Front Page Titles (by Subject) CHAPTER II.: PROTECTIONISM EXAMINED ON ITS OWN GROUNDS. - Protectionism: the -ism which teaches that waste makes wealth
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CHAPTER II.: PROTECTIONISM EXAMINED ON ITS OWN GROUNDS. - William Graham Sumner, Protectionism: the -ism which teaches that waste makes wealth 
Protectionism: the -ism which teaches that waste makes wealth (New York: Henry Holt and Company, 1888).
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PROTECTIONISM EXAMINED ON ITS OWN GROUNDS.
20. It is the peculiar irony in all empirical devices in social science that they not only fail of the effect expected of them, but that they produce the exact opposite. Paper-money is expected to help the non-capitalist and the debtor and to make business brisk. It ruins the non-capitalists and the debtors, and reduces industry and commerce to a standstill. Socialistic devices are expected to bring about equality and universal happiness. They produce despotism, favoritism, inequality, and universal misery. The devices are, in their operation, true to themselves. They act just as an unprejudiced examination of them should have led any one to expect that they would act, or just as a limited experience has shown that they must act. If protectionism is only another case of the same kind, an examination of it on its own grounds must bring out the fact that it will issue in crippling industry, diminishing capital, and lowering the average of comfort. Let us see.
Assumptions in Protectionism.
21. Obviously the doctrine includes two assumptions. The first is, that if we are left to ourselves, each to choose, under liberty, his line of industrial effort, and to use his labor and capital, under the circumstances of the country, as best he can, we shall fail of our highest prosperity. Second, that, if Congress will only tax us [properly] we can be led up to higher prosperity. Hence it is at once evident that free trade and protection here are not on a level. No free trader will affirm that he has a device for making the country rich, or saving it from hard times, any more than a respectable physician will tell us that he can give us specifics and preventives to keep us well. On the contrary, so long as men live, they will do foolish things, and they will have to bear the penalty, but if they are free, they will commit only the follies which are their own, and they will bear the penalties only of those. The protectionist begins with the premiss that we shall make mistakes, and that is why he, who knows how to make us go right, proposes to take us in hand. He is like the doctor who can give us just the pill we need to “cleanse our blood” and “ward off chills.” Hence either prosperity in a free trade country, or distress in a protectionist country, is fatal to protectionism, while distress in a free trade country, or prosperity in a protectionist country proves nothing against free trade. Hence the fallacy of all Mr. R. P. Porter's letters is obvious. (§§ 52, 92, 102, 154.)
22. The device by which we are to be made better than ourselves is to select some of ourselves, who certainly are not the best business men among ourselves, to go to Washington, and there turn around and tax ourselves blindly, or, if not blindly, craftily and selfishly. Surely this would be the triumph of stupidity and ignorance over intelligent knowledge, enterprise and energy. The motive which would control each of us, if we were free, would be the hope of the greatest gain. We should have to put industry, prudence, economy and enterprise into our business. If we failed, it would be through error. How is the congressional interference to act? How is it to meet and correct our error? It can appeal to no other motive than desire for profit, and can only offer us a profit where there was none before, if we will turn out of the industry which we have selected, into one which we do not know. It offers a greater profit there only by means of what it takes from somebody else and somewhere else. Or, is congressional interference to correct the errors of John, James and William, and to make the idle industrious and the extravagant prudent? Any one who believes it must believe that the welfare of mankind is not dependent on the reason and conscience of the interested persons themselves, but on the caprices of blundering ignorance, embodied in a selected few, or on the trickery of lobbyists, acting impersonally and at a distance.
Necessary Conditions of Successful Protective Legislation.
23. Suppose, however, that it were true that Congress had the power (by some exercise of the taxing function) to influence favorably the industrial development of the country: is it not true that men of sense would demand to be satisfied on three points, as follows?
