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question objectively and without prejudices certain facts are
patent.

It may be admitted that the imports, which during the
years 1834-1837 had increased out of all proportion, were a
disturbing element in the national industries, or that they
were one of the co-efficients of the crisis : it is admitted by
Wright, an impartial observer.* But it cannot be stated with
certainty that this increase was caused by the reduction of
duties ; since (as Taussig opportunely observes) the reductions
made in those years were very slight, the important reductions
not having been effected till after 1840. Nor can it be denied
that the crisis in those years was chiefly brought about by

^ Vid^ his most interesting essay upon the circulation of wealth in the
United States, preceding Walker's translation {Bihl. dtXV JScon, Serie 3% voL i.)
^ Vide Comparative Wages, etc., p. 192.



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CHAP. V CAUSES OF THE COMMERCIAL POLICY 197

other factors : such as over-speculation, unlimited credit, an
excessive circulation, a bad harvest, etc.^

That it was the protective tariff of 1842 that put an end
to the crisis, and caused the prosperity of the following years,
as the protectionists maintain, and as Wright himself insinu-
ates,* to a certain extent, appears to us a rash conclusion, for
it is evident that a crisis occasioned by transitory causes
such as those in question, could not be of long duration,
and that in a vigorous country like the United States,
prosperity would necessarily return of its own accord.
Taussig,' however, admits that protection in the years 1842-
1846 may have contributed to the re-awakening of commercial
activity : and it is, indeed, easy to understand how it may
have temporarily lightened the difficulties of the most op-
pressed branches of industry; an advantage enjoyed after-
wards, if not by the country, at all events by individual
capitalists.

The same author proceeds to show the effects produced on
certain industries by those duties, which even in this period
of gradually lowering tariffs might be considered as pro-
tective.

We are unable to enter into details, since we have not at
hand sufficient data to discuss Taussig's most minute analysis ;
and we must refer the reader to his excellent work. Some of
the author's conclusions, however, appear to us to confirm what
we have stated in the preceding paragraphs. On the whole,
he notes the limited influence of the duties upon industries
which no longer required protection, and which did not
cease to develop even when the duties were little by little
withdrawn. He affirms, on the other hand, the influence
which the high duties on iron, that lasted in various
shapes from 1831 to 1841, exercised upon the iron trade.
These duties had a protective effect, impeding, or rendering
importation very rare, and raising the price of iron, and thus
keeping in existence antiquated furnaces which would other-
wise have disappeared. But in so doing they did infinite
harm to the country, since they fettered the progress of iron
industry in the United States, and maintained at a high price

^ Vide Taussig, Wright, supra,
* Wright, €<mpartaive Wages, etc., p. 192. * Taussig, p. 119, 120.



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198 THE AMERICAN COMMERCIAL POLICY essay ii

a commodity which is one of the most potent factors in our
civilisation.

The resolute protection from 1842 to 1846 made
these effects all the more marked; and it was only after
1846, under a milder rigiTne, that the iron trade, stimulated
by foreign competition, began to develop rapidly. Protection,
consequently, was hurtful to the country; it injured manu-
factures which now no longer required artificial support ; but
it was of temporary advantage to those capitalists whose
money was sunk in the older processes of production which
they hesitated to abandon, since every transformation is
costly.

And now we pass on to a brief statement of the free-trade
thesis which attributes the prosperity of the period, specially
from 1846 to 1860, to the relative freedom of exchange. That
the giving up of the " American system " resulted in good to
the coimtry appears to us undeniable ; since, as we have seen,
protection had absolutely no longer any raison d'Stre, and had
become injurious, and free-trade was naturally bound to stimu-
late progress on the part of native industries now quite able
to hold their own with those abroad.

The comparative freedom of trade would necessarily be
a co-efficient in industrial progress; but the opinion that
the general well-being — the golden age which the United
States enjoyed from 1846 to 1860 — ^was due to it alone, or
even principally, seems to us altogether one-sided and beyond
the mark.

