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Subject Area: Economics
Topic: Free Trade

ESSAY No. CXIX. - 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. CXIX.

december 7, 1831.

The employment of a great number of labourers not always a proof of prosperity. This proved, in reference to the manufactories of Great Falls Village. Amount of tax imposed on the public for their support.

IF a traveller were passing along a road, and should see a thousand men busy at work in digging a canal, and were to learn that they received a dollar a day for their labour, it would strike him at once that this was a good thing for the labourers; but it would not so readily appear to him that it was a good thing for the public, for that might depend upon circumstances. For instance, if the canal were made in a direction where a sparse population resided, who had little agricultural produce to transport to market, and who of course could afford to pay for very few foreign products, it might be possible that the public would not gain as much by the canal as it would lose by the absorbing of the capital of beef and pork, flour and potatoes, clothing and groceries, whiskey and materials consumed by the labourers, whilst making the canal, and which was not re-produced by their labour, as it would have been had the men been employed in ploughing instead of digging canals. Thus it may be seen that the mere employment of a great number of persons is no certain evidence of public prosperity; and one of the advantages of an acquaintance with the principles of Political Economy consists in its enabling one to analyze mere facts, so as to discover whether they harmonize with a sound or a false theory; for, without a theory of some kind, no facts can be employed in argument.

In reference to this question of employment, there is a wide difference between the views of the political arithmeticians and those of the political economists. For the former, it is sufficient evidence of prosperity if people are employed: the latter require, to satisfy them, that this employment should be judiciously directed. They would, for example, think it no evidence of public prosperity, if all the inhabitants of a village were employed at good wages in turning grindstones, when there was nothing to be sharpened upon them. Nor can they behold any more certain signs of prosperity, if they see all the inhabitants of a village turning cotton-spindles, and superintending looms worked by water-power, if the cloth they produce is no greater in quantity than the consumers of cloth could have procured, for a sum as much less than that actually paid by them to the village factory, as would equal the whole amount of the wages paid to all the labourers of the village. Between this and the grindstone system they would be able to discover no difference, in principle or effect; and it is, therefore, not to be wondered at, that they cannot acknowledge all to be gold that glistens.

To illustrate what we mean, so as to make it plain to the most uneducated mind, we will state a particular case. In the New York American Advocate there was lately published a letter from Great-Falls Village, N. H., giving an account of a factory established there, of which the following is a copy:

“Great-Falls Village, }
“Town of Somersworth, (N. H.) October 21, 1831. }

“Dear Sir—

This village, seven years since, was an entire swamp and wilderness. It then contained a solitary farmhouse and a small saw-mill. It now contains five large factory-mills, two large hotels, ten blocks (3 stories high) of brick, and about one hundred frame dwelling houses, three churches, and eight or ten stores, and about two thousand inhabitants. There are four cotton and one woollen mill. The cotton mills contain, it is said, more spindles than are run by any other establishment in the United States, viz., thirty-one thousand! with preparations sufficient to supply nine-hundred looms, which produce six millions of yards of cotton cloth per annum. These mills consume, annually, above 3,000 bales of cotton, weighing 1,250,000 pounds. The largest mill is 400 feet long, and 6 stories high, and contains 22,000 spindles and 650 looms. The cotton mills alone give employment to 90 men, over 100 boys, and 600 females. They use from 7 to 8000 gallons of oil, 200 tons of anthracite coal, 500 barrels of flour for sizeing, and 300 sides of leather.

“The mills, which are of brick, handsomely ornamented with hammered granite sills and window-caps, are arranged along a fine canal thirty feet wide, and from six to seven feet deep, extending from the dam at the north of the village to the southern extremity of it. Along this canal is the great highway from the different mills, where a foot-path of planks protect the feet of the operatives in wet weather; and rows of trees, on either bank, bid fair soon to afford a sufficient shade for the heat of summer.”

Now we are willing to admit, that this array of statistics and big figures is prodigiously appalling, and we are not astonished that so many honest and simple-minded people are bewildered when they see such a volume of arithmetic staring them in the face. Such statements, however, have no terrors for the mind which has been habituated to analyze, and to separate the wheat from the chaff, the valuable materials from the rubbish. The fallacy of appearances can soon be stripped from the substantial reality, and the truth be made to appear.