24 (a.) If Congress can do this thing, and is going to try it, ought it not, in order to succeed, to have a distinct idea of what it is aiming at and proposes to do? Who would have confidence in any man who should set out on an enterprise and who did not satisfy this condition? Has Congress ever satisfied it? Never. They have never had any plan or purpose in their tariff legislation. Congress has simply laid itself open to be acted upon by the interested parties, and the product of its tariff legislation has been simply the resultant of the struggles of the interested cliques with each other, and of the log rolling combinations which they have been forced to make among themselves. In 1882 Congress did pay some deference, real or pretended, to the plain fact that it was bound, if it exercised this mighty power and responsibility, to bring some intelligence to bear on it, and it appointed a Tariff Commission which spent several months in collecting evidence. This Commission was composed of protectionists with one exception. It recommended a reduction of 25 per cent. in the tariff, and said: “Early in its deliberations the Commission became convinced that a substantial reduction of tariff duties is demanded, not by a mere indiscriminate popular clamor, but by the best conservative opinion of the country.” “Excessive duties are positively injurious to the interests which they are supposed to benefit. They encourage the investment of capital in manufacturing enterprises by rash and unskilled speculators, to be followed by disaster to the adventurers and their employés, and a plethora of commodities which deranges the operations of skilled and prudent enterprise.” (§ 111.) This report was entirely, thrown aside, and Congress, ignoring it entirely, began again in exactly the old way. The Act of 1883 was not even framed by or in Congress. It was carried out into the dark, into a conference committee,* where new and gross abuses were put into the bill under cover of a pretended revision and reduction. When a tariff bill is before Congress, the first draft starts with a certain rate on a certain article, say 20 per cent. It is raised by amendment to 50, the article is taken into a combination and the rate put up to 80 per cent.; the bill is sent to the other house, and the rate on this article cut down again to 40 per cent.; on conference between the two houses the rate is fixed at 60 per cent. He who believes in the protectionist doctrine must, if he looks on at that proceeding, believe that the prosperity of the country is being kicked around the floor of Congress, at the mercy of the chances which are at last to determine with what per cent. of tax these articles will come out. And what is it that determines with what tax any given article will come out? Any intelligent knowledge of industry? Not a word of it. Nothing in the case of a given tax on a given article, but just this: “Who is behind it?” The history of tariff legislation by the Congress of the United States, throws a light upon the protective doctrine which is partly grotesque and partly revolting.
25 (b.) If Congress can exert the supposed beneficent influence on industry, ought not Congress to understand the force which it proposes to use? Ought it not to have some rules of protective legislation so as to know in what cases, within what limits, under what conditions, the device can be effectively used? Would that not be a reasonable demand to make of any man who should propose a device for any purpose? Congress has never had any knowledge of the way in which the taxes which it passed were to do this beneficent work. It has never had, and has never seemed to think that it needed to get, any knowledge of the mode of operation of protective taxes. It passes taxes, as big as the conflicting interests will allow, and goes home, satisfied that it has saved the country. What a pity that philosophers, economists, sages and moralists should have spent so much time in elucidating the conditions and laws of human prosperity! Taxes can do it all.
26 (c.) If Congress can do what is affirmed and is going to try it, is it not the part of common sense to demand that some tests be applied to the experiment after a few years to see whether it is really doing as was expected? In the campaign of 1880 it was said that if Hancock was elected we should have free trade, wages would fall, factories would be closed, etc., etc. Hancock was not elected, we did not get any reform of the tariff, and yet in 1884 wages were falling, factories were closed, and all the other direful consequences which were threatened had come to pass. Bradstreet's made investigations in the winter of 1884–5 which showed that 316,000 workmen, 13 per cent. of the number employed in manufacturing in 1880, were out of work, 17,550 on strike, and that wages had fallen since 1882 from 10 to 40 per cent., especially in the leading lines of manufacturing which are protected. What did these calamities all prove then? If we had had any revision of the tariff, should we not have had these things alleged again and again as results of it? Did they not then, in the actual case, prove the folly of protection? Oh! no, that would be attacking the sacred dogma, and the sacred dogma is a matter of faith, so that, as it never had any foundation in fact or evidence, it has just as much after the experiment has failed as before the experiment was made.
27. If, now, it was possible to devise a scheme of legislation which should, according to protectionist ideas, be just the right jacket of taxation to fit this country to-day, how long would it fit? Not a week. Here are 55 millions of people on 3½ million square miles of land. Every day new lines of communication are opened, new discoveries made, new inventions produced, new processes applied, and the consequence is that the industrial system is in constant flux and change. How, if a correct system of protective taxes was a practicable thing at any given moment, could Congress keep up with the changes and readaptations which would be required. The notion is preposterous, and it is a monstrous thing, even on the protectionist hypothesis, that we are living under a protective system which was set up in 1864. The weekly tariff decisions by the treasury department may be regarded as the constant attempts that are required to fit that old system to present circumstances, and, as it is not possible that new fabrics, new compounds, and new processes should find a place in schedules which were made twenty years before they were invented, those decisions carry with them the fate of scores of new industries which figure in no census, and are taken into account by no congressman. Therefore, even if we believed that the protective doctrine was sound, and that some protective system was beneficial, and that the one which we have was the right one when it was made, we should be driven to the conclusion that one which is twenty years old is sure to be injurious to-day.
