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 XVI.

Tariff Protection does not Raise Wages.

In the last chapter the possibility of applying the protective idea to the building up of specific branches of industry within the limits of this country by obstructing imports, or by enhancing the cost of imported articles even for the time being, has been narrowed down to those special branches of industry which are included under the title of “Statistics of Manufactures” in the census reports of the United States.

It has been demonstrated that the number of articles, and the proportionate value of such articles as could be imported which belong under the title of “products of agriculture,” is so insignificant as not to constitute an important element in the discussion of the subject. It may also be remarked that the total number of persons occupied in mining who could under any conceivable conditions be affected by foreign competition also represents such an utterly insignificant fraction of the working population as to make the application of the legal aphorism “de minimis non curat lex” wholly applicable to them. The only branch of mining industry on whose behalf Protection has been seriously invoked is that of the production of iron ore. In this branch of mining the total number of persons employed in the census year 1890 was only 36,341, their average earnings being $357 each for the year; a rate somewhat less than those of a common laborer engaged in other occupations. Moreover, the most competent and skilful men who conduct the iron industry have proved that the more the ores of Spain and Cuba are admitted freely the more the domestic ores of iron will be required. The case is precisely analogous to that of wool, in which instance the duties on foreign wool have resulted in the depression of the price of domestic wool to the lowest prices ever known.

We may therefore give consideration to the specific branches of industry which are listed in the volume relating to the statistics of manufactures of the United States Census of 1880 under that title. It will be observed that the number of persons—men, women, and children—occupied in these manufacturing arts was 2,732,595; their average earnings in the census year were three hundred and ten dollars ($310) each. But it may not be assumed that such a very low compensation corresponded to the full employment for the year. It fell to the writer to compute the data of the cotton manufacture according to the schedules which had been prepared. The conclusion which he reached was this: that, since the new mills, of which many were constructed during the year, were included without regard to the time of their operation, while others, owing to circumstances, were stopped for a part of the year, the sum of wages should have been increased by twenty per cent. But there are many arts that are listed under the title of manufactures that can only be conducted at certain seasons, therefore this sum of wages would represent even less than three fourths of the year. Giving due regard to this element of uncertainty which the census authorities of 1890 have endeavored to correct, it would probably be safe to estimate that the actual average earnings of those who are occupied under this title in 1880 approximated four hundred dollars ($400) each for a full year’s work. Since 1880 there has been a marked increase in the rates of wages or earnings of all occupied for gain above the grade of common laborers. So far as the writer has been able to obtain the data, this advance in rates of wages may be estimated at from ten to thirty per cent. as compared to the rates of 1880; the proportionate advance in each class being in ratio to the relative skill required in the work. The wages of the common laborer have not advanced very much, but he has been rendered able to buy more for his wages on account of the reduction in prices; the skilled laborer has secured the highest rates of earnings ever known in this or any other country and can also buy more for each dollar.

The advocate of Free Trade who denies this advance makes a mistake; the advocate of Protection who attributes this advance to a high tariff makes a greater mistake. The conclusion which the writer has reached after a very long study of the subject is that the direct effect of a protective tariff upon protected industries in respect both to profits and wages has been greatly exaggerated by both parties in the discussion. Its effect in stimulating a few branches of industry is hurtful rather than otherwise, being apt to end in a local over-production; this excess, owing to the higher cost of materials under the present tariff, cannot be exported, and it therefore depresses prices until the over-production for our own use is stopped. The effect upon the general progress of the country has not been felt in any considerable measure because of the very limited number of industries of which a product of like kind could under any conditions be imported.

On the other hand, the evil effect of the obstruction to the exchange of our own products for those of foreign countries can hardly be exaggerated, because this influence is felt in stopping the export of that excess of domestic products which we cannot consume ourselves and which can only be sold for export. The prices of this excess become a regulator or determining factor in the price of all our great crops. The high-tariff system has in my judgment worked privation, qualified in some slight measure for short periods by somewhat excessive profits, but has been without permanent influence on wages unless to retard the advance in some small measure; this general advance has nevertheless been constantly in progress.

The space permitted in this series will not allow a complete analysis of the statistics of manufactures. The census documents, however, are of ready reference, and it needs but a short consideration of a very few branches of industry to demonstrate the point under discussion. In a previous chapter this subject has been touched upon with reference to titles in dealing with the census of occupations.

