The Online Library of Liberty

A project of Liberty Fund, Inc.

• 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

8.

Ruin Commerce

The phraseology adopted by the Committee in stating objections to the protecting-duty policy, is that resorted to at the bar, in stating the objections of an adversary. They are put in a hyperbolical dress, to exaggerate them into an aspect of absurdity. Comparative injury, and not absolute ruin or destruction, constitutes the true question as to the impression likely to be made, on revenue, commerce, and agriculture, by the policy of the Committee or its adversary. To understand the objection, we must consider what commerce is. Avoiding as much as possible the previous remarks applicable to its definition, it is necessary to remind the reader, that whether foreign or domestick, it ought to be an instrument for facilitating exchanges, and not for accumulating redundant capitals in a few hands by arbitrary and partial laws. Commercial accumulations flowing from extraordinary skill or industry, are merely means used by commerce, for effecting its beneficial intention; but using it as an instrument for transferring property, without suffering free will to compute compensations, destroys this essential principle for exciting its efforts, and extending its benefits.

One item of the policy of the Committee, is to destroy the end of commerce, for facilitating foreign exchanges, by exporting without importing; another, to substitute for this destruction a domestick commerce, not for promoting fair exchanges, but for effecting a great and lasting transfer of property. They imagine that foreign commerce will not be injured, by restricting it in an extensive degree, to exportation; and that domestick commerce will be encouraged by disemboweling it of its essential principle, and converting it into an instrument for effecting unequal exchanges, to enrich monopolists. Whether this novel system of political economy, will impair or nourish commerce, either foreign or domestick, or whether it has been the true cause of the evil days upon which we are fallen, may be illustrated by a further consideration of the nature of money. Currency, however fabricated, regulates value; and value, if left free, regulates currency, when it is used to facilitate exchanges; but when it is used to transfer property without compensation, it becomes an instrument in the hands of legislation, for fostering local and personal avarice. Domestick commerce, carried on by the instrumentality of currency, presents itself in two characters; that consisting of exchanges of value for value, settled by the medium of money with the consent of the exchangers; and that consisting of exchanging a less value for a greater, enforced by legal compulsion. The intrinsic value of the same commodities, never alters, but their prices are liable to fluctuations from their scarcity or plenty, whether occasioned by casualties, by the laws of nature, by improvements in fabrication, or by laws for transferring property. The value is of course liable to the same fluctuations. But if demand and supply are left free, these fluctuations, except the last, are encouragers of commerce, and money is a medium by which they are moderated, and reduced to an equilibrium, if not with exactness, at least with the fidelity of competition. In cases, however, of a legal enhancement of price, money is deprived of its equalizing utility, and is prohibited from diffusing this equilibrium of values, so evidently just, and so highly beneficial to mankind, both by invigorating their exertions, and extending their comforts. When wheat sold at six pence a bushel, both the raiser and consumer were in the same relative situation as when it sold at two dollars, if the fair equalizer of values was unbiassed by legal privileges; but if these were used, either to raise or lower the price of wheat, one of the exchangers of property was defrauded. Hence it appears, that relative, and not actual prices, constitute justice between occupations, and that the honest office of money is to adjust these relative prices. Whether the actual prices are high or low, the equalizing power of money, if exercised upon free exchanges, prevents any general calamity, and moderates to a great extent individual inconveniences. But laws for depriving money of its equalizing power, establish permanent inequalities of value between occupations, and create those very calamities; to prevent or moderate which, is the most valuable quality of money. The capacity of money to produce an equilibrium of values, operates between nations as well as occupations. The existing peace has diminished prices throughout the commercial world; but as money and commerce will equalize values, neither nations nor individuals sustain any injury from that circumstance. But if a nation shall prohibit itself from sharing in this universal diminution of prices, by crippling its own commerce; and shall moreover enhance by law the commodities for one occupation, whilst the prices of others remain depressed, all the individuals deprived of the compensation to be derived only from the capacity of commerce and money to equalize values, must be considerably impoverished. The government then undertakes to settle prices between occupations and individuals, and it loses sight of relative values, to destroy which is the only design of its interposition. By expelling foreign commodities, the United States are prevented from reaping any benefit from the universal fall of prices; and also deprived of the advantages of exchanging their own by the scale of relative values, which money soon establishes between nations; and by enhancing the prices of domestick manufactures, the relative values of domestick products are also destroyed, and the equilibrium which prevents a general fall of prices from producing any general or partial distress, is overturned; so that they cannot derive any compensations from the principle of relative values, or from commerce, either foreign or domestick. On the contrary, if these relative values were suffered to have an unobstructed operation, individuals would have the means of compensation in their own hands, and self-interest invariably finds it in some part of the commercial world, when not prohibited by governments from exercising its acuteness and industry.

