The Online Library of Liberty

A project of Liberty Fund, Inc.

• Introduction.
• Taxation and Work.
• Chapter I.: Occupations. Distribution of Products.
• Chapter II.: Taxation Measured By Work.
• Chapter III.: Taxation Measured In Money.
• Chapter IV.: Principal Sources of Revenue.
• Chapter V.: How the Tariff Should Be Reformed.
• Chapter VI.: Taxation Which the Government Does Not Receive.
• Chapter VII.: British Tariff Reform.
• Chapter VIII.: Beggarly Compensation of United States Officials.
• Chapter IX.: What Is Protection?
• Chapter X.: Occupations That Cannot Be Protected By Duties On Imports.
• Chapter XI.: Method of Tariff Reform.
• Chapter XII.: Protection By Exemption From Taxation.
• Chapter XIII.: Free Trade the Objective Point.
• Chapter XIV.: Attempted Definition of the Principle of Protection By Senators Sherman, Hoar, and Aldrich.
• Chapter XV.: Hamilton’s Policy.
• Chapter XVI.: Tariff Protection Does Not Raise Wages.
• Chapter XVII.: Protection Promotes War; Free Trade Promotes Peace.
• Chapter XVIII.: Does Tariff Protection Promote Liberty?
• Chapter XIX.: Progressive Reduction of Duties.
• Chapter XX.: Cost of a High Tariff.
• Chapter XXI.: Development By Free Commerce.
• Chapter XXII.: High Wages and Low Cost.
• Chapter XXIII.: The Use of Machinery By Nations.
• Chapter XXIV.: The Waste of Armies.
• Chapter XXV.: Senator Morrill’s Report On Canada Received. Food and Wages.
• Chapter XXVI.: In the Matter of Silver, Bi-metallism, and Free Coinage.
• Chapter XXVII.: Volume of Trade.
• Chapter XXVIII.: Taxation By Bad Money.
• Chapter XXIX.: How to Maintain Silver Equal to Gold.
• Chapter XXX.: The Issue Joined.
• Chapter XXXI.: Personal Observations—conclusion.

CHAPTER XIV.

Attempted Definition of the Principle of Protection by Senators Sherman, Hoar, and Aldrich.

In Webster’s Dictionary the word Principle is defined as a “truth admitted either without proof, or considered as having been before proved; a settled law or rule of action in human beings.”

The word Policy is defined as “that system of measures which the sovereign of a country adopts and pursues as the best adapted to the interests of the nation.”

If a system of taxation can be founded upon a principle according to the definition given in the dictionary, any subsequent discussion of the matter must be without effect. If, however, that which is defined as a principle is merely a policy, then reasonable men may rightly change their views of what the policy should be according to their experience or knowledge of the effects and conditions which have been developed under the application of that policy. The importance of this discrimination between a principle and a policy will become apparent as this subject is developed.

Among those who took part in promoting the protective measures which were adopted subsequently to the war, no one attained greater influence than the late Erastus B. Bigelow. He was substantially the author of the Wool and Woollen tariff, of which the present provisions of the McKinley act on wool and woollens are but a new adjustment. This original wool and woollen tariff was intelligently framed, and was justified on very simple grounds. It was held that there should be a specific duty upon foreign wool for the protection of the domestic wool-grower. It was believed that this duty would raise the price of all wool, domestic as well as foreign, and thus increase the cost of wool to the manufacturer. A provision was therefore carefully framed for assessing a specific duty upon woollen manufactures, the intention of which was to give exact compensation to the woollen manufacturer for the increased cost of raw material to which he would be subjected by the duty on wool. There was no concealment and no reservation about this declared purpose.

It was held by Mr. Bigelow and his associates that in this way the woollen manufacturer would be placed in the same position as that which he would hold if there were no specific duty either upon the wool or upon the goods. This matter having been adjusted, it was then held by Mr. Bigelow and his associates that there should be a moderate ad-valorem duty of twenty-five per cent. upon woollen and worsted fabrics, for the purpose of protecting the manufacturers. The justification of this protective duty of twenty-five per cent. was the alleged higher cost of labor in this country as compared to the cost of labor in foreign countries. Ad-valorem duties were therefore imposed upon woollen and worsted fabrics in addition to the specific compensating duties upon the raw wool, for the distinct purpose of Protection, and this protective duty was at the rate of twenty-five per centum. Reference may be had to the arguments before the Committee of Ways and Means by which they were governed in framing these acts. Mr. Bigelow did not justify protective legislation on the ground of a principle. He held that a protective tariff should be adopted merely as a matter of policy. He and his associates presented the case to Congress as one to be governed by their choice or discretion.

In his last pamphlet dealing with the protective system in 1877 Mr. Bigelow defined his position and that of his associates in these words: “There is no ultimate principle of universal application included either in Free Trade or Protection; they are questions of policy.”

Mr. Bigelow’s policy has been an utter failure; the wool and woollen tariff has been altered, amended, and increased, each time under the direction of its friends, and the last state and condition of the wool-grower and the woollen manufacturer has been worse than the first. Is it not time to change a policy which the original promoter declared to be founded on no principle whatever?