The United States were passing through a happy epoch
in which all industries, having consolidated themselves, were
being developed to their utmost capacity, and they availed
themselves of the boundless natural resources of the land. The
growth of the American economy was merely the effect of
natural causes, and the general welfare and vitality of trade
were to a certain extent also due to other reasons, such as the
discovery of gold in California ; so that, on the whole, without
under-estimating the benefits necessarily following the removal
of impediments to international trade, we are led to considei:
this relative liberty rather as an effect than as the cause of
the general well-being and industrial prosperity, which no
longer required uncertain and artificial support; an effect



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CHAP. V CAUSES OF THE COMMERCIAL POLICY 199

which none the less became in its turn a cause and an effective
co-efficient of progresa

Nor ought we, all the same, to exaggerate the importance
of international commerce, as it is exaggerated, with the most
misleading results, both by free-traders and by protectionists.
It is observed by Taussig that the alterations in duties during
this period produced far less effect upon industry than is gene-
rally supposed; the development of manufactures proceeded
uniformly, and seems to have been but slightly stimulated by
the heavy duties in 1842, and but little shaken by the more
moderate ones from 1846 to 1857. Generally speaking, the
extent to which the mechanical industries were created and
kept alive by means of the protective system, has been much
over-estimated by the advocates of the latter ; indeed, both the
character and the growth of these industries were far less in-
fluenced by the tariffs than might have been logically
expected^ And the same may be said of the exaggerated
influence attributed to free-trade. Foreign trade is one of
the elements of the economic life of a country, but it is by
no means the most important one ; internal commerce is a far
weightier element. This was insisted upon by Adam Smith,
who, rebuking merchants for considering inland trade merely
as an auxiliary to foreign trade, spoke of it as " the most im-
portant of all, the trade in which an equal capital affords the
greatest revenue, and creates the greatest employment to the
people of the country." ^

Nor must we lose sight of the fact that we are dealing
with the United States ; a vast country increasing rapidly in
population, and all of whose inhabitants naturally looked to
the interior of the land — an immense virgin region — rather
than to foreign prospects. It was above all things the develop-
ment of native resources that would fix the attention of the
American people : and this explains, on the one hand, the
spring of action, the leit-motiv of Carey's protectionist writ-
ings, and, on the other, as protection was now unnecessary,
the comparative indifference with which, as we have already
seen, Americans viewed the tariff question during the whole
of this period.

1 Vide TaHffEist. p. 154. *

2 Wealth of Nations, book iv. ch. i. p. 147, edition of 1791.



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CHAPTER VI

THIRTY YEARS OF PROTECTION ^" THE GOLDEN AGE OF

THE AMERICAN SYSTEM"

(from 1861 TO THE PRESENT DAY)

36. With the year 1861 was inaugurated in the history of
the American tariff policy a new and singular evolution which
has left indelible traces : the free-trade movement, which had
been slowly expanding during the preceding period, and to
which the country seemed readily to adapt itself, was suddenly
arrested. And the United States were plunged at the same
moment into all the horrors of a civil wax and into the
excesses of a protectionist policy that even now, after a course
of thirty years, shows no sign of abatement, and seems to
have broken the tradition, made good by the whole history of
the country, that the same tariff policy could only last for a
few years at a stretch.

The historical facts of this epoch are so close at hand and
so well known that there is no need to recall them : familiar,
too, are the vicissitudes of the America-n tariff policy during
the last thirty years; whilst, on the other hand, the im-
portance of this singular period has, in our opinion, been
inadequately appreciated and but little light thrown upon its
true significance. We shall therefore pass rapidly over the
historical events, in order to dwell at greater length upon
those facts which seem to us greatly to elucidate the nature
and characteristics of modern protection.

Ever since the crisis in 1857 there had been growing in
the eastern States, and particularly in Pennsylvania, a feeling
in favour of protection, which in the 1860-1861 session had



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CHAP. VI CAUSES OF THE COMMERCIAL POLTCY 201

led to the approval of the Morrill tariff, that, under cover of
substituting specific for many ad valorem duties, as a matter
of fact somewhat increased the burden on industrial products,
notably on iron and woollens. But this protective tendency
would in all probability have enjoyed but limited and
ephemeral success had it not been singularly aided by events.
The Morrill tariff had just been passed, when the turmoil
broke out ; it had hardly been applied before Fort Sumter
fell

The tariff question in the United States is, says Ellena,
intimately boimd up with that of the Federal budget ; ^ and
this fact, which we have more than once observed, is to be
met with anew at this moment, and during the following
y^ra The truth is that it was financial necessity that
dictated these excessive duties, which would never, in other
circumstances, have been tolerated by the country.

