Chapter XI: Where Every Penny Counts (2)

But why should the materials which are used in our cheap clothing be unsatisfactory—why can we not get durable cheap goods, as it is certain we once could? The answer is not contained in a word. There is always more than one reason for sweeping changes in standard articles like woollen goods. However, the chief reason, the one which is more powerful than all the rest, is to be found in the complicated wool schedule which has been in operation in this country since 1867, the three years of the Wilson tariff excepted. This schedule rests upon two arbitrary and utterly unjust duties. The first of these is that on wool “in the grease,” as wool is called when it is sheared from the sheep. To prepare this wool for manufacturing it is first scoured until clean, an operation which causes a shrinkage of from twenty to eighty per cent in the weight of the wool. In turning this clean wool into cloth there is a still further shrinkage. Indeed, the total shrinkage from wool to cloth is such that it sometimes requires as much as five or six pounds to make a pound of cloth; and again it requires as little as two pounds. Of course the value of the wool varies according to the shrinkage, _i.e._ according to the amount of cloth a manufacturer can get from a given lot. It also varies according to the _kind_ of cloth the wool will make, _i.e._ whether it will make a fine or coarse cloth. Now all imported “grease wool,” suited for clothing regardless of its value, of the amount of dirt and grease there is in it, the amount it shrinks, the amount and quality of cloth you can get from it, has to pay a duty of eleven or twelve cents a pound. If the American wool-growers who secured this duty, to begin with, on the supposition that they would soon be able to produce enough wool to supply the home demand had been able to keep their promises, it would not have been necessary to import wool, and competition might have kept the home prices down. But the wool-growers have not for many years, if ever, produced even half of what we use. It is customary to figure the amount as much larger. “Seventy per cent of the wool we use is produced at home,” the wool boomers cry, but they do their figuring on grease wool and omit altogether the wool which comes in manufactured! There is only one fair way to estimate the amount we grow, and that is to find out what we get from it after it is cleaned of grease and dirt and compare it with the clean wool, raw and manufactured, we import. Do this and we find that we really produce nearer 40 per cent than 70 per cent of what we use. In 1890—in 1895—in 1900—this was the approximate proportion. One of the leading wool authorities of the country makes the relative proportion the same in 1906, _i.e._ 40 per cent domestic to 60 per cent foreign. For 1909, he figured it 37 per cent domestic to 63 per cent foreign.

Now, as said above, all of the wool imported must pay a duty of eleven or twelve cents a pound when it is “in the grease.” The American wool-grower in normal and prosperous times can charge more for his wool because of this duty. He may not be able to add the full amount to his price—in fact, it is probable that he rarely does, but he certainly gets considerably more than he could if he were not protected.

The way the duty works is clearly illustrated by a personal experience in wool-buying related by Robert Bleakie, of Boston, a manufacturer who has been making woollen goods in this country _continuously_ since 1848. Mr. Bleakie’s account is of a purchase of wool he made in 1897 just before the Dingley Bill went into effect, that is, when we had free wool. He had bought in Africa 223,684 pounds of wool at 9-9/10 cents a pound. By the time he got it to Boston it cost him 13-2/10 cents a pound ($29,565.83 for the lot). Now, let us suppose Mr. Bleakie’s wool had not reached Boston until _after_ the Dingley Bill had gone into effect, that is, until after the eleven cents a pound had been placed on grease wool. To get his wool out of the custom-house Mr. Bleakie would have had to pay the tidy sum of $24,605.22; _i.e._ eleven cents on each pound. This would have made the wool cost him, instead of twenty-nine thousand dollars, over fifty-four thousand dollars. But it was fine wool, shrinking heavily in cleaning. As a matter of fact, he got out of the 223,684 pounds he imported only 85,000 pounds which he could use. But note that he would have had to pay duty on the _entire_ lot, that is, to pay it on 138,684 pounds of grease and dirt as well as on the 85,000 pounds of clean wool! Of course the duty simply shut him off from importing heavy-shrinking wool, and at the same time made domestic wool of this kind too dear to buy.

Now, there are two classes of wool manufacturers, known as carded woollen and worsted. The former, to which class Mr. Bleakie belongs, finds a large proportion of the wool they need to be heavy-shrinking—the latter use mainly the light-shrinking wool. It is the carded woollen manufacturer who makes our heavy woollen clothes—flannels and blankets, the warm and durable “all wool” goods of the poor man. Mr. Bleakie’s experience just quoted shows what the eleven-cent duty on grease wool does to his business. It takes the raw material away from it—“starves” it, as the manufacturers say. At the same time it gives his competitor—the worsted maker—a decisive advantage, for he uses mainly light-shrinking wool. It is obvious that if two manufacturers each import one hundred pounds of wool in the grease, and each pay $11.00 duty on his lot, the one which gets the larger number of pounds of clean wool will have the other at a disadvantage. Yet each will pay the same duty, $11.00 on a hundred-pound lot.

