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William D. (William Darrah) Kelley.

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REASONS






FOE ABANDONING THE THEOEY OP



AND



ADOPTING THE PEINCIPLE OF



Addressed to the Farmers and Working Men of the United States.



BY



WILLIAM D. KELLEY, M. C.



REPRINTED FROM THE AUTHOR S " SPEECHES, ADDRESSES AND LETTERS ON INDUSTRIAL AND

FINANCIAL QUESTIONS."



PHILADELPHIA :

HENRY CAREY BAIRD,

INDUSTRIAL PUBLISHER,
406 WALNUT STREET.

1872.



REASONS FOR ABANDONING THE
THEORY OF FREE TRADE.



IN offering this volume to the puMic it is proper to state
that I make no pretension to a critical knowledge of litera
ture or rhetoric, and that, when preparing the papers it con
tains, I did not suppose they would ever be collected for
republication. They are expressions of opinion called forth
by occasions ; and, as the reader will observe, not unfre-
quently in the excitement of current debate in the National
House of Representatives, or in response to invitations to
address popular assemblies under circumstances that pre
cluded the possibility of reducing them to writing in advance
of their delivery. It is proper also to say that I am not
wholly responsible for their publication in book form, inas
much as they have been collected and annotated in deference
to the judgment and wishes of citizens of different sections
of the country, who, though strangers to each other and en
gaged in pursuits involving apparently conflicting interests,
agreed in persuading me that by this labor I might render a
service to those of my countrymen who are engaged in farm
ing or who depend on their labor for the means of support
ing their children while giving them that measure of educa
tion without which no American citizen should be permitted
to attain maturity.

While I regret some expressions in the colloquial portions
of the Congressional speeches, and would have omitted them
could it have been done without impairing the argument, I
find no reason to question the soundness of my positions.
The theory that labor the productive exercise of the skill
and muscular power of men who are responsible for the faith
ful and intelligent performance of civic and other duties is
merely a raw material, and that that nation which pays least
for it is wisest and best governed, is inadmissible in a de
mocracy ; and when we shall determine to starve the bodies
and minds of our operatives in order that we may successfully
compete in common markets with the productions of the
under-paid and poorly-fed peasants of Europe and the pau
pers of England, we shall assail the foundations of a govern-

* This originally appeared as the Introduction to " Speeches, Addresses, and
Letters on Industrial and Financial Questions."



ment which rests upon the intelligence and integrity of its pea-
pie. To defend our country against this result, is the office
of a protective tariff, and for this duty it alone is sufficient.
This was not always my belief. My youthful judgment
was captivated by the plausible but sophistical generalities
by which cosmopolitanism or free trade is advocated, and
my faith in them remained unshaken till events involving
the prostration of our domestic industry, and the credit not
only of cities and States, but of the nation, demonstrated
the insufficiency or falsity of my long and dearly cherished
theories. In 1847, I had seen with gratification the protec
tive tariff of 1842 succeeded by the revenue or free trade tariff
of 1846. To promote this change, I had labored not only with
zeal and industry, but with undoubting faith that experience
would prove its beneficence. A number of remarkable circum
stances conspired to promote the success of the experiment.
The potato rot was creating an unprecedented foreign de
mand for our breadstuffs. It was then ravaging the fields
of England and the continent, having already devastated the
fields, and more than decimated the people of Ireland, who,
to escape starvation, were fleeing en masse to this country.
The gold fields of Australia and California had just been dis
covered, and promised, by increasing the circulating medium
of the world, and concentrating many thousands of emigrants,
who would engage in mining, in countries without agricul
ture or manufactures, to create great markets for our produc
tions of every kind, thus increasing our trade and quickening
every department of industry. Beyond all this, however,
and, as I afterwards came to understand, as a result of the
condemned protective tariff, in conjunction with recent im
provements in our naval architecture, our commercial marine
was growing rapidly, our ship builders were prosperous, and
our ship owners were receiving as compensation for extra
speed a shilling a chest in advance of English freights for
carrying tea from Hong Kong or Canton to London. Each
of these circumstances was a good auguiy for the success of
a tariff for revenue only. Going into effect under such favor
able conditions, it must, I believed, procure for our farmers
cheap foreign fabrics and wares, and secure a constantly in
creasing market for the productions of their farms ; and by
enlarging our share in the carrying trade of the world compel
the rapid construction of ships and steamers, whose employ
ment would increase our receipts of coin and immigrants.
Trade being so nearly free, we must in a few years see the
ships of all nations coming to New York for assorted cargoes,
and our commercial metropolis would then become the finan
cial centre of the world, in which international balances would



