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basis of a representative currency in the
form of silver certificates. The govern-
ment is at this moment staggering under
the weight of a load of silver and ap-
proaching a monetary crisis which, if not
arrested, will unsettle all values and ingulf
the industries of the country in common
ruin. Upon the subject of silver the
legislation of the country is in sharp con-
tention with an economic law which can
not be thrust aside, and whose operation
is as sure and relentless as fate.

Some of the prominent advocates of
silver acknowledging that the cost of
production ultimately determines the ex-
changeable value of the product, never-
theless maintain that the aggregate cost is
equal to the par value, reckoned at the
gold standard, of that metal counted in
dollars. That is, that there is as much
labor expended in the production of a
silver as of a gold dollar. In this are esti-
mated the money and labor expended in
fruitless prospecting and sunk in unprofit-
able mines. While it is probable that
these sources of loss are greatly exagger-
ated, it remains that they do not become
a charge or burden on the silver produced.
The losses of those who search in vain for
hidden treasure are not compensated out
of the profits of those who find it. The
great bulk of that product is produced at
a high rate of profit at present prices, and
the whole at an average rate of profit to
cover risks and make the business tempt-
ing. If this were not the case the produc-
tion of the metal would presently fall off.

The argument most commonly used is
that, by the demonetization acts the pur-
chasing power of gold has been augmented,
that relatively to gold all other commodi-
ties have been cheapened by them, and
that thus the demonetization of silver is
the result of a conspiracy against the
working classes. If this were true it
would point their strongest condemnation.
Those who make the statement stop short
of offering any proof of its correctness.
Evidence approaching to anything like
proof of this must necessarily take into
account the extent to which prices have
fallen in consequence of the greater pro-
ductiveness of labor by the application of
improved machinery and economizing
processes, by swifter despatch of business
and cheaper systems of distribution of
commodities, in their transportation over
lands and seas and the handling of deal-
ers. It is not sufficient to point to the
fact that a certain amount of gold will
buy a greater quantity of most classes of
commodities than the same amount would
twenty years ago. If this were not the
case it would argue that the fertile genius
and the vast energies of mankind had
been fruitlessly exerted and failed of their
purpose. That purpose is to continually
add to the sum of human comfort and
well being and advance the civilization of
the race. But the proof, such as exists,
points to a different conclusion. As to
the compensation of purely personal ser-
vices and the prices of those commodities
the production of which has not been
facilitated and accelerated by inventions
and machinery, there has been no decline.

It has become a familiar claim on the
part of those who advocate unrestricted
silver coinage, that the existing stock of
money is insufficient to meet the demands
or requirements of business. No proof is
ever offered of this. There is evidence
on the subject in abundance and it utterly
refutes their claim. In addition to the
increase in the silver coinage and paper
money representing silver since the demon-
etization acts, the figures for which, cov-



ering a portion of that period, have been
given as respects the United States, there
has been recently an unusual increase in
the gold reserves, that is, in gold used as
money. Professor Laughlin estimates the
increase in the gold reserves in the prin-
cipal banks of the United States and
Europe to have been from $477,000,000
in 1870-80, to $836,000,000 in 1885.
According to the same authority there was
in 1871-74, $1 in gold for every $3.60 of
the paper circulation of the civilized
world. In 1885 the gold reserves had
increased so as to reduce the proportion
of paper circulation to gold to $1 of gold
for every $2.40; this, too, notwithstand-
ing the total note circulation increased
during the same time to the extent of
$464,000,000, or 29 per cent. Quoting
from the same authority, it appears that
in 1870-74 the gold reserves amounted to
28 per cent, of the total note circulation,
and 64 per cent, of all the specie reserves.
In 1885 the gold bore a larger ratio to a
larger issue of paper, or 41 per cent, of
the total note circulation, and 71 per cent,
of the specie reserves. "This," says
Prof. Laughlin, "is a very significant
showing. What it means, beyond a shadow
of doubt, is that the supply of gold is so
abundant that the character and safety of
the note circulation has improved in a
signal manner."

