Front Page Titles (by Subject) CHAPTER XXXI.: Personal Observations—Conclusion. - Taxation and Work: A Series of Treatises on the Tariff and the Currency
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CHAPTER XXXI.: Personal Observations—Conclusion. - 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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It may not be considered egotism if in this concluding number of the series of thirty-one essays upon “Taxation and Work” I should state the reasons why I have put the data in this form, while I may at the same time give the motive of the whole series. In one respect and perhaps only one, the methods of the British administration and Parliament are better than our own. The questions which are brought before Parliament are of two kinds; first, measures by which a given administration will stand or fall and upon which divisions will be surely made upon party lines. Second, measures which are not distinctly party measures, but which Her Majesty’s opposition shares with Her Majesty’s administration in perfecting. In many cases measures of the second class are subject to parliamentary investigation by special committees, of which the members are selected purely with regard to their assumed knowledge of the subject and with very little regard to party lines. Reports of such committees have become historic for the exhaustive thoroughness with which the work has been done.
A beginning has been made by the present Senate of the United States in the conduct of an exhaustive examination of this kind. Every one who has become conversant with the methods that have been adopted by the members of the Finance Committee of the Senate in the investigation of prices and wages during the last half century and the influence of tariff legislation thereon, will wait for that Report with full assurance that through the combined action of the members of that committee of both political parties an exhaustive and impartial statement will be made.
It has become my good or ill fortune to obtain such a measure of authority in the investigation of financial questions as to have been called upon very many times during the last twenty-five years to give statements of facts, figures, and conclusions to the leading men of both political parties in the House and Senate and in executive office; I have also been subject to a wide correspondence, of which the requirements are somewhat difficult to meet. I have seldom been called upon to change a statistical statement or to alter a conclusion, and I believe that I have been quoted as authority as often by the advocates of high tariff Protection as I have been by the representatives of tariff reform or Free Trade.
The methods of the representatives of either party in this country, with a few conspicuous exceptions, are as bad as the English methods are good, keeping in view the search for the truth. Whatever statement, or judgment, or conclusion is submitted on the one side is usually met by a denial and an attempt at refutation on the other. Silly charges are bandied about by both sides. A lot of rubbish about the Cobden Club, the Home Market Club, British Gold, and Protective Greed is sure to appear whenever the subject comes up in the greater number of the party papers, and as surely as this vituperative method appears, as surely are the opinions or conclusions of that newspaper worthless. Men are held up to personal obloquy, charged with merely selfish interests, and abused roundly by all the party press on one day; if they then have the fortune to die suddenly, on the next day before the discussion is ended the same papers that had charged them with being bribed with British gold, or with seeking to rob their neighbors by the perversion of the powers of taxation, will hold them up as excellent examples of reputable citizens or legislators who had undoubtedly been a little mistaken in the direction of their work but had never failed in conscientious devotion to the duty with which they had been charged. The praise may be often as much misplaced as the blame had been.
Fortunately there are conspicuous exceptions to these foolish practices. Reference is often made to previous debates in the time of Clay, Webster, Calhoun, Benton, and other party leaders of old time. The writer has followed the tariff and currency debate of that period in the books and of the last few years in the Congressional Record. He must bear witness to a conclusion which will not be generally accepted, namely, that for sincerity of purpose, mastery of detail and logical conclusions from the premises upon which the arguments have been based, the debates of the last five or six years on either side have been as far in advance of those of a former time as the statistical data and general information in regard to our industrial conditions now exceed what were available in any former period.
It would be invidious to mention names, but it is a pity that some method should not be devised for establishing a judicial board of publication so that real discussions, the genuine arguments and the impartial statements that form the lesser part of the Congressional Record, might be separated from the set speeches prepared in the committee rooms which are apt to be addressed much more to the constituency or to the partisans of each side than with any expectation of influence in the pending discussion in Congress.
The same bad methods have affected private organizations on either side of the tariff question. Nearly twenty years ago the writer left the Free-Trade clubs and organizations, which were then active, simply for the reason that their methods were unjust and bad. They imputed the most selfish and corrupt motives to those who supported the policy of Protection; while, on the other hand, the advocates on the Protective side seemed to lose all sense of right and reason in their comments upon the advocates of Free Trade.