Referring to the statistics of manufactures, we find at the head,—Agricultural Implements. In this branch of industry we lay claim to excel nearly every other nation, and, in spite of the relatively higher cost as compared to other countries, due to the duties upon iron, steel, and other articles which are the component materials of chief value in this branch of industry, we are large exporters of this class of goods. Moreover, the average wages in this art are much higher than the average disclosed by the general statistics of manufacture; the amount earned by each person in the census year having been very nearly four hundred dollars ($400), without making any addition for full time to what is disclosed by the figures themselves. Actual average probably nearer $500.

Under the next title of considerable importance we come to Blacksmithing. It goes without saying that the industry of the blacksmith belongs of necessity to the place where he works. There can be no foreign competition of any moment with him. Brick- and Tile-making gives employment to a large force of stalwart men with whom there can be no foreign competition; Bread and Bakery products the same. Carriages, Wagons, and Street Cars are made almost exclusively and of necessity within the limits of the country, and of them we are also exporters. The wages earned in this branch of industry are very high relatively to all others, the workmen making their goods at low cost.

Cheese- and Butter-making is included under the title of manufactures, of which products we are large exporters. In Clocks we excel all nations.

Whether we should import any Clothing, except as a mere “fad” or fashion from other countries, cannot be determined until the materials are supplied to our clothiers on even terms with their competitors in other countries.

Flour, Grain, and Milling products count very heavily under the head of manufacturing, giving employment to a very large force at very high wages relatively; of course there can be no foreign competition.

In Furniture we excel at high wages and low cost, exporting it in no inconsiderable measure. In Lumber and Wood-working we find one of the most considerable items under the title of manufactures. In this, again, we absolutely need the product of the Canadian forests in order to prevent and stop the destruction of our own.

Slaughtering and Meat-packing count for a very large element under the title of manufactures. In this, again, the wages are very high and the cost of the conversion of the product very low.

In short, when a thorough and judicial examination is made of this list of manufactures, the number of branches of industry is very small in which any considerable foreign competition could under any circumstances exist, or in which articles could be imported from any other country of like kind; while the number of persons who could be in part subjected to foreign competition is distinctly less than one-half of the whole number included in this specific census list. Again, a very large part of those who, under our present conditions, are subjected to foreign competition in some measure, would be wholly relieved from foreign competition by removing the tariff tax from the crude or partly manufactured materials which enter into the processes of the specific branches of industry in which they are employed.

My own analyses of the occupations of 17,400,000 men, women, and children, who were occupied for gain in 1880, led me to the conclusion that not exceeding 1,200,000 were engaged in any kind of work of which a product of like kind could be imported, of whom 200,000 were occupied in agriculture. On the other hand, computing number of persons by ratio to value of exports, 1,400,000 occupied in agriculture and 200,000 in manufactures depended wholly on sales of their product for export.

It is clearly proved by the figures of the comparative wages in the arts in whose behalf the Protection of a high tariff has been invoked, that these wages are relatively lower than in the arts which can not be subjected to foreign competition. It may also be held and would surely be proved by a purely judicial observation, that there has been no excessive profit covering a long period either in the textile or metal industries that have been stimulated by a protective tariff. According to the observation of the writer, covering fifty years, the protected industries have been subject to greater fluctuations, greater variations, and to heavier losses than almost any other branches of industry that can be named. Abnormal profits have sometimes been attained; notably in the case of steel, but these profits may be attributed in much greater measure to the control of the Bessemer and other patents by a comparatively small number of persons, than to duties on imports.

The claim made by the advocates of the McKinley act and the various high tariffs that have been enacted subsequently to the war tariff, under which the rates of duty then imposed have been actually raised, that the prosperity of this country and the advance in wages which have marked the last twenty-five years are to be attributed to this system, has no support whatever in the facts, for the reason that the direct effect of such acts is limited to such a small proportion of those who are occupied for gain as to make it one of the minor or lesser factors in any aspect of the case.

Those who attribute any general influence upon the rate of wages to the stimulus that has been given to protected industries, even admitting that the effect of that stimulus has been a very considerable additional development of work on those lines, wholly fail to take note of the fact that we pay for our imports with our exports. The rates of wages in the production of what we export are relatively much higher than they are in the conduct of the arts which have been stimulated by Protection. In fact, the chief argument for the Protection of manufactures has been the high rates of wages which could be earned in the conduct of agriculture. Therefore, no one can fail to admit that, so far as an obstruction to imports is also an obstruction to exports, the results might be a reduction of wages rather than an advance in the rates. Such I think, has been the fact, although the influence of the system upon wages has, I think, been exaggerated on both sides.

