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Subject Area: Economics
Topic: Free Trade

ESSAY No. CV. - 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. CV.

may 25, 1831.

The Message of the Governor of Connecticut, in which many fallacies appear as to the Restrictive System, examined, and its errors pointed out. The doctrine of the home and foreign markets, as held by the advocates of restriction, shewn to be fallacious.

THE following are extracts from the Message of Gov. Peters to the Legislature of the State of Connecticut, delivered at the opening of its session, at the commencement of the present month of May:

“The industrious habits of the people are favourable to manufacturing employments—their progress and experience in the art have abundantly increased the intrinsic value of the articles manufactured—and the competition among the stockholders has, at the same time, reduced the prices.”

If it be true that the industrious habits of the people are favourable to manufacturing employments, where is the necessity of artificial stimulants to give them an impulse? This is a point upon which great confusion exists in the minds of the Tariff party. They say manufacturing is one of the natural employments of this country, to which a great proportion of the industry of the people must needs be applied. We say so too, and furthermore we say, that if Congress were to take an anti-manufacturing whim, and try to keep manufactures down, they could not do it. But the Tariff party say, this being true, it follows of necessity that the Government ought to grant bounties to manufacturers for doing the very thing which their interest points out to them as the most profitable. This is precisely the same sort of reasoning as if a baker were to say, “People must eat bread—there must be bakers—but the Government ought to lay a tax upon the people, to enrich them.” Governor Peters has fallen into the same error, and thinks that those who are not lame, ought to be provided, at the public expense, with a staff to walk with. His idea about the reduction of prices, shows that he has not examined this subject. Domestic competition has had as little to do with bringing down the prices of cotton and woollen manufactures, as it has had to do with bringing down the prices of tea and coffee. Would any one think that a scrub-race between a couple of carthorses, near Philadelphia, could have any influence upon the fleetness of the famous horses which lately exhibited such speed over the New York course? The truth is, that in manufactures there is a grand race now going on all over the world. The more full and free the competition, and the wider the market, the greater will be the reduction of price. Laws, therefore, which restrict the universality of the competition, and thereby narrow the market, diminish the chances of reduction; and hence, the artificial encouragement given to those manufactures which have not sprung up in this country in the natural course of things, has positively retarded the ratio of reduction. The case may be illustrated thus: The city of Philadelphia is situated in Pennsylvania, on the western bank of the Delaware; the state of New Jersey, which is situated on the opposite side of the river, supplies the Philadelphia market with nearly all the melons and peaches which are brought there; the competition among the Jersey farmers is so great, that there has been for many years a gradual reduction in the price of those articles. Both these fruits can be produced in Pennsylvania, but not to such advantage as many other articles of agricultural produce, for which her soil is better adapted. Now, suppose, by way of encouraging the growth of melons and peaches in Pennsylvania, the corporation of Philadelphia should exercise a power not delegated to it, and should impose a duty upon all that should be brought over from Jersey—and suppose that notwithstanding this duty, the Jersey farmers could find their account in still supplying the Philadelphia market with melons and peaches, and even at a lower price than before the duty was laid, which would of course compel the Pennsylvania farmers also to come down with their prices—would it not be silly to say that the reduction had been occasioned by the Pennsylvania competition? And would it not be equally clear, that the demand in the Philadelphia market, for melons and peaches, being less than it would have been without the duty, which keeps up the price, the reduction would be less than if free competition had existed?

“The consumer reaps the benefit, while he obtains the further advantage of a home-market for the raw material and the agricultural productions of the country, without encountering the expense and danger of transportation to foreign countries, and the caprices of their governments.”

The “benefit” which the consumer reaps, is that of paying two prices for a ton of iron, for a suit of clothes, or for a pound of sugar, instead of one. The “advantage” he obtains, is that of having one market instead of two. The nonsense, which is so current, about creating a home-market for agricultural products, by artificial means, in a country where there is an abundance of land, sufficient for the sustenance of ten times the existing population, can alone be founded on the supposition that people can only be induced to eat and clothe themselves when thereunto compelled by an act of Congress. It is surprising that so self-evident a proposition cannot be universally admitted, that the whole population of the United States must be fed and clothed, whether we have foreign trade or not. The home-market must exist as long as people have appetites to be gratified and backs to be covered; and those whose industry supplies these wants are just as sure of the home-market as a lawyer is sure of being benefited by the litigation of his neighbours. The great point to be gained is, to have a foreign market besides. This is what the friends of Free Trade are exerting themselves to accomplish. They say that the farmers ought to have two markets for their flour, grain, beef, pork, hams, lard, butter, &c.; and they say that the consumers of manufactures ought to have two markets to buy in. In this country nineteen men out of twenty are interested in this question, as agricultural producers, or as consumers, and the other twentieth it is, alone, which is benefited by the restrictive system.

