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 XXIV.

The Waste of Armies.

The reasons for the admission free of duty of the crude materials which are necessary in the processes of domestic industry have been fully treated and will not be again referred to in this series. The practical absurdity of attempting to give tariff protection to the farmers of this country has been dealt with. The separation has been made between those branches of the mechanic arts and manufactures which must in the nature of things be conducted within the limits of our own country and those of which a product of like kind might be imported. The nations which have applied modern machinery to production have been distinguished and set apart from those which have been classed as the non-machine-using nations. The reasons have been given why those nations who have applied modern science and invention to the greatest natural resources have attained a dominant position in manufactures and in commerce by supplying the people of other countries with goods made at a relatively low cost of production as compared to the conditions of the nations which they supply and yet at much higher rates of wages. Reasons have been given why the effectiveness of labor is proportionate to the supply of food; or even proportionate to the supply of that part of the food which yields nitrogen, which is the most costly and most necessary source of physical energy and of the power to maintain continuous work or labor.

Upon a final analysis of all these conditions, the actual competition among nations has been narrowed down to four groups of States: to wit, the United States, Great Britain, France including Belgium, and Germany including Holland.

Were it not for the assumed necessity of protecting the domestic industry and the home labor of this country from the competition of the people of the three geographical divisions named in this list, one may rightly affirm that there never would have been any tariff question in the sense in which that term is commonly used in this country. The attempt to exclude wool and other crude products would never have been suggested and the present contest would never have happened. In a final treatment of the question we may therefore narrow it down to a consideration of the relative conditions of the countries named.

With respect to the three European sections comprising three great States and two small ones it will be observed that Great Britain is called a free-trade country, using that term not in a scientific but in a practical way. The duties which Great Britain imposes upon imports are substantially limited to spirits, wines, tobacco, tea, coffee, and dried fruits. They are imposed wholly for revenue purposes, and in respect to spirits and fermented liquors are balanced by internal taxes on the same articles.

Holland was the typical free-trade country of Europe down to the period when under the domination of Napoleon a huge debt was imposed upon this small state which rendered recourse necessary to duties upon imports. Belgium imposes moderate duties for revenue only, with careful discrimination. Germany under Bismarck’s rule was subject to a high tariff, which, having failed to produce the expected results is now being rapidly modified. France is subject to very high duties upon imports with countries with which she has not negotiated commercial treaties; not, however, as high as our own. In all these states the crude materials which are necessary in the processes of their domestic industry are substantially free from duties and each possesses a considerable foreign commerce.

Discriminating among them it will be remarked that the exports from Great Britain consist mainly of useful fabrics; the products of iron, steel, wool, cotton, chemicals, and the like. The exports of Holland mainly consist in re-shipment of imports from her colonies of dairy products, and of fresh vegetables to Great Britain. The exports of France mainly consist of wines, silks, and finished goods which depend more upon fashion and style than they do upon utility for their market. The exports of Belgium consist either of very cheap goods, produced mainly by handicraft; or of very costly goods, like Brussels lace, which are wholly the product of the lowest priced hand labor, barely earning a wretched and miserable subsistence. The exports of Germany are various and have been greatly increased in recent years by the application of what is known as “the basic process” to the iron ores of Germany, which had previously been almost useless on account of the large percentage of phosphorus in them.

In dealing with the relations of these countries with each other it will be remarked that France and Germany have attempted to secure tariff protection against the imports from Great Britain and from this country; yet the rates of wages in Great Britain are very much higher than they are in France, practically double what they are in Germany, while the rates of wages are considerably higher in this country than they are in Great Britain.

The question then arises, What is it that has first given the chief control in the supply of the non-machine-using nations with manufactured goods and wares to Great Britain, and what is it that might give a paramount control to this country if we had not put ourselves at a great disadvantage by levying a tax on crude materials so as to maintain the relative cost of such materials in this country much higher than it is in Great Britain, whatever the actual price may be?