What this discrimination against those who use the heavy-shrinking wool amounts to is making wool too dear to be put into the common grades of flannels, blankets, and clothing materials. The manufacturer is forced to find substitutes. Forty-four years ago, when the duties on the coarse grades of wool were first made prohibitive, and the manufacturers were forced to find substitutes in order to make clothes that the average man could afford to buy, wool rags, wool waste, and carpet wools were resorted to. They were wool, at least, and warm. Between 1867 and 1890 the annual importation of shoddy rose from about 500,000 to 9,000,000 pounds. Then the cry went up that it was displacing wool. Prohibitive duties were placed upon all kinds of wool substitutes. By 1890 duties so high were put on all the wool substitutes that they could not be imported; that is, after taxing wool off our backs—the wool substitutes were taken away. Deprived of the advantages which the inventions for using waste gave, there was nothing left but cotton for the bulk of the substitutes used in inexpensive goods, and cotton it has been ever since. The rapid absorption by cotton of the wool field has indeed been one of the most significant changes in American industry since the McKinley Bill of 1890. The tables of 1905 show that while from 1890 to 1905 cotton increased in the manufacturing of clothing materials about 100 per cent, wool increased only about 25 per cent. One whole department of manufacturing formerly classed under wool, is now placed with cotton hosiery and knit underwear. The decrease in the per capita consumption of wool shows still more strikingly the passing of wool. In 1890 we were consuming 8.75 pounds apiece; in 1904, 6.22 pounds,—_less_ than we used in 1860!

This astonishing change in the relative use of the two materials is not all due to the tariff on raw wool. Cotton is gaining the world over. The general tendency to lighter clothing, the demand for a larger number of garments, and so cheaper prices, the failure of the world’s wool production to increase and consequently its higher price—all have encouraged the change, but it is certain that the great determining factor in the United States had been this duty combined with a second mischief-maker—the ratio used in estimating the compensatory duty on all products of wool imported.

If the maker of woollens had a sufficient supply of free wool—that is, if the price of his raw material was not raised by a duty—all the protection he could rightfully ask against his foreign rival would be the difference in the cost of production here and abroad. But his wool costs him more than his foreign rival’s. If he is to meet him on a level, he must be protected against wool as well as production; that is, there must be two duties on cloth which is imported—one a duty to make up for the higher price he has had to pay for his raw material, the other for the higher price of manufacturing.

These two duties vary with different grades of woollens. The schedule is highly complex—a matter for experts only. Its results, however, are simple—and hard—enough, for what they amount to is that the cheaper the blanket or the dress goods, the HIGHER the duty! On many materials and articles suitable for the slender purse these duties are so high that none of the goods can be imported. On cloth, for instance, worth not more than forty cents a pound, the duty averages over 140 per cent; on cloth worth more than seventy cents a pound, it averages about 95 per cent.

We shall notice here but one item of the taxes which bring about this unjust discrimination, and that is the duty allowed to make up for the higher cost of the raw wool. This duty is reckoned on the number of pounds of wool in the grease supposed to be used in making a pound of cloth. Where the goods are worth less than forty cents a pound three pounds are allowed; where they are worth more, four pounds. As the duty on this wool is eleven cents, the compensatory duty on a pound of cloth is thirty-three or forty-four cents. Take the latter as an illustration, it applying to the only grades imported in any quantity. This is an out and out swindle, for the simple reason that few of them contain this amount of grease wool.

When the discussion of the wool schedule was going on in Congress in 1909, the _Textile World Record_, a remarkably able, and fair-minded Boston trade journal, published the result of a series of analyses of cloth which its editor, Samuel S. Dale, had made personally, in order to discover the actual protection each was getting under the Dingley law. The estimate in each case was based on a large quantity, 10,000 yards. Here are samples of the results. The first fabric was a worsted serge, weighing 11,500 pounds. Mr. Dale found that 21,941 pounds of grease wool had been used in this piece of cloth. Now, according to a rational and honest application of the protective principle, one would expect the compensatory duty, in case such a piece of cloth was presented for import, to be eleven cents on each 21,941 pounds, or $2413.51; but as a matter of fact, it would be $5060! That is, forty-four cents would be charged on each pound of cloth; as if four pounds of wool had been required to make it, while as a matter of fact, less than two pounds had gone into it.

A cotton-warp dress goods was analyzed in which but a trifle over one pound of grease wool had been used for each pound of cloth. Mr. Dale calculated the compensatory duty on the 10,000 yards should be $496.65. But that cloth actually receives $2595.63! In the case of a piece of cotton warp casket cloth made of cotton, wool, and shoddy, the compensatory duty under the law is reckoned at $4262.72, while actually it should be $2238.15, and so it went. But two of the eleven fabrics contained over half of the four pounds on which the duty would be reckoned.

