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Subject Area: Economics
Topic: Free Trade

ESSAY No. LXXXIII. - 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. LXXXIII.

february 23, 1831.

Speculations as to the effects which would result from the adoption of the principles of Free Trade in the United States. Superior economy of direct taxation over indirect.

AFTER the payment of the public debt, what a glorious spectacle might not the United States present to the world, if their statesmen had the light of political science to guide them, and if the people could only be made to understand their own true interests. They would, in such case, lay the foundation for a policy having for its object the greatest good of the greatest number, by preparing the way for a gradual adoption of the principles of free trade in their most unlimited extent. What would be the effects of that policy, we shall undertake briefly to describe; not that we think it at all likely that there will be wisdom and virtue enough in our day for the consummation of so glorious a result, but that our readers may see the contrast which exists between the system now mis-called American, and that which, in our estimation, would alone deserve that distinguishing name.

To support such a government as ours, upon the economical scale appropriate to a republic, in which the tax-payers are themselves the sovereigns, does not call for more than $12,000,000, including the army, navy, civil list, expenses of foreign intercourse, and all others incident to the management of our public concerns. This sum, divided amongst the population, would not exceed one dollar per head upon an average, and, if assessed in the ordinary mode in which state taxes, county rates and levies, and taxes for the support of cities, towns, or townships, are assessed, would probably range from twenty-five cents to ten dollars per head. In other words, a poor man would contribute twenty-five cents per annum for each member of his family, towards the support of government, and a man worth his hundreds of thousands of dollars would not pay more than ten dollars. That this government could be maintained at that trifling cost, after the public debt is paid off, is as demonstrable as that two and two are four, and, were it not for that inconsistent folly which is so remarkable in this country, and which leads people to look upon a direct tax of a dollar, for the support of the Federal Government, as a bug-bear, whilst they pay, direct taxes of twice the amount for the support of State and local authorities, and five times the amount in indirect taxes for the support of monopolies, the present system of raising the revenue could not last. If any man wishes to see the difference it would make to him, whether the one system or the other were adopted, he can easily do so, by asking himself the following questions:

How much more do I now pay, for the foreign articles I consume in my family, than I should have to pay if there were no duties upon them?

How much more do I now pay, for the domestic articles I consume in my family, than I should have to pay if there were no duties upon foreign goods, operating as a tax upon the producers of the domestic articles, and compelling them to charge higher for their goods than they would have to charge if there were no such duties?

These are very simple questions, and questions very easily answered, and there is not a man in the land, however poor, who could not, in two or three items only, show that he now pays an indirect tax equal to the whole amount of direct tax he would have to pay, if there were no duties. There is many a man who now pays, in the price of the single article of sugar alone, as much tax as he would have to pay for his whole contribution. As to those persons who live in comfortable circumstances, there is not one who does not, in the ordinary dress of his family, pay more tax than one dollar a head, and, as regards those who can afford to wear broadcloth, the tax upon a single suit is upwards of ten dollars. We do not descend to further particulars, because the subject is so plain a one that any individual can understand it; but we state, as our sincere belief, that the increased prices paid by the whole body of consumers, occasioned by the imposition of duties, in articles of food, drink, clothing, furniture, utensils, implements, and all other articles consumed, is not short of five dollars a head upon the population, which is equal to sixty millions of dollars per annum. Now, if this estimate be correct, it will follow, that a saving to the nation could be effected, of forty-eight millions of dollars per annum, if the impost system were substituted by a system of direct taxation.

But this would not be all. Under a system of direct taxation, the burden would fall upon the right shoulders. The poor man would only pay his fair share, whereas, under the system now existing, he pays more than his share, for the tax is levied in such a way as to throw the principle weight upon the working classes. How a nation of working people can permit themselves to be ridden as they are, by an army of monopolists, booted and spurred, is one of the most incomprehensible things in nature, and almost makes one doubt of their capacity for self-government. The time once was, in this country, when the very names of monopoly and taxation were odious in the ears of the people. Now, they hug the abetters of these measures of oppression to their bosoms, as their best friends, and spurn from them those who are labouring to free them from a bondage which is as disgraceful to their understandings as it is destructive of their interests.

