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case the right and natural thing is for the people to say, through
their organ, the government, " Go ahead ; build your factory;
put in your machinery ; we will buy of you.'' In so saying
they are acting out their own freedom of choice to the fullest
degree. They are saying, " We choose to have a free choice
between the home and the foreign maker, and so Ave pledge
ourselves that the former shall have a chance to establish him-
self." All fre-edom is won by sacrifice ; the wise and far-sighted
people is the one that will make the sacrifice — that will suffer
the pains of a bloody revolution, as more endurable than the
long, wasting misery that centuries of tyranny inflict. Such a
principle will not be left out of sight when such a people enters
the work-shop and the factory. '

A writer in the Fortnightly Review (London) says: "An observant
journalist has remarked that it is a singular fact that in Austria 'those
who have vigorously struck down every ecclesiastical and political
monopoly throughout the empire are the most vehement advocates of a
restrictive commercial policy, while on the other hand those who are in
favor of free trade are the most ardent supporters of ecclesiastical
privilege.' Austria is not singular in this respect. In France the ad-
vocates of free speech and a free press are restrictionists ; while im-
perialists, as a rule, are free traders. In the United States the abolitionists
or Republicans are avowed restrictionists, while the Democrats are de-
cidedly in favor of free trade. Precisely the same phenomenon may be
observed in the British colonies. In Canada, Australia and New Zealand
the party of progress has always been identified with a restrictive com-
mercial policy, while the Conservatives are the most uncompromising of
free traders. Indeed, it may be said that one-half the entire English-
speaking race are, in one shape or another, in favor of a restrictionist
policy, and of this half the great majority arc advanced liberals. It is
the national creed in the United States, Canada, and the leading Australian
and New Zealand colonies. . . Strange as it may appear, it is neverthe-
less true that it is just because the party of progress in the colonies are
opposed to monopoly in every shape that they are the advocates of re-
striction in regard to commerce. Instead of that policy savoring of
monopoly, they maintain that it has exactly the opposite tendency ; and



IN PEACE PREPARE FOR WAR. 239

their chief ohject in imposing import duties is to put down monopolies,
by extending the sphere of competition."

§ 234. No violent transition from the sphere of the state's
direct duties is needed to carry it into this of its indirect in-
fluence. Indeed, it cannot discharge the former without exer-
cising the latter. It must make large purchases or manufacture
in its own workshops large supplies for the army, navy and other
executive branches (§ 277, note). In either case the choice
bctweeu home and foreign industry is forced upon it. If it
raise large sums by indirect taxation, it must select the method
of imposing these, — whether by excises upon home productions
or duties upon those of other countries.

Its provision for its own safety in case of war involves the
cherishing of such industries as furnish the great necessaries of
national use, and indeed requires their creation. " In time of
peace be prepared for war" is a commonplace of statecraft. Now
in war the government is of necessity a large purchaser of many
sorts of manufactured goods. Foreign commerce is interrupted,
cither entirely or so much so as to render the importation of
these goods — which are contraband of war — difficult and hazard-
ous, and on a large scale impossible. The home manufacturers
that might have supplied them cannot spring up in a night.
The narrowness of vision, the lack of foresight, that prevented
their being called earlier into existence, has its reward in na-
tional perplexity, often in actual defeat.

" How then is it," says Dr. Horace Bushnell, " that free trade
science is going peremptorily to settle all the great questions of
public economy ? For if we set ourselves down to it as the test
of economy, and say it is final, we are by and by obliged to ask :
Is there nothing to be done or thought of in the world that is
out of 'economy,' and rightly spurns it? May not the worst
'economy' sometimes be the best? To be fostering modes of
production when the trade-balance shows a disadvantage wears a
bad look certainly as respects the matter of economy. But how
many and vast supplies are wanted that must not be left to the
uncertainties of trade, — where to higgle over expeuse would be



2-10 SOCIAL SCIENCE AND NATIONAL ECONOMY.

even a contemptible weakness ? This is true in particular of all
the supplies that are needed for the equipment of the state of
war. Without these no people is a proper nation, or at least by
any possibility a strong one. These, therefore, we must not
only have, but must have the way of making at any cost."

