Front Page Titles (by Subject) CHAPTER VII.: British Tariff Reform. - Taxation and Work: A Series of Treatises on the Tariff and the Currency
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CHAPTER VII.: British Tariff Reform. - Edward Atkinson, Taxation and Work: A Series of Treatises on the Tariff and the Currency 
Taxation and Work: A Series of Treatises on the Tariff and the Currency (New York: G.P. Putnam’s Sons, 1892).
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British Tariff Reform.
A Very common but utterly erroneous idea prevails in this country that Great Britain only gave up the system technically called Protection when by means of this system she had attained conditions of great prosperity and a substantially commanding position in manufactures and commerce.
The very reverse is true; the protective system was given up by Great Britain under the pressure of pauperism and bankruptcy, in which it culminated in the years immediately preceding 1842, when Sir Robert Peel presented and carried his first great measure for the reform of the British tariff.
The origin of customs in England was in the time of Edward I.; thenceforward, duties were added and multiplied, each rate being devoted to a specific purpose, until in 1847 as many as fifteen separate duties were levied upon the same article. In 1787, William Pitt carried through an act for consolidation without reducing the number of articles taxed; this measure left twelve hundred articles subject to duty, and in order to bring the act into force three thousand resolutions were required in the House of Commons. In 1797, however, the laws relating to customs filled six large folio volumes, unprovided with an index. The great subsequent wars rendered nugatory all Pitt’s efforts to relieve commerce; between 1797 and 1815—six hundred additional acts were passed, and in fifty-three years of the reign of George III. the total number of acts relating to imports was thirteen hundred. At length taxes became so numerous that nothing was left untaxed; even premiums offered for the suggestion of fresh subjects of taxation failed to stimulate invention.
Another consolidation was begun which required twenty-five years for its completion. Then a third was undertaken under the direction of Mr. James Deacon Hume, and finally a fourth, which was enacted in 1833. All, however, worked changes in form rather than in substance, except that in 1824, under the lead of Huskisson, several of the crude materials necessary to British industry had been put into the free list, of which the most important was wool. This change had worked great benefit to both wool grower and manufacturer; the price of domestic wool advanced, while the manufacturer was enabled to reduce the cost of goods through the opportunity given him by freedom from taxation on imported wool to buy, sort, and mix his wool in the most effective manner.
The first decisive step in tariff reform was brought about in 1840 by the appointment of a Parliamentary Committee at the instance of Mr. Joseph Hume. The condition of the country was then desperate. The most concise account of the case is given in Noble’s Fiscal Legislation of Great Britain, but all authorities—Liberal and Tory alike—are substantially at an agreement upon this point. It is written that “every interest in the country was alike depressed—in the manufacturing districts mills and workshops were closed and property daily depreciated in value; in the seaports, shipping was laid up useless in harbor; agricultural laborers were eking out a miserable existence upon starvation wages and parochial relief; the revenue was insufficient to meet the national expenditure; the country was brought to the verge of national and universal bankruptcy.
“The protective system which was supported with a view to rendering the country independent of foreign sources of supply, and thus, it was hoped, fostering the growth of a home trade, had most effectually destroyed that trade, by reducing the entire population to beggary, destitution, and want. The masses of the population were unable to secure food, and had consequently nothing to spend upon British manufactures.”
In dealing with the tariff, Hume’s committee classified imports and the revenue derived therefrom under four titles, according to the use to which each subject of taxation might be put, and under each title the imports were classified again, according to the amount of revenue which was derived from each article. This table at once disclosed two facts, first, that a large part of the burden of taxation rested either upon necessary articles of food or else upon articles which were necessary component materials in British industry. Second, that the greatest number of specific articles taxed yielded a very small part of the revenue—more than half yielding such insignificant sums as not to pay the cost of collection. It was the logic of this table that led Sir Robert Peel to change his convictions in regard to the tariff policy and upon it his measures of reform were framed.
In 1885 the writer ventured to call the attention of Hon. Hugh McCulloch, then Secretary of the Treasury, to the bad form of our tariff acts, coupled with a corresponding bad form in the customary annual statements of imports and of the revenue derived therefrom.
In accordance with the writer’s suggestions, the Secretary gave instructions for the adoption of the existing classification and of the present forms of statement. Subsequently, under instructions from Secretary Manning, the annual accounts from 1880 inclusive were classified under the same forms, so that upon a single page of the annual report of imports entered for consumption which is issued by the Bureau of Statistics of the Treasury Department, one may compute at a glance the relative burden of taxation upon all classes of imports.
Some of the conclusions which are developed by the logic of these tables have already been given in this treatise.
