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Subject Area: Economics
Topic: Free Trade

ESSAY No. XCVII. - 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. XCVII.

april 19, 1831.

Reasons why restrictive laws have been established in most countries. History of the Excise System in the United States in 1795.

EVERY one who has examined the subject, knows, that the reason why restrictive laws have been introduced into the commercial policy of most nations, is, that those who have a great and direct interest in their enactment can always bring their influence and power to bear upon the government more efficiently, than those, even though vastly more numerous, whose interest is small and indirect. Hence, when ship-owners have wanted navigation laws, to insure them a monopoly in the transportation of commodities, being assembled in sea-ports, and in compact bodies, they have at all times been enabled to present their claims for protection in a manner which the rest of the community, who are injured by monopolies of all kinds, have not been able to resist. The same is true of manufacturers: living in cities and towns, they can combine with facility; and, having a direct interest in all they can extort from the pockets of the rest of the nation, they spare neither pains nor money to accomplish their ends. The community, on the other hand—which comprises, in reference to each specific monopoly, every individual in the country who is not directly concerned in that specific monopoly—finding their contributions light, feel an indifference on the subject, and do not take the trouble to prevent the rapacity which by degrees is consuming their substance. The tax of $4,200,000, now paid on sugar, is contributed by twelve millions of people; but, because it amounts on an average, to only 35 cents a head, it is regarded as a burden of too trifling a weight to merit consideration. And yet three such duties would support the whole expenses of this government after the public debt is extinguished. Now, when it is recollected, that, of this $4,200,000, more than one half of it—viz., $2,400,000—goes into the pockets of about five hundred sugar planters in Louisiana, in the shape of a duty of three cents a pound upon 80,000,000 lbs. of sugar—or, if it does not go there, it is a dead loss to the nation, incurred on their account—it is difficult to discover the reason why the zeal of the few, to keep on this duty, should be stronger than that of the many, to get it off? So in reference to the duty on iron, on cotton and woollen fabrics, and the fifty other articles, the manufacture of which is sustained by plundering the rest of the community, without an equivalent. The direct interests of the few are so great, and the benefits so certain, that they have every motive for activity and exertion. Hence they buy up the press, circulate their fallacious arguments, to prove to the people that high duties make goods cheap, and send men of their own class to Congress, by the votes of their dependents and retainers.

On the other hand, the public, good-natured fool as it is, stands by, with its hands hanging down by its sides, and looks on with as much unconcern as an ideot, who has fallen into the hands of a highwayman. It holds out no inducement for an advocacy of its cause. It neither pays nor thanks those who take up a defence of its rights, but permits them to struggle against prejudice and the bad feelings of those whose interests or ambition are endangered by their efforts, with scarcely a word of comfort to cheer them on their way. We have long since come to the conclusion, that, were it not for the spark of liberty which has been left burning in the breasts of the Southern people, and the mere abstract love of truth and justice which exists there, and in a few, very few, bosoms at the North, the cause of free trade would succumb to the monopolists, and the whole nation be turned over to them, bound hand and foot.

We have been led to these reflections by perusing a pamphlet of 116 pages, published at Philadelphia, anonymously, “for the booksellers,” in the year 1795, entitled “A Short History of the Nature and Consequences of Excise Laws; including some account of the recent interruption of the Manufactories of Snuff and Refined Sugars.” This work affords a remarkable and striking example of the pertinacity with which the manufacturers hold together and resist any encroachments made upon their interests: and presents, besides, some very interesting particulars, of which we shall offer a brief summary, and from which we shall be able to draw some conclusions highly favourable to the cause we espouse.

In the year 1794 a bill was introduced into the Congress of the United States, imposing an excise of four cents a pound upon all tobacco, and eight cents a pound upon all snuff manufactured, and of two cents a pound upon all sugar refined, in the United States. This measure excited the alarm and hostility of the tobacconists and sugar-refiners, who, with great unanimity, combined to prevent its passage. On the 2d of May the tobacconists presented to the House of Representatives a remonstrance against the bill as far as it referred to them, setting forth, in sound and strong terms, the impolicy of such a tax. They deprecated, not only the adoption of excises, as a means of raising revenue, but they particularly urged the inexpediency of imposing a burden upon a manufacture which only dated its existence from the close of the revolutionary war. They insisted, also, upon the obligation of the government to favour domestic manufactures—not, however, by high duties upon rival commodities imported from abroad, for they adopt the precise ground taken by the Philadelphia blacksmiths, and insist upon it that the imposition of a corresponding duty on the foreign manufacture would be “delusive and nugatory”—but by the government’s merely keeping its hands off. They say: “Societies are formed in almost every state, to introduce, encourage, and protect, domestic manufactures; and the independence of the United States, in arts, as well as government, must be made perfect, unless the hand of power shall prematurely shackle with a tax those exertions which the wise and the virtuous would stimulate with a bounty.”

