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Subject Area: Economics
Topic: Free Trade

ESSAY No. XXXI. - 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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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. XXXI.

april 21, 1830.

Comments on a speech of Mr. Clay, delivered at Natchez. Two markets, the home and foreign, can best be secured by free trade. The fall in the prices of commodities in the United States since the year 1815, shewn not to have been occasioned by the restrictive system.

SINCE the retirement of Mr. Clay from the office of Secretary of State, we have never noticed in any of his speeches, any other than general observations upon the benefits of the “American System,” prior to the one delivered at a public dinner at Natchez, on the 18th of March, as we have seen it published in the National Intelligencer. Upon that occasion he entered upon some arguments in support of his favourite theory, and has thereby laid himself open to that just criticism upon his doctrines, which is alike exempt from a display of party prejudice, or of personal asperity. The President of the day, in his address, in alluding to Mr. Clay, used, amongst other complimentary expressions, this language:—“He has ever been the firm and constant advocate of domestic industry and internal improvement: and however individuals may differ in opinion as to some of those questions, Mr. Clay must be allowed by all, to have invariably sought for the interests, and advocated the cause, of his country.” In this expression there is certainly nothing to warrant the idea, that the company present on the occasion, was favourable to the tariff policy. The same devotion to the interests of “domestic industry,” for which Mr. Clay was complimented, has characterized the public acts of all our prominent statesmen; and where they have differed, it has not been upon the point, whether “domestic industry” should, or should not, be advocated, but whether manufacturing industry should have a preference over agricultural and commercial industry; or, whether each, being like the others, “domestic industry,” should be left in that state of freedom in which it was placed by nature and the constitution. It may indeed be a question, how any politician can be said to be in favour of “domestic industry,” when he advocates a policy which depresses two branches, and elevates but one; and especially when one of the depressed branches is that which furnishes occupation and support to four-fifths of the whole nation. But so it is. The farmers themselves have been silly enough to suffer themselves to be duped into the belief, that there is no domestic industry but spinning and weaving in large factories, and we are therefore not to be surprised that this admission on their part should be employed as a weapon in future assaults upon their interests. But to the speech:—

Mr. Clay took a brief, but necessarily general view of the American System, to which allusion had been made. “I am aware, Mr. President, he said, that many of us differ widely, yet honestly, in opinion upon this subject. I would not obtrude my opinions unnecessarily upon others, yet I trust I shall be pardoned, if I offer one or two remarks upon this important measure. When it was first brought forward in Congress, it was urged against it, that the country was not prepared for the introduction of manufactures to any great extent—that our territory being extensive, our soil fertile, stronger inducements were held out by other branches of industry—that labour commanded a higher price here than in Europe—that Great Britain possessed other and decided advantages over us, particularly in the skill of her mechanics, and in the perfection to which she had brought her machinery—that it must follow, of course, that her manufactures would be cheaper and better. The experience of years, [said Mr. C.,] has shown the fallacy of these predictions. Not only have they been proved to be groundless, but the argument is now upon the other side. American manufactures are not only cheaper, but they are better, being more durable.

“The subject, Mr. President, appears to me to be summed up in two questions—one in relation to sale—the other to purchase.

“How is it in relation to the seller? Sir, I put the simple question—is it not better that he should have two markets than one—a home market, as well as a foreign market? Let me confine myself to the staple of your own state. You complain, and not without reason, of the present low prices of cotton. There is a surplus of the raw material in the foreign market, and the necessary consequence is, a depreciation in value. But, sir, what would be the result, if the two hundred thousand bales, which are now consumed by the home manufacturers, should be thrown into the foreign market, which is already glutted? Why, sir, further and alarming depreciation in price—the consequence would be inevitable.

“Now, sir, for the buyer—how is it with him? Bring forward any article you please, that has been affected at all by the tariff, and let us see if the price has not been reduced since the tariff of ’24? Sir, I challenge the investigation. I will refer you to an article, which at this moment suggests itself—it may be because it touches individual interest.” [Here Mr. Clay could not restrain a mutual smile with a gentleman, who at the moment caught his eye, and who for many years had been Mr. Clay’s agent in this place for the sale of Cotton Bagging, which was the article to which he referred.] “Formerly, Bagging sold at from thirty to forty cents—it is now selling at eighteen cents. But, Mr. President, I cannot enter upon the details of this measure. I will not detain you longer. Upon this subject, I am fully aware that many wise and honest men are radically opposed to me in sentiment. Sir, I have not the presumption to hold up my opinion as infallible—it may be that I am wrong. But, sir, said Mr. C., after a long and anxious observance of the effects of the “American System,” not only upon the immediate objects of its operation, but upon other great branches of our national industry—it is my unshaken opinion—it is my solemn belief—that it forms one of the great foundation stones, upon which alone, the independence and prosperity of our beloved country can rest securely.”