28. There is nothing then in the legislative machinery, by which the tariff is to be made, which is calculated to win the confidence of a man of sense, but every thing to the contrary; and the experiments of such legislation which have been made, have produced nothing but warnings against the device. Instead of offering any reasonable ground for belief that our errors will be corrected and our productive powers increased, an examination of the tariff as a piece of legislation, offers to us nothing but a burden, which must cripple any economic power which we have.
Examination of the Means Proposed, Viz., Taxes.
29. Every tax is a burden, and in the nature of the case can be nothing else. In mathematical language, every tax is a quantity affected by a minus sign. If it gets peace and security, that is, if it represses crime and injustice and prevents discord, which would be economically destructive, then it is a smaller minus quantity than the one which would otherwise be there, and that is the gain by good government. Hence, like every other outlay which we make, taxes must be controlled by the law of economy—to get the best and most possible for the least expenditure. Instead of regarding public expenditure carelessly, we should watch it jealously. Instead of looking at taxation as conceivably a good, and certainly not an ill, we should regard every tax as on the defensive, and every cent of tax as needing justification. If the statesman exacts any more than is necessary to pay for good government economically administered, he is incompetent, and fails in his duty. I have been studying political economy almost exclusively for the last fifteen years, and when I look back over that period and ask myself what is the most marked effect which I can perceive on my own opinion, or on my standpoint, as to social questions, I find that it is this: I am convinced that nobody yet understands the multiplied and complicated effects which are produced by taxation. I am under the most profound impression of the mischief which is done by taxation, reaching, as it does, to every dinner-table and to every fire-side. The effects of taxation vary with every change in the industrial system and the industrial status, and they are so complicated that it is impossible to follow, analyze, and systematize them; but out of the study of the subject there arises this firm conviction: taxation is crippling, shortening, reducing all the time, over and over again.
30. Suppose that a man has an income of $1,000, of which he has been saving $100 per annum with no tax. Now a tax of $10 is demanded of him, no matter what kind of a tax or how laid. Is he to get the tax out of the $900 expenditure or out of the $100 savings? If the former, then he must cut down his diet, or his clothing, or his house accommodation; that is, lower his standard of comfort. If the latter, then he must lessen his accumulation of capital; that is, his provision for the future. Either way his welfare is reduced and can not be otherwise affected, and, through the general effect, the welfare of the community is reduced by the tax. Of course it is immaterial that he may not know the facts. The effects are the same. In this view of the matter it is plain what mischief is done by taxes which are laid to buy parks, libraries, and all sorts of grand things. The tax-layer is not providing public order. He is spending other people's earnings for them. He is deciding that his neighbor shall have less clothes and more library or park. But when we come to protective taxes the abuse is monstrous. The legislator who has in his hands this power of taxation, uses it to say that one citizen shall have less clothes in order that he may contribute to the profits of another citizen's private business.
31. Hence if we look at the nature of taxation, and if we are examining protectionism from its own standpoint, under the assumption that it is true, instead of finding any confirmation of its assumptions, in the nature of the means which it proposes to use, we find the contrary. Granting that people make mistakes and fail of the highest prosperity which they might win when they act freely, we see plainly that more taxes can not help to lift them up or to correct their errors; on the contrary, all taxation, beyond what is necessary for an economical administration of good government, is either luxurious or wasteful, and if such taxation could tend to wealth, waste would make wealth.
Examination, of the plan of Mutual Taxation.
32. Suppose then that the industries and sections all begin to tax each other as we see that they do under protection. Is it not plain that the taxing operation can do nothing but transfer products, never by any possibility create them? The object of the protective taxes is to “effect the diversion of a part of the capital and labor of the country from the channels in which it would run otherwise.” To do this it must find a fulcrum or point of reaction, or it can exert no force for the effect it desires. The fulcrum is furnished by those who pay the tax Take a case. Pennsylvania taxes New England on every ton of iron and coal used in its industries. Ohio taxes New England on all the wool obtained from that state for its industries.* New England taxes Ohio and Pennsylvania on all the cottons and woolens which it sells to them. What is the net final result? It is mathematically certain that the only result can be that (1) New England gets back just all she paid (in which case the system is nil, save for the expense of the process and the limitation it imposes on the industry of all), or, (2) that New England does not get back as much as she paid (in which case she is tributary to the others), or, (3) that she gets back more than she paid (in which case she levies tribute on them). Yet, on the protectionist notion, this system extended to all sections, and embracing all industries, is the means of producing national prosperity. When it is all done, what does it amount to except that all Americans must support all Americans? How can they do it better than for each to support himself to the best of his ability? Then, however, all the assumptions of protectionism must be abandoned as false.