The needs of the Federal finances during that titanic
struggle gave rise to one of the most curious and complex
financial experiments that have ever been made, and one that
put the great economical vigour of the country to the severest
test. In a very short space of time an enormous public debt
was created, and simultaneously heroic steps were taken for
its extinction ; a forced currency was resorted to, and a rapid
depreciation of paper money ensued ; after having fallen into
desuetude for half a century, internal taxes were revived,
and the result was a system of imposts which for its univer-
sality and singularities has had no parallel in history, nor
is it ever likely to be imitated in the future.* Government
had been seized with a rage for taxation in view of the
financial exigencies; and, by laws passed from 1862 to 1864,
a complicated and curious system of taxation was introduced
that weighed heavily on every kind of manufacture, assessing
in more ways than one production as well as sale, and
confiscating from 8 to 20 per cent of the value of
commodities.* Naturally at a time when all wa43 done to

^ Vide Relaaume della commissione (T inchiesta per la revisione delta tariffa
do^iutle. Parte iridtutriale, Roma, Botta, 1886.

* Vide Wells, * * The Recent Financial, Industrial, and Commercial Experiences
of the U.S.," Cobden Club Essays.

* For further particulars re^irding the imposts levied in the United States
during this period see Wells' work, and especially W. C. Ford, "Internal



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202 THE AMERICAN COMMERCIAL POLICY essay ii

increase the revenue, recourse was had to means for augment-
ing the returns of that which was its most important source,
namely, the customs duties, and in fact, they were successively
raised during the war, and specially in the years 1862 and
1864. The higher duties were, moreover, justified by the
necessity of compensating national manufacturers for the
enormous increase in internal taxation, and enabling them to
compete with foreign rivalry in the unfavourable circimi-
stances in which they then foimd themselves.^

Nevertheless, it is certain that the protectionists then in
power availed themselves of this state of affairs, and that,
under the pretexts mentioned above, they raised the tariff
exorbitantly, the average duties in 1862 amounting to 37"20
per cent, and in 1864 to 47'06 per cent Every increase of
import duties demanded by native producers was granted;
the general welfare was entirely lost sight of, and laws were
made to favour special interests ; and on the foundations laid
by the war and by political corruption was erected the
edifice of absolute protection, fostered by the sentiment of
national exclusiveness and isolation.^

37. At the conclusion of the war the extraordinary
requirements which had given rise to the tremendous taxa-
tion of which we have spoken naturally ceased : the national
debt was regulated, the internal duties were little by little
abolished, and the financial organisation tended to reassume its
normal aspect. Hence, the exorbitant customs tariff, which
necessarily weighed heavily on the country, should like-
wise have been reduced ; but the interests which had grown
up around it were by no means inconsiderable ; the moment
was a critical one, and the protectionists seized the oppor-
tunity of the general perturbation in prices and of the
cessation of the demand for goods on the part of the state, in
consequence of the termination of the war, to oppose every re-
duction, and not only this, but to increase protection by abolish-
ing those duties which had no protective character and raising
the others, so as to deprive the tariff of all fiscal attribute&

Revenue of United States," in Lalor*s Cyclapeedia; also Bolles, Financial
History^ 1861-1885, etc.

' Wells himself admits this.

^ Taussig, pp. 166, 167 ; and Smith and Seligman, p. 14.



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CHAP. VI CAUSES OF THE COMMERCIAL POUCY 203

Bolles^ says, indeed, that up to 1872 requests for a
reduction of the tariff were few ; and that the agitation was
confined to professors of political economy and journalists who
had nothing better to do. But this sally, directed perhaps
against Wells, who in those very years (1868-1870) published,
as Commissioner of Eevenue, his famous reports demanding a
diminished tariff, is more malicious than true, especially when
it is borne in mind that these reports — as Bolles himself
admits — ^made a great impression on public opinion, and that,
in 1872 a reduction of 10 per cent was approved of, not
only on account of the excess of imports, but also on account
of the agitation (resulting from agricultural depression), which
was raised against the tariff in the west.