The answer to this question is very plain. The paramount control of the commerce of the world has been vested in Great Britain through her position, the stability of her monetary system, and through her possession of what until within a few years were the principal deposits of iron and coal of the world. Through her position, and by working these deposits of coal and iron and their application to machinery and the manufacturing arts, through many years and down to a comparatively recent period protected by penal laws which made it a crime to disclose the methods of the construction of such machinery, Great Britain was enabled to resist the competition even of the United States. By her commerce, first artificially developed, she has been able to purchase an abundant and ample supply of food, until her people are subsisted to the extent of more than one half upon food derived from other countries. This is a dangerous condition. It is necessary for Great Britain to carry the burden of her enormous navy. The supremacy of Great Britain in iron and coal has passed from her and has been assumed by the United States. We now hold the key to the commerce of the world, and we now hold the dominant power to supply the non-machine-using nations of the world with all kinds of useful wares and goods, because we possess the coal and iron mines which can be worked at the lowest cost with the largest product. We can pay the highest rates of wages because our ores of coal and iron are mined with the least expenditure of labor by the measure of time or days’ work. We produce the food and the cotton which the world must buy, because the cost is lower while the wages of labor are higher.

I have said that we hold the key to the commerce of the world, but we have turned it so as to lock out the products upon which we might extend our work, our product, and our progress.

Through these analyses we are brought again to the source of wages and to the distribution of the joint product of labor and capital from which all profits, rents, wages, interest, earnings, taxes, and stealings are alike derived or recovered.

Not only is the product of Europe deficient compared to our own, but its distribution is bad.

At the risk of repetition of data that I have previously given, either in this series or in my books upon the Distribution of Products and upon the Industrial Progress of the Nation, I must again present the facts that govern the distribution of our excessively abundant product and of the meagre supply of the means of existence in Europe.

The motive of this series as given in the title, Taxation and Work, are synonymous terms. All product is the result of all work, be it mental, manual, or mechanical, or a combination of the three methods by which all work is done. All taxation is derived from or constitutes a share of all work. Taxation is either direct or indirect. Direct taxation, in terms of work, consists in the conscription of the workman for enforced service in armies or navies. Indirect taxation, in terms of work, consists in taking a part of the product of work by due process of law.

Lawful taxation consists in taking such part of the products of work as may be necessary for the conduct of the government, by measures so devised that all the work that the people exert in supplying the means shall be secured to the benefit of the government, and shall not be diverted for the support of private enterprise.

Unlawful taxation, making use of the terms lawful and unlawful as synonyms for right and wrong, may be imposed by measures that are legal for taking the property or work of one citizen and conveying it to another under the forms of law, which, nevertheless, “constitutes robbery by a decree under such forms of law.”—(Loan Association vs. Topeka, Reports of the Supreme Court.)

Each nation will be placed at a relative disadvantage with another as it enforces one or the other of these methods of securing work from the people of each State.

This relative disadvantage of a bad method of taxation may, however, be more than compensated by other elements in the conduct of affairs governing production or by the possession of great resources.

The greatest relative disadvantage among the machine-using or manufacturing States of Europe and America already named, consists in the system of militarism, or the subjection of the masses to the support of the military classes. The measure of this direct tax upon labor or work has already been stated in terms of money; it will now be given in terms of work and money combined.

Dealing in round figures and disregarding fractions, according the data of the Statesman’s Year Book of 1892, the population of France, Belgium, Germany and Holland, numbers 96,000,000; or a number exceeding the population of the United States and Canada, by thirty-seven per cent. According to customary estimates the number of men of arms-bearing age in these four States, of which the united area is 436,851 square miles, or one-seventh that of this country omitting Alaska, would be 19,250,000, of whom 1,236,000 are in camp, or barracks, or ships of war subsisting upon the work of the rest at a cost of $250 per man, amounting to a tax of $314,000,000 a year. That is to say, one man in every fifteen is idle so far as productive industry constitutes occupation. If we assume that the product of each man’s work in productive industry in these States would possess a value of $300, a larger estimate than the work of 1,000,000 other men is devoted to the support of these armed forces and what remains of the product of the rest furnishes them the meagre, underfed support, which characterizes the condition of the mass of the people. This diversion of product from constructive to destructive purposes is especially noticeable in the deficiency of nitrogen in the food of the masses. The muscular energy of the army must be sustained even though the people starve.