33. In 1676 King Charles II. granted to his natural son, the Duke of Richmond, a tax of a shilling a chaldron on all the coal which was exported from the Tyne. We regard such a grant as a shocking abuse of the taxing power. It is, however, a very interesting case because the mine-owner and the tax-owner were two separate per. sons, and the tax can be examined in all its separate iniquity. If, as I suppose was the case, the Tyne valley possessed such superior facilities for producing coal that it had a qualified monopoly, the tax fell on the coal mine owner (landlord); that is, the king transferred to his son part of the property which belonged to the Tyne coal owners. In that view the case may come home to some of our protectionists as it would not if the tax had fallen on the consumers. If Congress had pensioned General Grant by giving him 75 cents a ton on all the coal mined in the Lehigh Valley, what protests we should have heard from the owners of coal lands in that district! If the king's son, however, had owned the coal mines, and worked them himself, and if the king had said: “I will authorize you to raise the price of your coal a shilling a chaldron, and, to enable you to do it, I will myself tax all coal but yours a shilling a chaldron,” then the device would have been modern and enlightened and American. We have done just that on emery, copper and nickel. Then the tax comes out of the consumer. Then it is not, according to the protectionist, harmful, but the key to national prosperity, the thing which corrects the errors of our incompetent sell will, and leads us up to better organization of our industry than we, in our unguided stupidity, could have made.
Examination of the Proposal to “Create an Industry.”
34. The protectionist says, however, that he is going to create an industry. Let us examine this notion also from his standpoint, assuming the truth of his doctrine, and see if we can find any thing to deserve confidence. A protective tax, according to the protectionist's definition (§ 13) “has for its object to effect the diversion of a part of the labor and capital of the people * * * into channels favored or created by law.” If we follow out this proposal, we shall see what those channels are, and shall see whether they are such as to make us believe that protective taxes can increase wealth.
35. What is an industry? Some people will answer: It is an enterprise which gives employment. Protectionists seem to hold this view, and they claim that they “give work” to laborers when they make an industry. On that notion we live to work; we do not work to live. But we do not want work. We have too much work. We want a living; and work is the inevitable but disagreeable price we must pay. Hence we want as much living at as little price as possible. We shall see that the protectionist does “make work” in the sense of lessening the living and increasing the price. But if we want a living we want capital. If an industry is to pay wages, it must be backed up by capital. Therefore protective taxes, if they were to increase the means of living, would need to increase capital. How can taxes increase capital? Protective taxes only take from A to give to B. Therefore, if B by this arrangement can extend his industry and “give more employment,” A's power to do the same is diminished in at least an equal degree. Therefore, even on that erroneous definition of an industry, there is no hope for the protectionist.
36. An industry is an organization of labor and capital for satisfying some need of the community. It is not an end in itself. It is not a good thing to have in itself. It is not a toy or an ornament. If we could satisfy our needs without it we should be better off, not worse off. How then can we create industries?
37. If any one will find, in the soil of a district, some new power to supply human needs, he can endow that district with a new industry. If he will invent a mode of treating some natural deposit, ore or clay for instance, so as to provide a tool or utensil which is cheaper and more convenient than what is in use, he can create an industry. If he will find out some new and better way to raise cattle or vegetables, which is, perhaps, favored by the climate, he can do the same. If he invents some new treatment of wool, or cotton, or silk, or leather, or makes a new combination which produces a more convenient or attractive fabric, he may do the same. The telephone is a new industry. What measures the gain of it? Is it the “employment” of certain persons in and about telephone offices? The gain is in the satisfaction of the need of communication between people at less cost of time and labor. It is useless to multiply instances. It can be seen what it is to “create an industry.” It takes brains and energy to do it. How can taxes do it?
38. Suppose that we create an industry even in this sense, What is the gain of it? The people of Connecticut are now earning their living by employing their labor and capital in certain parts of the industrial organization. They have changed their “industries” a great many times. If it should be found that they had a new and better chance hitherto undeveloped, they might all go into it. To do that they must abandon what they are now doing. They would not change unless gains to be made in the new industry were greater. Hence the gain is the difference only between the profits of the old and the profits of the new. The protectionists, however, when they talk about “creating an industry,” seem to suppose that the total profit of the industry (and some of them seem to think that the total expenditure of capital) measures their good work. In any case, then, even of a true and legitimate increase of industrial power and opportunity, the only gain would be a margin. But, by our definition, “a protective duty has for its object to effect the diversion of a part of the capital and labor of the people out of the channels in which it would otherwise run.” Plainly this device involves coercion. People would need no coercion to go into a new industry which had a natural origin in new industrial power or opportunity. No coercion is necessary to make men buy dollars at 98 cents apiece. The case for coercion is when it is desired to make them buy dollars at 101 cents apiece. Here the states” man with his taxing power is needed, and can do something. What? He can say: “If you will buy a dollar at 101 cents, I can and will tax John over there two cents for your benefit; one to make up your loss and the other to give you a profit.” Hence, on the protectionist's own doctrine, his device is not needed, and can not come into use, when a new industry is created in the true and only reasonable sense of the words, but only when and because he is determined to drive the labor and capital of the country into a disadvantageous and wasteful employment.