See Scribner's Magazine for July 1871, article on "Free Trade and
Protection."

235. It is sometimes urged as an argument in favor of unre-
stricted trade, that " the mutual dependence of the nations thus
produced is eminently promotive of the cause of international
peace. It will put the nations under bonds to keep the peace,
by placing each of them in such a relation to the rest that a
war with any other will inflict ruinous losses upon its industries,
and therefore it will create within each a sentiment in favor of
peace, and a class whose interests are bound up with its preser-
vation."

Ah unhappy comment upon this rose-colored theory is found
in the fact that the majority of modern wars have been under-
taken, not for national honor or pride, but for the sake of trade,
— " the fair, white-winged peace-maker." The communities most
at war with the rest of the world have generally been those in
which the spirit of trade predominated — Tyre, Carthage, Venice,
England, &c. A great English military historian and general,
Sir W. Napier, lays it down as a rule that the traders have
begun the wars and the soldiers have ended them (See §§ 274,
291, note).

Furthermore, this argument assumes that war in and of itself,
is the chief thing to be avoided in international affairs. It
leaves out of sight the truth that a just and righteous war may
be the clear vocation of a nation, and the preparation for it the
very highest duty. If unrestricted trade unfits a people for the
infliction of just punishment upon unrighteous nationalities, it
unfits it for one of the very highest ends for which nations exist;
— unfits it for rendering to other nations the very highest
service possible, — the defending them against the unjust
invasion of their rights, or the chastising them into a better



OUR FINANCIAL METHODS. 241

state of mind. Such cases, do, undoubtedly, exist ; but they are
exceptional, and not happy exceptions either. Europe has no
more pitiable spectacle thau the sight of a nation foremost in
•wealth, culture and capacity for just and impartial indignation,
yet bound hand and foot by trade motives, foreswearing its better
instincts, deserting its natural allies, and held back from ex-
erting its just influence upon the world's politics.

Furthermore, the effect of such unrestricted commerce is to
place the weaker and less developed of the two countries at the
mercy of the other. The dependence is never fully mutual and
equal, and in the nature of things cannot be. The one is fully
provided with all the munitions and appliances of war; the other
has all these to seek. Hence the rule of international law now
coming into recognition, that neutral nations are bound to strict
(not merely to impartial) neutrality, as the weaker of the tw r o
nations at war will derive more benefit than the other from the
power of making unreserved purchases on neutral soil. This
fact of the unprepared state of the more backward country can-
not be hid from the other ; in case of a disagreement, it furnishes
a strong motive to overbearing insolence and aggression. It has
been repeatedly alleged as a motive for rushing into hostilities,
never for holding back.

§ 236. A comparative study of the financial methods of dif-
ferent nations discloses circumstances that render discrimination
in favor of the home manufacturer the only fair mode of pro-
ling. One country makes efforts to be rid of the burden of
debt, and to that end imposes a heavy director indirect taxation
upon its people ; another funds its debts in perpetual annuities,
and has uo intention of paying more than the interest. One
country has adopted~a very efficient but expensive system of gov-
ernment by paid and responsible officials ; another possesses and
employs a large class of men of wealth and leisure, upon whom the
work of legislation and the local administration of justice can be
devolved. One country has a very high ideal of the duties and
responsibilities of government, and considers the health and in-
telligence of the people its charge, and. taxes all property-owners
10



2-42 SOCIAL SCIENCE AND NATIONAL ECONOMY.

accordingly ; another leaves these matters to the care and in-
terest of individuals. One country expects in all its people a
certain degree of civilization implying a corresponding expendi-
ture for fitting habitations, clothing, food, education, &c, and
thence an adequate scale of wages to support this expendi-
ture ; another country is satisfied to see large masses of its
population but slightly raised above the brutes, and toiling
for a pittance. One country extends over a vast and sparsely-
settled territory, and this fact adds to all the national ex-
penses ; the other has a small territory with a compact popula-
tion. One country, through force of circumstances, has been
compelled to ask very great sacrifices of its people for the
national safety and defence ; the other has long dwelt at peace.
Any one or more of these circumstances make it just and fair
to compensate for the weight of home burdens by duties high
enough to give the home manufacturer a fair chance. Nothing
could be more unequal than equality of duties in such cases.