be settled. That these were but a small part of the great
results my theories promised will appear to any one who
will refer to the annual reports of the then Secretary of the
Treasury, Robert J. Walker, who was not more sanguine
than I, and whose statements of the general prosperity that
would flow from a revenue tariff were as positive and rose-
tinted as those with which Messrs. Atkinson and Wells now
beguile their followers.

Were we early revenue reformers worshippers at false
shrines, or did the sequel approve our faith? History
answers these questions with emphasis. It needed but a de
cade to demonstrate the folly of attempting to create a mar
ket for our increasing agricultural productions, and to
develop our mining and manufacturing resources by the
application of the beautiful abstractions disseminated by
Free Trade Leagues. It was just ten j^ears after the
substitution of the revenue tariff of 1846 for the protective
tariff of 1842, that the general bankruptcy of the American
people was announced by the almost simultaneous failure of
the Ohio Life and Trust Company, and the Bank of Pennsyl
vania, and the suspension of specie payments by almost
every bank in the country. In that brief period, our
steamers had been supplanted by foreign lines, and our
clipper ships driven from the sea, or restricted to carrying
between our Atlantic and Pacific ports. At the close of
that brief term, the ship-yards of Maine were almost as idle
as they are now when railroads traverse the country in
all directions and compete with ships in carrying even such
bulky commodities as sugar, cotton, and leaf tobacco ;* and
while the families of thousands of unemployed workmen in
our great cities were in want of food, Illinois farmers found
in corn, for which there was no market, the cheapest fuel
they could obtain, though their fields were underlaid by an
inexhaustible deposit of coal that is almost co-extensive
with the State. Capital invested in factories, furnaces,
forges, rolling mills and machinery was idle and unproduc
tive, and there was but a limited home market for cotton or
wool. Taking advantage of this condition of affairs, foreign
dealers put their prices down sufficiently to bankrupt the
cotton States, to induce many of our farmers to give up
sheep raising, and to constrain mair^ thousand immigrants
who could not find employment to return to their native
countries. 1847 had been a good year for farmers, mechanics,
miners and merchants ; but 185T was a good year for sheriffs,



* See figures from the report of Mr. Nimmo, Chief of Tonnage Division, in
aote, page 431.



6

constables and marshals, though few were purchasers at their
sales except mortgagees, judgment creditors, and capitalists
who were able to pay cash at nominal prices for unproductive
establishments, and hold them till happier circumstances
should restore their value.

Not one of the glowing predictions of Political Economy
had been fulfilled, and the surprise with which I contemplated
the contrast presented by the condition of the country with
what it had been at the close of the last period of protection,
amounted to amazement. Nor did my cherished theories
enable me to ascertain the cause of the sudden and general
paralysis, or suggest a remedy for it. Yet I could not
abandon them, for, as their ablest recent American champion,
Mr. Edward Atkinson, of Boston, in his article in the Atlantic
Monthly for October, says of the details of the Revenue Re
form budget, they were " simple, sensible, and right." Was
not each one a truism that might be expressed as a maxim
an indisputable proposition the mere statement of which es
tablished its verity ? To prove that they were not responsible
for the prostration of our industries, the want of a market
for our breadstuffs, and the widespread bankruptcy that pre
vailed, required the enunciation of but one of them : CUS
TOMS DUTIES ARE TAXES.* No one can dispute this proposi
tion, for the people pay them, and the Government collects
them, and not only may but should raise its entire revenue
through them. Surely nobody could have the temerity to
assert that an industrious and prosperous people could be re
duced to idleness and bankruptcy by the repeal or reduction
of taxes, and thus charge this national disaster to free trade
and the doctrinaires who had kindly taught us Political
Economy, and induced us to abandon the protective system.
The case was clear. Yet, strange to say, perfect as the de
monstration seemed to be, I was forced by the condition of
the country to doubt and ask myself whether, in some occult
way, the reduction of the rate of duties might not have had
something to do with producing it. The results promised
by the teachers of my cherished science, and those attained
by experiment, were irreconcilable, and I was constrained to
ask myself whether it might not be possible that Political
Economy was not an exact an absolute science, the laws
of which were equally applicable to all nations, without re
gard to the conditions and requirements of the people, or
the extent, variety or degree of the development of their re
sources ? It was easier to harbor this doubt than to believe
the alternative, which was, that the Almighty had not put