39. Still further, it is obvious that the protectionist, instead of “creating a new industry,” has simply taken one industry and set it as a parasite to live upon another. Industry is its own reward. A man is not to be paid a premium by his neighbors for earning his own living. A factory, an insane asylum, a school, a church, a poor-house, and a prison can not be put in the same economic category. We know that the community must be taxed to support insane asylums, poor-houses, and jails. When we come upon such institutions we see them with regret. They are wasting capital. We know that the industrious people all about, who are laboring and producing, must part with a portion of their earnings to supply the waste and loss of these institutions. Hence the bigger they are the sadder they are.
40. As for the schools and churches, we know that society must pay for and keep up its own conservative institutions. They cost capital and do not pay back capital directly, although they do indirectly, and in the course of time, in ways which we could trace out and verify, if that were our subject. Here, then, we have a second class of institutions.
41. But the factories and farms and foundries are the productive institutions which must provide the support of these consuming institutions. If the factories, etc., put themselves on a line with the poor-houses, or even with the schools, what is to support them and all the rest too? They have nothing behind them. If in any measure or way they turn into burdens and objects of care and protection, they can plainly do it only by part of them turning upon the other part, and this latter part will have to bear the burden of all the consuming institutions, includingthe consuming industries. For a protected factory is not a producing industry. It is a consuming industry! If a factory is (as the protectionist alleges) a triumph of the tariff, that is, if it would not be but for the tariff (and otherwise he has nothing to do with it), then it is not producing; it is consuming. It is a burden to be borne. The bigger it is the sadder it is.
42. If a protectionist shows me a woolen mill and challenges me to deny that it is a great and valuable industry, I ask him whether it is due to the tariff. If he says no, then I will assume that it is an independent and profitable establishment, but then it is out of this discussion as much as a farm or a doctor's practice. If he says yes, then I answer that the mill is not an industry at all. We pay sixty per cent. tax on cloth simply in order that that mill may be. It is not an institution for getting us cloth, for, if we went into the market with the same products which we take there now and if there were no woolen mill, we should get all the cloth we want, but the mill is simply an institution for making cloth cost per yard sixty per cent. more of our products than it otherwise would. That is the one and only function which the mill has added, by its existence, to the situation. I have called such a factory a “nuisance.” The word has been objected to. The word is of no consequence. He who, when he goes into a debate, begins to whine and cry as soon as the blows get sharp, should learn to keep out. What I meant was this: A nuisance is something which by its existence and presence in society works loss and damage to the society—works against the general interest, not for it. A factory which gets in the way and hinders us from attaining the comforts which we are all trying to get,—which makes harder the terms of acquisition when we are all the time struggling by our arts and sciences to make those terms easier, is a harmful thing, and noxious to the common interest.
43. Hence, once more, starting from the protectionist's hypothesis, and assuming his own doctrine, we find that he can not create an industry. He only fixes one industry as a parasite upon another, and just as certainly as he has intervened in the matter at all, just so certainly has he forced labor and capital into less favorable employment than they would have sought if he had let them alone. When we ask which “channels” those are which are to be “favored or created by law,” we find that they are, by the hypothesis, and by the whole logic of the protectionist system, the industries which do not pay. The protectionists propose to make the country rich by laws which shall favor or create these industries, but these industries can only waste capital, so that if they are the source of wealth, waste is the source of wealth. Hence the protectionist's assumption that by his system he could correct our errors and lead us to greater prosperity than we would have obtained under liberty, has failed again, and we find that he wastes what power we do possess.
Examination of the Proposal to Develop our Natural Resources.
44. “But,” says the protectionist, “do you mean to say that, if we have an iron deposit in our soil, it is not wise for us to open and work it?” “You mean, no doubt,” I reply, “open and work it under protective help and stimulus; for, if there is an iron deposit, the United States does not own it. Some man owns it. If he wants to open and work it, we have nothing to do but wish him God-speed.” “Very well,” he says, “understand it that he needs protection.” Let us examine this case then, and still we will do it assuming the truth of the protectionist doctrine. Let us see where we shall come out.
The man who has discovered iron (on the protectionist doctrine), when there is no tax, does not collect tools and laborers and go to work. He goes to Washington. He visits the statesman, and a dialogue takes place.
Iron man.—“Mr. Statesman, I have found an iron deposit on my farm.”