In this eulogium upon the system to which Mr. Clay has allied his future fortunes and political prospects, there are several erroneous positions and fallacies of reasoning, which we hardly expected to find at this late period of time. These we shall undertake to point out, and we challenge any partizan of the American System to refute our positions, or to sustain those of Mr. Clay, by proof or argument.

The first position of Mr. Clay, to which we object, is one of fact, and is found in that expression, wherein he lays it down as a matter proved by the experience of years, and admitting of no dispute, that American manufactures are not only cheaper than those of Great Britain, but better. This declaration will no doubt be read with astonishment by many who are acquainted with the fact, that the whole tariff policy is founded upon a denial of this position. High duties are laid wholly and solely because foreign manufactures can be imported into the country, and after paying freight, commissions, insurance, merchants’ profits, and a moderate revenue duty, can be sold below the price at which the same articles can be manufactured in this country. Were this not the case, why should the manufacturers and their friends in Congress manifest such aversion to touch the tariff, that every effort of the friends of agriculture and commerce, during the present session, has been stifled and put down by an arbitrary vote? Why should the manufacturers urge upon Congress the adoption in this country of a system of espionage and of inquisitorial persecution, which would do honour to the Holy Inquisition itself, or to the Dey of Algiers, if foreign manufactures, after paying all expenses of importation, and a high premium for the risk of smuggling, could not be sold cheaper than our manufacturers can sell them? Why should the same party, for the sake of preventing the reduction of duties, which the people anticipate after the extinguishment of the public debt, already have commenced a system of expenditure of the public money, which shall raise up new drafts upon the public purse to take the place of the debt? Why, in fine, should the whole body of the American System party anticipate from a reduction of duties an overthrow of their whole edifice? The answer to these questions is too plain to be misunderstood, and they cannot but be in direct opposition to Mr. Clay’s assumption. To attempt, therefore, to bring forward additional testimony to disprove this position, would be an insult to the understandings of those whom we address. It would be like bringing forward the eleven additional reasons assigned by a suitor in court amongst a dozen, to account for the absence of a witness, after having stated as the first one, that the man was dead.

Nor will Mr. Clay escape the imputation of having laid an erroneous foundation for his arguments, by mixing up the quality of manufactures with their price. When it is asserted, that foreign goods can be sold cheaper than domestic, the remark is always understood as having reference to goods of the same quality, and the expression therefore of better, as applied by Mr. Clay, is only pushing somewhat further his doctrine of cheapness; for if domestic goods are not only cheaper than foreign, but better, they are doubly cheap. We shall conclude this part of the subject, by asserting, what we think will not be disputed. Mr. Clay’s doctrine, that American manufactures are cheaper than foreign, is true, or it is not true. If it is true, there is no necessity for a continuance of the high duties; for in that case our manufactures would enjoy that natural protection which is afforded by their superior cheapness, and which it would not be in the power of foreign governments to overthrow or disturb. If it is not true, then it must follow, that all reasoning founded upon its admission, falls to the ground. This is the dilemma in which Mr. Clay now stands, and we care not which of its horns shall be selected for him.

The next point we object to, is one of fallacious reasoning. It is the doctrine of the home and foreign markets. “Is it not better that we should have two markets than one—a home market as well as a foreign market?” To this question, put by Mr. Clay, the universal answer must be, affirmative. But what is the policy best calculated to give us the command of two markets of the greatest extent?—“Prohibit importations,” says Mr. Clay. “Reduce your duties,” say we. Nations which will not buy, cannot sell. If we will not take the coffee and sugar and rum and molasses of the West Indies and Brazil, they cannot take our flour, our beef, pork, hams, lard, butter, &c. If we will not take the cotton, woollen and iron fabrics of Great Britain, she cannot take our cotton, tobacco and rice. If all foreign imports were prohibited, all domestic exports would be equally prohibited, unless we should be silly enough to give away our property for nothing, and, consequently, a diminution of any portion of our foreign imports cannot take place without a diminution of an equal amount of our domestic exports. Exports and imports are as necessarily connected as effect and cause. One cannot exist without the other, and if there be any one truth of economical science, which cannot be disputed by any man of a clear and logical mind, it is, that commerce is an exchange of equivalents. Now, if these positions be true, it is manifest, that restrictive laws which diminish imports, at the same time diminish exports. The very glut of cotton in the foreign market, spoken of by Mr. Clay, is the result of our diminished demand for British fabrics. It is the same sort of glut that the manufacturers of cotton bagging would find, if they were to refuse to take in exchange for it the only articles which the cotton planters could give them. And it is the same sort of glut that our merchants constantly find at the islands in the West Indies, to which they export flour and other agricultural produce, in consequence of their government’s refusing, by high duties, to permit them to receive as much coffee, sugar, rum, and molasses, the only articles which the West India planters have to give, as they would be willing to let us have in exchange for our produce.