* See Dr. Bushnell, in note, pages 317, 318.



production, commerce and trade in the United States under
the government of universal and immutable laws, but had
left them to the control of chance. This conclusion being
inadmissible, there was nothing left but to waive the further
consideration of the subject, or to withdraw my theories from
the dazzling light of abstract reason, and examine them
under the shade of present experience.

It is a cardinal maxim among the adherents of free trade

that TWO MARKETS IN WHICH TO BUY AND SELL ARE BETTER

THAN ONE, and I could not dispute it ; but when in the pro
gress of my re-examination, I announced it to an intelligent
protectionist as indisputable, he admitted that it was so.
"But," said he, "where is the evidence that free trade is
the road to two markets for the United States ? " In
endeavoring to answer this question satisfactorily to myself
it became apparent that I had evaded the real point at
issue. Both parties to the controversy agree that two mar
kets are better than one. But the protectionists say, " Do
not risk the loss or diminution of the home market afforded
by our people when fully employed and well paid, by at
tempting to secure another, in a direction where success will
be, to say the least, exceedingly doubtful ; " the free traders
saying, " Court foreign trade by all means, and as you
are sure of the home market, you will thus secure two."
Which are right ? To determine this, we must ascertain
whether trade between nations is reciprocal or nearly so.*
To settle this question, I made a thorough and searching
appeal to the trade statistics of our own and other countries,
and ascertained that the amount of our productions con
sumed by the manufacturing nations of Europe has in no
degree, in any year, depended upon the amount of their pro
ductions consumed by us ; but on the contrary, that they
never took an equal amount, and frequently, when we were
taking most from them, took least of everything but cotton,
which they could not obtain elsewhere, from us. Thus it
had often occurred that when our store-houses were being
gorged with productions of the underpaid workmen of Eng
land, she, taking gold and silver from us, had gone to
Prussia, Germany, Austria, Turkey, and France, who bought
but little from her, and the chief diet of whose laboring
people consisted of rye bread, potatoes and garlic, for her
breadstuffs. This examination further showed that the
amount of breadstuffs England will ever take from us is
measured by the slight deficiency she may expect to experi
ence after having exhausted the markets of those lower priced

* See extract from Kirk s Social Politics, in note, page 186.



countries, whose people are suojects, and whose wages mark
the minimum on which families may subsist. When ^Esop s
stupid dog snapped at the shadow in the water he lost his
bone ; and the investigation convinced me that the attempt
to secure a second market by reducing our customs duties
had destroyed our home market, but opened no other for
any of our productions except gold and silver, and State and
corporate bonds. It had given England, with her low rates
of wages and interest, two markets in which to sell, and by
destroying our home market for grain, an additional one in
which to buy ; but had deprived us of the one on which,
under an adequate system of protection, we could always
depend, as has been shown by the uniform general prosperity
that has prevailed since the Merrill tariff of 1861 went into
effect. Thus it appeared that the fallac3 - was not in the ab
stract proposition which neither party disputed, but in the
assumption that free trade would insure us two markets.

