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Subject Area: Economics
Topic: Free Trade

ESSAY No. XLV. - 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. XLV.

june 16, 1830.

Niles’ Register. Communication extracted from, as to the relative advantages of domestic and foreign labour. Fallacy of its reasoning exposed.

MR. NILES’ Register being looked upon by the restrictive party as a sort of text-book, in regard to the truths of political economy, may be considered in this country as the standard of American System orthodoxy, and, as such, has an extensive circulation, and a powerful influence. We cannot, however, say, that we have ever been forcibly struck with any of his reasonings, and whilst we give him credit for his industry and indefatigable zeal in collecting statistical facts, we think it would not require much effort to point out the fallacy of many of the conclusions which he draws from those facts. The following article, some months ago, particularly attracted our attention:

From Niles’ Weekly Register of Oct. 31.

“Domestic and Foreign Labour.—The following statement is from a practical man. It is highly interesting; but might have been much further extended, as to the labour actually employed, through the establishment spoken of, and the capital vested in lands, buildings &c., to carry it on, and to subsist the persons directly engaged in this business. It is however sufficient to show the difference between domestic and foreign labour, in their effects on national prosperity—the success of which must depend upon the profitable and full employment of the people; seeing that there is no other way than by labour to obtain national wealth. Not less than five hundred persons are subsisted by the establishment spoken of.

to the editors of the register.

Philadelphia, Oct. 26, 1829.

“In your Register of Saturday, I observed an extract from the Boston Manufacturer,” in which, with reference to the comparative effects of commerce and manufactures upon the domestic industry of a nation, it is stated, that 200 sailors employed for a year will bring us all the bar iron that we purchase from abroad, while it would employ fifteen thousand persons to make it.

“In further illustration of the same subject, I send you the annexed statement, showing the amount of American labour set in motion and advantageously employed, during one year, in both the branches of manufactures and navigation, by one small establishment, engaged in making iron. To import the same quantity, (less than 1000 tons,) which here gives employ and comfortable support to so many American citizens, would, if brought from Great Britain in American vessels, require the labour of some fifteen or twenty seamen during thirty or forty days—but if transported in British ships, the whole would be accomplished without giving occupation or contributing to the support of a single American for one moment. When I add, that the article, when made, is sold at a price less than it could be imported for, if no other duty existed than that which, were he Secretary of the Treasury, the editor of the “Banner of the Constitution” would himself be compelled to recommend, or preside over an empty exchequer, it would hardly be contended, even by that gentlemen, that the consumer is taxed by the system which has produced this result.

“I answer for the facts, as they are taken from the books of the concern.

“1. To cut the wood requires an average of about 50 men for five months, at that period of the year during which there is not much demand for labour at other employ.

“2. To convert it into coal and deliver it at the works, 19 men and 16 horses, during 9 months.

“3. To raise [dig] and deliver the ore at a point from whence it is transported by water, 15 men and 16 horses, for 9 months.

“4. To transport this ore and other heavy raw materials requires 3000 tons of coasting vessels. Sloops and schooners of 50 to 70 tons are employed, and 4 or 5 of these, navigated by 15 to 20 men, do the work in about 8 months.

“5. Thirty to thirty-five men, and 15 to 20 boys, are employed for 10 months in converting these raw materials into the manufactured article—and then nearly 1000 tons of coasting craft in carrying them to market.

“The aggregate of this labour you will perceive is equal to about 100 men for one year—to import the same in an American vessel would, as before remarked, require less than one-fifth of the men for one-twelfth of the time.

“But this is not all. The labourers and their families on shore, and the horses, consumed, whilst so engaged, the following articles—

480barrels flour,
120barrels mess pork,
100barrels salt fish,
6,000bushels corn,
4,400lbs. coffee,
4,000lbs. sugar,
1,500gallons molasses,
3,500dollars in value of dry goods, besides a large sum in miscellaneous articles, including hay for the horses, &c. Of the dry goods, about 2-3ds. were of domestic origin.

“The establishment being situated in a comparative wilderness, the articles of agricultual produce were all brought from a distance, and paid a further tribute to American industry and capital in transportation.

C.”