Statesman.—“Have you, indeed? That is good news. Our country is richer by one new natural resource than we have supposed.”
Iron man.—“Yes, and I now want to begin mining iron.”
Statesman.—“Very well, go on. We shall be glad to hear that you are prospering and getting rich.”
Iron man.—“Yes, of course. But I am now earning my living by tilling the surface of the ground, and I am afraid that I can not make as much at mining as at farming.”
Statesman.—“That is indeed another matter. Look into that carefully and do not leave a better industry for a worse.”
Iron man.—“But I want to mine that iron. It does not seem right to leave it in the ground when we are importing iron all the time, but I can not see as good profits in it at the present price for imported iron as I am making out of what I raise on the surface. I thought that perhaps you would put a tax on all the imported iron so that I could get more for mine. Then I could see my way to give up farming and go to mining.”
Statesman.—“You do not think what you ask. That would be authorizing you to tax your neighbors, and would be throwing on them the risk of working your mine, which you are afraid to take yourself.”
Iron man (aside).—“I have not talked the right dialect to this man. I must begin all over again. (Aloud). Mr. Statesman, the natural resources of this continent ought to be developed. American industry must be protected. The American laborer must not be forced to compete with the pauper labor of Europe.”
Statesman.—“Now I understand you. Now you talk business. Why did you not say so before? How much tax do you want?”
The next time that a buyer of pig iron goes to market to get some, he finds that it costs thirty bushels of wheat per ton instead of twenty.
“What has happened to pig-iron?” says he.
“Oh! haven't you heard?” is the reply. “A new mine has been found down in Pennsylvania. We have got a new ‘natural resource.’”
“I haven't got a new ‘natural resource,’” says he. “It is as bad for me as if the grasshoppers had eaten up one.third of my crop.”
45. That is just exactly the significance of a new resource on the protectionist doctrine. We had the misfortune to find emery here. At once a tax was put on it which made it cost more wheat, cotton, tobacco, petroleum, or personal services per pound than ever before. A new calamity befell us when we found the richest copper mines in the world in our territory. From that time on it cost us five (now four) cents a pound more than before. By another catastrophe we found a nickel mine, thirty cents (now fifteen) a pound tax! Up to this time we have had all the tin that we wanted above ground, because beneficent nature has refrained from putting any underground in our territory. In the metal schedule, where the metals which we unfortunately possess are taxed from forty to sixty per cent., tin alone is free. Every little while a report is started that tin has been found. Hitherto these reports have happily all proved false. It is now said that tin has been found in West Virginia and Dakotah. We have reason to devoutly hope that this may prove false, for, if it should prove true, no doubt the next thing will be forty per cent. tax on tin. The mine-owners say that they want to exploit the mine. They do not. They want to make the mine an excuse to exploit the taxpayers.
46 . Therefore, when the protectionist asks whether we ought not by protective taxes to force the development of our own iron mines, the answer is, that, on his own doctrine, he has developed a new philosophy, hitherto unknown, by which “natural resources” become national calamities, and the more a country is endowed by nature the worse off it is. Of course, if the wise philosophy is not simply to use, with energy and prudence, all the natural opportunities which we possess, but to seek “channels favored or created by law,” then this view of natural resources is perfectly consistent with that philosophy, for it is simply saying over again that waste is the key of wealth.
Examination of the Proposal to Raise Wages.
47. “But,” he says again, “we want to raise wages and favor the poor working man.” “Do you mean to say,” I reply, “that protective taxes raise wages—that that is their regular and constant effect?” “Yes,” he replies, “that is just what they do, and that is why we favor them. We are the poor man's friends. You free-traders want to reduce him to the level of the pauper laborers of Europe.” “But here, in the evidence offered at the last tariff discussion in Congress, the employers all said that they wanted the taxes to protect them because they had to pay such high wages.” “Well, so they do.” “Well then, if they get the taxes raised to help them out when they have high wages to pay, how are the taxes going to help them any unless the taxes lower wages? But you just said that taxes raise wages. Therefore, if the employer gets the taxes raised, he will no sooner get home from Washington than he will find that the very taxes which he has just secured have raised wages. Then he must go back to Washington to get the taxes raised to offset that advance, and when he gets home again he will find that he has only raised wages more, and so on forever. You are trying to teach the man to raise himself by his boot straps. Two of your propositions brought together eat each other.”
