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Subject Area: Economics
Topic: Free Trade

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

Edition used:

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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ESSAY No. XVIII.

february 20, 1830.

Plausibility of the terms “Domestic Industry” and “American System.” The consumption of foreign products affords employment to American industry as much as the consumption of domestic products. This proved, by a comparison of the two modes of converting raw cotton into fabrics, the commercial process, and the manufacturing process.

THERE is something so captivating in the term “Domestic Industry,” and something so patriotic in the term “American System,” that it is not to be wondered at, that the party which first seized upon those expressions as watch words, should have succeeded with the mass of the people, and have carried their point by a coup de main. The time once was, when, by “domestic industry” was meant the industry of the farmer, the planter, the miller, the mariner, the merchant, the mechanic, the tradesman, the day labourer, the artizan, and, in fine, all the various individuals, who by their industry contributed to advance the wealth of the nation and the prosperity of the people. At the present day it signifies very little more than the industry of the very few persons who are employed in the spinning and weaving of cotton and wool, and who do not comprise more than one in every one hundred of the whole population. In vain is it urged upon the champions of the “American System,” that foreign commodities can only be procured in exchange for domestic commodities, and that domestic commodities can only be produced by the employment of domestic industry. They will not believe that the industry of Pennsylvania, which is employed in the raising of wheat, pork, butter, lard, beef, whiskey, corn, hams, linseed oil, wagons, carts, carriages, harness, saddlery, hats, boots, shoes, books, stationary, and a hundred other articles, and which are exchanged with the cotton, rice, and tobacco growers of the South, for bills on Great Britain, with which she pays for the manufactures she imports from that country, is domestic industry; for, if they did so believe, they would never repeat, so steadily, the exploded argument, that to import foreign fabrics is to be tributary to foreign industry.

When we reflect upon the tenacity with which this doctrine is adhered to, contrary to the clearest demonstration, for its falsity is as self evident as that two and two are four, we are almost tempted to regard as hopeless all expectations of seeing the public mind enlightened upon this important subject. When we hear men, some of them too the most conspicuous politicians of the country, pronounce with great earnestness their conviction, that to import foreign fabrics is paying foreign tribute—that the American cotton manufacturers enter into successful competition with the British in foreign markets, when they are not able to do it in the home market, without a protection of from 25 to 175 per cent.—that experience shews that the effects of high duties are to reduce the prices of commodities below what they would be without them—that high duties instead of diminishing commerce, increase it—that the way for a nation to grow rich, is to refuse to purchase the products of other nations, and thereby to diminish the extent of the sales of her own products;—when, we say, we hear such doctrines as these, advanced as the doctrines of sound political economy, we are persuaded that, in order to produce a change of opinion, reason is not the faculty of the mind which is to be addressed. As well might a teacher of mathematics attempt to instruct in the principles of that science a scholar, who, at the threshold, should refuse to admit that two parallel lines can never meet, or that any two sides of a triangle are greater than the third. The powerful reasoning of Adam Smith, the clear demonstrations of Say, and the forcible and able expositions of McCulloch, would have no more influence in effecting a change of the views of some we could name, than if they were the wild and silly effusions of ignorant declaimers.

There must, however, be some individuals, whose rational faculties have not been distorted so as to prevent them from perceiving a truth, and to such we address the following illustration of the position which we have already more than once advanced—That the importation of foreign fabrics is nothing more than a mode of production, which gives employment to domestic industry, in the same manner, precisely, that manufacturing does.

Let us suppose two individuals, each possessing a capital of thirty thousand dollars, and each resolved to direct his industry towards the same object, the production of cotton fabrics.—The one proposes to produce them by manufacturing industry, the other by commercial industry. The one expends one-third of his capital in building a factory and machinery, and the residue in the purchase of raw cotton, and in the payment of the wages of spinners and weavers. The other expends one-third of his capital in building a ship, and the other two-thirds in the purchase of raw cotton to be shipped to Great Britain, and in the payment of the wages of the crew of his vessel. By these expenditures each one will have contributed towards the support of domestic industry. The one will have employed carpenters, brick-layers, machine-makers, smiths, lumber and iron dealers, to the amount of ten thousand dollars. The other will have employed ship-carpenters, riggers, sail-makers, mast-makers, boat-builders, rope-makers, plumbers, painters, caulkers, timber and iron dealers, and various others, to an equal amount. The one will have employed a number of spinners and weavers. The other will have employed a number of sailors, and each, it will be observed, employs the same amount of capital. Now, whether theactual number of individuals employed in the two different modes of production, be greater in the manufacturing process, or in the commercial process, is of no sort of consequence. The simple question which presents itself is, whether or not the cotton fabrics, which are imported in exchange for the raw cotton exported, are not as much the representative of American industry, value for value, as the cotton fabrics made at home; and, if so, must not that mode of production, whether it be the manufacturing or the commercial one, which produces the greatest number of yards of cotton cloth, of the same quality, be the most profitable one for the nation to pursue? To answer this question in the negative, would be the same thing as to say, that cheapness in purchasing, which is the end and aim of all the efforts now making by science and philosophy, in all the branches of industry all over the world, is not to be preferred to dearness—which is too absurd to be worth a serious refutation.