity for dealing with them.

He says that “it is amongst the first principles in finance that the value of each dollar, expressed in prices, depends upon the total number of dollars in circulation.” There is no such principle of finance as the one here formulated. The “quantity doctrine” of currency is gravely abused by all bimetallists, from the least to the greatest, and it is at best open to great doubt. When the dollars in question are dollars of some money of account which can circulate beyond the territory of the State in which it is issued, the quantity doctrine cannot be true within that territory. It may be noted, in passing, that this is the reason why no scheme of the silver people for manipulating prices in the United States can possibly succeed. Silver and gold will be exported and imported until their values conform throughout the world, and prices fixed in one or the other of them will conform to the world’s prices, after all the trouble and waste and loss of translating them two or three times over have been endured.

The quantity doctrine, however, means that the value of the currency is a question of supply and demand, and everybody knows that to double or halve the supply does not halve or double the value, or have any other effect which is simple and direct. If it did have such effect speculation would not be what it is.

Mr. St. John goes on to argue that our population increases two millions every year, on account of which we need more dollars; that the production of gold does not furnish enough to meet this need, and that, therefore, prices fall. This argumentation is very simple and very glib. Prosperity and adversity are put into a syllogism of three lines. But, if we can avert the fall in prices and adversity by coining silver, it must be by adding the silver to the gold which we now have. “High” and “low” prices are only relative terms. They mean higher and lower than at another time or place; higher and lower than we have been used to. If misery depends on ten-cent corn we are advised to cut the cents in two and we shall get twenty-cent corn and prosperity. Corn will not be altered in value in gold, or outside of the United States, and, as all other things will be marked up at the same time and in the same way, its value in other things will not be altered by this operation. When we get used to twenty-cent corn it will seem just as low and just as “hard for the debtor” as ten-cent corn is now. Then we can divide by ten and get two-dollar corn, by adding free coinage of copper. When we get used to that we shall be no better satisfied with it. We can then make paper dollars and coin them without limit. Million-dollar corn will then become as bitter a subject for complaint as ten-cent corn is now. The fact that people are discontented is no argument for anything.

The fact that prices are low is made the subject of social complaint and of political agitation in the United States. Prices have undergone a wave since 1850. They arose until about 1872. They have fallen again. They are lower than they were at the top of the wave all the world over. This fact, the explanation of which would furnish a very complicated task for trained statisticians and economists, is made a topic of easy interpretation and solution in political conventions and popular harangues, and it is proposed to adopt violent and portentous measures upon the basis of the flippant notions which are current about it. But what difference does it make whether the “plane” of prices is high or low? If corn is at forty cents a bushel and calico at twenty cents a yard, a bushel buys two yards. If corn is at ten cents a bushel and calico at five cents a yard, a bushel will buy two yards. So of everything else. If, then, there has been a _general_ fall, and that is the alleged grievance, neither farmers nor any other one class has suffered by it.

It is undoubtedly true that a period of advancing prices stimulates energy and enterprise. It does so even when, if all the facts were well known, it might be found that capital was really being consumed in successive periods of production. Falling prices discourage enterprise, although, if all facts were known to the bottom, it might be found that capital was being accumulated in successive periods of production.

It is also true that a depreciation of the money of account, _while it is going on_, stimulates exports and restrains imports.

But who can tell how we are to make prices always go up, unless by constant and unlimited inflation? Who can tell how we are to avoid fluctuations in prices or eliminate the element of contingency, risk, foresight, and speculation?

It is also true that, although high prices and low prices are immaterial at any one time, the change from one to the other, from one period of time to another, affects the burden of outstanding time contracts. Men make contracts for dollars, not for dollar’s-worths. Selling long or short is one thing; lending is another. Borrowers and lenders never guarantee each other the purchasing power of dollars at a future time. If the contracts were thus complicated they would become impossible. Between 1850 and 1872 the debtors made no complaint and the creditors never thought of getting up an agitation to have debts scaled up. The debtors now are demanding that they be allowed to play heads I win, tails you lose, and Mr. St. John and others tell us that they have the votes to carry it; as if that made any difference in the forum of discussion.