The output of the gold mines has enor-
mously increased in recent years. Before
1840 the annual productioti was $14,000,-
000. It rose to $157,000,000 about the
year 1853, from this it declined until in
1885 the product amounted to $101,000,-
000. There is no evidence that any less
use has been made of silver as money
since its demonetization. In this and a
number of other countries its use has been
greatly increased.

In any attempted estimate of the suffi-
ciency of the present volume of money to
perform with ease and efficiency the work
of the world's exchanges, a very partial
view only is obtained by ascertaining the
actual increase in the legal circulating

medium. The lowering of prices in most
classes of commodities by means of
reduced cost of production would of
itself, without an addition to the currency,
increase the proportion of money to the
ratio of exchanges to be made. The
rapidity of transit over land and sea has
increased 50 per cent, within twent)'
years. Within recent years the telegraph
has come into every day use for the trans-
mission of money, or credits, which per-
form the functions of money, in the
world's business arrangements. Banking
facilities since 1840 have increased eleven-
fold and the world's commerce but three-
fold. Vastly increased use is now made
of checks, of credits, drafts and bills of
exchange, and these form a species of cir-
culation representing commodities, safe,
economical and convenient. The estab-
lishment and use of clearing houses is
another expedient that greatly increases
the efficiency of money by economizing
its use. In proportion to the volume of
the world's commerce and the exchanges
to be effected, I think I hazard nothing in
saying that the monetary facilities existing
to-day are greater than ever before.
These facts, however, possess but scant
significance to that class of persons among
us (and they are by no means a small
body) who believe that the government is
an omnipotent instrumentality, that it can
create wealth and insure prosperity.

* * :1: * * ^\-

It seems singular, indeed, that, after one.
hundred years of Adam Smith, in a dem-
ocratic republic, the doctrine of dearness
should find numerous and powerful adher-
ents. The advocates of high protection
have changed the ground of their plea for
its continuance. Formerly its purpose
was held to be the fostering, and encour-
aging the establishment of infant indus-
tries, by furnishing such incidental protec-
tion as a discriminating imposition of
revenue duties would afford. Such a plea
would now be consciously ridiculous in
the face of the fact that those infant indus-
tries have become colossal, and that to



now reap the full benefits of the protective
duties which have been thrown around
them, it has been found necessary in many
of the departments of production to form
trust combinations to forcibly limit pro-
duction and create artificial or high
prices, and to sell their surplus manufac-
tures in the markets of the world in com-
petition with the free trade and so-called
pauper labor countries of Europe. The
infant industries never demanded more
than 30 per cent, tariff, the giants demand
50 per cent.

The plea is now put forth that this high
tariff is necessary to maintain the differ-
ence between the wages paid to laboring
men here and those paid in Europe. This
is a fallacious pretense. There is no prin-
ciple more firmly established in the sci-
ence of political economy than this — that
high wages for labor are neither created
nor maintained by a tariff, whether it be
high or low. I undertake to say further,
that the condition of labor and the various
compensations it is able to command to-
day in all industrial countries, furnishes the
amplest proof of that principle. Among
the industrial countries of Europe there
exists a considerable similarity in respec,t
to natural resources, the character of the
laboring classes and the progress and
status of industrial pursuits. It would
naturally be expected that the average
rate of wages paid the working classes
would be substantially the same in all
those countries.

Fifty years ago, when all alike were
under the blessings of protection, this was
the case. But within that period one of
those countries — England — shook off the
protectionist regime and embarked on a
career of free trade ; the rest, meanwhile,
increased their protection by building
higher the wall. Wages advanced under
free trade more than 50 per cent, in Eng-
land and remained stationary in the pro-
tectionist countries. We are constantly
pointed to the fact that the rate of wages
paid in free trade England is below the
rate paid in like industries in this country.