This, however, was only an apparent concession, since it
dealt almost exclusively with unprotected commodities, and,
moreover, a general and equal reduction effected in such a
manner could be of little use, and laid itself open to being
suddenly revoked at one time or another. In fact, after the
crisis of 1873, when the Federal revenue decreased in pro-
portion to the diminished imports, the occasion was immediately
seized, in 1875, to annul the reduction made in 1872, and
the war tariff, which had been merely aggravated by the
various modifications introduced into it, was restored. And
this state of things lasted almost ten years longer, till 1883,
notwithstanding the attempts made during each session of
Congress to lower the duties.

But, especially in the closing years of this period, the
demands for a reduction of the tariff became more and more
pressing, and encouraged by the ever-increasing surplus
yielded by the Federal revenue, they gathered strength daily.
A commission, appointed by Congress in 1882, bore witness
to the fact that the more enlightened public opinion of the
country and the voice also of those who in former times had
claimed absolute protection for national industry, desired a
reduction of the tariff; and it pointed out that such a reduc-
tion would be not merely a just concession to the national
sentiment and an act of justice to consumers, but would be
likewise substantially beneficial to trade interests generally.
Hence the commission proposed to modify the existing tariff

* Vid,€ work mentioned, p. 452.



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204 THE AMERICAN COMMERCIAL POLICY essay ii

in such a way as to render it protective only in those cases in
which the conditions of labour and of American capital
placed the manufacturers of the United States in a position of
inferiority to their foreign competitors, and to prevent the
undue influence of high duties giving an immoderate and
fatal impulse to production and speculation,^

However, the tariff of 1883, which was voted in conse-
quence of these proposals, brought a very slight amount of
relief; in substance it was the same tariff as before, and it
was certainly not calculated to satisfy the demands of the
western States that claimed a substantial and not a merely
fictitious lowering of duties. The tariff of 1883 was the work
of protectionists, and it was designed to meet the opinion that
was growing in the popular mind against excessive dutiea*
The reductions affected those products especially in which
American industry no longer dreaded foreign competition,
such as the commoner sorts of cottons and wools ; and, on the
other hand, heavier duties were laid on fine goods that were
of greater importance as an article of import.*

So that, the mean reduction in the tariff, according to
Nimmo (the director of Federal statistics), came to barely 5
per cent ; and the duties remained at about 38 per cent.

38. But during the following years, no changes being
made in the tariff, the gradually lowering prices, by aggravat-
ing protection in a system of specific duties, caused a pro-
gressive rise in the percentage duty on imports, calculated ad
valorem, which in 1884 was estimated at 41*61 per cent on
total imports, in 1885 at 45 per cent, in 1886 at 45*55 per
cent, in 1887 at 47'10 per cent. This average was, however,
the result of a great variety of duties extending from 5 to
200 per cent.

In the meanwhile, the necessity to meet that singular
phenomenon — the continuous surplus revenue — occasioned
a fresh revision of the tariff. On the other hand, the
discontent which it aroused, particularly among agricul-
turists, went on augmenting. During the year 1885 the
movement in favour of reduction gained strength by the
democratic victory. A scheme was discussed at considerable

1 BoUes, p. 477.
' Taussig, p. 254 ; and Smith and Seligman, p. 22. ' Taussig, p. 236.



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CHAP. VI CAUSES OF THE COMMERCIAL POLICY 205

length which aimed at the lowering of the duties, and the
exemption of raw materials, including wool But the
protectionists insisted on the general depression of trade,
and in spite of the lamentations of the western farmers,
who complained of having to pay too dearly for their
agricultural implements, clothes, and furniture, the bill was
rejected.

In 1887 President Cleveland sent to Congress the famous
Message, in which he advocated reduction of duties and the
abolition of those on raw materials.