But Mr. Clay thinks, that the glut of cotton in the foreign market would be increased if the 200,000 bales now supposed to be consumed in this country, were to be thrown into it, and that the price would be greatly reduced. Nothing can be clearer than this, unless indeed the duties upon foreign manufactures were at the same time reduced to a moderate revenue scale; and in that case, we would venture to affirm, that the additional supply of 200,000 bales in a year, so far from occasioning a reduction of price, would be followed by a rise. And why? For the simple reason, that a demand would exist in this country for a greater quantity of foreign fabrics than was before consumed, inasmuch as the consumption would increase as the price declined, and inasmuch as there are no limits to the extent of imports into a country, except those prescribed by the inability to sell, which inability may be brought about, as we have shewn, by its own acts, as well as by the acts of others.

The third point to which we take exception, is that of ascribing to the operation of the tariff policy, a fall in the prices of commodities, which is a position resulting from fallacious reasoning. We are aware that, since the adoption of our restrictive system, a great fall has taken place in the prices of almost every article of consumption. We are also aware, that advantage has been taken of this fortuitous circumstance by the manufacturers, to impress upon the public mind the belief, that the fall has been occasioned by the tariff policy, and millions of people now in these United States, because they see that goods are cheaper now than they were fifteen years ago, do really believe that they are cheaper on account of the adoption of the American System. We hardly expected, however, that any citizen so elevated as Mr. Clay, and with such opportunities of receiving proper light on this subject, could have suffered himself to be deceived by such a gross fallacy. It seems, however, that we have been mistaken; and as we think it important that those who aspire to high stations in this government, should have their opinions, upon matters that are connected with the welfare of the people, examined with the same freedom as those of more humble citizens, we shall trespass a little longer upon the patience of the reader.

That there has been since the year 1815, a great fall in the prices of foreign commodities, is true. It is observable in almost every article of necessity and comfort; in woollen cloths, silks, cotton, and iron fabrics of every description, in teas, wines, liquors, coffee, sugar, salt, &c.

One cause of this fall was the change from a state of war to a state of peace. During the war, all foreign commodities were necessarily enhanced in price, on account of the increased risk and expenses of importation; and as this fact is known to every one, it needs no argument to support it.

A second cause was the restoration of the currency from a depreciated paper one, to a sound metallic one. This cause alone, without the aid of any other co-operating causes, would have occasioned a reduction in the price of every article consumed, of from 5 to 20 per cent., according to the state of the depreciation in different places, excepting in New England alone, where, to the lasting credit of the banks of that section of country, the currency was maintained sound throughout.

A third cause was that gradual diminution in the cost of producing and of transporting commodities, raw materials as well as manufactures, which results from the various improvements made in all the branches of industry, in agriculture, navigation, manufactures, and the mechanic arts, from the slow but steady and sure progress of science, skill, education, and philosophy; and which will go on, towards the effecting of further reductions in the cost of producing, perhaps for ages to come. This last cause has had an universal operation all over the world, whilst the two first named have been peculiar to us, or, to other nations similarly situated.

A fourth and last cause has been the great and astonishing discoveries in the art of labour-saving, which have been made within fifteen years, and especially in the machinery for spinning and weaving, by which one man is enabled to do what formerly required perhaps two or more, and which, by diminishing the quantity of human labour required to produce a fabric, enables the producer to sell it cheaper than before, inasmuch as the price of every product depends upon the quantity of labour necessary for its production. This is the great cause which has occasioned that revolution in the prices of woollen and cotton goods, which has been erroneously ascribed to the operation of the tariff; and it is a cause which would have operated whether our tariff policy had ever been adopted or not, owing to the great competition which exists amongst the individual manufacturers of Europe, to undersell one another in the markets of the world.