This does not prove the protectionists'
point, it simply emphasizes the difference
in natural conditions between the two
countries. The conditions that affect the
wage rate are similar in the free trade col-
ony of New South Wales to those that
exist in the United States, and as high
a rate of wages is paid in one country as
in the other. The average wages paid to
labor engaged in the protected industries
in this country is no greater under a tariff
of 50 per cent, than were paid when the
tariff was only 15 per cent. It is claimed
that wages in those classes of industries
which receive the benefit of protection
have, on the whole, rather receded than
otherwise as the tariff advanced. Whether
this is so or not, it hardly admits of doubt
that the ultimate effect of the operation of
high tariff duties is to force a decline in
the wages of the working classes.

No one will contend that, as a rule,
employers pay more for the kind and
amount of labor which they require than
is needful to secure it. Laborers discover
that the benefits derived from enhanced
protection do not reach them. Whenever
employers perceive that they can secure
the labor they need at a reduced price,
they propose a reduction of the wages of
their employees. This tendency to reduc-
tion may be checked or prevented in those
instances where it may be inevitable that
a reduction will provoke a strike and the
losses ensuing from this may overbalance
the advantages of a reduction. Barring
the terrorism of the strike and whatever
deterrent effects it may have upon the
mind of the employer, the wages of the
different classes of working men are deter-
mined by competition among working men
for the work to be done. No employer
apportions the wages of his employees
with reference to his own profits, unless
he has adopted the system of profit shar-
ing among them, and instances of this
kind are of very rare occurrence.

Whatever resources or causes may exist
to relieve the sharpness or pressure of
competition on the labor market, will


exert a tendency to maintain a higher rate
of wages than would otherwise exist. Such
a resource exists in this country and some
of the new colonies of Great Britain,
where exceptionally high wages rule, in
the large areas of cheap and fertile lands.
Here the majority of the laboring men
become their own employers, and the
number of those who extract a sturdy and
manly independence from the soil is con-
stantly increasing. Many of the prosper-
ous farmers of this country have been
artisans, mechanics and common laborers.
Approximately, manufacturers and other
employers of labor must pay a rate of
wages equal to the value of a man's labor
on the farm. Labor, by reason of its
mobility, determines a tendency in wages
to a common level, as surely as the fieely
moving particles of water preserve the
level of the oceans. By this I do not
mean that the price of expertness and skill
can ever reach the dead level of that which
commands the services of muscle and
bone. But that in like classes of occupa-
tions, if a higher rate of compensation is
afforded to labor by one employer than
another, the one will be crowded with
applications for employment, while the
other will suffer a diminution either in
quantity or quality. And so of nearly all
classes of employments, where higher
rates of compensation for the labor em-
ployed are afforded, this additional attract-
iveness sets up a competition that brings
them down to the normal level. Even the
professions have become so crowded that
there is only room now at the top.

But what rate of compensation for labor
an employer is required to give is ulti-
mately determined by the average produc-
tive value of men's labor at the base of the
industrial system. Whatever tends to
lower the value of this, strikes at the
wages of all above, and this is the legiti-
mate and inevitable effect of a tariff. Its
purpose and effect is to restrict foreign
trade, to cut off or at least diminish im-
portations, and by necessity affect expor-
tations ; for all foreign trade is barter.

The cotton, wheat, corn, beef, pork and
the numerous other products we sell
abroad are paid for not in money but in
other commodities. Possessing, as we do,
the greatest area of fertile soil under gen-
ial skies of any nation on earth; employ-
ing the vast majority of our own produc-
tive labor in extracting wealth from the
soil, it results that the greatest bulk and
value of our exports consists in the prod-
ucts of the soil. The prices of these at
home depend upon an active market for
them abroad. If we refuse to take the
foreigner's goods he will decline ours. He
will seek his supplies of cotton and wheat
and beef in other lands. This process
has begun and is now going on, receiving
whatever of stimulus can be given to it by
the American tariff. And thus by striking
down the prosperity of the farmer by
reducing the productive value of labor on
the farm, you aim a blow at the wages of
every laborer and every mechanic in the

When England adopted free trade, she
invited all nations to bring their products
to her ports. They came and took away
as much as they brought. With the free-
dom of trade new and large demands
quickly arose, production was stimulated,
tens of thousands of idle hands were set
to work ; wages advanced ; increased
comfort and an improved condition of the
laboring classes were brought about; in-
vention lent her genius to quicken and
cheapen production, and the better nour-
ished body and brain made the Englishman
himself a more efficient machine. Within
the past fifty years England has made
greater material and political progress
than she achieved in the two hundred pre-
ceding years.