At the very time when the protective system culminated in the desperate conditions of Great Britain in 1840, it will be observed that it was at the end of a period of profound peace which had lasted over twenty-five years, in which the personal wealth of the upper classes in Great Britain had become immense. When presenting his first measure of the tariff reform Sir Robert Peel remarked, after stating the deficit and the financial difficulties to be met: “You will bear in mind that this is no casual and occasional difficulty. You will bear in mind that there are indications among all the upper classes of society of increased comfort and enjoyment; of increased prosperity and wealth: and that concurrently with these indications there exists a mighty evil which has been growing up for the last seven years and which you are now called upon to meet.” This evil was the increasing poverty and destitution of the great mass of the working people. The remedy was sought in a re-distribution of the burden of taxation. The tariff then covered 1,200 separate subjects of taxation, of which seventeen yielded ninety-four per cent. of the revenue; the rest were petty obstructions to commerce imposed for the purpose of “protection with incidental revenue.” That purpose was not, however, avowed in these exact terms at that time as it has lately been in this country by the advocates of McKinleyism.
In the first measure Sir Robert Peel wholly abated or reduced the duty upon a consistent plan on 750 articles, and also caused an income tax of seven pence in the pound to be put upon classified incomes, which is a fraction less than three per cent.; all incomes below £150 being exempt. From this income tax he anticipated a revenue of £3,770,000 in the first year. It yielded £5,100,000, conclusively proving that under the previous system, while the poor had been rapidly reduced to pauperism, the rich had become richer.
Like causes produce like effects. Under the pretext of protection to the miners of this country, and especially Pennsylvania, a duty has long been maintained upon the import of foreign iron ores; it is now seventy-five cents a ton, which is precisely equal to the labor cost of producing a ton of iron ore in Pennsylvania,—according to the sworn statements of the iron masters of Pennsylvania, by whom its iron mines are worked. The result of this system in the last census year,—a year of the greatest activity ever known—was that 4,410 iron miners and workmen secured an income of $259 each, amounting in all to $1,141,239. There are iron masters in the state of Pennsylvania, whose single incomes in a single year have exceeded the whole sum earned by the protected iron miners.
Where is the leader who will do what Sir Robert Peel did for England? Who is the legislator who will give up the errors of a life-time in the face of the logic of such facts and lead his political supporters to a conclusion which will give him a right to use the same words which Sir Robert Peel uttered, when he left office in 1847, after having carried the repeal of the Corn Laws?
“I shall leave a name sometimes remembered with expressions of good will in the abodes of those whose lot it is to labor and to earn their daily bread by the sweat of their brow, when they shall recruit their exhausted strength with abundant and untaxed food, the sweeter because it is no longer leavened by a sense of injustice.”
The effect of the first measure of tariff reform in Great Britain—that of 1842—was not immediately perceptible, the evil effect of the previous conditions being very deep-seated; but before 1845 the beneficial influence upon every branch of industry, agriculture, manufactures, and commerce alike, had become so manifest that little opposition was met to Peel’s second great act of tariff reform of 1845, by which four hundred and thirty articles, consisting of the crude and partly-manufactured materials which entered into the processes of domestic industry were put into the free list; the duties on the lessening number of dutiable imports being at the same time reduced and adjusted to these new conditions. In 1846 the Irish famine forced the abatement of all taxes upon food by orders in council, subsequently followed by the repeal of the Corn Laws.
In 1847 Sir Robert Peel left office, but the immense benefits to every branch of British industry rendered it a comparatively easy matter to bring the tariff substantially to its present condition in 1853, coupled with a repeal of the Navigation Laws under the lead of Mr. Gladstone. Since that date the people of the United States have been forbidden by their own acts to compete with Great Britain in the construction and use of ocean steamships, while the commercial flag of Great Britain dominates every sea under the beneficent influence of freedom from all restrictions, and by virtue of the protection which is given by exemption from taxation on all the materials used in the construction and in the subsistence of the vessels.
In the speech of 1842 in which Sir Robert Peel surrendered the conviction of a life-time of active political influence when introducing a reform of the whole fiscal system of Great Britain, he laid down the principle of which he had framed that measure in this memorable declaration:
“If we had to deal with a new society, in which those infinite and complicated interests which grow up under institutions like those in the midst of which we live, had found no existence, the true abstract principle would be ‘to buy in the cheapest market and to sell in the dearest.’ And yet it is quite clear that it would be utterly impossible to apply that principle in a state of society, such as that in which we live, without a due consideration of the interests which have grown up under the protection of former laws.
“While contending for the justice of the abstract principle, we may at the same time admit the necessity of applying it partially. I think the proper object is first to lay the foundation of good laws, to provide the way for gradual improvement which may thus be introduced without giving a shock to existing interests. If you do give a shock to those interests, you create prejudice against the principles themselves and only aggravate the distress. This is the principle on which we attempted to proceed in the preparation of the tariff.”
This principle was justified by events—the most earnest opponents at the beginning became the most urgent supporters of the reform before its completion, giving Mr. Gladstone the reason for saying when reviewing these measures: “The road to Free Trade is like the road to virtue—the first steps the most painful, the last the most profitable.” (I quote from memory.)
It would be difficult to state the rule upon which tariff reform should be conducted in this country in any plainer or simpler terms.