If pecuniary income remains as high as it was when prices were double to what they now are, its real value is doubled, and a double portion of the profits or property of productive labour, absorbed by unproductive. It is by the branch of domestick commerce (if it can be called commerce) for the purpose of transferring property from productive to unproductive employments, that nations are oppressed and enslaved; and I do not recollect a single instance in the whole history of mankind, of a nation oppressed or enslaved, by leaving relative values to be settled by money and commerce. It is said to be necessary to establish this enslaving branch of domestick commerce, to counteract the teasings of foreign restrictions, which cannot enslave us. So far as these foreign restrictions counteract the power of money and commerce to equalize values, they resemble our domestick restrictions for the same purpose; except that the latter are infinitely more effectual, because the former are dissimilar, and the number of disunited nations enables a free commerce to shun, and often to benefit by them. But the relative capacities of foreign and domestick commercial restrictions to enslave nations, by means of a power in the government to regulate values, usurped from commerce and money, is very different.

The nature of a domestick commerce for transferring property, may be demonstrated by a few facts. In the time of Washington, wheat was worth two dollars, and the prices of labour and other property were equivalent. Then the Federal Government received three millions annually. For the sake of round numbers, let us suppose the price of wheat to be now one dollar, and the receipt of the Federal Government twenty-five millions. It is obvious that one dollar represents as much property as two did then, and that though the same equilibrium of value may remain in free exchanges; yet that the equilibrium in the commerce between productive and unproductive employment, or between industry and income, is excessively altered. Tyranny or oppressive taxation, is graduated by this equilibrium. For the same services, or nearly so, rendered by an indispensable species of unproductive labour, which then cost us three millions worth of property, we are now paying fifty millions worth of property. If we come nearer the fact by supposing the average price of wheat to be now seventy-five cents, and other property to be reduced to a relative value, productive labour is paying seventy-two and a half millions annually, for the same government which then cost it only three, estimated in property. The increased expenses of the State governments, have also contributed considerably towards augmenting the oppression arising from the property-transferring branch of domestick commerce. The difference between the amount of contributions to unnecessary, unproductive employments, in the time of Washington, and the existing amount, is still greater. If labour then paid to the infant policy of exclusive privileges even as much as three millions annually, and is now paying more than ten to banking alone, these ten by the same scale are now transferring twenty or twenty-five millions worth of its property instead of three. In the time of Washington, duties were chiefly confined to the object of revenue; now, they are extended to that of enriching capitalists. If these capitalists gain ten millions by this branch of property-transferring domestick commerce, labour is losing twenty or twenty-five millions more beyond what it then lost. It results from the estimate, especially if we include the State governments, that above twenty times more property is transferred annually from industry to unproductive occupations, than was transferred thirty years ago, being the difference between its losing six, or an hundred and twenty-five millions annually. The Committee say that foreign commerce ought to be diminished, in order to encourage and extend this property-transferring domestick commerce. If a European government, between one and two centuries past, when wheat was at one third of its present price, had in thirty years increased the contributions of labour to unproductive employments, twenty-fold, the effect would have been such as is felt here, from our excessive cultivation of the same kind of domestick commerce, and the appreciation of money. If the contributions of industry to unproductive occupations happen to be doubled or trebled by the appreciation of money, I see no remedy for the unforeseen calamity, but a reduction of these contributions to what they substantially were when imposed. What legislature would propose a great and sudden augmentation of taxation, when the value of money was uncommonly high, and the price of products uncommonly low? There is some strange defect in the structure of society, if such an augmentation can be made without any legislative act at all. It is still stranger that the Committee should think of legislating exactly like this invisible tyrant; of whose pernicious laws they are complaining; by proposing to augment the contributions of industry to unproductive occupations, further than his unconscionable conscience has gone. Some irresistible power has substantially doubled or trebled our taxes and contributions to exclusive privileges, without the consent, and contrary to the wishes of our representatives; and instead of advising them to resist this evil spirit, the Committee propose that they should become his accomplice by increasing taxes and bounties, because the means of paying them have greatly diminished. It is this policy only which causes peace to aggravate the distresses of nations, by making the domestick commerce for transferring property, infinitely more lucrative to unproductive occupations, and more oppressive to industry. The extravagances of war and the appreciation of currency, created capitals, bearing with less weight upon industry, whilst the prices of property were high; and the appreciation of currency, by depressing the prices of commodities, has correspondendy increased the value of income. The Committee propose to increase capital and income like war, and to enhance their value like peace, by restrictions on foreign commerce, and domestick exclusive privileges.