Under the influence of this bad method of dealing with what is purely a business question, each side has come to distrust the other so as to prevent any co-operation in removing defects, both in the tariff itself and in its administration, which are admitted by all and might be remedied if the opposition party in our Congress could be guided by the same sound judgment that is exercised by Her Majesty’s opposition in the British Parliament, whether Liberal or Tory.
In the foregoing series the writer has endeavored to put the case of Protection versus Free Trade, and of Free Trade versus Protection upon its merits; he has attempted to deal with it both on the ground of principle and of policy; he has given the reasons why there is no distinct principle or “rule of action governing human beings” upon which a high tariff can be justified; he has also given reasons why Free Trade although founded upon a principle, that is to say, upon a rule of action governing human beings when their conduct is not altered, changed, or directed by statute law, must yet, at present, be dealt with as a policy in practice. He has also given reasons why the rule of action which would govern legislation if there were no need of a revenue from customs or duties upon imports has been and must be modified by that fact.
Therefore, the question of Free Trade as well as Protection now becomes a matter of policy rather than one of principle. This leads to a similar conclusion which must govern the action of both parties; to wit, in framing measures for the collection of revenue from the duties upon imports such discrimination must be exercised as will most certainly promote domestic industry and protect home labor.
That conception of a true policy being established the only question remaining open is simply this: Will Protection be most fully assured by exempting materials of foreign origin from taxation and promoting the interdependence of states and nations, or by taxing such material and stopping commerce? Shall we more surely promote domestic industry and protect home labor by isolating this nation from others and attempting to establish what is called “national industrial independence” in place of international interdependence? One does not like to use such long words; in the vernacular, Will a State be bettered by attempting to support itself wholly, or will it do better by exchanging products with other countries for mutual benefit?
In dealing with the case from the latter point of view, so far as I have presented the facts I shall probably have furnished arguments for both parties in future controversies as I have in the past.
When I have borne witness to the fact that this country is more prosperous than any other, and has prospered more in the last twenty-five years than ever before, I shall have furnished even the advocates of the McKinley act with an argument on which they will attempt to sustain that measure, which is so obnoxious to myself.
When I have stated that the obnoxious provisions of the McKinley act for raising a revenue of about fourteen million dollars a year by taxation on crude materials of foreign origin which are necessary to our domestic industry have cost this country fifty-fold the amount of revenue that is received by the government, or seven hundred millions, in a single year, I shall have furnished an argument with which the advocate of tariff reduction will prove his case on irrefutable evidence.
When I have declared and attempted to prove that the tariff has been one of the minor forces in its effect upon the direction of labor or investment of capital in this country, I shall have disappointed the advocate of Free Trade, and may have taken from him what seems to be a potent argument.
On the other hand, when I have attempted to prove that the obstruction of the means of payment with which foreign nations buy the excess of our farm products is injurious in the extreme, I shall have furnished the advocate of Tariff Reform with most potent reasons for making a change.
When I have said, however, that the long existence of a high tariff has given a different direction to the investment of a large amount of capital and has provided employment for a very large body of working-people on different lines from those on which their labor would have been exerted under other conditions, I shall have given complete justification for maintaining even high revenue duties, for a limited period, upon the import of the finer products of our mills and of our workshops which cannot be gainsaid. When I have attacked the general policy of the McKinley act, I shall be charged with being a member of the Cobden Club and subject to the subtile influence of British gold, and when I have stood up for the policy of continuing the revenue duties upon finished fabrics for a reasonable period, I shall be charged by the intolerant free trader with making an exception in favor of my immediate associates at the cost of the wool growers and the makers of pig-iron.
When I have stated that proofs can be submitted that, with the exception of certain industries that have been protected not only by a tariff, but also by patents and the control of great bodies of ore or coal, the branches of manufacturing which have been subjected to the stimulus of a high tariff have not been as a whole profitable,—I shall have taken away from the free-trade orator one of the principal grounds of his attack.
It is necessary that all these varied misconceptions should be removed, and that the pending discussion should not be obscured by errors and mistakes on either side.