At the same time a memorial of similar import was presented from the sugar-refiners; and, by way of giving strength to these representations, a meeting of the tobacconists and sugar-refiners [as droll a combination of traders, if one looks at the commodities they deal in, as is easily to be imagined,] was held on the 7th day of May, at which it was, amongst other things—

Resolved, That, on a retrospective view of the taxes on the various manufactures of Europe, scarce any, and not even the article of bread, is exempt; and, as the present measure appears an imitation of the policy of the said governments, it therefore becomes a general concern to the manufacturing interest of this country.

Resolved, That a committee be appointed to invite to a general meeting all the manufacturers of the city of Philadelphia and its vicinity, who may be of opinion that an extension of the said contemplated law may affect their rights and interests, in order to present to the view of that Honourable House the destructive consequences attending the completion of such a law, and of which we conceive they are not sufficiently aware.

Accordingly there appeared, on the following day, a notice, of which the following is a copy:

EXCISE—Citizens Attend!!—Whereas a proposition has been adopted by the House of Representatives of Congress, for imposing an excise upon two of the domestic manufactures of the United States—(tobacco and snuff, and refined sugar)—and, besides the fatal consequences inevitably attending the immediate objects of the tax, it is justly apprehended that this precedent will hereafter be employed to countenance similar excises, till, by insidious and successive impositions, every art and manufactory will be involved in a system forever odious to freemen, dangerous to liberty, pernicious to morals, and destructive of industry. And whereas it is the duty, as well as the interest, of all good citizens, to resist, by every peaceable and constitutional method, the first attempts to introduce into the administration of a free government those oppressive regulations, which never fail to acquire irresistible force from the increase of their number, and the length of their continuance:

In order, therefore, to obtain the common sentiments and cooperation of the manufacturers of Philadelphia, in support of their common cause, all the manufacturers of malt, hops, beer, ale, and cider, of tobacco, and snuff, of sugar, of starch, and hair-powder, of chocolate and cocoa paste, of vinegar, of glass, of candles and soap, of paper and pasteboard, of leather and skins, of iron, &c., &c., and all other manufacturers whatsoever, together with such other citizens as justly condemn the imposition of excises upon the infant manufactories of America, are earnestly requested to assemble, at the State-House, at 5 o’clock this afternoon, to devise and pursue such lawful measures as the nature of the case may require.—Philadelphia, May, 8, 1794.

In pursuance of this notice, a meeting took place, at which sundry resolutions were adopted, and copies were ordered to be transmitted to the President of the United States, and the Speaker of the House, denouncing the proposed excise as “unjust, impolitic, oppressive, dangerous, and unnecessary.” Petitions were also again sent on to Congress, from the sugar-refiners and the tobacconists, remonstrating, in the strongest terms, against the proposed measure. On the 19th of May a memorial from the tobacconists of Baltimore was also sent in. The effect of this perseverance was the striking out of the tobacco bill, the excise upon tobacco; but the majority of the House of Representatives remained as inexorable to the entreaties of the petitioners in reference to the excise upon snuff and loaf-sugar, as the present majority of Congress has been to the entreaties of the blacksmiths, whose sufferings are quite as great, under a tax differing from an excise only in name. The bills were passed by that body; but the tobacconists and sugar-refiners, with a devotion to the principles of liberty as truly Virginian as the commodity in which the former were accustomed to deal, sent in a petition, on the 26th of May, to the Senate, urging that body to arrest the passage of the bill. In this attempt also they failed, and they then deputed a committee to confer with a committee of the Senate, with no better success; and then, as a last resort, they presented a memorial to President Washington, beseeching him to exercise his constitutional negative, by putting his veto on the two bills. This request was not acceded to by the President, and the bills became laws.

After such repeated discomfitures, had the petitioners been merchants or farmers of the present day, they would have abandoned the cause as a forlorn hope. But not so with those manufacturers. With the true spirit of freemen, who spurned at the idea of a partial and oppressive taxation, who “asked not an exemption from taxes, but a security from outrage—who sought not to be less exposed, in occupation, fortune, or person, than their fellow-citizens, but insisted that they ought not to be more,” as they said to the Senate—they tried another channel for redress. In September, of that same year, they sent into the Legislature of Pennsylvania a strong petition, calling upon that body to aid them in the recovery of their rights.