To justify this scheme for a domestick commerce, they have repeatedly urged the argument uniformly resorted to by every contrivance for transferring property. Whatever local or individual injuries it may produce, they contend that it will beget national prosperity. For this doctrine, they might have referred to English authorities and examples, more conclusively applicable than any they have quoted.

Many English writers, and among others the venerable Adam Smith6 himself, justify the enrichment of Britain by the wealth drawn from her provinces, by the assertion, that the provinces are integral portions of the British empire; and that the trade between them and the mother country, is therefore to be considered as of a domestick character, and ought to be managed so as to promote the prosperity of the empire. Whether this doctrine is to be ascribed to the partiality of British writers for Britain, or to the design of deluding the provinces into an opinion, that the British monopoly of their commerce was no local injury; whether it was suggested by an ardour for local popularity, conviction, or avarice, it furnishes a parallel of the question we are considering. Admitting it to be true that the commerce between Britain and her provinces ought to be considered as domestick, because they constitute a portion of the British empire, it does not follow that these provinces sustain no injury from the domestick restrictions and monopolies to which their commerce is exposed. These regulations make use of the transferring capacity of money, by inflicting on the provinces a legal necessity of selling cheaper to Britain, and buying dearer of her, than they would do if she was checked by competitors. This double compulsion to buy of Britain and to sell to Britain, creates a domestick commerce, governed partly by the good, and partly by the bad soul of money. So far as the relative value of commodities prevails, its good soul predominates; but whatever is gained by Britain from the provinces beyond this relative value, by means of her monopoly, is bestowed by the bad soul of money, and is an acquisition of property without compensation. The United States, whilst portions of the British empire, constantly felt, and often urged, the great losses they sustained from the restrictions and monopolies of domestick commerce; and Britain as constantly felt the wealth she gained by them, and justified her acquisitions by the same argument now used by the Committee, namely, that these restrictions and monopolies contributed to the national prosperity. Neither side could convince the other, although the colonies, awed by power, would have made considerable sacrifices of their opinion, to obtain only partial alleviations of an oppression, of which they were quite sensible. For the sake of peace, they only contended that Britain ought not to compel them by law to buy, nor to collect in the colonies a tax for nurturing the property-transferring policy, which she had established between them and herself. But Britain, enamoured with this property-transferring domestick commerce, as our capitalists now are; and protesting that she was wholly uninfluenced by avarice, and only influenced by the national prosperity, as the capitalists now protest; continued to increase her restrictions and monopolies, as the capitalists have done, and are still striving to do. The parties therefore went to war to settle a question, which we are trying to settle by reason, as the colonies attempted to do, before that war commenced.

Let the capitalists or factories stand for Britain, and all the other occupations for the colonies, and very little difference between the two cases will appear. If domestick commercial restrictions could transfer property from the colonies to Britain, they may transfer it from these occupations to capitalists. If they were fraudulent and oppressive, though inflicted by the British Parliament, either as a regulation of domestick commerce, or a system of revenue, they may be also fraudulent and oppressive, though inflicted by an American Congress, also as a regulation of domestick commerce, or as a system of revenue. If such relations transferred great wealth from British colonies to British capitalists, they will also transfer great wealth from American States to American capitalists, wherever they may be located. If a compulsion upon the colonies to purchase necessaries of Britain, was impoverishing to the purchasers; a compulsion upon States and occupations to purchase necessaries of capitalists, must be equally impoverishing on the purchasers. Are not cargoes of internal manufactures, attended by a prohibition against competition, equivalent to cargoes of tea and British commodities, forced upon the colonies without being attended by competition? Will strong and free States be insensible to the oppression of this property-transferring policy, which was seen and resisted by weak and dependent provinces?