We shall, perhaps, be told by some of the booted and spurred, that, if there were no duties, no branch of industry could flourish. This would be as much as to say, that no branch of industry could thrive without levying contributions upon the rest of the community. Such language is idle, and can easily be refuted. Would not agriculture, the natural business of this country, thrive, if our ports were made as free as Gibraltar or Genoa? Could not more grain, and flour, and beef, and pork, and butter, and lard, be sold, if all the world was allowed to bring us their commodities free of taxation? Why do we consider it of importance, in our negotiations with foreign powers, that we should have our productions admitted by them at low duties? Is it not because there would be a more extensive barter of our commodities for theirs? And would not, consequently, our removal of duties produce the same effect, and extend their barter for our commodities? Common sense will answer yes. “But no,” says the American System, “foreigners will not buy our agricultural productions.” Very well—then we cannot buy theirs. Nothing is clearer than this. Will they give them to us for nothing? If they will, so much the better. No people could be losers if it were to rain broadcloths and hardware. But the truth of the matter is, that foreigners are not such fools as to give us their wares without full value received. They may sometimes make accidental losing voyages, but, to say that any merchant or manufacturer will ship goods to a certain loss, is to ascribe, to a very close, calculating class of people, a folly, of which they have never yet been guilty. What would be thought of any one who should insist upon it that the ruinous shipments of cotton made from this country to England, in 1826, were designed to injure the British speculators in cotton? To argue seriously on such a subject, is almost impossible. Commerce is an exchange of equivalents, and imports from abroad can never take place into any country where corresponding amounts are not exported.

But, not only would agriculture thrive under a trade perfectly free; manufactures would themselves prosper. All those connected with ship building would flourish beyond any former example. But, independent of these, every species of employment, almost, would advance. For instance, population would increase, calling for additional houses; carpenters, bricklayers, masons, painters, glaziers, plaisterers, brickmakers, lumber-cutters, saw-millers, boat-men, raft-men, lime-burners, cart-men, cellar-diggers, and all others connected in any way with building, would all find an additional demand for their labour. Houses cannot be imported, and must therefore all be made in the country. Indeed, from the very nature of things, the great mass of the products of labour consumed in any country, must needs be produced in that country, arising from the limits which are placed on foreign commerce, by the expenses of transportation, and by the similarity of soil and climate, which occasions a similarity of productions. These circumstances constitute a natural barrier to competition, or, as some would say, a natural protection against foreign competition. If a bushel of wheat can be raised in Pennsylvania, for a dollar, and a similar bushel can be raised in France for the same price, there can be no commerce between those countries, as far as that article is concerned; nor can there be any commerce, if the expenses of transport are too great to be remunerated. At Pittsburg coal can be purchased at four cents a bushel—at New York it is worth twenty cents; but, as far as coal is the only equivalent which an inhabitant of Pittsburg has to pay for New York merchandise, so far is he deprived of the power of purchasing, because the New York merchant cannot find his account in taking coal in payment. From this it will be seen, that, in all commerce, two things are requisite to carry it into effect: first, that there should be goods to sell: and, secondly, that he who wants to buy them should have something to give in exchange, which the seller is willing to take. We dare say that the Pittsburgers have no limits to the extent to which they would buy New York merchandise, if the New York merchants would take coal in payment. But, as the latter cannot do so consistently with their interests, the former have a natural limit imposed upon their demand.

The same thing precisely exists in reference to the United States and Europe. There is a natural barrier imposed upon the commerce of the two countries, which it is not possible to remove, although it may be greatly diminished by economy in navigation. The natural protection enjoyed by a person engaged in any domestic industry, is equal, not only to the expenses of importing a similar product, but also to the additional expense of exporting the domestic product with which it was purchased. That this is the case, may be evident, from this consideration: The total mass of foreign goods consumed in this country, if they could be imported by magic, and be paid for by domestic goods, exported also by magic, would cost precisely as much less than they now do, as the expenses of freight, insurance, commissions, and the other charges incident to the aggregate mass of imports and exports. We state this, merely to show, that, without any duties, there is a sufficient protection for domestic employments, and that, under a trade entirely free, foreign competition could only interfere with those few, very few, branches of business, which owe their establishment to the hot-house process, which ought never to have been forced upon the country, and which it would be advantageous for the nation to get clear of with all the expedition that would be consistent with a reasonable regard to the interests of those who are engaged in them.