From the foregoing statement we learn—

First. That 1,250,000 pounds of cotton can be converted into 6,000,000 of yards of cloth, which is very nearly 5 yards to the pound of cotton.

Secondly. That the manufacture of 6,000,000 yards of cloth require, in a year, for the spinning and weaving, 790 men, boys, and females—which is equal, upon an average, to 7,594 yards to each operative.

It is not stated how much wages are paid to these operatives, nor is it material for our present purpose. Our design is merely to show that the case is one which belongs to the grindstone system, and we do it thus:

The duty on cotton cloths of the quality above referred to, is 8 3-4 cents per square yard, or about 6 1-2 cents per running yard of three quarters’ width. The tariff party pretend that their duties are not prohibitory. If that were the case, they would be able to sell their cotton cloth at 6 1-2 cents per yard higher than the foreign cloth costs abroad. But we do not agree with them. The duty on all low-priced cottons is prohibitory; and we are therefore willing to acknowledge, that the protection they enjoy is not more than half the amount of the duty, or say, three cents per yard. Now let us see how this operates.

A protection of 3 cents per yard enables the manufacturer to sell his cloth for 3 cents a yard more than he could get for it without the protection. This sum is a tax upon the consumer, because he has to pay that much more than he would otherwise have to pay. Now if one yard of cloth occasions a tax of 3 cents, how much tax must be paid on six millions of yards? Answer, $180,000—equal to $227 bounty per head for each operative, young and old, male and female, employed in their manufacture.

Now we do maintain, and defy contradiction, that it would be better for the public, rather than pay this enormous tax to support this single factory, to make up a purse equal to $100 a head for these 790 operatives, and give them each that sum as an annuity for standing idle, or, if it be an object to have them employed, for turning grindstones. The public would thereby be a gainer of a sum equal to $127 a head upon all these operatives, or, in the aggregate, of $101,000—and they could well afford to do this, and even pay for all the oil, coal, flour and leather, consumed by the factory, which would amount to about $12,500 more.

The letter then proceeds—

“The woollen mill is a fine 6 story brick building, 220 feet in length, containing all the machinery necessary for the manufacture of from 120 to 130,000 yards of fine broadcloth yearly. This is also said to be the largest woollen manufactory in America. The consumption of the raw material, and various articles of commerce, is immense. Upwards of 200,000 pounds of wool, 5000 gallons of oil, 150 tons of anthracite coal, besides indigo, madder, copperas, together with numerous kinds of drugs necessary in the manufacture of woollen cloth, annually giving employment, within the establishment, to 300 individuals.

“Connected with the woollen is a carpet manufactory, where the best description of ingrain carpeting is made. The perfection of the dye, beauty of arrangement of the colours, and taste in figures, are not surpassed by the best quality of those imported. This factory is capable of producing 150,000 yards annually.

“This Company, “The Great-Falls Manufacturing,” have a capital of one million of dollars, and own most of the property in and around the village.

“The churches are handsomely located, on rising ground, at the south of the village, and they are built in a style of great neatness. The first in beauty and architecture is for the use of the Congregationalists, who are said to comprise most of the persons of standing and influence. The Methodists and Baptists have also separate churches, and are more numerous than the Congregationalists.”

From the foregoing extract we learn, that 300 individuals are employed in a factory which produces 120 to 130,000 yards of fine broadcloth yearly—which is equal, taking the lowest estimate, to 400 yards per head. In this journal we have published various statements, proving that during the year 1831 large quantities of fine broadcloths have been imported into this country, and sold at a good profit, after paying from 50 to 100 per centum duty. At the late Convention of the Manufacturers at New York, it was stated by one of the speakers that the real protection enjoyed by the manufacturers did not exceed 40 to 45 per centum, owing to fraudulent entries at the custom-house; but this assertion was repudiated by the official Address, which denied the existence, to any great extent, of frauds upon the revenue. We have investigated this subject minutely, and positively aver that this amount falls short of the actual protection. The duty, therefore, on fine broadcloths, not being a prohibitory one, the duty paid on importation is the precise measure of the tax paid by the consumer. This tax upon all cloths, costing abroad above $1.50 per running yard, and less than $3.75 per running yard, amounts to $1.68 3-4 per running yard; and as this is the quality called fine broadcloths manufactured in this country, it follows that the bounty paid to the cloth-makers at Great Falls Village over and above the price at which foreign cloth of the same quality could be purchased, upon 120,000 yards, is $202,500. This sum amounts to a bounty of $675 to each operative employed in this manufacture!!! Now we would candidly ask the reader whether it would not be good policy for the wearers of cloths to raise a fund and to allow each of these operatives a salary of $100 a year, if they would only direct their American industry to the turning of grindstones, and leave the public to buy their cloth where they could get it cheapest?

