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 XXVII.

Volume of Trade.

In dealing with our monetary system it becomes expedient to attempt to establish the data of the huge volume of transactions which are conducted in terms of money within the limits of our own country, in a tolerably certain manner, since any legislation, beneficial or otherwise, will affect these transactions throughout the whole circulation. All purchases and sales imply the use either of actual money or of checks, bills of exchange, or other instruments of credit. The one is the shadow of the other, inseparable from it.

One method which I have adopted has been to attempt to value the merchandise which has been moved by the railways. There are no data for the exact computation of the average valuation of the goods, wares, and merchandise which are moved over the railways of this country, yet one can obtain an approximate estimate in the following manner. The lowest-priced products are perhaps moved the longest relative distances, but as a rule they are loaded upon the cars and moved but once because they will not bear the cost of handling. The articles which are below the value of twenty dollars per ton consist mainly of ores, coal, and stone. Our total annual output of coal, of ores, of iron, of limestone used as a flux in smelting, and of building stone, comes to about two hundred million tons. A considerable part of the coal is used where it is mined, and a large part of the ores with another part of the coal is moved by waterways, the rest is moved by railways.

Of the total tonnage moved by rail in 1890 covering seven hundred million tons, one may assume that one-quarter part consisted of ores, coal, and stone, at a valuation of two or three dollars per ton, amounting in value to less than four hundred million,—probably about three hundred million dollars.

On the other hand, if we compute the movement of cotton by rail, the movement of wool, both domestic and foreign, by rail, and the movement of hemp, sisal, and other fibres which are converted into cordage, twine, flax, and other fibrous substances, these fibres only would reach a tonnage of about two and a half million tons, of which probably two million tons are moved by rail. The value of the wool is from twenty to thirty cents per pound, of cotton seven to nine cents, other fibres varying greatly. It is probable that the total value of these fibres would very nearly equal that of the coal, ore, and stone, even before they are converted into their secondary forms. If moved again after their first conversion they would come to a very much greater sum.

Having dealt in this valuation only with coal, ores, stone, and fibres, we have computed the value of less than one-third the actual tonnage of the railways, leaving the products of the forest and of the field still to be dealt with.

There is no exact measure of the product of the forest. A ton of wood will cover from two to three thousand feet, board measure,—more or less according to the kind of timber. Sawed lumber is worth from ten to sixty dollars per thousand feet, board measure. Therefore the products of the forest, even in their crude condition, may vary in valuation from thirty to one hundred and fifty dollars per ton.

Food products, however, constitute the larger element in the railway traffic, as they do in the family expenses. An average grain crop weighs one hundred million tons; corn is worth fifteen to twenty dollars per ton; wheat, from twenty to twenty-five; oats, from twenty to twenty-five; meats on the foot, from eighty to one hundred dollars; meats dressed or packed, one hundred and fifty to two hundred dollars; cheese, one hundred and sixty to two hundred and fifty; butter, four hundred to six hundred, and so forth.

Thus far we have dealt only with crude materials of various kinds, and with some forms of food in condition ready for consumption. The only clue that we have for obtaining the exact value of this class of substances is from the figures of the tonnage moved over the Erie Canal. Under the rules of the State all products moved on the canal are valued. They consist mainly of the lower-priced, cruder, and heavier substances. The average value is thirty-three dollars per ton.

In dealing with the railway traffic it would be useless to attempt to compute the value of most of the secondary products or any of the final forms named manufactures, such as flour, bread, canned provisions, fish, fruits, machinery, leather, boots and shoes, hardware, clocks and watches, and all the protean forms of finished goods in which nothing can be found of any weight to which any consideration is due, that is worth less than twenty dollars per ton; while great quantities range from two hundred to two thousand dollars per ton, or even more.

On the other hand, in dealing with the railway traffic there is no means of telling how many times the same ton is repeated, or how many times the same lot of flour or other commodity may be reported in the way from Chicago to the sea, by the different corporations that make returns. On the whole, however, the largest traffic is over the ways of the largest corporations that make but a single return covering a very long distance. The average haul per ton in 1890 was one hundred and thirteen miles. It may be assumed that most of the heavy and very crude substances, such as ores and stone, are reported but once. It is probable that the greater part of the grain is reported but once, as it is carried to the mill on through lines. Secondary products may be reported more than once, therefore the actual number of tons moved by rail may be less than the apparent number reported; but, on the other hand, the value which has been put on these secondary products is very far below the true value, and the valuation of twenty dollars ($20) per ton on finished products is very greatly below the average.