These things are not superficial matters that may be adapted
to the economic teachings of every new set of economists. The
national methods of finance are the expression of the nation's
life ; their peculiarities are the expression of that in the nation's
life which gives it individuality and historic distinctness. They
need continual and steady reform, that they may be kept up to
the national standard of right, and the national average of intelli-
gence. But reform is not revolution; it is evolution rather.
In these things there is for every nation a " constitution and
course of nature," whose laws must be learned and followed in
wise change and in wise resistance to needless change.

For these considerations the cosmopolitical school have no
place ; they think their consideration in connection with the
question of wealth and economy an impertinence. They write
as if there were no nations, or as if they were merely local and
conventional arrangements for police purposes. With Cobden,
they would gladly see all boundary lines wiped from the map;
and like him, they regard nations as necessary evils. Their
arguments are never based on the necessities of national life,



TARIFFS AND THEIR METHODS. 243

and the means to attain the largest and fullest degree of that
life; hut on "the maximum of production throughout the
world." They know of no interest save pocket-interest, whereas,
as Mr. Mill well says, a man's interest is whatever he takes an
interest in. And every good citizen will take an interest in the
industrial development and independence of his own country.
We might, as Dr. Bushnell does, concede the force of all their
economic arguments, and then reject their conclusions on higher
grounds.

So much for arguments drawn from political theories and the
replies to them. From these we pass to'the purely economic argu-
ments in favor of restrictions upon foreign trade, and first to
those that would justify the imposition of those restrictions per-
manently, if need were. But first of all as to the methods of
restriction.

§ 237. The state, then, possessing the right to discriminate
between home and foreign industry, and being prompted to do
so by reasons of public policy as well as by a desire to promote the
welfare of its citizens, has to make a choice of the best means
to that end. Tt might directly encourage the worker at home
by a system of bounties and subsidies; but this plan is now
rally rejected as too artificial, and as open to great abuses.
Or it may prohibit the importation of foreign wares, or discour-
age their importation by duties that will raise their price high
enough to enable the native manufacturer to compete with them
in the home market. Prohibitions are now properly regarded as
unwise ; discriminating duties are adopted as preferable by nearly
all civilized nations.

Another question of method is the choice between specific and
ud ml,, rem duties. The former exact so much for each pound,
yard's length or square loot of all goods of a given kind, with
no reference to their comparative fineness or value. The latter
taxes each class of goods a certain percentage on their sworn
value. The specific form of duty is preferable, (1) because its
proper amount is most easily and surely ascertained. It enables



244 SOCIAL SCIENCE AND NATIONAL ECONOMY.

government to dispense largely or altogether with " Custom-
house oaths ;" renders false invoices as good as useless. (2)
Because it gives the largest protection to the manufacture of
those cheaper and bulkier articles which are of prime necessity
to the nation. It thus furnishes a primary school of industrial
education, in which the working classes and their captains of
industry learn to make cheap things before they attempt those
that require finer elaboration. (3) It diminishes smuggling.
To bring in goods without paying duty requires a degree of con-
cealment that is impossible iu the case of the coarser wares;
while the smallness of the duty upon the others, in comparison
with their cost, makes it not worth while to run the risk of
detection. (4) It does not, as ad valorem duties do, intensify
the fluctuations iu the price of an imported article, by admitting
it at a low duty when it is cheap, and imposing a higher duty
when it is dear. Especially in times of crisis and distress, when
an industry is ready to perish, it does not, as ad valorem duties
do, invite foreign rivals to complete the ruin, by allowing their
goods to enter almost duty free ; but by its unvarying defence
against such assaults revives the fainting industry.