In the 1887-1888 session the question was warmly dis-
cussed in Congress, and the divergent opinions were clearly
defined; the democratic party, in favour of the moderate
diminution of protection proposed by Mills and approved of
by the House, maintained that the duties were excessive and
weighed most heavily on the poor classes, and that, besides,
a great part of the manufactures consumed in the United
States could be produced there as cheaply as in England, and
therefore without any need for protection. Hence they
suggested a modification of the tariflf on the following basis :
the transformation of many specific into ad valorem duties, the
exemption of many products, especially raw materials and
wool, and the lowering of many other duties. It may be
observed that the protection of wool was the corner-stone of
the American system, since it purchased the assent of a large
number of agriculturists to the industrial protection.^ To
Mills' Bill the Senate, where the republican party prevailed,
opposed Allison's Bill, which claimed the resolute mainten-
ance of protection, and at the same time advised the reduc-
tion of the duties on unprotected commodities, or even their
total exemption, in order to effect a diminution in the revenue
— in this way reducing the tariff to a mere instrument of
protection.

The elections of 1888 were decided on a tariff platform,
and the victory of the republicans ensiured the triumph of
protective principles, which culminated in 1890 in the
fisimous MacKinley Bill. But this measure has been so amply

^ The duty on raw wool, says Taussig (vide '' La tariffa Mackinley," in the
Oiomale degli JSconomisti, Borne, January 1891), is the price that American
niAnuiacturers pay to the farmers for the continuation of the protective system.



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206 THE AMERICAN COMMERCIAL POLICY essay ii

discussed by the press of the whole world, that we may be
excused for not going into many details, and confining our
attention to its spirit.

The MacKinley Bill has considerably raised the duties,
especially upon the textile and finer manufactures, to which
the American industries are less adapted, and which are
imported in great bulk : the duty on woollen manufactures has
been raised on an average from 67 to 91 per cent ad valorem,
and in some cases, on the finer products, to 150 per cent ; that
on raw and manufactured metals has gone up from 40 to 80
per cent.^

Some raw materials essential for manufEUStures have been
exempted from duty ; and as a sop to the farmers of the north
and west, high duties have been laid on agricultural produce
(Canadian competition especially being aimed at), tobacco and
raw wool, the duty on which has been further raised from 34
to 40 per cent — this latter being a heavy fee paid, as we have
seen, by the manufacturers for the maintenance of protection,
and which leads consequently to exorbitant duties on manu-
factures.

But putting aside the forms of the tariflf, the predominat-
ing characteristic of the famous MacKinley " Bills " is a spirit
of absolute aversion to foreign importations and to inter-
national trade, an aversion which in the so-called '' Administra-
tive Bill " showed itself in the form of an infinite number of
complicated and extremely vexatious regulations, no doubt
partly designed to prevent fraud, but which none the less
betray the evident intention of discouraging to the utmost
extent all foreign imports.

" Considering these laws, not in their abstract economic
bearing, but in their context and apparent intentions, which
are revealed by countless particulars," said an American news-
paper, quoted by Moireau, "it would almost seem that the
chief and better part of the assembly of the richest country in
the world was inspired exclusively with the strange idea that
the importation of foreign commodities was an immoral traffic,
and that the merchants who effect it are criminals, or little
less."

1 Vide Moireau, " Les Bills MacKinley," in the BewA des deux Mondea, 1st
July 1891 ; and Taussig, article quoted.



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CHAP. VI CAUSES OF THE COMMERCIAL POLICY 207

And this strange idea of destroying or crippling inter-
national commerce was even quite frankly stated in Congress ;
for, an opponent of the tariff having said that he did not
understand on what principle its supporters voted the expenses
for the maintenance of lighthouses, Senator Hiscock abruptly
replied that were it not for the coasting-trade he would
willingly see every beacon extinguished on the shores of the
United States.^

But we are not arguing at the present moment ; we are
only stating facts, and strange facts they are forsooth !

It may be well to point out, in conclusion, that a month
after the MacKinley Act had been in force, the republican pro-
tectionist party met with a rebuff at the general election for the
House of Eepresentatives ; it was occasioned by various poli-



Online LibraryUgo RabbenoThe American commercial policy: three historical essays → online text (page 21 of 42)