48. We will, however, pursue the protectionist doctrine of wages a little further. It is totally false that protective taxes raise wages. As I will show further on (§ 91 and following), protective taxes lower wages. Now, however, I am assuming the protectionist's own premises and doctrines all the time. He says that his system raises wages. Let us go to see some of the wages class and get some evidence on this point. We will take three wage-workers, a boot-man, a hat-man, and a cloth-man. First we ask the boot-man, “Do you win any thing by this tariff?” “Yes,” he says, “I understand that I do.” “How?” “Well, the way they explain it to me is that when any body wants boots he goes to my boss, pays him more on account of the tax, and my boss gives me part of it.” “All right! Then your comrades here, the hat-man and the cloth-man, pay this tax in which you share?” “Yes, I suppose so. I never thought of that before. I supposed that rich people paid the taxes, but I suppose that when they buy boots they must do it too.” “And when you want a hat you go and pay the tax on hats, part of which (as you explain the system) goes to your friend the hat-man; and when you want cloth you pay the tax which goes to benefit your friend the cloth-man?” “I suppose that it must be so.” We go then to see the hat-man and have the same conversation with him, and we go to see the cloth-man and have the same conversation with him. Each of them then gets two taxes and pays two taxes. Three men illustrate the whole case. If we should take a thousand men in a thousand industries we should find that each paid 999 taxes, and each got 999 taxes, if the system worked as it is said to work. What is the upshot of the whole? Either they all come out even on their taxes paid and received, or some of the wage receivers are winning something out of other wage receivers to the net detriment of the whole class. If each man is creditor for 999 taxes, and each debtor for 999 taxes, and if the system is “universal and equal,” we can save trouble by each drawing 999 orders on the creditors to pay to themselves their own taxes, and we can set up a clearing house to wipe off all the accounts. Then we come down to this as the net result of the system when it is “universal and equal,” that each man as a consumer pays taxes to himself as a producer. That is what is to make us all rich. We can accomplish it just as well and far more easily, when we get up in the morning, by transferring our cash from one pocket to the other.
49. One point, however, and the most important of all, remains to be noticed. How about the thousandth tax? How is it when the boot-man wants boots, and the hat-man hats, and the cloth-man cloth? He has to go to the store on the street and buy of his own boss, at the market price (tax on) the very things which he made himself in the shop. He then pays the tax to his own employer, and the employer, according to the doctrine, “shares” it with him. Where is the offset to that part which the employer keeps? There is none. The wages-class, even on the protectionist explanation, may give or take from each other, but to their own employers, they give and take not. At election time the boss calls them in and tells them that they must vote for protection or he must shut up the shop, and that they ought to vote for protection, because it makes their wages high. If, then, they believe in the system, just as it is taught to them, they must believe that it causes him to pay them big wages, out of which they pay back to him big taxes, out of which he pays them a fraction back again, and that, but for this arrangement, the business could not go on at all. A little reflection shows that this just brings up the question for a wage-earner: How much can I afford to pay my boss for hiring me? or, again, which is just the same thing in other words: What is the net reduction of my wages below the market rate under freedom which results from this system? (see § 65).
50. Let it not be forgotten that this result is reached by accepting protectionism and reasoning forward from its doctrines and according to its principles. In truth, the employés get no share in any taxes which the boss gets out of them and others (see § 91 fg. for the truth about wages). Of course, when this or any other subject is thoroughly analyzed, it makes no difference where we begin or what line we follow, we shall always reach the same result if the result is correct. If we accept the protectionist's own explanation of the way in which protection raises wages we find that it proves that protection lowers wages.
Examination of the Proposal to Prerent Competition by Foreign Pauper Labor.
51. The protectionist says that he does not want the American laborer to compete with the foreign “pauper laborer” (see § 99). He assumes that if the foreign laborer is a woolen operative, the only American who may have to compete with him is a woolen operative here. His device for saving our operatives from the assumed competition is to tax the American cotton or wheat grower on the cloth he wears, to make up and offset to the woolen operative the disadvantage under which he labors. If then, the case were true as the protectionist states it, and if his remedy were correct, he would, when he had finished his operation, simply have allowed the American woolen operative to escape, by transferring to the American cotton or wheat grower the evil results of competition with “foreign pauper labor.”
Examination of the Proposal to raise the Standard of Public Comfort.
52. But the protectionist reiterates that he wants to make our people well off, and to diffuse general prosperity, and he says that his system does this. He says that the country has prospered under protection and on account of it. He brings from the census the figures for increased wealth of the country, and, to speak of no minor errors, draws an inference that we have prospered more than we should have done under free trade, which is what he has to prove, without noticing that the second term of the comparison is absent and unattainable. In the same manner I once heard a man argue from statistics, who showed by the small loss of a city by fire that its fire department cost too much. I asked him if he had any statistics of the fires which we should have had but for the fire department (see § 102).
