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Subject Area: Economics
Topic: Free Trade

ESSAY No. II. - Condy Raguet, The Principles of Free Trade [1835]

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The Principles of Free Trade illustrated in a series of short and familiar Essays originally published in the Banner of the Constitution, 2nd ed. (Philadelphia, 1840).

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Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


ESSAY No. II.

january 9, 1830.

Remarks on the Report of the Committee of Manufactures, made to the House of Representatives on the 5th of January, 1830. Impossibility of protecting one branch of industry without injuring others. Observations on the phrase “The encouragement of manufactures,” employed in the preamble to the Revenue Act of 1789. Smuggling. Downfall of the American System foretold.

IN our last paper we gave the Report of the Committee on Manufactures, made to the House of Representatives on the 5th inst. on the subject of the Tariff, in which it was declared to be the opinion of the committee, that “it is inexpedient, at the present time, to make any change in the existing laws intended for the aid and protection of domestic industry.” This opinion may be regarded as evidence of the sense of a majority of the committee, who are favourable to protective laws, and is important in one point of view. It establishes the fact, that the American System has been brought to a halt, and we consider that the friends of agricultural and commercial freedom, have cause to congratulate themselves upon this auspicious symptom. If high duties are calculated to augment the wealth of the nation, and promote the prosperity of the people, why hesitate to push onward, when the cry of all the woollen manufacturers is, We are not sufficiently protected? If a doubling of the duties on low-priced woollens, be essential to the salvation of the manufacturers, as has been over and over again proclaimed by their most distinguished champions, why not abolish the one dollar minimum, and thus accomplish that which has been the burthen of the writings and speeches of editors and orators for a year past? But no: The report in question recommends an abstaining from all movements, and as this is the first instance since 1816, of a hesitancy, on the part of the advocates of restriction, to push still further their favourite policy, it may be regarded as evidence of doubt as to the efficiency of the American System, or as to their power to extend its desolating influence.

With these preliminary remarks, we shall take the liberty of commenting on such parts of the report as strike us as being particularly open to criticism.

The committee say, in reference to the applications for protection from different interests—“To do justice to all, and injury to none, was a delicate and difficult undertaking.” In this position, we differ from the committee. It was one of the easiest and most simple tasks imaginable. But it could be accomplished only by one mode, and that mode was to abstain from granting the request of either. If there be any doubt on this subject, we think it can be removed by a slight attention to a very simple illustration. A hatter says to Congress, “I wish a monopoly—I want a law which shall prohibit all other persons from selling hats.” Says the shoemaker, “I have no objections that the hatter shall charge every body double price for his hats, as I only wear one in a year, provided that Congress will prohibit all persons but me from selling shoes.” Says the tailor, “I will agree that the hatter and shoemaker may both tax the whole nation for their hats and shoes, provided that an equal protection be extended to me, by prohibiting every body from making clothes but me.” Congress listens to their pretensions, and grants them the desired monopolies. Now, how does the matter stand? The hatter pays the shoemaker and the tailor a tax, upon what he consumes of their fabrics, but, as a remuneration for this, he compels all the rest of his customers to pay a tax to him. The shoemaker and the tailor do the same thing. Now if this sort of protection, or monopoly, were extended through the whole circle of employments,—if each individual were bound to pay to others as much as others paid to him, then the protection would be equal. What a man paid out of one pocket, would be paid back into the other, and each one, at the end of the year, would stand in the same relative position, with this difference, however, that each would have had fewer of the comforts and necessaries of life, than if competition had been left free. But for protection to be equal, all employments must have monopolies, and as all cannot have them, it follows, that “justice to all and injury to none,” can never be the result of protective laws. Laissez-nous faire, is the only sound doctrine in such cases, and to suppose that laws, which authorize a dozen trades to levy contributions upon six hundred, are equal or just in their operation, is just as rational as to suppose that it would be advantageous for a community that every fiftieth man should be allowed to rob all the rest; for it can readily be seen, that there could be no equal justice in the case, unless each individual was allowed to rob all the others. Now if the question were fairly put, shall each man in the land be allowed to plunder all the others, or shall each be protected in the enjoyment of his property, which of the two propositions would be most likely to be adopted? The answer to this can be but in favour of the latter, and this is the answer which Congress ought to have given to the applicants for protection.

