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Subject Area: Economics
Topic: Free Trade

ESSAY No. LXXXIX. - 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. LXXXIX.

march 9, 1831.

Remarks on a passage in Mr. Mallary’s report, declaring that we can manufacture cottons as cheap as the British. This position refuted. Cost to the people of the United States, of supporting the cotton manufacture.

MR. MALLARY in his late report in favour of the Prohibitory System, has introduced the following passage:

“But, suppose the protecting duty withdrawn, and the American manufacturer left to compete with foreign labour on equal terms. Admit the cottons of India, England, and Scotland, and what would be the effect? Within two years, not a single cotton-mill in the United States would be in motion. The immense capital invested in them, amounting to many millions, would be utterly sunk to the country, and their owners irretrievably ruined. And why? Not because we cannot make the goods as cheap as in Manchester or Glasgow, but because a war would be waged, by British capital, against American capital—a war of extermination. Such a war has been waged upon every article of American industry, wherever the protecting duty has been inadequate, or the law extending the duty so framed that mercantile cupidity, and the cunning of foreign manufacturers, could evade it.”

This sort of logic has been at all times much relied upon by the tariff party, but, as it has heretofore seldom appeared, except in the silly effusions of the political arithmeticians who know nothing of political economy, we have scarcely deemed it worth the trouble of refutation. Being now presented to us, however, in a grave state paper, intended to set forth the creed of the American System as we are to have it in case of the election of Mr. Clay, it ought not to be passed without some special notice.

The position we understand to mean, that, although we can now manufacture cotton goods in this country as cheap as in Manchester or Glasgow, which the committee undertake to prove, in a previous part of their report, by the assertion that “large exportations of them are made to foreign countries: they are carried to India, China, and South America, where they are sold to advantage,”—yet, the removal of the duty would lead to such immense importations, owing to the readiness of the foreign manufacturers to sell their goods for less than cost, that our mills would not be able to carry on their operations. Let us now examine this position, and see to what it would lead.

The quantity of cotton annually manufactured in the United States is, according to the broadest estimate, 200,000 bales, of 300 pounds each, making 60,000,000 pounds. Assuming the quantity of cloth manufactured from each pound of cotton at four yards, we shall have 240,000,000 yards, equal to twenty yards a head upon our whole population. Now, whatever may be the average price per yard at which these fabrics are produced, it is evident that an equal quantity of similar products could not be imported from abroad, without incurring the expenses of freight, insurance, commissions, packages, porterage, and other charges, from which the American fabric would be exempt. We think that one cent per yard would be a low estimate for these increased expenses, and, if that position be granted, it will follow, that, in order to enable the foreign manufacturers to enter our market upon equal terms with the American, they must agree to lose, at the very start, one cent a yard, which, upon goods costing from 5 to 10 cents per yard, would be from 20 to 10 pre centum, making an average of 15 per centum. But it must be recollected that this loss of 15 per centum would not of itself answer the purpose of breaking down the American manufacture. The American manufacturer would still be able to stand his ground: for, even with this loss on his shoulders, the foreign manufacturer would not be able to undersell the American. He would be merely able to sell at the same price, and, as such a trade would be a senseless one, promising a certain present loss, without the prospect of any eventual gain, it certainly could not long be continued. No manufacturer in the world would be such a numbskull as to send goods abroad for the purpose of selling them at the price he could get for them at home, sinking, without an equivalent, all the expenses of the voyage, and even incurring the risk, well known to British manufacturers, of never getting paid for them at all.

But we think we can hear Mr. Mallary say, “Aye, but the foreign manufacturer will not be content to lose one cent a yard; he will consent to lose two, or three, or four, or five, rather than not succeed in breaking down the rival manufacture.” Very well—let us examine this position also. The loss of an additional cent per yard would amount to 15 per centum more, making the whole loss 30 per centum. But would a reduction in the price of cotton fabrics, of one cent a yard, which could only take place by a sacrifice, on the part of the foreign manufacturer, equal to 30 per centum upon his invoice, have the effect of stopping all our cotton mills? Would a reduction of two cents a yard do it? It might certainly stop some of those in the middle states, where skill and economy are not so far advanced as in some other quarters, but in New England it would probably not stop one. Would a reduction of three cents a yard do it? For the sake of argument, we will suppose that it would. We will suppose, that, if all our manufacturers were obliged, by foreign competition, to sell their fabrics at three cents per yard less than they now procure, it would be unprofitable for them to manufacture any more. This, then, we will suppose to be the extent of the sacrifice called for, on the part of the foreign manufacturers, to enable them to stop all our cotton mills. And how much will it amount to per annum? Why, precisely four cents per yard upon 240,000,000 yards—that is $9,600,000, or 60 per centum upon the invoice cost.

Now, can any man believe that any set of manufacturers would be so regardless of their interests, as to give away, for nothing, more than one-half their property, in order to induce others to purchase the residue at a mere remunerating price? Human nature, and even human folly, great as it sometimes is, can furnish no foundation for such a belief. If, however, Mr. Mallary thinks that the foreign manufacturers would be guilty of such stupidity, it must be because they would expect some eventual benefit. He perhaps supposes, that, after the American mills had been stopped, the foreigners would raise their price. Very well, let us suppose they do. If they raise it one cent a yard, the New England cotton-mills will again go into operation. If they raise it two cents, those of the middle States will again go into operation. And, if they raise it three cents, the old price and customary profits will again be restored, and the foreigners would find that they were no better off than when they began; but on the contrary, if they continued their “war of extermination,” (self-extermination it should have been,) for two years only, they would be nearly twenty millions of dollars out of pocket, which by no possible contrivance could ever be regained.