On the other hand, the heavy advance in the rates of wages in all the arts that have not been subjected to the stimulus of the tariff while the cost of labor in each unit of product has been reduced, gives conclusive evidence that the influences to which our prosperity may be attributed are something wholly outside of the fiscal policy of the country. The progress of the country can rightly and only be attributed to the application of science and invention to all the arts in which we excel,—to the development of the power of steam and electricity,—to the reduction in the cost of transportation, both by land and by sea,—and yet more than all to the continental system of free exchange among the people of the several States that make up the Union.

It may be judicious to give one example of the potent forces which have been tending to a reduction in the price of articles of prime necessity, accompanied by an advance in the rate of wages, by reference to a single incident. In a discussion upon the silver question at a meeting of the British Association for the Advancement of Science in Manchester in September, 1887, a great deal was said by advocates of what is called bi-metallism upon the injurious effect of the competition of India on a silver basis with the production of wheat in Great Britain on a gold basis, it being assumed that the discount on silver as compared to gold worked as a premium upon its export from India to Great Britain, it being also alleged that silver retained its old purchasing power in India, which is an error. I ventured to call the attention of the scientists to the prime importance of the competition of the United States upon a gold basis in bringing about the reduction in the price of wheat in Great Britain, and I remarked that such had been the progress in invention since the date when wheat sold for fifty shillings a quarter in Mark Lane, as to have made a return of thirty-four shillings a quarter in 1887 quite as profitable to the grower as the former price of fifty shillings. This statement raised almost a storm of execration about my cars, which found its expression in the London Times, whose editor subsequently declined to print the proofs which I subsequently submitted sustaining my statement. In the interval between 1873 and 1887, the self-binder had been perfected and attached to the reaper, thus rendering it possible to harvest an immense wheat crop which could not otherwise have been gathered. The export of flour had to a considerable extent taken the place of the export of wheat, while the railway charges and the freight by steamer, due to the adoption of the Bessemer rail and the compound marine engine, had been excessive. In the interval between 1873 and 1887, we had also met all the difficulties and had surmounted them, which were connected with the restoration of a gold standard in 1879. Such had been the effect of the application of science and invention that the railway charge for fifteen hundred miles from Minnesota and Dakota to the seaboard had been reduced eleven shillings per quarter,—reduction on steamship charge five shillings,—the reduction in the cost of planting and reaping two shillings, the sum saved in milling and sacking three shillings, and the reduction in elevating and handling one shilling. In fact there had been a gain between 1873 and 1887, which had been divided between the producer and the consumer, of twenty-two shillings per quarter of eight bushels of wheat. The average price of wheat in Mark Lane, for the years 1870 to 1873 inclusive, had been fifty-four shillings and ninepence per quarter. Deduct twenty-two shillings paid in 1873, subsequently saved in production and transportation, and there was left thirty-two shillings and ninepence as the average return to the American farmer on the prices of 1870 and 1874. The price in 1887 was about thirty-four shillings, which left the American farmer a better result than fifty-four shillings and ninepence had yielded him from 1870 to 1873.

This statement was bitterly contested, and it was denied that a return of thirty-four shillings would yield any profit to the American farmer in 1887. The Englishman could not believe it.

Since that date, in 1887, there have been still further reductions in all these charges, while the price of wheat in Mark Lane for the present season has been thirty-six shillings per quarter. Wages are higher on the farms at the present time than they were in 1887; the cost of production and distribution is lower.

I also made an analysis of the cost of the production of wheat in Rhenish Prussia, where the highest rate of wages paid the farm laborer was six dollars per month, the average rate much less, but the cost of the wheat was eighty cents a bushel. The cost of the wheat on many of our Western farms at four times this rate of wages is less than one-half that sum, or forty cents. What influence has the tariff or duty upon imports upon the product of agriculture of this country, except to obstruct exports, consideration being given to these potent in fluences of other kinds?

The number of persons, workingmen and working-women, and others whose home market rests wholly upon the demand for export, is larger than the total number of persons occupied in all the arts of which any part could under any conditions be imported from a foreign country; the two bodies of working people together constituting but fifteen to seventeen per cent. of the whole number who are occupied for gain in all the work of this country, the proportion varying somewhat year by year. Is it not the free exchange of the products of the field, the farm, and the factory among the people of our land which is of prime importance in determining the abundance of the product, the rate of wages derived from that work, and the distribution of that product?

Those who fear a reduction of the duties as well as those who hope for a reduction, may well bear in mind that, after all has been said, the tariff system is only one of the minor and not one of the major forces affecting the condition of our country. I am the more careful to press this point, because it will render the solution of all our difficulties much easier when the true measure of the problem is fully comprehended.