I long since bore witness to the very grave danger that would ensue from bad methods of changing even a bad tariff system. I have witnessed the results of such methods and the present recurrence of such danger. The so-called free-trade tariff of 1846 is an instance of a bad method of reforming a bad tariff. The tariff of 1842, which was by intention a highly protective tariff, discriminated in both directions by high duties on finished fabrics, and low duties or the free admission of crude materials. It led to a large investment of capital in many branches of work by men who were not capable of undertaking them under ordinary conditions, but who might perhaps have learned how to do the work except for changes made in the very reverse direction in the tariff of 1846. This tariff has been called a free-trade tariff, it was really nothing of the kind. It was a measure, as I have been informed, that was framed under the direction of the late Robert J. Walker by a committee of custom-house officers, and it was carried under party control without amendment. In many instances it raised the duties on crude materials above what they had been while it reduced them on the finished fabrics. It thus discriminated against the very branches of industry which had been to some extent unwholesomely promoted under the previous act of 1842. Unnecessary harm was done by raising the duties on crude materials, and this disaster was attributed in general terms to what became known as “A Free-Trade Measure.” This act was subsequently amended by the abatement of the duties on crude materials, to the end that under the tariff of 1857, in which very low rates compared with those now in force were put upon finished fabrics while crude materials were either free or subject to low duties, the progress in the manufacturing arts which had been subject to great variations and fluctuations previously, was more steady, uniform, and freer from great fluctuations than under any system of duties which has ever come under the observation of the writer.
This danger of lack of discrimination in amending a bad measure has again happened in recent years. It has been proposed by conspicuous persons, even among the advocates of protection, to reduce the duties on goods and in the same measure to raise them higher on the materials which are necessary in these protected manufactures.
Again, some of the measures which are even now pending in the present Congress, represent neither a principle nor a sound business policy; they are sectional, or else they have been promoted by mere opposition to trusts. If suitable discrimination were applied in the preparation of a broad and general measure of reform, the duties, for instance, upon cotton ties would not be taken off until the manufacturer of cotton ties had been placed in a position to compete on even terms with the foreign iron-worker by the removal of the duties upon the material from which cotton ties are made. The removal of the duty upon binding twine may not be justified on any sound principles of discrimination in framing a revenue measure, until the manufacturer of binding-twine and cordage has been given a position equal in advantage to his foreign competitor by taking off the tax on the materials that enter into the construction not only of his goods but also of his machinery. The proposition to abate duties on some classes of crude materials while maintaining them on others, because their abatement might have a sectional effect adverse to party success is without justification. On the other hand, all these measures are merely tentative, and may perhaps be defended in order to show the final direction on which a reform of the tariff would be carried into effect in one comprehensive bill if it had not become a mere party question.
Again, while the rule of high wages derived from low cost of production may be proved to govern all the arts which have been of necessity conducted within the limits of our own country in which our interstate or domestic commerce is absolutely free, this rule has been subject to a variation in our relations with foreign countries. By keeping the demand of this country, which possesses the greatest power of purchase, from being freely made upon the textile factories, iron foundries, workshops, and other establishments of England and other countries, it may doubtless be proved that the rates of wages in these particular arts have been kept lower in Europe than they would otherwise have been had our demand been free—while the rates of wages in these specific arts in this country may have been maintained as high as the high rates of wages that prevail in other pursuits; such rates being higher than those paid under existing conditions in foreign countries. It follows of necessity that if these specific finished products were suddenly admitted to this country free of duty, there would be a destruction of capital and a taking away of established methods of work which would be wholly destructive and unjustifiable. Discrimination may rightly be applied to the maintenance of duties for revenue purposes on these finer goods and fabrics which are of voluntary and not of necessary use. Such duties may be maintained without harm to the consumers until the establishments have had time to become adjusted to the new conditions of free commerce in the component materials that enter into their products.