In addition to the compensatory duty of forty-four cents is the duty to protect from difference in the cost of production, which is 50 or 55 per cent of the value of the cloth. There is probably no doubt but this duty is all out of proportion to the actual difference. Forty-four years ago, when practically the same duties now in force on wool were wrested from an unwilling Congress by a combination of wool-growers and woollen manufacturers, all that the latter asked was 25 per cent to cover difference in the cost of production. American labor has advanced, but so has European labor—and still more has machinery increased the output.

Of course these high duties make imported cloth very expensive, and enable American manufacturers to hold up their prices. As a matter of fact, the duty makes the American consumer of woollen goods pay just about double what his English cousin pays. In 1908 I was shown by a gentleman who has for years been at the head of one of the best of the wholesale cloth houses of New York, a bundle of matched samples of woollen goods—American and English—with carefully worked out statements of cost here and abroad. The goods had been matched by one of the leading woollen experts of England. I was unable to detect any difference in quality, and only the slightest in finish. There was practically no choice, so slight was the difference. But note the price. For an American serge costing $1.37½ a yard the price of the matched English goods in Bradford was 67 cents. The English equivalent of an American fabric costing $1.50 was 78.05 cents. Beautiful blue light-weight serges, such as are used for men’s summer suits, cost in America $1.80, in Bradford 81.2 cents. The mohair which is used so much in this country for women’s summer travelling suits can be bought in Bradford for 27¼ cents; here it is wholesaled at 70 cents and costs at retail $1.00. This was the showing over a large range of goods. It amounted to this, that the English price was only about half the American.

An example of the difference in cost of woollen goods was given in 1909 in Boston, where the cost of living was being investigated. Mr. Dale, of the _Textile World Record_, was being questioned on the comparative costs of American and European goods. “You can make comparisons in two ways,” Mr. Dale answered; “first, by comparing prices at which the same grades are sold, and, second, by comparing the grades that are sold at the same price. For example, here are two fabrics, one made and sold in this country, and the other made and sold in England. The English fabric is sold at 3_s._ 6_d._ (84 cents) a yard, 55 inches wide. The American cloth is sold for 77½ cents per yard, 55 inches wide. So that the two are sold at approximately the same price. The difference is represented by the difference in the two fabrics. The English cloth is a fine worsted weighing 10¼ ounces per yard, 55 inches wide; the American fabric is made with a cotton warp and a mixed cotton and wool filling. The cloth consists of 30 per cent wool, 70 per cent cotton. It weighs 9.6 ounces per yard, 55 inches wide.”

In addition to this increase in prices, a most exasperating practice developed after the passage of the Dingley Bill in many protected industries—selling goods abroad at prices from 10 to 70 per cent lower than they were sold at home. The Dingley Bill had not been long in operation before the administration itself warned the iron and steel people officially that they were in danger of giving the game away if they continued to sell steel rails, for months together, to foreigners for $22.00 a ton, while they charged their compatriots $35.00. But the warning seems to have had little effect. Frank manufacturers like Mr. Schwab said, Of course we sell cheaper to foreigners; not only that, but we sell materials to our fellow manufacturers cheaper when they are to be turned into goods for foreigners than we do when they are to be turned into goods for our own people! Mr. McKinley’s Industrial Commission of 1900 found considerable evidence of discriminating export prices. The contention of the corporations which admitted the practice was that it was necessary to work off surplus, and to keep factories going on full time. Mr. Thomas W. Phillips of the Commission, in commenting on this explanation in a minority report, said, “This argument overlooks the fact that their surplus product could also be worked off by lower prices at home, and that it is the tariff which encourages them to create a domestic surplus by restricting domestic consumption through high prices.”

The best detailed evidence of the difference between home and foreign prices which we have, comes in the price lists which are prepared for foreign trade-lists, which are not circulated in this country, of course. In 1906 the Tariff Reform Committee of New York City issued a pamphlet made up from discount sheets by Byron W. Holt. It is a beautiful study in gratitude! Mr. Holt names over 250 different articles on which at that date discounts of from 10 to 66 per cent lower were quoted to foreign than to home buyers! An American dealer paid $5.50 for potato hoes which a foreigner could get for $4.75. All farm tools, indeed, were sold abroad far lower than at home, thanks to the Farm Tools Trust. He paid $16.00 a dozen for wooden wheelbarrows for which the foreigner paid $14.50. He paid $20.00 for the incubator which to the dealer over the border was quoted at $15.00. He paid $30.24 per gross for soap which the foreign dealer bought for $20.48, and so one might go on with scores of articles of daily use in farming, in housekeeping, in all sorts of trades. In 1909 the same committee published a similar exhibit showing that equal advantages were still regularly offered on a great variety of articles. It sometimes seems as if the great American system for making the foreigner pay the duty had resulted in presenting it to the foreigner. He buys our goods cheaper than we can buy them, and, like Mr. Coats, establishes his factory here, and, protected from world competition, drives our own manufacturers into his combination, runs the business from the other side of the waters, and charges us twice as much as he can his countrymen!