The Legislature of Pennsylvania took no step in consequence of this petition—but the manufacturers were not thereby deterred from prosecuting their claims for redress. Soon after the meeting of Congress, in the following December, a report was made, by a committee of the House, recommending, as one of the means of paying off the National Debt, the continuance of the excises on refined sugar and snuff. Much time did not elapse before the voice of the sugar-refiners and tobacconists was again heard in their hall, in the form of remonstrances, urging anew the repeal of the odious taxes. The sugar-refiners, in urging their claims, employed the following emphatic and sound argument: “The sole objects which induce to the formation of government, are, protection of person and property, the inculcation of morality, and encouragement to the arts. In these considerations is government a blessing. But these objects are completely destroyed, and we return to a state worse than that in which we were before the formation of the social compact, when the taxes for the support of that government are apportioned grossly unequal.” We recommend this passage to the perusal of the manufacturers of the present day, for the sentiment is as true now as it was then, and perhaps they may draw from it a little of the moral instruction which they so much need. The remonstrance of the tobacconists also contained some sensible reflections, and urged upon Congress, as the most equitable mode of collecting a revenue, a tax on estates, real and personal—and concluded by expressing their willingness “to subscribe and pay, by reasonable instalments, their several proportions of the public debt, or to submit with cheerfulness to any general system of taxation on property of every description, operating equally on all classes of citizens, in proportion to their means, for the speedy liberation of their country from the weight and danger of the public burdens.”

To give force and effect to these new representations, the pamphlet before us was written and published. It contained, in detail, all the transactions of which we have given the above brief outline, together with copies of the various petitions referred to, and a full account of the Excise System, as it operated in Great Britain, supported by sound and conclusive reasoning. It demonstrated, from the experience of other countries, the demoralization produced by high duties, in leading to purjury and smuggling, and showed, most clearly, the injustice of all partial taxation.

The petition of the sugar-refiners met with no success, and the excise was continued until the 30th June, 1802, after the election of Mr. Jefferson to the presidency, when it was repealed. The snuff-makers had better luck: in 1795 the excise was taken off, and in place of it a duty was imposed upon all mills employed in the manufacture of snuff—In 1796 this law was suspended, and, subsequently again, in 1797, and on the 24th of April of that year it was repealed. The ground of this abandonment of the duty was, perhaps, more owing to the operations of fraud, than in regard to the representations of the tobacconists. By the first law a drawback was allowed upon snuff exported, equal to the duty, and by the second law a drawback of six cents per pound. In 1795 it turned out, that, whilst the gross amount of duties was $20,000, the drawbacks amounted to $25,000.

In this pamphlet one of the matters which struck us most forcibly, was, that, in no part of it, did the manufacturers rest their claims for protection, upon any other act of the government, than merely keeping its hands off. The argument was, “We do not wish you to tax other people for our benefit—we want merely to be exempt from being borne down by partial taxation.” In one of the resolutions adopted at the town-meeting it was expressly asserted—“On the exertions of individuals, America must, after all, rely for her manufactures.” An example of the exercise of the right by a State, to protect manufactures, is furnished in this pamphlet, in the following words:

When a manufactory was to be established at Patterson, in New Jersey, Mr. Alexander Hamilton, one of its founders, did not think that his institution could bear excessive burdens. He drew an act, passed for its encouragement by that State, of date the 22d of November, 1791, and which fills more than sixteen folio pages. By the fourth clause, the lands, tenements, goods, and chattels of the society, were exempted from all taxes levied by the state for ten years. The manufacturers themselves had numerous privileges. Among others, they were, by the fifth clause, exempted “from all poll and capitation taxes, and taxes on their respective faculties or occupations, and from all taxes in the nature of general assessments.” By the twenty-fifth section the society were empowered to raise an hundred thousand dollars by way of lottery.

Another fact is also striking in the history of the revenue system, afforded by this pamphlet. Why was so odious a system of taxation resorted to, at the hazard of a rebellion, when the duties upon imported commodities were so very low as they were in 1794, when cotton goods paid but 15 per cent., woollen but 10, iron but 15, and most other articles proportionably low? It was because the good sense of the nation knew that high duties prevent imports, and that the obstruction of imports prevents exports. Had our legislators of 1794 been of the school of the American System, they would have risked no rebellions, but have shewn the deluded people that high duties make goods cheap, and augment exports.