Is seems to be a fact now well recog-
nized by political economists that the effi-
ciency of production is in large measure
dependent upon the condition of the
laboring classes, material, intellectual and
moral. Ignorance means stupidity, half
nourished bodies mean sloth, hunger
effaces the feeling of moral responsibility.



Discussing the arguments of American
protectionists, Prof. Cairnes remarks : "I
would ask such to consider what are the
true causes of the high remuneration of
American industry. It will be admitted
that, in the last resort, these resolve them-
selves into one great fact of its high pro-
ductive power. Capitalists and laborers
receive large remuneration in America
because their industry produces largely.
This is the simple and patent fact which
all must acknowledge."

England has never feared the competi-
tion of the low priced labor of other
European countries, but those countries
have always been jealous of the competi-
tion of the comparatively high priced
labor of England. Now it is no part of
the functions of government to guarantee
or specially provide for the prosperity of
one class of its citizens, or the security of
their business and profits. For this can
only be done by invading that equality of
rights among its citizens which is funda-
mental in democracy. In the very nature
of the case protectionism means class
legislation, discrimination, the selection of
one or a class ot industries to be favored
at the expense of the rest. Moreover, it
raises false hopes and expectations. It
may aid in the development of infant
industries but it becomes a formidable
obstacle to their expansion. The only
path of safety, which is also coincident
with the highest interest of the public, is
that which falls within the lines of politi-
cal economy. A government that under-
takes to do more than it should, will be
required by the people to do more than it
can, and will be held responsible for the
failure. It is a dangerous thing to foster
in the minds of the masses of the people
the idea that the government can impart
or withhold prosperity. If crops fail, hard
times pinch and mortgages increase, the
result is attributed to the profligacy of the
government. If crops are very bountiful
and prices drop, it is due to the bulls and
bears, who in a few commercial centers,
buy and sell from each othei' more grain

or stocks than they have on hand to deliv-
er. When the tariff goes up and wages go
down and great strikes occur in conse-
quence, as was recently the case, the men
claim the right to seize and hold forcible
possession of their master's works until he
is coerced into delivering their share of
the plunder. And this claim is advocated
as a right by statesmen upon the floor of
the national congress.

A reaction from the artificial prices of
a boom is owing to a shortness or dearth
of money, and since the government can
issue millions an hour at no expense
beyond that incurred in the operation of
an engine and printing press, it is respon-
sible for the bursting of the boom. The
statute books of the nation and of many
of the states are becoming honeycombed
with legislation of a futile character. The
longer we keep up the pretense that the
government can create prosperity, the
greater will be the number of the short-
comings and sins laid at its door. What,
then, do you insist that we must accept
free trade ? That, doubtless, is a fearful
alternative, but it seems to me to be the
inevitable logic of the principles of democ-
racy. Free trade legislation proceeds up-
on the fundamental idea that what a man
owns is his, that one of the attributes of
ownership is the right to dispose of your
own earnings or property, or use them in
such way as in your judgment will best
promote your own interest and welfare,
that the knowledge and wisdom of sixty
millions of people is greater than the
knowledge and wisdom of four hundred
of them assembled in congress. Further
that, when every man in the country,
knowing best his own needs and situation,
has, without let or hindrance from the
legislative power, so lawfully used his own
as to promote, according to his own best
judgment, his own interest and welfare,
the aggregate of well being and of national
wealth will be best secured. This is the
philosophy of free trade, and the vital
principle of democracy. Protectionism
is the antithesis of this. The principle


and spirit of protectionism is mediaeval.
It is foreign to the spirit and destiny of
democracy. The whole course of western
civilization tends to the development of
personality, to the growth and elevation
of individualism, to the narrowing" of the
sphere of governmental functions. Every
scientific discovery, from that of the rev-
olution of the earth to the origin of
species, and of evolution as the corollary
of the doctrine of the persistence of force.