Mr. H. V. Poor, the author of The Railway Manual, has given close attention to this subject, working by different methods from the ones which I have employed, and he has reached the same conclusion, to wit: that the minimum value of all the goods, wares, and merchandise moved over the railways of the United States is twenty dollars per ton.

In view of these considerations one may submit as a fact that the actual tons moved in 1890, as listed in The Railway Manual, computed at 700,000,000 tons, moved one hundred and thirteen miles, possessed a value of not less than twenty dollars per ton, or fourteen thousand million dollars ($14,000,000,000) in all. This merchandise was probably worth a great deal more than that sum, and this is the measure of only that part of the exchange of goods, wares, and merchandise which is worked by the railway system. In each exchange in terms of money, coin, notes, checks, or bills of exchange must pass.

There are other methods of dealing with the same subject, leading up to the conclusions which it is necessary to reach in order to comprehend the full bearing of our monetary system. If we should compute the product of the people of this country at two hundred dollars’ worth per head, or at six hundred dollars’ worth as the average product of each one in three of the population who is occupied for gain,—our gross product comes to twelve thousand five hundred million dollars’ worth at the places of final consumption ($12,500,000,000). It is probable that five hundred million dollars’ worth may be consumed at the place of production; all the rest is bought, sold, or exchanged once, twice, thrice, or more. All the rest is moved by lake, river, rail, wagon, or by hand once, twice, thrice, or more, and every transaction is conducted in terms of money. Grain and meat are sold by the farmer to the miller or the packer; moved to the elevator, to the flour-mill, to the creamery, or the packing-house; moved again to the wholesale dealers, and again to the distributors. Fibres are removed from the field to the factory, from the factory to the bleachery, from the bleachery and dye-house to the clothier; moved again to the great centres of distribution, and moved again to the place where they are finally sold. Even in the process of conversion into clothing, fabrics are cut in the cities and are moved hundreds of miles to be sewed into garments in farmers’ families and returned. Metals are moved from the furnace to the machine-shop and to the tool factory, and from thence, once, twice, or many times. In every movement there is purchase and sale conducted in terms of money.

All that we can do is to move something; we can make nothing. The work of life is a conversion of force, of which the end is to supply to each man, woman, and child with from two and one-half to five pounds of food a day, with from ten to twenty pounds of cotton or wool a year for our backs, with a few boards over our heads for a dwelling-place. Food, shelter, and clothing? What else can the richest man consume? What else will satisfy the needs of the poorest? There may be relative and very great inequality in the distribution of the necessaries of life, but there must be substantial equality in the consumption of the materials by which we exist. The greatest inequality is in the provision for shelter. How to house the crowds in the great cities is the hardest problem which we are called upon to solve.

If then we may value the product as stated,—if we may compute the whole exchange by railway at the sum given,—it would seem that the measure of all our business transactions in purchases and on sales or exchange of product for product, all of which must be stated and measured in terms of money, cannot come to less than forty thousand million or forty billion dollars in a year ($40,000,000,000). All these dealings imply delivery of goods by water-ways, by railways, by wagon, and by hand; heavy products by water-ways and railways,—package and wholesale distribution mainly by railway,—parcel delivery by wagon or by hand costing more than either of the other methods. It costs as much for the parcel delivery of a loaf of bread in cities as it does to raise the wheat, mill it, and move it to the bakery and convert it into bread.

If the measure of all business transactions is forty billion dollars, that part which is reported in the railway traffic must come to more than one-third or more than the fourteen billion dollars at which I have computed it. In every one of these transactions in the actual things that are required to support life, the shadow passes with the substance. Money of some kind, a promise of money, or a representative of money of some kind, goes with each purchase and each sale.

In dealing with our monetary system, legislators touch the very nerve-centre of this immense volume of mutual services. It is computed that ninety-five per cent. at least of these purchases and sales are liquidated by the use of symbols or notes,—by checks, bills of exchange, and other instruments of credit.