What the exact effect of the adoption of this policy of common-sense would be upon existing forms of industry can hardly be demonstrated in advance. In the judgment of the writer, the stimulus to the textile arts in the useful or necessary directions, and to the higher branches of metal working would be very great; it would probably lead to a reduction in the import of many kinds of textile manufactures, and to an increase of our exports of textiles and yet more of metal work. It may be observed that our export of what are called manufactures is even now increasing in considerable measure. In the line of metallurgy it consists of goods of the highest grades to which most skilful labor is applied at the highest rates of wages; that branch of export traffic would be very greatly stimulated if the consumers of metal in this country could secure their supply of crude materials on the same terms with their competitors in other countries, whatever the actual prices might be in any given year. The same reasoning would be in a measure true in its application to staple textile fabrics; the finer kinds of textiles, however, depend so much upon style, fashion, and fancy for their sale, that we cannot predicate the future conditions upon any single rule.
It must, however, be here remarked that Great Britain is our principal customer. She has flooded us for many years with British gold in order to promote her own interests. Through the long-continued efforts of Richard Cobden, John Bright (antecedent to the conversion of Sir Robert Peel and W. E. Gladstone) for the remission of duties, the British taxes upon the import of our grain, meat, dairy products, and cotton were removed. The effect of this work of Cobden, and of his successors who now constitute the Cobden Club, has been such that within the last few years we have exported to Great Britain two hundred and fifty million dollars’ ($250,000,000) worth of our domestic products in excess of our imports from Great Britain. The figures of 1891, disregarding fractions, show exports from this country to Great Britain $445,000,000 in value; imports $195,000,000. The difference, $250,000,000, consists of British gold which has been placed at the credit mainly of our farmers who have found in Great Britain the most profitable place for the sale of their excess of grain, dairy products, meat, and cotton. The drafts for our purchases in other countries of sugar and of tea and coffee and other food materials, as well as of hides, wool, dye-woods, and other articles that enter into our manufactures, have been drawn against this great fund of British gold for the support of our manufacturing and mechanical industries.
I have thus given the motive of this series of essays, with the hope that the time may come—perhaps in the second session of the present Congress—when legislators will adopt what may be called the “method of agreement”; or of cancellation by agreement of all points in this problem that can thus be eliminated. It is related that two old-time clergymen of different denominations had been disputing a long time upon many points of doctrine. One day it occurred to them to undertake the “method of agreement,” so as to bring their points of difference into such clear aspect that they could be reasonably adjusted. In pursuance of this method they finally eliminated so many of the points of contention that all there was left for dispute was a different construction given to one Hebrew word in the Hebrew version of the Bible; upon that one word they then agreed to differ without further contention.
If this tariff question could be taken up by a jury of twelve men, selected on the ground of their being competent to deal with the whole subject, presided over by a true jurist, an act for the collection of an ample revenue for the support of this government, to be wisely and not penuriously expended, could be framed upon conditions that would assure to the people that all taxes that were paid by them would be received into the Treasury of the United States. This work could be done by adjusting the points on which all parties are now agreed, with as little difficulty as that which was met by the clergymen in doing away with the points of contention by which they had been so long parted.
When it shall become useless for any specific body of men, for any district, for any State, or for any section to attempt to promote public legislation for the private support of any specific branch of work except through exemption from taxation,—the prime cause of corruption in the civil and political service of this country will have been removed. Then, and only then, will a government of the people, by the people, for the people, be absolutely assured.
It may perhaps be held to be somewhat presumptuous for any one person to attempt to deal with this great public question in the way in which it has been treated in this series of essays by calling “A plague on both your houses,”—upon the doctrinaire free-traders and the intolerant advocates of McKinleyism alike.
That argument, however, does not concern the writer. He has been guided by the rule of demand and supply in providing such articles, essays, and treatises upon economic subjects as might be called for in a way that would warrant the work he has done in their preparation. Years ago the writer found out that the community would not be reformed by agitators, and that the only way for one who did not occupy a conspicuous public position to bring about righteous changes would consist in a close and constant observation and study of events, and in biding the time when the very circumstances of the hour would force public attention to be given to these great problems.
For many years subsequent to the restoration of specie payments on the 1st of January, 1879, it became apparent that the tariff question, in which the writer had previously taken quite an active part, had become an issue of lesser importance as compared to the maintenance of the public credit and of a sound currency. So long as one party could be depended upon more than another on that issue, it seemed useless to continue a discussion on the tariff question from which no practical results could be attained, because both vote and action must yield to the more important problem of the currency.