In order to give the slightest pretensions to soundness to the position we are combating, it ought to be shown, that, when the cotton-mills are stopped their value is annihilated, the same as if they were burnt to the ground, or swallowed up by an earthquake. But this is not the case. They are merely shut up, and, although they may sustain some injury from rust and want of use, the loss, besides, which is sustained by the community, is only equal to the interest of the capital invested, which is a mere trifle, compared to the advantages the community would have gained by procuring their supply of cotton fabrics at a diminished cost of three cents per yard. Supposing the whole value, in the United States, invested in buildings and machinery applied to the cotton manufacture, to be equal to ten millions of dollars, (which would pay for five hundred at $20,000 a piece,) the annual loss, by their being suspended, would be equal to but 600,000 dollars—whereas the gain to the community, in getting 240,000,000 yards of cloth, at three cents per yard less than cost, would amount to $7,200,000.

But here we shall be told, that the labour of 50,000 people, employed in the cotton manufacture, would be lost to the country. But would that be the case? Could not all those persons find employment in agriculture, or some other pursuit, if they would consent to work at less wages than they now receive at the cotton-mills? We can have no doubt of it; but, as we have to deal with a class of reasoners who admit nothing but what favours their determination to hold on to the American System, we are obliged to argue with them on their own ground. And we therefore contend, that, even should there have been a total loss to the country of the entire labour of these 50,000 persons, the community would still have been gainers—and we prove it thus:

The advantage gained by a reduction of three cents per yard, on 240,000,000 yards of cotton cloth, would be$7,200,000
Deduct the interest on capital invested in idle buildings and machinery,600,000
Also possible injury sustained by want of use,600,000
Also the value of the labour of 50,000 men, and children, at $100 each per ann. upon an average,5,000,000
$6,200,000
Leaving a clear gain of$1,000,000

At this stage of the argument we shall probably be stopped by another position, which was once gravely put forth by Professor List, viz., that it is no advantage to a country to get goods cheap from abroad. That profound reasoner asserted, in a Lecture delivered at Harrisburg, that it was a great evil to a country to import cheap goods, which could be manufactured at home. This doctrine, carried out to its full extent, maintains that half a loaf is better than a whole one, that one pound of sugar is better than two, that a roundabout jacket is better than a long coat, and half a cord of wood, of a cold day, is better than a whole one, that a great coat is better than a great coat and cloak besides. To combat such nonsense by serious argument, is enough to try the patience of a saint, and we must therefore leave it for others who have more of that virtue than we possess.

It would seem that those who believe that the foreign manufacturers are ready to make sacrifices to any extent to ruin our manufacturers, have never given themselves the trouble to think who was to bear the loss. Some pretend that the British Government would bear it. It would perhaps be difficult to persuade a certain class of people that this was not the case. There are some editors in this country who profess to believe that the British Government employ people to set fire to our manufacturing establishments, and to kill our sheep. With such people it would be vain to argue: the question with them is not one of reason, but of passion—and,

  • “Convince a man against his will,
  • He’s of the same opinion still.”

We think it much more likely that the British Government, if it were to interfere at all in forcing the manufactures of private individuals into this country, would do it by affording facilities to the trade with Canada, with the view of aiding their clandestine introduction through that channel; but we think no man can seriously believe, that, loaded as Great Britain is with debt and taxes, her government would undertake to pay the losses of individual manufacturers, in enterprizes which could not possibly now or hereafter eventuate in benefit. If cotton-mills were like oak trees, which require a century to replace them, and if acorns were a valuable nut, there might be some ground for apprehending the agency of some foreign rival in destroying the existing forests. But, in regard to cotton factories, a couple of years would suffice to replace all there is in this country, even if they were to be destroyed, and not merely suspended. If, then, the British Government is not likely to raise the annual fund of $9,600,000, requisite to suspend one single branch only of our industry, who will do it? The manufacturers. What manufacturers? Those who expect the benefit. But what benefit? None can ever accrue to them: for the most they can expect, in return for so enormous a sacrifice, would be, to raise the price again to the old rate. As for raising it higher, as many, who think only skin-deep suppose, it would be impossible. If manufacturing is profitable in the United States at present prices, an increase of one cent a yard would only draw fresh capital into manufactures, and down would come the price again to the general level of profits.

But, even supposing that our manufacturers were not to recover, the price could never be raised, abroad, to any point higher than the one which existed at the time of the commencement of the “war of extermination.” For, the very moment that the manufacturers who made the sacrifice should begin to charge higher prices, others, who shared no part of the loss, would step in with their competition, and prevent it. In so large a community as that of Great Britain, combinations of manufacturers are impossible. Competition operates with its full force, and a knowledge of this fact is of itself sufficient to prevent any one class of individuals from embarking in a sacrifice, the benefits of which, if any accrue, will be just as accessible to others as to themselves.

The more we have looked at this subject, the more are we convinced that this doctrine of foreign sacrifices, to keep down our manufactures, is altogether destitute of sound reason to support it. Great sacrifices are sometimes made by the casualties of commerce, but in no instance, we believe, could Mr. Mallary lay his hand on one, and show that the loss was foreseen at the time of shipment.