Again, we may add to this great volume of trade in the necessaries of life the transactions in real estate, stocks, bonds, and professional services. All of these transactions—with very rare exceptions—are liquidated by checks or other instruments of credit. Again we may reach some conception of the magnitude of our transactions from the figures of the bank clearing-houses. The annual volume of the whole traffic in goods, wares, real estate, and securities cannot be less than one hundred and fifty thousand million or one hundred and fifty billion dollars ($150,000,000,000), and may be more. To any one to whom these figures carry any conception of the functions of money, the paramount importance of the quality of our coin, rather than its quantity, becomes apparent.

At the instance of the representatives of the little petty product of our silver mines, which is worth only fifty million dollars in fact, but for which the owners wish to get seventy million at the cost of the tax-payers, there has been great danger that this whole volume of transactions might be thrown into disorder and confusion.

It is extremely difficult, however, to reason on these huge amounts; we must bring the measure of all these transactions down to the unit of the family. We have computed our product at two hundred dollars per head, which is very near the mark. From this product, whatever it may be, all wages, earnings, profits, rents, interests, taxes, and stealings are derived. These are the divisions or shares into which these products are converted in terms of money in the processes of exchange by purchase and sale. If this is the measure of all there is, then it follows of necessity that by so much as some may secure more, others must secure less. One in three of our population is at work for gain; the average family numbers five. The incomes of by far the greater number of the families of this country (five in number per family) are less than one thousand dollars; it is probable that the incomes of more than one-half of the population of this country are less than from six hundred to eight hundred dollars a year for each family group of five persons.

If my computation of the trade and commerce of this country in the necessaries and comforts of life is approximately correct, i. e., if each article is bought and sold three times on its way from the original producer to the consumer, then the transactions or purchases and sales are more than three times the value of the total product. If this will be admitted, it follows that the food, fibres, and fabrics on which a family spending six hundred to eight hundred dollars a year is supported, will correspond to sales amounting to two thousand dollars or more in each year.

More than ten per cent. of all who are occupied for gain or engaged in the services of the community are occupied in the mere processes of trade and transportation. The merchants, tradesmen, draymen, the clerks, the railway employees, and the salesmen occupied at the present time number at least 2,400,000 persons out of a total of 23,000,000 who are now occupied for gain, and upon whose work the subsistence of 65,000,000 depends.

Since January 1st, 1879, all this work has been computed by the standard of the lawful unit of value of a dollar made of gold. Under the pretext that the prices of the necessaries of life are now so low as not to leave a sufficient profit to those who control the work of production and distribution, an attempt is now being made to increase the volume of money in circulation by the free coinage of silver dollars, which are worth less than seventy cents on a dollar in gold. By such an act our standard of value would be changed, gold would be driven from circulation, and the whole volume of transactions would require a re-adjustment in order to bring it to an uncertain and variable silver unit in place of the established gold unit of value.

This act is advocated without regard to the concurrence of other nations, and without regard to the relations of this country to international commerce.

The promoters of this act overlook the fact that while prices have fallen since the specie standard of payment was re-established on January 1st, 1879, the wages of labor have constantly risen, subject to occasional small fluctuations. It is for the benefit of the workmen that prices should be kept down so long as wages mount higher and higher, until they are now higher than they ever were before. So long as products increase in ratio to consumption, it is not true that the profits are insufficient. Our product has increased in the period that has elapsed since 1879 more rapidly than it ever did before. Shall legislators be permitted to retard progress both in profits and wages? The maintenance of the rate of wages depends upon the established credit of the unit of value being unimpaired; on the stability of our unit of value without disorder and without discredit depends the continuance of this vast volume of transactions in which every family spending from six hundred to seven hundred dollars per year has a special interest to the amount of two thousand dollars’ worth of purchases and sales. The unit of value must be maintained to do this work.

The effort to deprave the currency has already caused a check to production and has impaired wages.

It is possible that such an act may pass the Congress of the United States, but upon the instant that the depreciation begins and credit is shaken, or at the very instant when gold goes to a premium of only one per cent., the free coinage of debased dollars will be stopped, whatever party may be in power. The mass of the people will insist that the present standard of value shall be maintained, and the credit of our coined money shall all be at par. They will not submit to use any coin that is worth less than seventy cents as compared to the gold dollar, or its equivalent, in which their wages are now paid.