every mechanical invention and improve-
ment, from the printing press to the steam
engine, every political advance from
Magna Charta to the declaration of Amer-
ican independence, has contributed to the
levelling of ranks and the diffusion of
power. The final realization of the pur-
po,se of democracy lies in the fullest prac-
ticable attainment of the inalienable right
to life, liberty and the pursuit of happi-
ness. James Humphrey.


Hawaiian Annexation.

^y/ T the meeting of the Seminary on
^ February 25th, Mr. O. H. Holmes
was chosen chairman, in the absence of
the regular officers. The subject for dis-
cussion was the Hawaiian situation.

The history and geography of the
islands were discussed by Miss Wymer.
On account of their situation they are of
great value as a coaling station to any of
the great trading nations having commer-
cial relations with the Orient. A review
of the existing treaty relations between the
United States and Hawaii was given by
Miss Humphrey. The present treaty was
negotiated in 1S85 and will continue in
force something over two years. By the
conditions of this treaty the products of
the islands are admitted to the United
States free of duty and similar concession
was made to the United States. The
economic and commercial advantages of
annexation were presented by Mr. Kinzie.
The commercial advantage to the United
States results from the location of the
islands and their remarkable fertility. The
principal ])roducts are rice, coffee, sugar,

cocoanuts, tobacco and nearly all varie-
ties of fruit. At present, about 90 per
cent, of the imports come from the United
States, but if any other power should
obtain possession of the Hawaii islands,
the commercial supremacy of the United
States could not be maintained.

The political side of the question was
presented by Mr. Sherman. The advan-
tages of possessing the islands in case of
war between the United States and an
eastern power are very great. A man of
war could not well carry sufficient coal to
maintain itself for any length of time in
the Western Pacific. The Hawaii islands
present the only practicable solution of
such a difficulty. Our claim is paramount
to that of any other nation and as long
as there is any possibility that England or
Germany may secure a foothold in these
islands, the United States should not
hesitate to annex them. After the reading
of the papers, the question was discussed
until the close of the hour. The advan-
tage resulting to Claus Spreckles from
annexation was mentioned and explained.
T. D. Bennk'J'I', Reporter.



^vj T the meeting of the Seminary on
^^^ February 5th, Mr. H. Fiegenbaum
read a paper on Government Ownership
of Railroads, of which the following is
an abstract.

Ownership and management of railways
by the State is one of the measures sug-
gested to do awa\' with the railroad
wrongs. A few of the advantages claimed
for government ownership are: ( i. ) It
will do away with competition in a field
where competition is undesirable and im-
possible. (2.) It will put an end to the
evils of pooling, stock watering, preven-
tion of legitimate investment, and the con-
struction of parallel and unnecessary lines.
(3.) It will purify politics.

Railroads are a monopoly. While there
are at times sa\ings in the transaction of
a business by a monopoly, when these are
desired that line of business should be
turned o\er to the government, either
local, state or federal, according to the
nature of the undertaking. As at present
managed, only a portion of the public- de-
rives the full benefit from the railroad
monopoly. This result may be partially
attributed to want of competition. Offers
of service are made only for competitive
points and shippers on isolated lines derive
no ad\'antage from competiti\e rates. On
the contrary, local rafes are kept high to
make up for the loss occasioned by the
reduction on through freight.

Closely allied to competition is discrim-
ination. The power of railway managers
to foster or to injure particular traders,
branches of business, or sections of coun-

Online LibraryKansas. UniversitySeminary notes published by the Seminary of historical and political science → online text (page 53 of 62)