§ 238. Protective duties yield for a considerable period a
large revenue to the state, but that is not the object of their
imposition. Duties for revenue, i. e., too low to be protective,
in spite of their appearauce of moderation, are highly unjust.
They inflict all the hardships of indirect and unequal taxation,
without even the purpose of benefiting the consumer. Duties
for protection, while they bring large revenue, have 'another
purpose, and, as we shall see, benefit the consumer to a far
greater extent than they tax him, while their amount is equally
available for public uses. Their object is their own abolition,
for they aim at such a development of the national industry as
shall render impossible the importation of the dutiable articles.
To impose revenue duties is to accept indirect taxation as a
permanent method of finance j to impose protective duties
is not.

§ 239. It would, of course, be absurd for a young or a poor






THE INCIDENCE OF DUTIES. 245

country to begin at once the production of everything that her
people need. The limited amount of her capital and of her
labor would not allow of this. Those coarser articles whose cost
of transportation is great, and which a specific system of duties
will do most to exclude, should be the first object; afterward
those that are finer.

But even classes of goods that are under very heavy duties
will continue to be imported for a good while. It will ordinarily
take the lifetime of two generations to acclimatize thoroughly a
new manufacture, and to bring the native production up to the
native demand. It is from such imported goods as these that
the customs' revenue is derived ; and they will sell at a higher
rate than before the duty was imposed. The very object of the
duty was to raise the price of the foreign article ; if it failed to
do so, it would offer no protection. But it is a great mistake to
suppose that such articles will sell for their old price plus the
duty. A part of the burden will fall on the foreign producer
and the importer. The amount of it that they will have to pay
will generally be proportional to the amount of home production.
When such duties are first imposed and the amount of native
competition is very slight, nearly if not quite the whole of the
duty is paid by the consumer; but the amount thus paid dimin-
ishes steadily as home production increases, and when the latter
is nearly up to the home demand nearly if not quite all the duty
will be paid by the importer and the foreign manufacturer.
Hence the outcry raised by these two classes against protective
duties ; it is not from love of the consumer, nor yet from jealousy
of the profits made by the native manufacturer, but from an un-
pleasant consciousness that through his efforts the amount of
revenue that they are furnishing to the government is steadily
increasing in proportion to their whole busiuess, and to the re-
duction of their profits.

Here are two bits (if information and confirmation from British trade
circulars. A Sheffield steel firm says: " We have a very large steel trade-
in America, amounting to a large proportion of our whole business, and
in that market there is, from various causes, much competition ; and
these two causes, large trade and competition combined, have induced us



246 SOCIAL SCIENCE AND NATIONAL ECONOMY.

to be satisfied with a smaller average of profit there than we hare real-
ized on the average in our other markets." A Loudon iron firm explains
to its producing customers: " With the present out-turn, a material re-
duction of the American duty, or something equally significant, is
necessary to advance the price of iron above £7 a ton." The \i:y\ threat
of a protective duty, i. e., the threat to foster native production and com-
petition, has often had the effect to lower the price of the foreign article.

There are some very evident inferences from this fact. (1)
The amount of a duty is not always nor often the same as the
amount of the protection it offers. If the duty be seventy-five
per cent., and the foreign manufacturer pay fifty per cent, of it, —
i. e., if he sell his goods only twenty-five per cent, higher than
before it was imposed, then the protection afforded is twenty-five
per cent, and no more. Allowance, therefore, must be made for
this fact in imposing protective duties. A duty is protective in
intention when its object is to promote home production ; it is
protective in effect, whether it be low or high, when it does
raise the price of the foreign article sufficiently to give the
native producer a chance in the home market. It must there-
fore be so high that the foreign producer and his agents cannot
pay it, and still have a sufficient profit on sales.