This waste of the energy of 2,236,000 men out of 19,250,000 comes to a fraction under twelve per cent. of the whole force and renders it necessary for the women to perform the most arduous field labor, to do the scavenger work of the streets, to mix the mortar for the building trades and in many other ways to unsex themselves. Bearing in mind that these direct and indirect taxes upon work upon the machine-using States of continental Europe, take away the most vital element from production and the most essential element from an insufficient supply of food is not the mystery of pauper labor disclosed? Do not low wages and inefficient work cease to become a cause for dread here or to excite any fear of competition?

In evidence of this relative inefficiency, I may cite the following on the authority of Mr. Chauncey Smith who was the counsel of the McKay Sewing Machine Company. The machines made by this company throughout the duration of its patent rights and of its existence were made in the same way, they were all owned and kept in repair by the company, the revenue was derived from the sale of stamps, one of which was to be attached to each pair of boots and shoes made upon the machine. The revenue derived from the machines thus put in operation in Europe was only two thirds as much as the revenue derived from each machine on the average in the United States. Ex uno disce omnes.

From this example, the relative conditions of the competition between the continental States and the English speaking people of Great Britain and the United States may be comprehended. Upon the continent of Europe it requires longer hours and a greater number of working men or women to do the work, the wages in all arts are lower but the cost of labor by the unit of the product is in almost all cases higher. Except for the variations in the relation of wages to cost of labor which have been brought about by restrictions upon trade this rule would apply to all cases.

If the standing army of the United States bore the same ratio to the number of men of arms-bearing age as those of Germany, France, and the Netherlands, we should now have 850,000 men in active service and at our higher ratio of product it would take the work of at least 650,000 men to support them, making 1,500,000 men in all. By so much as this burden is less our power to compete with France and Germany is greater; we deprive ourselves of a part of this advantage by taxing crude materials that we require while they admit them free.

But the burden upon Great Britain is less but still severe, especially in the necessary construction and support of her navy. In proportion as her burden is less is her product greater, her wages higher and her competition more urgent as compared to continental Europe. Yet so far as the mere equivalents of taxation and work for the support of the national government, army and navy interest on debt and pensions can be expressed in terms of money, her assessment in 1890 was nine dollars and a quarter per head while ours was only five dollars and a quarter. We must, however, add to our own tax the evil effect of a bad system which almost if not quite doubles the sum. But even then, in proportion to our greater product we are subject to a lesser burden of taxation as compared even to Great Britain, while in respect to the States of continental Europe our burden is trivial.

National debts work a different distribution of the products of labor from what would otherwise be made, and therefore may create great differences in the relative conditions of the classes who own the bonds as compared to those who are taxed for the interest.

The only national debt which is being diminished in Europe is that of Great Britain; others are increasing. The interest-bearing debt of the machine-using nations that I have listed, Great Britain, France, Germany, Belgium and Holland is about $10,000,000,000, say ten billions dollars, mostly incurred for purposes of war. Our own debt, bearing interest, is less than $600,000,000, all of which will soon be paid.

When the English-speaking people of Great Britain, Canada and the United States are united in the peaceful bonds of reciprocal free trade, qualified by tariffs for revenue only, the continental States of Europe must disarm or starve.

In the interval, the government of the masses for the support of the privileged military classes go on. That which is seen is the increase of debts, the increase of taxation, the growth of deficits, the spread of hunger and the enforcement of the conscription and the military drill with greater and greater severity. What is not seen but heard is the explosion of the bombs of the anarchist, the conspiracies and assassinations of the nihilist, the revolutionary excesses of the communist and the rapid spread of socialism when, even for a few weeks, the pressure of the government is removed.

These are the complement of the policy of blood and iron and of military rule.

It must be left to others to trace out the connection of cause and effect. All that I can do is merely to suggest what may be hidden behind the figures of Taxation and Work except to those who can apply the imagination to wrest from them their true meaning.

In support of the theory that the rate of wages depends upon the supply of the nitrogenous element of food, I may give some facts which have been developed by an investigation of the comparative nutrition of countries and States upon which a beginning only has been made.