The masses of the people will not submit to the free coinage of any kind of a dollar of which the metal is not worth as much after it is melted as it purports to be in the coin. The classes who would mislead them for the private benefit of the owners of the silver mines will be swept away like chaff before the cyclone. A tax imposed upon the working people of this country for the benefit and profit of a few capitalists, whose gains are only to be secured by raising the prices and lowering the value of wages, will not be submitted to for a single day after the fraud is exposed.

In conclusion of this branch of the subject, it may be remarked that while the measure of all our transactions, purchases, and sales, may come to forty billion dollars a year ($40,000,000,000), the measure of our exports and imports in 1890 amounted to seventeen hundred million dollars ($1,700,000,000) in 1890. In the last fiscal year, owing to our excessive exports of food products to meet the scarcity in Europe, exports and imports combined may come to two thousand million dollars ($2,000,000,000) or two billion. If each subject of export and import is dealt in three times, then the volume of transactions corresponding to our foreign traffic would be six billions in a total of forty billions of foreign and domestic trade combined, or fifteen per cent.

The attempt has been made to bring into conspicuous notice the vast volume of our domestic traffic as compared to our foreign trade, yet the advocates of McKinleyism venture to impute the increasing welfare of this country to the obstruction of imports under the McKinley tariff act. It may be admitted that in spite of this obstructive measure the people of this country prosper, but our progress is like that of a strong man into whose boot a McKinley pebble or projecting shoe peg has been driven; it makes him halt and lag behind in the race instead of leading, but does not prevent him from making progress. Foreign debts and armies are greater obstructions to the progress of our competitors, and these may be a greater burden than even a tariff as obstructive as the McKinley tariff act.

It is singular that the very same persons who ask for greater appropriations for improving our rivers and harbors, in order to facilitate the transportation of our goods and wares, and who ask for subsidies and bounties for steamships in order to communicate with foreign countries, and who in every other way attempt to remove the obstructions to commerce, have yet raised an obstruction to foreign commerce higher and higher by the way of prohibitive duties upon the goods which are the only means of payment for our own commodities. Our commerce, however, goes on in a lame and halting way in spite of measures which often work the very reverse of what was intended by them, as in the case of the duties upon wool, inviting larger imports at higher cost in place of benefiting the domestic wool grower.

It is remarked in Motley’s History of the Netherlands that throughout their long and bitter struggle with Spain the Dutch maintained free commerce with all the world, raising their revenue by taxes which at one time were said to have taken one-half the product of the country, yet at the end they came out strong and rich, “and while producing not one single grain of wheat they yet ate the whitest bread in Europe.”

England has become the great centre of the world’s commerce, and London has become the monetary centre and clearing-house of the world, under two conditions: namely, first, the free import and the free export of all commodities that are manufactured or produced, subject only to a tariff for raising a moderate sum from duties upon the import of spirits, wines, liquors, tobacco, spices, and fruits. Second, London has become the monetary centre and clearing-house of the world’s transactions because of the superiority and safety of its unit of value. That unit of value consists of the grains of gold which are nominated pound sterling, and which can be delivered in English coined sovereigns only when such coins are of full weight.

Were equal facilities for commerce and equal assurance of the stability of our standard of value granted and given by the United States, the centre both of the world’s commerce and of the clearing-house of nations might be transferred to this continent.

So long as the McKinley act remains in force and so long as there is a shadow of doubt as to the stability of our unit of value, this change cannot occur. As the Dutch, producing not a grain of wheat yet ate the whitest bread in Europe, so the people of the United States may command the gold of the world, even if not a single dollar’s worth were produced in our own mines, whenever we will.

The estimates of the revenue from liquors, tobacco, and miscellaneous permanent receipts presented in the early chapters, have been justified by the government receipts for eleven months of the present fiscal year. They will suffice to cover all expenditures except pensions, so far as one can now tell. They may suffice next year if excessive appropriations are not made for rivers and harbors and other purposes which are wholly within the control of Congress, and if the purchase of silver bullion is stopped—not otherwise.