But was “the tariff of 1828, adopted as the best measure, under all circumstances, that could be devised to accomplish the desired object?” We think not. In some particulars it defeated the objects for which it was ostensibly enacted. It imposed high duties upon manufactures, and, at the same time, high duties upon the foreign materials, without which they could not be made. It thus destroyed the interest it was designed to uphold. It may perhaps have been the only measure, which, “under all circumstances,” could have been extorted from a majority of Congress. But it contained as much bitter as sweet, as much poison as honey; and this sad and solemn truth is now known to many, who, so far from regarding it as a measure advantageous to the manufacturing interest, have stigmatized it as “the bill of abominations.” So fully are we of the opinion, that this epithet is an appropriate one, that we do not believe there is in the whole law a single provision, which, by itself, would have had a majority of Congress in its favour. And shall such a monster, without a single feature allowed to be symmetrical by a majority of those who were present at its birth, be held up as an idol, which it would be sacrilege to touch?

But “it is now the law of the land.” This, unfortunately, is but too true, but we hope it will not long remain so. Indeed we think it cannot so continue for two years longer, if the calamities experienced in the manufacturing districts be as extensive as represented. Smuggling is now making rapid strides towards a fixed residence among us, and we shall be greatly mistaken, if another season does not witness New England herself coming to her senses, and calling out for the statu quo ante.

The committee think, “that any effort to change existing provisions, at the present time, would be wholly unsuccessful.” That is indeed quite probable. All attempts to repeal portions of the law, which have been found hurtful to particular interests, would meet with the undivided opposition of the members from the anti-tariff states. Whenever a sense of justice shall operate upon the North, and induce its representatives to propose a modification, which “shall do justice to all,” they will find a host ready to join with them in releasing the country from her shackles. And yet, notwithstanding the conviction of the committee, that any effort at modification would be unsuccessful, we are fully persuaded, that there is not in the law, a single duty, which, if presented by itself, would not find a majority in favour of its repeal.

“Great apprehension has been entertained that the protecting policy would, eventually, be abandoned.” And with good reason. The more its true character is known, the more must the people be convinced, that its tendency is to subvert the best interests of the country. Knowing this fact, are not apprehensions very natural, with those whose fortunes are placed at the disposal of the popular breath? And is it not a happy thing for the country, that the instability of the system, operates in restraining others from committing theirs to the same uncertain tenure? What sure guarantee can exist, in a representative government, for the continuance of a system, ascertained by a majority, for the time being, to be injurious to the interests of the nation? There can be none, and consequently there never can be a character of stability imprinted on that policy, which is believed, by a vast portion of the most intelligent people, to be hostile to the public prosperity; and, as we believe that the existing tariff law is opposed to sound policy, we shall ever use our feeble endeavours to repudiate the doctrine, so confidently laid down by the committee, that “nothing should be attempted that can, at home or abroad, be considered as giving the least countenance to the opinion or belief, that a hostile change will ever be effected.” We believe that such a change will be effected, and we further believe, that the proposition to effect it, will proceed from a portion of the very individuals who have, to their sorrow, fastened the system upon themselves and the country.

In a report proceeding from a committee containing a majority of advocates of protective laws, we are not surprised to find the fallacies of the restrictive system relied upon as arguments. We have here the old doctrine of foreigners selling us their goods for next to nothing, presented to us as a national evil. The Committee are of opinion, that if it was thought by foreign nations that we were not bound neck and heels by the cords of the restrictive system, they would force their fabrics upon us, “let the losses and sacrifices be ever so great.” This is all delusion. Foreign nations have no goods to dispose of in so silly a manner. And as to individual manufacturers, very few of them could afford to play at so losing a game for any length of time. We should like to know whether it is probable that the manufacturers of New England would be guilty of the folly of giving their goods for half price to the inhabitants of South Carolina and Virginia, in order to break down the cotton manufactures which some few individuals have been there recently establishing. If so, we should like to know how they would combine, and how long and how much they would be willing to contribute to this prostrating fund? The idea of such deliberate folly, as shipping goods to a known certain loss, is a fiction of the American System, and it has been so often repeated, that many persons take it as a fact which ought not to be doubted.