The article above quoted, is, if we understand it aright, intended to shew, that the labour of fifteen or twenty seamen employed for thirty or forty days, is capable of bringing into the country as much iron as it would require one hundred men to produce in this country in one year, and that it is for the interest of the nation that the domestic production should be resorted to instead of importation. Now, if we state the proposition correctly, it follows, that the writer is of opinion, that the more laborious the process by which a commodity is attainable, the more advantageous it is to the public; in other words, that it is better for the public that a hundred men should be employed a whole year in producing one thousand tons of iron, at home, than that fifteen or twenty should be employed thirty or forty days, in procuring the same quantity from abroad. This, to be sure, is a very extraordinary doctrine, and is in fact a repetition of the fallacy once refuted by us in the Free Trade Advocate, under the illustration of a snow-storm. It has its origin in the absurd belief, that if the people are only employed, it matters not how they are employed; whereas the truth is, that, in an economical point of view, it is often better for people to remain idle, than to be employed in labour which can only be remunerated by levying contributions on the public.

There is a story told of our fellow-citizen, Stephen Girard, of Philadelphia, who understands the practical truths of political economy as well as any man in the country, as is shown by the skilful management of his great commercial capital and his bank. A man applied to him one day for charitable aid, who had every appearance of being able to labour. Mr. Girard asked him why he did not work? He replied, that he could not find any employment. Mr. Girard suspecting this to be an excuse for idleness, and wishing to try the applicant, said, he would give him some employment. He then directed him to remove a large pile of bricks, which was near at hand, to another place. This the man accomplished, and then applied for his reward. “The business is but half done,” said Mr. Girard, “they must all be moved back again into the old place.” The absurdity of such sort of American industry as this, was too glaring even for the mendicant, and rather than look and feel like a fool, he sneaked off without his pay. Now, had one of our American System philosophers been present at this occurrence, he would without doubt have denounced the beggar, as he would any individual of the free trade party, for his ignorance, in not being able to perceive how advantageous it was for the public that people should be employed; and he would have thought that it was decidedly beneficial to the community, that this man should have been employed in removing these bricks, even though a few should be broken by the operation, rather than that he should have been maintained as a pauper without working.

But, says Mr. “C.,” the 1000 tons of iron produced at the iron works, by the labour of these one hundred men for one year, is sold at a price less than it could be imported for under a moderate revenue duty. If this is the case, and if this price remunerates the iron-master for the capital and labour employed in his works, as we presume it does, it presents one of the strongest arguments against the high duties on iron that could be adduced. For, if iron can be profitably made in this country under duties of only 20 or 25 per cent., why should $37 per ton, equal to 140 per cent. be imposed? Certainly there can be no reason, except it be to enable the owners of sterile or exhausted mines to force into operation unproductive ore banks, which had better be suffered to lie idle, like the salt-petre caves of Kentucky, that can only be made to produce that article at two or three times the price of the foreign. Again: If the iron which these 100 men produce at home in a year, is no more than the quantity which 15 or 20 sailors could produce by importation in thirty or forty days, would it not be the best policy to adopt the latter course for procuring iron? For, if 1000 tons of iron could be had from abroad, with one-sixtieth of the labour requisite to produce it at home, would it not be better to save the other fifty-nine parts, and apply it to some other purpose? To make this plainer, we will illustrate it by a reference to a particular case.

We will suppose that the iron works alluded to are those of Mr. R., in New Jersey. He has land possessing iron mines, or bog ore, and he has capital enough to maintain one hundred men for a year. These men he maintains by paying them wages, or, in other words, by giving them the quantity of flour, pork, fish, corn, coffee, sugar, molasses, and dry goods, stated in Mr. C.’s estimate. In return for this expenditure he receives annually 1000 tons of iron. Now, if Mr. R., by diverting a part of his capital to commerce, could get, by the labour of 20 of his men as sailors, in one month, as much iron as he now gets by the labour of the whole hundred for one year, would he not, if he was a man of common sense, resort to the least expensive and laborious process of procuring his 1000 tons of iron? For, it will be perceived, that, with his 1000 tons of foreign iron, he would have as abundant means to maintain the whole body of his labourers, as if they had all been occupied in making iron; and if he had nothing more profitable for them to do, and was solicitous that no American industry should be lost to the country, he might set them to work in carrying bricks from one place to another. But we know Mr. R. too well, to believe that he would be guilty of such an absurdity. If he was determined to keep a hundred men in his employ, he would set some of them at chopping wood for the Philadelphia market, others in hauling it, some in cultivating his land, or in building houses and barns, or perhaps in embellishing his grounds by walks or hedges, or in making a canal or rail road from his woods down to the river; and under such a state of things, would it not be better for him and for the community, and for the very labourers themselves, than that the whole hundred should be occupied in doing nothing more than producing 1000 tons of iron?