(2) Nothing, therefore, can be more misleading than some of
the wooden calculations made by the opponents of protective
duties. They reckon up the entire consumption of the home-
made article, and calculating — in the case supposed — that it sold
for seventy-five per cent, more than the foreign article would
have cost had there been no duty, they assume that the vast
sum thus reached went into the pockets of native manufacturers,
and was " taken out of the pockets of the consumer."

For another false assumption in such calculations — the assumption that
the home producer does or can charge up to the amount of the protection
he receives — see $ 249. Henry Clay used to tell a story of a Free Trade
orator haranguing from the stump a crowd of Kentuckians. '" Do you
know, sir," said he to an attentive hearer, " that that coat on your back
cost you a half a dollar a yard more than it need, because of this accursed
tariff?" " Wal, stranger," was the reply, drawled out slowly, " I reckon
it must be so since you say it. But this coat cost me by the yard just,
three bits" (three-eighths of a dollar).

(3) The notion that unrestricted commerce gives each nation



THE ECONOMY OF LABOR. 247

simply all the possible advantage that it can reap from the more
advanced industries of others, and that nothing but a fair profit
can be added to the cost of production and transportation, is
utterly untenable. Were this the case, the entire duty would
fall on the consumer from first to last. But in fact, the money
received into the treasury is very largely drawn from the trader's
excessive profits, and not from the consumer in any sense.

The benefits reaped by a nation from a restrictive policy may
be considered under four heads.

§ 240. Firstly, it is a wise economy of the labor of the people.
Now the national economy of labor consists, not in getting on
with as little as possible of it, but in finding remunerative em-
ployment for as much of it as possible. If labor be the source
of wealth, — and this is one of the few points on which all are
agreed — then the country must advance to wealth that has work
for all who are willing and able to do it. To find work for all is
one of the greatest problems that a nation has to solve ; none has
yet attained to a complete solution of it; but none is so far from
its solution as the country in which agriculture is the only em-
ployment open to the great mass of the people. For farming, as
a rule, furnishes employment only to robust men and in the
open air; all others — women, the young, the sickly — are left in
idleness ami dependence upon the farming class.

In districts of our own country, especially in the South,
where agriculture is the only industry, a considerable portion of
the people live on the verge of starvation for want of work.
Maine was a by-word for poverty sixty years ago, when her
people were either farmers or lumberers. Since she began to
utilize her immense water-power, she has left many other states
behind her. ami has now work for all her people. Australia is
a young country, with plenty of land, large natural resources,
and no excess of population, and but a small percentage that are
incapable of hard work. Yet she has been greatly perplexed to
find employment for that percenta-e. especially for the young.
A highly-respectable farmer from Ulster, who went thither about
1840, could get nothing for his boys to do, and actually made



248 SOCIAL SCIENCE AND NATIONAL ECONOMY.

sailors of them to save them from idleness and worse. For this,
among many good reasons, most of the Australian colonies foster
home industries by restrictions on foreign trade.

The greater the variety of the industry the more the demand
for labor and the better the laborer is paid ; for instead of two
workmen competing for every job, we will have two masters, two
sorts of masters running after every workman. " There is rarely
competition for labor on the part of employers within a trade, in
a particular place, unless there be competition for it from with-
out. And in the absence of competition from without, what
competition there is on the part of employers within a trade
often tends to lower wages" (Cliffe Leslie). Thus in the north-
ern and eastern shires of England, and the three north-eastern
counties of Ireland, work is far better paid than in the other
parts of those kiugdoms, because in those agriculture and manu-
factures are competing for labor, while elsewhere there is little
or nothing else than agriculture. So also in the Walloon pro-
vinces of Belgium, as compared with the Flanders provinces.
In the latter farming has been brought to perfection, but indus-
tries exist only on a petty scale, for want of coal and water-
power, and there is a considerable amount of misery. In the
Walloon provinces farming is backward in comparison, but great
industries abound, wages are nearly twice as high, and pauperism
exists to hardly any extent. The notion that labor will in such
cases transfer itself from the worse to the better market, is not



Online LibraryRobert Ellis ThompsonSocial science and national economy → online text (page 22 of 38)