The idea of its being a desirable thing to avoid “the expense and danger” of foreign commerce, is quite novel. If the expense and danger of shipping a cargo of mules and horses from Connecticut to the West Indies were equivalent to thirty dollars a head, and if the increased price obtained at Jamaica was sixty dollars a head, would Gov. Peters’ political philosophy teach him that this was a process which ought to be avoided? If so, we can tell him that we know gentlemen in New Haven who have a very different opinion on the subject, and who are now enriching themselves and the country by “encountering the expense and danger” of transportation, and of the horse latitudes to boot. As to the caprices of foreign governments, it is a happy thing for mankind that no mischief can result from them, which does not weigh with a more heavy hand upon those who indulge in them, than upon those against whom they may be levelled. If the British Government is so unwise as to show its caprice, and say that the British people shall be put upon a short allowance of bread, would the American Government act any more wisely if it were to retaliate, by declaring that the American people shall be put upon a short allowance of shirts and coats? This is the true statement of the case; John is so full of caprice, that he cuts off one of his fingers—and Jonathan, by way of avenging himself, insists upon it that his true policy is to cut off two of his own by way of retaliation.

“In time of peace, this system renders our country independent—in time of war we are not reduced to the humiliating necessity of violating our own laws to procure clothing and blankets from the enemy, to cover our suffering armies.”

The independence in time of peace here spoken of, is, to use the witty language of a Southern statesman, “Robinson Crusoe in his goat-skins.” It is the independence of having one coat instead of two, one ton of iron instead of two, one barrel of sugar instead of two; or, to apply the case to the ladies, it is the independence of having one dress, one hat, or one shawl, where two might be had. In time of war it is undoubtedly very humiliating to be beholden to an enemy for favors. But there is no necessity for this. Unless we were at war with the whole world, there would always be some neutrals ready to supply us; and nothing is more certain than that that nation is always best prepared for war, which, by low duties, permits the accumulation within her territory of large stocks of foreign merchandise, to be availed of in case fresh supplies should be cut off. The doctrine of Governor Peters is this: That, because it is possible that we may be at war one year out of twenty, during which we may possibly have to pay for foreign supplies an increased price, equal to twenty or thirty per cent., to pay for the increased insurance and freight, it is sound policy, in order to avoid this possible evil, to begin at once, and to compel ourselves to pay double price for the whole twenty years. This is the whole sum and substance of this argument—and it is just as rational as it would be for the shoemaker to make his own hats, at double the cost of labour which he would have to incur by exchanging shoes for hats, merely because he took it into his head that possibly he and the hatter, at some distant day, might have a falling out.

“The South and the West participate in the benefits, from the improved quality and reduced prices of domestic manufactured articles, and in finding a sure market, with an increased demand, for the productions of their farms.”

Adding insult to injury never mends a matter. It is bad enough for a man to be robbed; but to be told by the robber that the loss of his purse is a positive gain to him, is carrying the joke too far. The “benefits” which the South experiences from the American System, are like those experienced by York county, in Pennsylvania, in consequence of the legislature fusing to let the Baltimoreans construct a rail-road, by which York county would have access to two markets instead of one. As to the South benefiting by the improved quality and the reduced price of manufactures, that is not the question at issue. The question is, whether she gets her supplies as good or as cheap as she would get them if it were not for the high duties. A pound of sugar can now be had for six cents, which used to cost twelve, and if it were not for the duty it could be had for three. The American System has had about as much to do with the fall in the price of sugar throughout the world, as it has had to do in bringing down the price of logwood or mahogany, which have fallen as much as sugar; and, as far as it is concerned, its only operation is to prevent sugar from being as cheap as it would otherwise be. But because the power of steam carries a boat down the river at the rate of twelve miles an hour, whilst the tide carries her up at the rate of three, it is insisted, that the velocity of nine miles, which the boat gains, results from the force of the tide. The “sure market” which the West finds for her agricultural produce, is that of a people whose powers of purchasing are limited by restrictions upon their industry, and is nothing like as great as it would be if every one was free to sell where he could sell dearest, and buy where he could buy cheapest.

“The encouragement and protection of domestic manufactures has been a sound policy of the Government of the United States from the commencement of its operations. This policy it has become a settled principle of the people to continue.”

The encouragement and protection afforded to domestic manufactures, at the commencement of our government, were limited to the indirect operation of duties of five to fifteen per centum, imposed solely for revenue. So long as revenue is needed, and so long as the custom-house is resorted to, so long will the same sort of protection be afforded. But if the Governor means to say that duties of thirty-five to two hundred and twenty-five per centum are to be adhered to, as the settled policy of the country, for the benefit of the manufacturing corporations of New England, we think his Excellency will find himself mistaken.

It is remarkable how precisely alike all the philosophers of the American System mystify the subject whenever they touch it. They take good care never to approach the true question, which is this: Is it not advantageous to a community to have cheap goods in preference to dear ones, and does not the American System prevent goods from being as cheap as they otherwise would be? Let them answer this question.