It happened, unfortunately, that the party that had been dominant for many years and upon whom rested the responsibility of the maintenance of a sound currency, had also committed itself to such tariff measures as the acts of 1867 and subsequent tariff acts down to 1883 inclusive. It therefore became necessary that the policy of increasing duties in the vain effort to give protection by excessive taxation must run its course. It was long since manifest that it would culminate in some measure corresponding to the McKinley act, by which the fallacy and futility of the attempt to protect by privation of imports would be finally exposed.
That time has come. Members of both political parties have now united in maintaining the credit of the nation, and will remain united and hold out to the end in successfully sustaining a safe standard of value.
The policy of promoting American industry by the reduction of taxation and by the exemption of crude materials from heavy duties, has now taken firm hold upon the mass of the people. Under such conditions it may be held to be the duty of every man upon whom a demand may be made, to submit what he believes to be the facts and to give the conclusions on which right measures of reform may be framed. Under such a condition of parties as that which now exists one should adhere strictly to the facts in the case; by so doing he will inevitably take away the foundations of many of the delusions that have existed on either side of this discussion. The intolerants on either side may alike reject his conclusions, but it may happen that they will still serve a useful purpose.
The interest of the whole people of this country is now excited upon questions of finance and taxation. The Farmers’ Alliances, the Trades’ Unions of the workmen, the Trade Associations of the employers, the advocates of Woman Suffrage, and the Labor organizations, are alike trying to deal with the problems that have been treated in these essays. That is a more hopeful condition than the inertia which has given an opportunity to the advocate of special legislation to carry out his measures without remark.
In every emergency the great mass of people may be relied upon to support that policy which is right. Slow, but sure in action, the people detect the specious charlatan who covers his selfish purposes under the show of working for the public good. They insist upon the truth, the whole truth, and nothing but the truth. That is what the writer has endeavored to present in this work without fear or favor, in response to an urgent demand made upon him from many quarters.
It is interesting, for one who is convinced that the logic of events will govern the actions of men, to observe that even during the short period that some of these essays have been in process of publication in the daily press, the negotiation of additional treaties of reciprocity in trade, the passage of a bill to admit foreign-built steamships to American registry, and the increase in the revenues of the government from liquors and tobacco fully sustain all that has been said about the tendency of events, as well as all that has been submitted in regard to the ability of the country to remove every obnoxious tax and yet give full assurance of ample revenues for the future conduct of the government, coupled with sure protection, by exempting the materials required in our domestic processes from taxation, and by so doing enabling our foreign customers to pay with their own products for the products of our farms and factories.
The Democratic party has become the party of Tariff Reform and reduction. The Republican party, having found out that McKinleyism is a blunder, seeks by indirection to accomplish the same purpose through reciprocity and the free list. Ere long the logic of the case will govern, so that each party may try to outstrip the other in giving true protection to the manufacturer, the mechanic, and the farmer alike by the complete exemption of all material from any taxation.
In closing, I may again call attention to certain facts which are not yet patent to all. The area of the continent of Europe, omitting the uninhabitable portions of the extreme north, is about 3,000,000 square miles. The area of the United States, omitting Alaska, is about the same. Upon each continent there is every variety of climate except extreme heat, every variety of soil, and every variety of product except the tropical. In the United States the differences of race, creed, color, and condition are greater than in Europe. The methods of local taxation are as various or more so. On the one continent all forces tend to peace, order, and industry. There is abundance and great material welfare. On the other continent all forces tend to war, scarcity, pestilence, and even famine, to disorder, and to the enforced idleness of the barracks and the camp. What is the one difference in the conditions of the people of the two continents? On the one side the people of each and every State serve each other under a system of absolute Free Trade such as was never before assured to an equal number of people nor ever before extended over half a continent. On the other, the barriers to mutual service are sustained by the armies which, except for these barriers, might be disarmed.
The time may not be far distant when the intelligence of the people of this country will be equal to the opportunity that is offered them to establish the one factor in our liberty of which we have been so long deprived,—the liberty of commerce.