The Online Library of Liberty

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• Foreword
• A Note On the Text
• Preface to the First Edition
• Tyranny Unmasked
• Section One: Unmasking the Protecting-tariff Policy and Its Advocates From Many Perspectives
• Section Two: Arguments Against the Protecting Duty Summarized Through an Analysis of Its Major Consequences
• 1.: Protecting Duties Are Unconstitutional
• 2.: Manufactures Are Injurious to Morals, and Produce Pauperism
• 3.: No Further Protection Necessary
• 4.: The Increase of Duties Will Lead to Smuggling
• 5.: A Tax On the Many, a Bounty to the Few
• 6.: A Restrictive System
• 7.: Destroy Revenue
• 8.: Ruin Commerce
• 9.: Destroy Agriculture
• Section Three: a General Discussion of Tyranny and the Choice That Americans Face

5.

A Tax on the Many, a Bounty to the Few

This objection, the Committee admits “would be conclusive if true; that a permanent tax to encourage manufactures would be radically wrong; but that disclaiming the word bounties, as wholly inapplicable to any part of the bill, they are willing to test it by the principles of its active and intelligent opponents.” On the next page, however, they observe “if there were no manufactories, and government could build them up by imposing duties on foreign fabricks, such duties would not be a tax on the farmer, but an efficient bounty, by giving a value to his otherwise useless products.” The first suggestion they use in support of these assertions, is exactly of that character employed in pleading a cause. It is an extract from the report of a Boston Committee, admitting that in some cases, an argument may be found in favour of encouraging particular employments by bounties and taxes. Upon this admission the Committee have seized, as an acknowledgment that bounties to exclusive privileges, constitute a wise and just policy. But it may have happened that the admission itself came from an exclusive privilege. Some capitalists, contented with the existing protecting-duty monopoly, or fearful of pushing it further lest it should burst, are opposed to its augmentation. When the policy of bounties, monopolies, and exclusive privileges is introduced, those deriving emolument from any item of it, may find an interest in opposing another, but they will never contend that the policy itself is bad, and ought to be abandoned. Neither the landlord nor capitalist-interest in England, will admit that the system of bounties and exclusive privileges is radically vicious, though each will contend that its antagonist gets too much, and itself too little by it. Of what value can the authority of either, asserting that a system is good by which both get money, be to an enquirer who is considering whether it is also good for a nation? Such admissions are a vice in the system itself, because they are purchased concessions, not for disclosing truth to advance the public good, but for concealing it to enrich combinations. However the family of exclusive interests may quarrel among themselves, yet they will unite when the whole craft is in danger; and even when at variance, they will be careful to advance arguments in favour of the principle which sustains their common interest. Leaving, therefore, this extract from the report of the Boston Committee, as proving nothing, let us proceed to the words of the Congressional Committee, and consider what they prove.

The frequent occurrence of contradictions in their report, bewilders the understanding and perplexes the subject. They say “bounties are wholly foreign to their bill, and yet to build up manufactories by duties on foreign fabricks, would be an efficient bounty to the farmer.” To build up these factories, by such duties, is the avowed object of the bill; and, when thus created, they will be bounties to farmers, the very fact upon which the Committee and its other advocates have rested its defence. And the same Committee deny “that the word bounty is applicable to any part of the bill; contend that the bill bestows an efficient bounty on farmers; and admit that a permanent tax to encourage manufactures, would be radically wrong.” An advocate for the freedom and happiness of a nation, will not become the partisan of a particular interest. Why are the Committee, after having candidly admitted that a permanent tax for the protection of manufactures must be radically wrong, instantly converted into advocates for an efficient bounty to farmers? Having disclaimed the hateful term bounty, they instantly resume it in favour of farmers, whilst they renounce the propriety of thus endowing manufactures, although equally meritorious. If duties paid by the consumers of foreign fabricks to build factories would be no tax on the farmer, yet the efficient bounty thence accruing to him must be a tax on somebody; unless indeed the new discovery of the Committee, that such duties paid to support government are not taxes, which must be the case if they are not taxes when imposed to build factories; can obliterate all the received ideas of taxation. Bounty certainly implies a payer as well as a receiver, and when it is bestowed by a government, it implies taxation on the people, considerably exceeding its amount, on account of the misfortunes to which public money is exposed, and the expenses of collection. As the proposed bounty to farmers could only be paid by some kind of tax, and the Committee assert that it would be wrong also thus to encourage manufactures, it follows that it would be wrong also thus to encourage farmers. If a permanent bounty could not exist without its accomplice, a permanent tax, then the bounty promised to farmers, as resulting from building factories, distant as it is, must vanish the instant it arrives, or inflict on some interest the reprobated permanent tax. With the factories the case is very different. These are to be built by taxes on foreign fabricks, which must, inevitably, fall on consumers of the substituted domestick fabricks; but the farmers, far from paying any portion of them, are to be reimbursed by an efficient bounty. If so, the tax paid for building the factories, would be more glaringly unequal and oppressive, as other occupations and professions will pay all the tax, whilst the farmers will receive all the efficient bounty. But this whimsical mode of reasoning is gotten over, and the admission of the Committee, that the protection of manufactures by a tax on the community, is wrong, virtually retracted by the magical influence of the word “permanent.” A tax on the many to raise a bounty for the few, is allowed by the Committee to be radically wrong, if the tax is permanent. It is impossible to find a better argument in favour of abuses, because it will fit all. The conciliating candour of acknowledging a policy to be bad if permanent, is a solicitation of confidence in the assurance that it is good, if temporary. Few things in this fluctuating world are less permanent than the promises of statesmen and the calculations of financiers; and the nation which submits to exclusive privileges, bounties, monopolies, and other abuses, because they are told they will not be permanent, instead of obtaining felicity like ancient wiseacres, by bestowing their temporary property on priests, will obtain the most permanent political machine we know of; a machine invariably constructed by temporary abuses, namely, a bad government.