Kindred to the foregoing proposition, and equally unde
niable as an abstract truth, seemed this other : You SHOULD
BUY WHERE YOU CAN BUY CHEAPEST.* Yet we had been doing
this for ten years, and were bankrupt. This condition of affairs
could not, it seemed to me, be the result of reduced rates of
duties, and the payment of reduced prices for what we had
consumed. What process of reasoning could show these
facts to be related as cause and effect ? England could sell
us railroad bars to lay over our wide stretches of limestone
country, and our immense fields of coal and iron, at lower
prices than, in the undeveloped condition of our resources,
and with our higher priced labor and money, we could pro
duce them ; and we had bought our supply from her. With
her accumulated capital, machinery, skilled labor, and her
lower wages, she could also spin and weave cotton and wooi,
and make the cloth into garments cheaper than our country
men could, and we had bought from her our clothes, or the
cloth from which to cut them. So, too, she could sell us
chemicals, prepared drugs, pig-iron, raw steel, and an im
mense number of other commodities for less money than we
could produce them ; and we had gone to her markets and
bought them where we could buy them cheapest. Mean
while, we had mined hundreds of millions of dollars worth of
gold and silver; had raised unprecedented crops of cotton,
tobacco, and breadstuffs ; had produced immense supplies of
naval stores and other exportable commodities ; and had,
withal, issued hundreds of millions of interest-bearing bonds,
by which our future productions and those of our posterity

* See Dr. Bushnell, in notes, pages 285 and 354.



9

were mortgaged. Yet, strange to tell, in spite of the lower
duties paid on our imports, and the lower than American
prices at which we had procured our supplies, we had not
gold and silver enough to serve as a basis for a redeemable
currency, and being, in many instances, unable to pay the
interest on our bonds were sued and sold out by our English
friends, to whom our gold, silver, and bonds had gone. We
were, however, rich in one class of commodities the produc
tions of the farm. Of these the people of the Western States
had a superabundance. It was, howeA 7 er, unfortunately, not
possible to make them available, as our English creditors
would not take them even in payment of debts unless we
would, after paying for their transportation to the sea-board,
let them have them at the low prices at which they could
obtain like articles which had been produced by the ill-fed
peasants of Russia, Prussia, Austria, Hungary, and Turkey.
Than to do this it was better for farmers in the extreme
West to let their crops perish on the field.

Our condition was anomalous. There was no element of
wealth, or of the conveniences of life that could be produced
by a reasonable amount of labor outside of the tropics of
which we did not possess greater stores in the form of raw
materials than any other nation ; and of the productions of
the farm our supply was so superabundant that some of us
were, as I have said, using corn for fuel ; yet, our manu
facturing operatives were poor and unemployed, our farmers
were unable to pay for past purchases or fresh supplies, and
our merchants and banks, involved in the common fate, were
unable to meet their obligations. Did this strange ex
perience prove that it is not best to buy where you can buy
cheapest ? No. But it did prove that money-price is not
the test of cheapness ; and that we buy more cheaply, though
the nominal price of each commodit} 7 be higher when we buy
what we consume of those who will buy what we produce at
fair prices, than we do when we buy at lower prices for cash,
or on credit, and permit our productions to perish for the
want of a market. Thus did deductions from unquestion
able and present experience demonstrate the fallacy of the
system of "established principles," which I had cherisfied
as a sufficient economic creed.

The terrible ordeal through which the working classes of
England are now passing, is constraining her statesmen and
scholars to bring the prevailing system of Political Economy
to the test of experience, and one of these scholars has been
bold enough to deny not only the policy, but the morality of
the proposition I have just considered. Mr. David Sj me, in
a well-considered and powerful article on the " Method of Po-



10

litical Economy,- in the Westminster Beview for July, 1871,
which has come under my notice since the foregoing was
written, says :

"A close investigation will, indeed, lead to the conclusion
that the spirit of the moral law is incompatible with the
modern economic doctrine of buying in the cheapest, and
selling in the dearest market. For a scrupulous sense of
duty will often compel a man to act contrary to his own
personal interests. Such a man will conduct himself in his
business relations on the strictest principles of honor and
fair dealing. He will refuse to take an advantage when the
law may permit it, when, by so doing, he might prejudice
the interests of others. He will not take all he can get, and
give as little as he can ; but he will give as much as he can
afford, and take only what is fair and equitable. This is not
Utopianism, but the true spirit of the moral law.