It has been wholly upon the ground of policy and not of principle that the war tariff has been subsequently amended and altered by the remission of duties on tea, coffee, and sugar, by the enactment of the tariff of 1883, and by other changes down to the adoption of the McKinley act. Then came a very profound change in the declared purpose of the promoters of the protective theory. In the words of its author this new purpose is “Protection with incidental revenue.” It has been held in recent discussions that the principle of Protection has become a settled law or rule of action which must govern our future policy, and which is not a subject of further discussion. It is also held the revenue should be the incident, Protection the end to be assured by a tariff.

But to this perversion of principle and policy alike, only an insignificant fraction of the people or of the legislators of the country have ever given their adhesion. The choice is therefore presented to those who defend existing acts of tariff legislation, either to present a principle of taxation sustaining those acts, or else to justify the existing acts as true measures for securing the enforcement of a policy which is for the general welfare.

In all the recent discussions in defence of the existing tariff acts, public speakers both in Congress and without have presented the case as one founded upon a distinct principle. That is to say, Protection in its technical sense as brought into effect by the McKinley act is claimed to be based upon an “admitted truth already proved, or upon a rule of action or settled law governing human beings.”

It may now be judicious to revert again to the dictionary for a definition. What is Protection? The definition is, “the act of protecting, defence, shelter from evil, preservation from loss, injury, or annoyance.”

It therefore follows that those who would forbid the free exchange of the excess of the products of our fields, forests, mines, and of our factories which we do not want and cannot consume ourselves, for the goods and wares which are produced in other countries which we do want and can use in the processes of domestic industry, must justify such interference with the laws of commerce upon the ground that such a free exchange of product for product will inflict “loss, injury, or annoyance,” upon the people of this country. They must justify these acts upon the ground that it is the function of the legislator to “defend” the people of this country so as to give them “shelter from an evil,” which may ensue if they are allowed to have their own way, and to exchange their products with other countries on such terms as appear to them to be profitable.

Can there be any such justification? It is apparent that unless there is a profit, gain, or advantage to both parties in any mutual service or exchange, then such exchange, in which all commerce consists, must cease. No trade or commerce has any duration among men, and no transactions are repeated in which any party or nation gains at the loss of any other. There must be a mutual service and a mutual benefit in all exchanges, else they stop. All business experience merely consists in so conducting trade and commerce that it shall be profitable to the buyer as well as to the seller, and vice versa. This being an elementary truth, how can any obstruction to such exchanges be defended? The so-called “Principle of Protection” must be defended, if at all, consistently with the definition of the words as those definitions are given in the dictionary. Lest the writer might do an injustice to those who claim to represent the “Principle of Protection” he lately transmitted a letter to several of the leading supporters of the McKinley act, asking them the simple question: “What is the principle of Protection?”

Among all those, ten in number, to whom this letter was addressed, Mr. William McKinley, Jr., was the only one who failed to make a reply. The first missive was sent to Senator George F. Hoar, of Massachusetts, and through an error of the stenographer he was asked to define the principle of Free Trade, which he did in the following terms:

“You ask me to give you in a concise way my conception of the Principle of Free Trade. I am not sure that your type-writer or secretary has not accidentally mis-stated your desire. I should have supposed you would have been more likely to ask me to make for you a statement of the principle of Protection in which I am a believer, than the principle of Free Trade, in which I suppose you are a believer. But I will state the doctrine of Free Trade as I understand it.

“I suppose that the principle of Free Trade does not necessarily imply that there shall be no taxes or duties upon imports, but it regards such tax or duty as a necessary evil, like any other mere tax which compels men to contribute of their own property to support the government. But I suppose that the principle of the free-trader is that no such duty or tax should be laid or determined in its amount by the desire to encourage the establishment, in the country raising it, of any industry or employment which would not otherwise be established, or to increase such employment or industry in consequence of the duty or tax to an extent to which it would not be increased without it; or to maintain, and continue, in consequence of the tax or duty, any existing industry or employment which would not be maintained or continued without it.

“I am faithfully yours,

“Geo. F. Hoar.

Upon discovering the mistake Senator Hoar was asked to define the principle of Protection, and to this he made the following response:

“Worcester, Mass., Nov. 18, 1891.

“You meant, as I thought, to ask me to state the Principle of Protection. I think that you can perhaps infer my definition of Protection from my definition of Free Trade which I sent you in my letter of Nov. 13th. I think Protection as used in our political and economic discussions, is the imposing of such duties on the importation of foreign products as will prevent a domestic producer of the same article from having his business destroyed by the competition of the foreign import, while he establishes it; or will enable him to maintain the production without its being destroyed or rendered unprofitable by the competition of the foreign article after it is established, when he could not otherwise so establish or maintain it; or the enabling him to pay larger wages in such production than he could pay if he were subject to the foreign competition.