“A permanent tax to encourage manufactures would be radically wrong, but the word bounties is inapplicable to any part of their bill, and to build up factories by duties on foreign fabricks, is good policy.” There is some difficulty in simplifying this confusion of ideas. Would a permanent tax be radically wrong only because it was permanent, and a temporary tax be right only because it was temporary? A radical imposition must be made so by some principle, and not by the duration of the imposition. If a permanent tax to encourage manufactures would be radically wrong, it can only arise from the injustice inflicted on other occupations, by conferring an exclusive benefit on one at their expense. But whatever may be the principle which convinced the Committee that such a permanent tax would be radically wrong, the same principle must pronounce a temporary tax for the same partial purpose, to be also radically wrong. The temporary tax for the encouragement of manufactures is denied to be a bounty, by the assertion that the word bounties is inapplicable to any part of the bill. Why would the tax be radically wrong if permanent? Undoubtedly because it would be a permanent bounty. If the tax, being permanent, would be a permanent bounty and radically wrong, the same tax, though temporary, must be a temporary bounty, and equally wrong. A tax may be imposed for two objects; one to sustain a government, the other to enrich individuals. The idea of a bounty cannot be severed from the latter object, and the Committee labour against language and an indissoluble affinity, to prove that a tax not imposed for the use of government, but to encourage manufactures, does not imply a bounty. A feeble attempt, if such was the design, is made to find a subterfuge from conclusions so inevitable, by speaking of building factories with duties on foreign fabricks. Not a cent of such duties has gone or can go towards their fabrication. All the duties received on foreign importations go into the treasury, and are applicable to public uses, and the enhanced prices obtained on domestick fabricks from domestick consumers, by diminishing the amount of duties produced from foreign fabricks, are the architects of factories, and constitute the bounties to capitalists.

A great curiosity of the discrimination between good and evil, attempted by the words permanent and temporary, consists in its being addressed to temporary beings. Build factories for capitalists, because it is only a temporary radical wrong, and you will be reimbursed by what man can never get in this world; a permanent good. Why not build houses for farmers and professional men, because it may permanently foster agriculture and science? The consolation, that abuses may be only temporary, is ingeniously used to inflict them; and the sound principle, that temporary abuses are an introduction of durable evils, is to be abandoned. Factories are now to be built by bounties to capitalists, in order by and by to bestow efficient bounties on farmers. One abuse is proposed as a remedy for another, and these two occupations are to be provided for by successive bounties, radically wrong if permanent, but right if temporary. No compensation is even suggested for the others which share in the taxes to raise these bounties. Indeed this omission is of no consequence, for if these factories should deliver manufactures from the grasp of their own monopoly, the farmers could never obtain the alluring bait of an efficient bounty in their turn, unless corn and their other products had ceased to be exported; and could only hope to be reinstated upon the ground of free and fair exchanges.