The protected manufacturer does not always export at a discount. Very often he follows Mr. Coats’s lead and establishes himself abroad. He finds it more advantageous to do this because in most civilized lands the materials of industry are free. Many years ago the duty on nickel drove the Meriden Britannia Company to build in Canada and there they still manufacture for export. In 1906 Mr. James J. Hill, commenting on the rapid multiplication of American industrial plants in Canada, said: “A few years ago there was not a smelter on Canadian soil west of the Rocky Mountains. To-day there are six in British Columbia and these are largely occupied with the reduction of American ores. Commerce will go her own way even though she must walk in leg irons.” Curious and unnatural alliances have already begun to arise from this effort of industry to escape her leg irons. Take the case of the International Harvester Company, which has been much abused, and unjustly, for selling abroad at prices lower than at home. Whatever may have been its practice in earlier years, it has been well established by the recent investigation of a government agent that the prices of its machines are _lower_ in this country than they are abroad. The reason seems to be a rather nice little combination of tariffs and price fixing. For instance, the binder which in the United States sells for $125.00 at retail sells in France for $173.70. The reapers, mowers, and rakes are proportionately dearer. There are two reasons for this: In the first place France has been applying her maximum tariff to our exports, by way of meeting our high duties on her products. But after the harvesting machines get into the country, they meet another hindrance to a natural price; the importers of agricultural machines in France are organized into a general syndicate, which consists of French, German, Canadian, and American firms. These gentlemen have combined to prevent price cutting. Judging by the comparative prices of the machines here and in France, they have succeeded admirably. The Americans, in spite of the large advance they get on their goods, have not been satisfied, and the International Harvester Company has erected factories at Croix. If the reciprocity agreement with France negotiated in 1898 had been put into effect, the company claims that it would not have taken this slice of its capital and product out of this country.

Again, it is the tariff which has induced this same company to construct factories in Canada, Sweden, Germany, and Russia. In Germany, the binders which they sell here for $125.00 are selling, according to consular reports, for $203.00. The German tariff on a binder of this kind is about $12.00. It would seem that the company ought to be able to manufacture in the United States, pay this duty, and still make good profits on the $125.00 binder. If tariffs did not have the tendency to increase rather than decrease, this might be so. Experience seems to prove that where tariff exists the manufacturer is safer on the _inside_ of the wall, even though it may be that it costs him as much or more to manufacture there than it does at home. The Harvester claims that _in spite of the difference of wages, it has no hope of being able to manufacture more cheaply abroad than at home_. This is no doubt due to a factor which protectionists unite in ignoring,—the greater productivity of the American workman.

The whole situation is an excellent example of the unnatural and uncertain relations into which tariffs thrust industry. Moreover, it is an illustration of the way tariffs in the long run defeat their own purpose. The International Harvester Company did a business of $90,000,000 in 1910, _over one-third_ of which was _outside_ of the United States. Its future depends largely on the development of this outside market, and tariff conditions are such, thanks mainly to our own policy, that they find it advantageous to establish factories in the very countries which are our best customers!

With each year that passed after the Dingley Bill became a law, the burden of increased prices became heavier, the restraint on commerce more unendurable. There were other causes at work besides prohibitive duties, but in certain cases these very causes could be weakened by revising the tariff. It was an obvious way of easing a bad situation, though by no means a cure-all. Through the whole citizen mass irritation at the reluctance of politicians to touch the subject, existed, and with time found varied expression. Unfortunately the leader of neither party had ever really sensed the enormity of the protective system, and consequently he could not sense the strength of the revolt which had begun. Neither Mr. Bryan nor Mr. Roosevelt had ever found in the tariff a sufficient cause of the evils they attacked so valiantly to arouse their indignation. Neither of them had ever been genuinely stirred by the unsoundness of the doctrine or by the vicious practices for which it was responsible, or by the heavy burdens it laid “where every penny counts.” By all the signs Theodore Roosevelt should have been the Richard Cobden of our tariff reform, but he did not see it as a dragon worthy of his steel.

But the issue was there deep in men’s minds; something oppressive, puzzling, and complicated, but not to be avoided for that reason. So strong and genuine was this popular conviction that the Republican party was forced in 1908 to declare for a downward revision of the tariff, and because of that declaration chiefly, it was able to elect its candidate for the presidency, William H. Taft.