But the committee say, “It should be kept in mind, that the determination to protect the industry of this country, as far and as fast as circumstances would allow, has existed ever since the formation of our government.” We admit the position, so far as it refers to the acts of the government prior to the commencement of the restrictive policy; but we deny it, as relates to a subsequent period. During the former epoch, agriculture, commerce and manufactures, which conjointly constitute the industry of the country, were left in a state of freedom. The agriculturist, the merchant and the manufacturer, were at liberty to direct their capital and labour to any pursuit, which to them might appear to be most advantageous. Duties were imposed for the legitimate purposes of revenue alone, and were upon a scale so moderate, that no artificial excitement existed, to force into being any branches of industry but those, and they were not a few, which the natural course of things demanded. In this manner, the industry of the country was protected. During the latter period, on the other hand, “the industry of the country” has not been protected. The industry of manufacturers and of wool growers, and iron masters, has alone received the protection of the government. To call these few interests, which, to all the interests of the nation, bear an insignificant proportion, “the industry of the country,” is a sheer misnomer. As well might the hatter, the shoe-maker and the tailor we have referred to above, pretend, that “the industry of the country” was protected by their monopolies. We know very well, that the committee had their eye upon the preamble to the first act of Congress, which assigns “the encouragement of manufactures” as one of the motives of imposing a duty upon cotton and woollen fabrics of five per cent. But who cannot perceive, that the introduction of that phrase into the preamble was a mere expedient to render palateable to the people, even so small a duty, and one too imperiously called for by the exigencies of the government. Can any man seriously believe, who reflects that, at the present day, when, by the aid of machinery the inequalities of the wages of labour in different countries is so materially diminished, and who adverts to the fact that, from fifty to two hundred and twenty five per cent. duty is required to enable the manufacturers of this country to compete with those of Great Britain—can any man, we say, seriously believe that, in the year 1789, a duty of five per cent. could have been in any degree imposed for the purpose of encouraging the growth of manufactures? The idea is preposterous, and this will be manifest to all who reflect for a moment upon the fact, that, at the period designated, agriculture was so clearly the natural and most profitable channel for capital and labour to flow in, that higher duties would then have been required to divert them from that employment, than are required at the present day. Let the idea then be for ever discarded, as unworthy of reliance, that the act of 1789 was, in the most remote degree, designed for the protection of manufactures. It could not possibly so have been, if the application of means to an end was a branch of knowledge possessed by those who framed it, and it is evident, that the absurdity of so misplaced a reason was soon discovered, for it was omitted in the next act on the same subject, and has never since been restored.

In regard to frauds on the revenue, there may be, and there no doubt are, strong reasons for believing that many have been practised. Such frauds are as inseparable from high duties, as an effect is inseparable from its cause, and it is by means of these very frauds, that limits are placed upon the power of governors and legislators, which restrain them in their tendency to encroach upon the rights of individuals. We have no doubt that smuggling is fast usurping the seat of lawful commerce, and we are equally sure, that after it shall, by a continuance of the protection which is now so generously extended to it by law, (smuggling being the branch of industry most highly protected,) become fully established, it can never afterwards be eradicated from the country. The man whose moral feeling requires two hundred per cent. to tempt him to dishonesty, will, after the first plunge, be willing to continue in crime for twenty per cent. And yet this important fact, so fully established by the experience of all Europe and South America, is regarded by the manufacturers of this country, as a bug-bear conjured up by their opponents for the purpose of exciting their fears. The time, however, will come, when they will realize the truth of the solemn warnings which have been reiterated on this point, and will regret that the morals of the people, the only safe barrier against frauds upon the revenue, had been tempted beyond what they were able to bear.

In the last paragraph of their report, the committee has thought it expedient to throw out a suggestion, probably with the view of quieting those who have been clamorous for more of the “American System.” They say, “The alleged evasions of our revenue and protecting laws require an immediate and thorough investigation. If they are found to exist, the most effectual means should be employed to prevent them in future. When this is done, it is probable all may be satisfied that higher protecting duties should not be required. Until this is done, it is impossible to determine how efficient those duties may be made to operate. The committee have already proceeded to the consideration of this subject.” From this, we would infer, in case the existing frauds should be found to be of limited extent, and in case it should appear, that the glut of the market and the consequent fall of prices, has not resulted from evasions of the laws, as much as from other causes, that then it may become necessary to take another turn at the windlass. In other words, the hope is indirectly held out, that, at a future day, it may be found expedient again to take up the line of march, and push on with restrictions. We think, however, that no such onward movement will be again urged upon Congress, with any reasonable prospect of success. The Western states, which have now found that they experience no benefit from the American System, but, on the contrary, a positive injury in the tendency it has to discourage emigration to the West, will naturally look well to this point, and regard it as adverse to that growth of population which they expect will one day transfer the political power heretofore wielded by the Atlantic states, to the regions west of the Alleghany. Judging indeed, from what we see, we cannot avoid the belief, that the day is not distant, when a multiplicity of questions, involving interests of the most important nature, will be brought to bear upon each other, and in the conflict which is to ensue, we shall behold the American System crumble into atoms. For this prophetic annunciation, we shall perhaps be styled visionary. Be it so. We have no hesitation in encountering the risk of so being thought, by those who shall live five years hence, and whom we consider to be the only competent tribunal to pass judgment in such a matter.*

[* ] This prophecy was fulfilled in the year 1833.