" If, moreover, we consider man in the social state, we shall
find that the individual is bound to recognize the interests
of others as well as his own. He cannot, even if he would,
be guided in his social relations by an exclusive regard for
his own interests. In seeking his own advantage he must
be careful to do nothing that might in any way IDC injurious
to his neighbor. He must not sell a spurious article for a
genuine one, nor a deleterious compound for a wholesome

one. He must not use false labels or unjust weights

Economic science recognizes the existence of the social
state, and the social state presupposes the existence of the
social virtues honor, honesty, and a regard for the feelings
and rights of others."

It was not easy to abandon opinions I had cherished
through so many years, and in which my faith had been so
implicit, but it was still more difficult to accept the oppo
site system, that of protection, which I had so often de
nounced as false, selfish, and exclusive. Nor did I do this
hastily: more than two years had been devoted to the
writings of the ablest advocates of both systems, and still I
halted between them. Meanwhile, it became apparent to
me, not only that Political Economy was not a science, but
that it was impossible to frame a system of abstract economic
propositions which would be universally applicable and bene
ficent ; and, further, that the same principles could not be
applied beneficially to England and the United States. The
conditions of the two nations are not the same, but are in
striking contrast. England is a small island, but the United
States embraces almost the entire available territory of a
continent. The former is burdened by an excess of popula
tion, and vexed by the question as to how she shall dispose



11

of the excess ; but our great need is industrious people, and
with us the question is how can we increase immigration. She
has to import food for half her people, and her foreign trade
is to her what seed-time and harvest are to the countries from
which she procures the breadstuifs she requires but cannot
produce ; but were they on our soil, we could feed ten times
the number of her whole people ; and even while I write, the
merchants of Minnesota, Iowa, and other northwestern States
are suffering financial embarrassment because the farmers
they supply cannot find a market for their crops. She is
dependent on foreign countries for most of the raw mate
rials she consumes ; but we have within our limits exhaust-
less stores of every variety not dependent upon tropical heat
for their production. Her resources are ascertained and
developed ; but ours await development, and in regions, any
one of which is larger than all western Europe, including
the British Islands, await definite ascertainment. Her popu
lation is compacted within narrow limits, and her railroads are.
completed and paid for; but our people are settled sparsely
over half a continent, and most of our system of roads, for
which the capital is yet to be produced, is to be constructed.
The charges for transportation within her circumscribed and
populous limits are very light ; but over our extended and
thinly-settled country they are necessarily heavy. Her facto
ries were erected and supplied with machinery while she main
tained the most rigid sj^stem of protection the world has
ever seen ; but ours are to be built as experiments in the
face of threatened free trade which would involve a more
unequal competition than any against which she defended
hers by protective duties and absolute prohibitions. Her
average rate of interest is 3 per cent, per annum ; but ours
is never less than 6 per cent, per annum, and in large sec
tions of the country is often 3 percent, per month. The great
body of her laborers, even since the recent extension of the
suffrage, are subjects without civic duties ; but ours are citi
zens, and liable to such duties. She pays the daily wages of
her workmen with shillings ; but we pay ours with dollars
worth four shillings each, and give many classes of them
more dollars than she does shillings : It is, therefore, impos
sible that the same economic polity can be applied with equal
advantage to countries whose condition presents so many
and such important contrasts.

Ten years under a tariff which levied the lowest rates of
duties consistent with the purpose of raising by imports the
amount of revenue required by the current expenses of the
government, sufficed to destroy the industries and credit of
the American Deople. The immense advantages England



12

possesses in manufactures and trade have enabled her to with
stand the untoward influence of free trade for a longer period
than we were able to ; but at the end of a quarter of a cen-
tmy it has become apparent that even the mistress of the seas
and the work-shop of the world cannot, at less cost than the


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Online LibraryWilliam D. (William Darrah) KelleyReasons for abandoning the theory of free trade and adopting the principle of protection to American industry → online text (page 1 of 4)