“I do not suppose that such Protection will ordinarily result in permanently raising the domestic price or in permanently arresting or diminishing its fall. But it protects the domestic producer against large combinations of foreign capital or against temporary disturbances in the market price by throwing upon the American market the surplus products of the foreign countries at less than the cost of their production, leaving the foreigner to raise his price again if that be found practicable, after the domestic manufacture has been destroyed.

“If you propose to quote my definition in public, perhaps justice to me would require that you should quote my definition of Free Trade as well as my definition of Protection,

“I am faithfully yours,

“Geo. F. Hoar.”

Senator Nelson W. Aldrich, whose ability in defending the McKinley act in its details is deserving of all the credit due to the successful advocate in a bad cause, replied to the question in the following terms:

“United States Senate, Washington, D. C., Dec. 9, 1891.

“I have your favor of recent date asking me for a concise definition of the principle of Protection. The only principle I know of universal application to our customs legislation is that it should be of such a character at all times as to secure the highest degree of welfare to the people of the United States. The practical application of this rule of action under existing conditions leads to the admission of one class of articles free of duty while it imposes upon another class revenue duties, and upon still another levies protective duties. It also provides for the free admission of articles or the reduction of duties through agreements for reciprocal trade. To state definitely just what articles should be included in each of these classes and the reasons for such inclusion would require more time than I have at my disposal, and more space than you would be willing to give to a ‘concise’ definition.

“Very truly yours,

“Nelson W. Aldrich.”

There are very many persons who so fully concur in the defence of honest money and sound finance advocated by Senator John Sherman, that they might well hope to reach concurrence with him also in the matter of taxation. Senator Sherman made the following reply:

“Senate Chamber, Washington, Nov. 30, 1891.

“It is difficult to answer your note of the 25th by a phrase or two. The common arguments in support of the principle of Protection as a necessary feature of every tariff law have been so often stated that if I had time I could select from the official recommendations of nearly every President up to and including General Jackson, clear and strong declarations in favor of Protection as an object equal in importance to that of revenue in our tariff laws. It is an axiom recognized and practised by all nations that a duty on imported goods is the most convenient, the cheapest, and the best mode of levying revenue for the support of any government, whatever may be its form. It is equally clear that a uniform duty on all kinds of imported goods would be unjust to the consumer. Therefore a discrimination of rates on different articles is unavoidable. The best policy for any nation is that which, while securing sufficient revenue, will promote a diversity of productions and as extensive a range of employments as may be permitted by the climate and natural resources of the country. In the United States every tariff law since the beginning of the government has recognized the principle and acted upon the policy of Protection. The degree of Protection and the amount of revenue required must vary from time to time according to the wants of the government, or the condition of domestic industries. Upon these details there has been, and always will be, a difference of opinion, but whatever may be the theoretical views of free-traders, the practical framing of a tariff law necessarily involves a consideration of the rates which will either injure or improve home industries. A practical business man would seek to give to each industry suitable to our climate that degree of Protection which will compensate for the difference in the rate of wages in our and other countries, and with a view to induce capital to embark in new enterprises, and to employ labor that would not be degraded by wages below the standard of comfort which American laborers ought to enjoy.

“Very truly yours,

“John Sherman.”

Hon. Thomas B. Reed sent me in reply to my request a copy of his review of the Mills Tariff Bill. As I did not find any statement of a principle I made a second request, to which Mr. Reed submitted the following rejoinder:

“You ask me to state the principle of Protection, defining the word ‘principle’ as ‘a rule of action and admitted truth requiring no proof.’ If you or anybody else could state the principle of Protection in such form that it would be an ‘admitted truth, requiring no proof,’ you would not be able to write your articles in favor of Free Trade, nor would I have made a speech.”

In this Mr. Reed touches the very nub of the case, so as to bring out the fact that the distinguished gentlemen whose replies have been previously given have simply justified a policy under the guise of a principle.

Other letters from many other correspondents are all in the same direction. The space available for this discussion forbids giving any more of the answers that have been received.

I have given enough to make it apparent that in no one of these statements is there any definition of a principle according to the construction which would be given to that word in any court of justice. Each respondent gives the definition of a policy, which he thinks it would be for the best interest of the country to maintain, but which many other persons of equally sound judgment and capacity believe would work injury instead of benefit.

It may be remarked, however, that the defence of the policy of Protection rests wholly upon the assumption that because the rates of wages are higher in this country than they are in others, therefore the cost of labor in each unit of product must be greater, and that leads to the final point upon which I believe Mr. James G. Blaine once made a declaration, that in the end the tariff question is a mere question of wages.

If it can be proved that the rates of wages—which are admittedly higher in this country than in any other, have been attained in spite of the interference with commerce in the free exchanges of this country, and not by reason of that policy, then the whole system must fall.

If high rates of wages are the necessary correlative or result of the production of the goods and wares, from the sale of which the wages or earnings are recovered or derived, because of the low cost at which such products can be made in this country, then it would of necessity ensue that we might control the commerce of the world, and should remove every obstruction thereto.