A thirty days’ ration that will support life without much power of work consists of fifty-three pounds of grain and vegetables with four pounds of fat—either butter, pork or suet. In Boston this quantity can be bought for $2.10, or at the rate of seven cents a day; flour purchased by the sack or barrel, the rest in small parcels at retail. Twenty-five pounds of meat added carries this life-ration to the standard of the working ration of a German soldier in active service. In Boston this quantity can be bought at retail, of the coarser or tougher portions of meat readily converted into nutritious, appetizing and tender food by right methods of cooking for $1.80, or at the rate of six cents per day, making the cost of adequate nutrition thirteen cents a day or ninety-one cents a week. Coffee or tea may be added within the compass of $1.00 a week. Of course there are very few persons who can give the time or possess the gumption to secure a good subsistence at this low cost, but it is wholly feasible. In this land of abundance the food bill of an adult working-man is apt to be double the sum named and a large portion of what is spent for food material is wasted in bad cooking. That subject does not come within the scope of this treatise. Suffice it that one may obtain the full standard of nutrition of a German soldier and vary the bill of fare every day in the week at a cost of thirteen cents a day in New England.

In Michigan, Iowa, and Nebraska the cost of this full supply of bread, meat, and vegetables may be reduced, at the customary retail prices, to eleven and even to ten cents a day. In London and in Paris the cost is sixteen to seventeen cents. In Berlin, Nuremberg, Munich, and other cities of Germany the cost of the same quantity of bread, vegetables, and meat is twenty-one to twenty-three cents per cent. The wages of the workman permit no such expenditure; he can barely secure a supply of food that will support life, he must forego the meat, and make up as well as he may for the deficiency of nitrogen by the consumption of peas, beans, lentils and other legumes, and of cheese. But when he has spent sixty to seventy per cent. of his meagre earnings for the food of himself and those who depend upon him he is still an underfed and ill-nourished man. For want of means he cannot buy the food which is necessary to efficient work, for lack of efficiency in the work he cannot earn more than enough to support life, and barely that. Meantime the army is supported on rations which have been most carefully computed so as to secure the maximum of energy.

No wonder that the government of Germany is attempting to teach the working-people what food to buy and how to cook it, lest hunger should convert socialism into anarchy, and perhaps induce the conscript soldier who is now subject to a drill which has been denounced as cruel in its severity, to turn his rifle upon the privileged military class, by whom the policy of blood and iron has been enforced.

The thrift of the French and their skill in cooking enables them to resist the lesser measure of want that afflicts France; but her population is stationary, and Paris is a volcano ready to burst into a destructive eruption at any moment. Italy pays for armed liberty by semi-starvation, and, like Germany, is losing the better part of her working-people by emigration, while the less capable and ill-nourished remain.

The benefits of modern science and invention, and the increased product derived therefrom, are grasped by the governments of continental Europe and expended in military oppression; yet national debts and deficits increase, while the disciples of Lasalle preach the so-called “iron law of wages,” which has no application in a free country. It is based upon the conception that the lower the cost to which a bare subsistence may be brought, the lower will the rate of wages be forced.

In the French Revolution the soldiers fraternized with the people. In the Revolution of 1848 they began to do so, but were checked. What will be their decision in 1893 to 1898 if another bad harvest occurs?

It matters not to this country, in the consideration of the subject of foreign competition, whether the conditions of continental Europe remain as they now are or culminate in revolutions; the only aspect of the case to us is how to enable these underfed people to buy our food by enabling them to send us their products which are their only means of payment. Otherwise it will happen, as Chancellor Caprivi has put it, “Germany must export goods or men,” and so must other European countries. Either the product or the laborer will come to this country: which can we assimilate most readily? Would it not be better to make it for the interest of the French Canadians, the Italians, the Bohemians, and the Slavs to remain at home by opening the way for them to buy our excess of our grain, cotton, iron, oil, and goods in exchange for whatever they can supply as the means of payment, rather than to promote their coming to this country faster than we can find suitable work for them to do?

As Daniel Webster once tersely put the case, “Can we afford to do the kind of work in this country which foreign paupers can do for us,” without coming here and placing any greater difficulty upon us in the conduct of our government?