53. The people of the United States have inherited an untouched continent. The now living generation is practicing bonanza farming on prairie soil which has never borne a crop. The population is only 15 to the square mile. The population of England and Wales is 446 to the square mile; that of the British Islands 290; that of Belgium 481; of France 180; of Germany 216. Bateman* estimates that in the better part of England or Wales a peasant proprietor would need from 4½ to 6 acres, and, in the worse part, from 9 to 45 acres on which to support “a healthy family.” The soil of England and Wales, equally divided between the families there, would give only 7 acres apiece. The land of the United States, equally divided between the families there, would give 215 acres apiece. These old nations give us the other term of the comparison by which we measure our prosperity. They have a dense population on a soil which has been used for thousands of years; we have an extremely sparse population on a virgin soil. We have an excellent climate, mountains full of coal and ore, natural highways on the rivers and lakes, and a coast indented with sounds, bays, and some of the best harbors in the world. We have also a population of good national character, especially as regards the economic and industrial virtues. The sciences and arts are highly cultivated among us, and our institutions are the best for the development of economic strength. As compared with old nations we are prosperous. Now comes the protectionist statesman and says: “The things which you have enumerated are not the causes of our comparative prosperity. Those things are all vain. Our prosperity is not due to them. I made it with my taxes.”
54 (a) In the first place the fact is that we surpass most in prosperity those nations which are most like us in their tax systems, and those compared with whom our prosperity is least remarkable are those which have by free trade offset as much as possible the disadvantage of age and dense population. Since, then, we find greatest difference in prosperity with least difference in tax, and least difference in prosperity with greatest difference in tax, we can not regard tax as a cause of prosperity, but as an obstacle to prosperity which must have been overcome by some stronger cause. That such is the case lies plainly on the face of the facts. The prosperity which we enjoy is the prosperity which God and nature have given us minus what the legislator has taken from it.
55 (b) We prospered with slavery just as we have prospered with protection. The argument that the former was a cause would be just as strong as the argument that the latter is a cause.
56 (c) The protectionists take to themselves as a credit all the advance in the arts of the last twenty-five years, because they have not entirely offset it and destroyed it.
57 (d) The protectionists claim that they have increased our wealth, All the wealth that is produced must be produced by labor and capital applied to land. The people have wrought and produced. The tax gatherer has only subtracted something. Whether he used what he took well or ill, he subtracted. He could not do any thing else. Therefore, whatever wealth we see about us, and whatever wealth appears in the census is what the people have produced, less what the tax gatherer has taken out of it.
58 (e) If the members of Congress can establish for themselves some ideal of the grade of comfort which the average American citizen ought to enjoy, and then just get it for him, they have used their power hitherto in a very beggarly manner. For, although the average status of our people is high when compared with that of other people on the globe, nevertheless, when compared with any standard of ideal comfort, it leaves much to be desired. If Congress has the power supposed, they surely ought not to measure the exercise of it by only making us better off than Europeans.
59 (f) During the late presidential campaign the protectionist orators assured the people that they meant to make every body well off, that they wished our people to be prosperous, contented, etc., etc. I wish so too. I wish that all my readers may be millionaires. I freely and sincerely confer on them all the bounty of my good wishes. They will not find a cent more in their pockets on that account. The congressmen have no power to bless my readers which I have not, save one; that is, the power to tax them.
60 (g) If the congressmen are determined to elevate the comfort of the population by taxing the population, then every new ship load of immigrants must be regarded as a new body of persons whom we must “elevate” by the taxes we have to pay. It is said that an Irishman affirmed that a dollar in America would not buy more than a shilling in Ireland. He was asked why then he did not stay in Ireland. He replied that it was because he could not get the shilling there. That is a good story, only it stops just where it ought to begin. The next question is: How does he get the dollar when he comes to America? The protectionist wants us to suppose that he gets it by grace of the tariff. If so he gets it out of those who were here before he came. But plainly no such thing is true. He gets it by earning it, and he adds two dollars to the wealth of the country while earning it. The only thing the tariff does in regard to it is to lower the purchasing power of the dollar, if it is spent for products of manufacture, to seventy cents.
61. Here, again, then, we find that protective taxes, if they do just what the protectionist says that they will do, produce the very opposite effects from those which he says they will produce. They lessen wealth, reduce prosperity, diminish average comfort, and lower the standard of living. (See § 30.)
[*]Taussig “History of the Existing Tariff, 78 fg.
[*]The wool growers held a convention at St. Louis May 28, 1885, at which they estimated their loss by the reduction of the tax on wool in 1883, or the difference between what they got by this tax before that date and after, at ninety million dollars (N. Y. Times, May 29). If that sum is what they lost, it is what the consumers gained. They are very angry, and will not vote for any one who will not help to re-subject the consumers to this tribute to them.
[*]Broderick, English Land and English Landlords, p 194.