That this is the case, is evident from the fact, that notwithstanding the fall which has taken place since 1815, foreign goods would be much cheaper now than domestic ones of the same quality, if the duties were to be reduced, as is known to every merchant who purchases foreign goods for exportation; for as the drawback allowed him is precisely equal to the amount of the duty, he knows that if there were no duty charged, the price of the article for consumption would be just as cheap as it is for exportation. In regard to the article of cotton bagging, specifically referred to by Mr. Clay, who it seems is a manufacturer of this article, it is well known that, although its price may have fallen within a few years, from the causes we have stated above, from 30 to 40 cents a yard, down to 18 cents, yet itwould be five cents per square yard cheaper, were it not for the actual duty.

In this speech, as far as quoted by us, there is but a single sentiment in which we coincide with the orator, and which is to be found in the expression, “It may be that I am wrong.” This admission is somewhat more frank than we are accustomed to see from the advocates of the tariff, and if it be sincere, as we are bound to suppose it to be, it ought to operate as a solemn warning to the party which looks to Mr. Clay as their leader, and to induce them to pause and reflect. If there exist a doubt as to the policy of the tariff on one side, and no doubt whatever on the other, which we affirm to be the case; and especially if this absence of all doubt is strengthened by a moral, steadfast, and perfect conviction that the tariff is also illegal, unconstitutional, and oppressive; we think that a wise and prudent statesman would hesitate before he should resolve to push his measures to an extreme, that might endanger the existence of the government. But notwithstanding this avowal of fallibility, Mr. Clay is still of opinion, that “the American System forms one of the great foundation-stones upon which alone the independence and prosperity of our beloved country can rest securely.” It may indeed give us independence, but it will be the independence of poverty instead of the independence of wealth—the independence of beggary instead of the independence of competency—the independence of misery instead of the independence of comfort—the independence of idleness instead of the independence of constant employment. That this is the sort of independence which Mr. Clay desires, we do not believe, notwithstanding he states, explicitly, that he has arrived at his conviction from a “long and anxious observance of the effects of the American System, not only upon the immediate objects of its operation, but upon other great branches of our national industry.”

Now let us examine and see what have been the effects of the American System. According to Mr. Niles’ repeated declarations, the manufacturers of woollens are nearly all ruined, and the owners of sheep have been obliged to deliver over their flocks to the slaughter. The cotton-spinners and weavers in various parts of the union have been obliged to suspend their works, to make immense sacrifices of their goods, and hundreds of them have been totally prostrated. The distillers of rum in New England have been nearly all broken up. The manufacturers of iron, as has been proved irrefutably before Congress, and as we have shewn in this paper, have been thrown out of employment at the rate of probably five for every one employed by the iron masters. The rope-makers, ship-carpenters, smiths, riggers, sail-makers, plumbers, mast-makers, block-makers, stevidores, ship-joiners, painters, dray and cart-men, have been deprived of employment, in consequence of the high duties obliging the merchants to send their ships to Europe to be rigged and fitted with sails. The ship-owners have seen their ships rotting at the wharves. The farmers have experienced a diminished demand for produce of every description. The planters have sustained a loss of millions by the fall in the price of cotton. People have been driven from wines and foreign spirits to whiskey, and have abandoned temperance for excess. Honest men have been converted into smugglers, and finally, a crisis has been brought upon the country, of a nature so serious, that nothing like it has been seen since the year 1775. Now if this state of things be one of independence, it is such an independence as we hope the nation will not long continue to enjoy; and we do altogether deny it to be such a one, as that the “prosperity of our beloved country can rest” upon it securely. If any of the positions or reasoning that we have herein advanced can be controverted, we should be glad to see any friend of Mr. Clay point out their defects, and we offer the free use of our columns to any gentleman who may be inclined to use them for the purpose. Our object is the development of truth; and if the supporters of the “American System” cannot uphold their doctines by any more sound arguments than those employed by Mr. Clay, in the article we have quoted, they must be prepared to anticipate the downfall of their fabric. The public mind is daily becoming more and more enlightened. The mists and delusion which have overspread the land are fast dispersing; and, to our view, the day is not distant, when the nation will awake as from a dream, to its true interests, and will acknowledge that domestic industry is not confined to spindles and looms, but that agriculture and commerce are equally domestic industry, when carried on by American citizens, as manufactures, and entitled to equal protection, viz., the protection which can only result from leaving them all as free and unshackled as they can possibly be left, consistent with the collection of a revenue adequate to the support of an economical government.