Under this view of the subject, we cannot conceive it possible that any individual could prefer to see a hundred men employed in making 1000 tons of domestic iron, when it is possible for the same hundred, by a different mode of applying their labour, to produce 1000 tons of foreign iron, and other articles of fifty-nine times the value, perhaps, beside. If there be any such man in the community, his mind must be obnubilated. Mr. C. himself would not prefer it; and he, certainly, when he wrote the above communication, was not aware of the reductio ad absurdum of which it was susceptible. The fact is, the whole reasoning of Mr. C. is grounded on the error of supposing that when 1000 tons of iron are brought into the country, it is there brought by the labour of fifteen or twenty sailors for one month. This is an entirely false assumption, and is no more true than it would be to assert that the labour of the carter, who hauls a load of wood to our door, is the labour which produces the wood. The part which the sailors perform in the total operation of production is a very small part indeed. It is probably, in every ton of iron, not more than the tenth or twentieth part of the domestic labour employed in producing it. The labour of the merchant who directs the voyage, and of the ship-carpenter, rigger, sail-maker, boat-builder, ship-smith, painter, plumber, stevidore, and porter, and of a dozen others employed in building, rigging, and loading a ship, must be taken into the account. And even these, all put together, form but a small part of the domestic labour employed in the production of the foreign iron. To whose labour then is due the foreign iron, if not to the seamen and the mechanics employed in ship-building? We answer, to the hard-working farmer—to the man who by his plough has turned up the ground, who has planted the seed, harrowed it into the earth, harvested the grain, hauled it to his barn, threshed the sheaves, and carried the wheat to the mill to be ground for exportation—to the man who, by diversifying his agricultural pursuits, has raised beef and pork, hams, lard, butter, whiskey, cider, staves and heading, shingles, boards, plank, lumber, spars, tar, pitch, turpentine, skins, furs, cattle, cheese, hogs, horses, corn, corn meal, rye meal, oats, potatoes, apples, onions, cotton, rice, and tobacco, and the numerous other agricultural products which form the mass of our annual exports. Without these labours of the farmer and planter no foreign iron could come into the country, unless foreigners would give it to us for nothing, which is not at all likely; and therefore, in drawing a comparison between the quantity of labour employed in producing 1000 tons of domestic and foreign iron, respectively, the domestic industry of the farmer and planter in producing the equivalent with which alone the latter could be obtained, must not be omitted, it being the most essential part.

In thus pointing out the error of Mr. C.’s reasoning, we must advert to an error in one of his facts. He says—“But this is not all. The labourers and their families on shore, and the horses, consumed while so engaged, the following articles,” &c. Now this expression seems to imply that the provisions and clothing consumed by the one hundred labourers, were in addition to their wages. This, however, is not the case. No labourer who receives a dollar a day, can consume his wages and a dollar’s worth of flour, pork, and salt-fish besides. The articles enumerated were the real capital consumed by the labourers, and constituted their wages; for, whether they received coin, or bank notes, or the orders of their employer upon his own store, the coin, or notes, or orders, must have been given in exchange for the provisions and clothing, which alone could be consumed.

As to the last paragraph of Mr. C.’s communication, it is but a confirmation of the theory upon which he has built this comparative estimate of foreign and domestic labour. He supposes that it is of so much importance that American industry should be employed, that it is of positive advantage that the agricultural produce consumed at Mr. R.’s iron works should be brought from a distance. Upon this principle, it would also be of advantage that the smelting house should be at a distance from the ore banks, inasmuch as the conveyance of the ore to the furnace would give employment to additional American industry; and we see no reason, if the doctrine be a sound one, why it is not the better the further it is pushed. We see no reason why Mr. R. would not promote his best interests, and those of the public, by transferring his works to Egg Harbour, which we presume is not fifty miles from his ore banks, for, in that case, it would employ a great many more hands, and horses, and oxen, than it now does, to produce his 1000 tons of iron.

As to the question, whether the domestic or the foreign mode of procuring a thousand tons of iron, gives employment to the most American industry, we shall leave it to others to answer. This, however, we will say, that if restrictive laws did not interfere, the common sense of the public would lead them to get their iron by the employment of the fewest possible number of people, and never by the employment of the greatest number; so that if the commercial process required a fewer number of hands than the manufacturing process, it would be unquestionably resorted to, and vice versa.