The promise of future compensation for present wealth is the cunning offer made by the capitalists to the farmers. Build factories and give bounties to us now, and we will restore to you the blessing of free exchanges the moment we can no longer extort from you an enhanced price for our fabricks. Such is the basis of their arguments, and such the boon by which they are endeavouring to bribe the farmers, without paying any respect to other occupations. Is there any man in his senses who would make such a bargain with another man? No day of payment is prescribed. No security for performance is proposed. After all other interests have enriched the capitalist interest, it may break its promise, cease even to manufacture, and retain the wealth acquired by its bounties. Suppose lawyers and doctors could persuade the nation to build palaces for them, and buy their law and physick at double prices, under a promise that when these employments were overdone, it should get their physick and law cheap. What speculations can be equal to these? Vast estates are purchased by a promise, and no obligation to pay any thing for them is incurred. Indeed no payment can ever be made for them, except a restoration of free exchanges and fair competition, suspended to bestow them. The utmost compensation to be expected is that of taking off the suspension. Why then put it on? To take away a social right, in order to restore the same social right, is worse than nothing, by the amount of the intermediate loss incurred by the suspension. Whilst the business of building factories is made lucrative by bounties, the capitalists will pursue it; when it ceases to be so, they will give it up. If other occupations should escape from their toils and become profitable, by receiving either patronage or justice, the capitalists will transfer their wealth from the worn out, to the new patronage, or at worst, employ it in free and fair exchanges upon equal ground with other wealth. Money emigrates without difficulty from one exclusive privilege, or from one occupation to another; it is neither nailed to the soil, nor to a factory; it follows the scent of profit; and the cry of capitalists upon the track of exclusive privileges, like hounds in pursuit of game, grows louder as the scent grows stronger. A nation when caught does not indeed lose its life, but it loses the precious castor which is the object of the chase. The policy of transferring property by law, is only a series of speculations, like a series of monarchical successions, inflicting, it is true, temporary evils only, but which always last as long as we live. It is the system for keeping the birds in its hand, and sending the mass of a nation to look for them in the bush. The Committee, however, deny that it is a tax on the many or bounty to the few, and admit that if it was, it would be radically wrong. They only defend this denial, and elude the admission, by the use of the words permanent and temporary. The objection does not assert that which could not be foreseen, namely, that protecting duties were a permanent tax on the many and a permanent bounty to the few, and the Committee feebly deny, that which is quite visible, namely, that they are a temporary tax on the many and a temporary bounty to the few. They admit the truth of the objection by seeking for a refuge from it under the word permanent; and if all monopolies, exclusive privileges, bounties, and political abuses, are by nature temporary; if they beget successors, like other tyrants; if the bad principles, by which they are defended, are permanent; this vail is too thin to hide the fact stated in the objection, or to make that conceded to be radically wrong, according to permanent principles, radically right, because of a hopeless possibility that it may be only temporary.

The Committee have asserted “that there is no instance of an increase in the price of any articles, the high duties on which have secured our market to our own manufactures.” Nothing is more easy than for the capitalists to make out accounts favorable to themselves. Who would lose a cause, if he could garble the evidence, much less if he could fabricate it? Nails and a few other articles are selected to prove the assertion. But how could its truth be established, except by the expelled test, competition? Prices may have fallen in other countries below those paid here, but it cannot be ascertained, except by the rejected test. It is therefore quite safe to make the assertion, when the means of detection are excluded. Yet for still greater safety it is equivocal. The price of articles secured against competition has not risen. This may be nominally true, and substantially false. The value of money has doubled, and if the prices of the selected articles remain undiminished, they are substantially doubled also, so as to acquire a great enhancement from being protected against foreign competition, if the same foreign articles have been reduced in price by the appreciation of money. If, however, protection against competition does not enhance domestick prices, then there is no reason for protecting duties. To establish the fact that it does not, the Committee have selected two or three articles, and left us to infer a general rule, generally false, from these meagre exceptions. Our situation would have been unexampled, if we had not possessed some internal manufactures, the prices of which would not be enhanced by protecting duties, or the exclusion of competition; but these furnish no evidence applicable to manufactures, the prices of which will be enhanced by this exclusion. To blend them, in order to misapply evidence furnished by the class of manufacturers, placed by domestick facilities beyond the influence of competition, to that class exposed to it for want of these facilities, is evidently incorrect. I could furnish the Committee with many articles, more conclusively establishing the fact they assert, than those they have selected. The price of flour has not been increased by a monopoly of that manufacture and the absence of competition. But would the low price of that article prove, that a monopoly would not enhance the prices of other articles? In like manner a selection of any other articles, the prices of which have not risen, from causes distinct from protecting duties, is insufficient to prove that such duties do not enhance prices, and a mode of reasoning entirely delusive. It is quite the case of one party making up the evidence for both.