But it may be asked, what would the farmers do with their 200,000 pounds of wool, if it was not for this factory? We answer, the consumers of cloth could afford, out of their savings, to pay the farmers a bonus as great as the extra profit (equal to the protecting duty on wool of 4 cents per pound and 50 per centum ad valorem) which they derive by raising wool in preference to other things—which is the most they ought in reason to desire. If this should be 25 cents a pound, (and upon coarse qualities it would not be ten cents,) it would amount to but $50,000 per annum. They could even afford to pay more, without suffering by the bargain; and could, besides, pay out and out for all the coal, oil, indigo, madder, copperas, and all the other things used in the manufacture; and in addition to this, if it were necessary, a profit to the owners of the establishment equal to 10 per centum upon the capital invested in buildings and machinery. As this is an important subject, we will state it in the form of an account, thus:

Salary paid to 300 operatives, at $100 per head$30,000
Farmers’ profit on 200,000 lbs. wool, at 25 cents50,000
5000 gallons of oil, at $1,5,000
150 tons anthracite coal, at $8 per ton,1,200
Indigo, madder, copperas, &c., suppose3,800
Profits on capital invested by the stockholders, in buildings and machinery, estimated at $250,000, at 10 per centum,25,000
Total$115,000

Now if this sum were deducted from the $202,500, the amount saved to the consumers in the price of the cloth, there would be a clear gain to them of $87,500, besides being in possession of oil, coal, drugs, &c., charged at $10,000.

Those who have never turned their attention to analyzing the deceptive appearance of these tariff statistics, will be astonished to see how utterly worthless they are as the basis of a system to be adopted by an intelligent nation. And yet, such as we have shown these cotton and woollen concerns to be, can most of the other kindred establishments be proved to be. The real truth is, that the tax paid by the nation upon the cotton, woollen, iron, and sugar monopolies, besides the full worth of the goods, is greater in amount than the whole sum of the wages paid to the whole mass of operatives employed in them, and is as much a dead loss to the public as if they were to pay a similar amount to the same people for turning grindstones, provided they enjoy the liberty of getting their commodities at the cheapest market.

In regard to the carpet manufacture referred to above, the writer has left us in the dark as to the most material part of his statement, viz., the number of persons it takes to make 150,000 yards of ingrain carpets. It is possible, however, to arrive at some conclusion, without such aid, and we shall attempt to do it.

Ingrain carpets are worth in this city, by retail, about 130 cents per square yard. At the Great Falls Manufactory they cannot be worth more than 120 cents by wholesale. The duty upon ingrain carpets is 40 cents per square yard; and as this duty is not prohibitory, foreign ones being constantly imported, it follows that a tax is paid to the carpet concern of the Great Falls Factory of $60,000 per annum. In other words, they sell their carpets at $60,000 more than they are worth—and for the benefit of how many labourers? Certainly not more than half the number employed in producing the cloth. If 150 then be assumed, it will appear that these sixty thousand dollars are equal to a bounty of $400 per head of the operatives, which is no trifle to be paid by the purchasers of carpets in addition to the full value of the article.

With such a power to lay the nation under contribution as that possessed by the Great-Falls Manufactory for its support, it is no wonder that this wealthy corporation should “own most of the property in and around the village,” and be able to build churches. With a grant of an equally profitable monopoly by Congress, we would undertake to create a flourishing village on the top of the Catskill mountain, or in the pine barrens of South Carolina.