The Committee observe that “it is not easily conceived, that duties, short of prohibitory, can easily operate as a bounty to manufactures.” Having previously asserted that duties amounting to a prohibition do not enhance prices, and now that duties short of a prohibition do not operate as a bounty, they come to the conclusion, necessary, as they imagine, to sustain their policy, that no duties whatsoever will have any such effect. If their assertions are true, then these duties will be wholly inoperative, except for producing expense, and extending patronage; if false, it follows that they are taxes on the many for the benefit of a few, and whether true or false, the assertions suggest the conclusion, either that there is no reason for commercial restrictions or prohibitions, or that they are founded in a principle allowed to be radically wrong.

“Our best statesmen,” say the Committee, “have laid it down as a maxim, that domestick competition will always tend to the reduction of price. It is not, therefore, without some surprise, that it should be so generally alleged by opponents of protecting duties, that they are a tax on the many, to enrich a few. If the price of the article advances with the duty, it still leaves the same profit to the importer.” It is with no less surprise that I see a principle, directly adverse to monopoly, applied to its justification by the following mode of reasoning. All wise men agree, that competition will reduce prices, and therefore an exclusion of competition will reduce prices. As the Committee had previously endeavored to make temporary evils good, by the instrumentality of the word permanent, they now endeavour to make competition a bad thing for the reduction of prices, by the instrumentality of the word domestick. But is not the competition between foreign and domestick commodities, wholly domestick? Will not the reduction of prices by competition be graduated by the extent of competition? How an enormous diminution of domestick competition can reduce prices, is inconceivable to me. The Committee, to prove that such will be the case, have imagined that the effect of protecting duties to capitalists, is the same as the effect of revenue duties to importers. Whatever are the revenue duties, the profit of the importers remains the same. I do not understand the observations they have deduced from this fact, but the difference between the cases is not so abstruse. In one case there is no monopoly; of the other, it is the basis. In one case the increased price occasioned by revenue duties goes to the support of government; in the other, the increased price produced by expelling competition, goes to enrich capitalists; one is a tax on the many for public benefit; the other a tax on the many for private emolument; one case is a transfer of property necessary for maintaining society; the other a transfer of property contrary to one of the ends of society. As to competition between importers, it is not affected by duties, because they all pay the same; but competition between commodities is destroyed, if so many of them are driven out of the market, as to enable the holders of the residue to enhance their prices by taking advantage of a scarcity. I cannot discern how two cases so clearly distinct, can be confounded, to make an exclusive privilege or a partial monopoly, bear the least resemblance to duties paid by importers. Confining the idea of competition to a rivalry between domestick factories, its great benefit, a reduction of prices is not to be expected. We cannot get manufactures cheaper by bribing capitalists, because these bribes are themselves an enhancement of price paid by the nation. If the factories should foolishly lose the bribes by a competition among themselves, yet a cheapness beyond that to be derived from keeping the whole field of competition open, could not be produced, because they would export their wares, if they should sell higher in foreign countries than at home. Thus the proposed policy consists of a tedious, heavy tax, to be paid to capitalists by excluding the domestick competition, begotten by the admission of foreign commodities, to enable them to carry on a war against natural laws, the utmost success of which cannot produce a degree of cheapness beyond that which would have existed, if competition had not been suspended, and no such tax had been paid.

Let us even imagine with the Committee, that these factories will be so many little nations, as incapable of being combined into one interest by an Amphictyonic council, as the little nations of Greece; and that they will be inspired with a spirit of rivalship, instead of combination, by the view of getting money and also with a disinterested spirit of patriotism which scorns money, and intends only to make us independent of any nations but themselves. Yet even this wild supposition, could not enable these very small nations to create a competition among themselves, as operative in reducing prices, as a competition among all the trading nations of the world, added to their own, in supplying our wants. Independent of local and natural advantages possessed by the great nations, the vast difference in the number of competitors, would have an influence in the reduction of prices, exactly similar to the constant effect of plenty and scarcity; and carry the benefit of cheapness in articles of consumption, as far as possible, because the great disunited nations could not mould themselves into one combination, and carry on their operations against our pockets in concert, as may possibly be done by our little factory nations. If, then, it is the opinion of our best and greatest statesmen, that competition will reduce prices (to discern which common sense is as competent as these sages) the same sagacity will also discern, that the effect must depend on the plenty or scarcity of this competition. How, then, can an unprejudiced understanding, which admits that cheapness is a benefit only to be obtained by competition, contend also, that by contracting or destroying the remedy against the evil of dearness, and creating an artificial scarcity of competition, that it will not be melted down into a settled domestick monopoly, and produce effects exactly the reverse of those contemplated by able statesmen.