The similitude of these cases cannot be evaded by the subterfuge of a difference between foreign and domestick commerce. They are both domestick, subject to the same principles, and made to transfer property by the same regulations. Domestick restrictions and monopolies, more effectually transfer property than foreign, because they can be more effectually enforced; and therefore these instruments are more extensively fraudulent and oppressive in domestick than in foreign commerce, and are infinitely more able to establish domestick tyranny, whilst it is quite uncertain whether they can obtain any species of profitable trade. There is no difference between a contiguity by land or by water, sufficient to make the policy of transferring property foul and oppressive upon British colonies, but fair and beneficial when applied to free States. Britain may, indeed, plead as she feels, that the oceans which separate her from her provinces, render them only half social; and that therefore she is justifiable in using restrictions and monopolies to cheat them of half their property in exchanging hers for it; but the capitalists cannot contend for an addition of fifty per centum to the price of their wares, because the imposition operates upon a sort of half-breed or mongrel citizenship, having only a right to half justice. The moral difference of representation, far from justifying the fraud, is the strongest argument against it. These States, when colonies, possessed a representation for internal purposes, and strenuously contended, that this representation was a provision against colonial oppression by commercial regulations, made by the British Parliament. Can it be possible, that this moral plea, deduced from colonial representation, could have been sounder than the same plea deduced from State representation, even if the latter had no auxiliaries? But are not the original sovereignties of the States, the reservation of internal rights of sovereignty, and limitations of the federal constitution, to prevent Congress from making some States tributary to others, powerful auxiliaries to the argument deduced from representation? Was not representation both State and Federal, instituted to prevent fraudulent transfers of property from State to State, and from the people, to exclusive privileges and legal combinations? If representation does wrong, the possibility of which is contemplated by every free government, some mode of correction is necessary. We have provided two; election, and a division of representation between the Federal and State governments, assigned to each distinct and independent powers, and divided the moral rights of representation, that one species may check the wrongs of the other. Had an accommodation with Britain taken place upon the ground of a representation in her parliament, and conferring upon it the same rights conferred on Congress, reserving to the colonies their local representations for internal purposes, could it have been fairly so construed, as to have rendered these local representations perfectly inefficient, and to have empowered the parliament, in virtue of a right to regulate the commerce between the colonies, to make one tributary to another, or the colonists generally, tributary to a sect of capitalists?

An argument applicable to the point of constitutionality, has been postponed to this place, because it is also applicable to the point of representation. The constitution empowers Congress “to regulate commerce with foreign nations, and among the several States, and with the Indian tribes.” Under this authority it has undertaken to regulate internal exchanges between individuals, and to destroy the freedom of exchanges, by conferring monopolies upon some individuals operating upon other individuals. Foreign nations, States, and Indian tribes, are united in one article, and intended to be affected in one mode. Did this article empower Congress to make one Indian tribe tributary to another to build factories in one tribe, in order to provide objects for an excise, and to destroy the freedom of exchanges between the individuals composing the tribes? Did it give to Congress the same power as to foreign nations? If foreign and internal exchanges, were not intended by the article to be regulated by Congress, neither were State internal exchanges between individuals intended to be regulated by Congress, because the power being equivalent as to each, the construction must also be equivalent and the absurdity of a construction as to two of the cases placed on the same ground, demonstrates the character of the same construction as to the third. National and not individual regulations of commerce, between States as expressed, and not between individuals, were therefore meant; and the representation in Congress, is only a national representation of this national object, and not a representation of the freedom of internal exchanges between State individuals, any more than the British Parliament was, or would have been, had the proposed accommodation taken place.

The monopoly of domestick commerce outstrips that established by the British Parliament. The colonies were left at liberty to trade with Britain and her dependencies. This created a competition infinitely more extensive and effectual than that confined to our few factories. If the inferior British restrictions crippled our commerce, will not restrictions more general, cripple it also? The British restrictions left the British portion of the world open to colonial commerce; the protecting-duty policy prohibits or restricts our commerce with the whole world, and opens it with a few monopolies.

The Committee do not deny that foreign commerce will be wounded by this policy. On the contrary, they admit that such has been, and will be, the case, by urging its decay as an argument in favour of a monopolized domestick commerce. From the numberless intimate connections between foreign and domestic commerce, one is selected as a proof that the wounds inflicted on the former, will reach the latter. Our coasting trade is greatly fostered, if not sustained, by foreign commerce. Heavy products are carried to a few large cities, from whence they are exported, and the returns pursue the same route. If foreign importations are prohibited or diminished, and factories scattered sufficiently through the States to become markets for culinary goods, it must diminish or render unnecessary this coasting trade. But if this should not happen, and these factories should be so partially located, as to make some coasting trade necessary, yet the insufficiency of their manufactures to meet the demand, and the diminution of exchanges, must greatly impair it. Either the vaunted coasting trade, or the vaunted neighborhood markets, or both, must therefore be a delusion.

The case of tonnage duties, selected by the Committee to prove the wholesomeness of protecting duties, illustrates the confidence to which such selections are entitled. These duties are rather fiscal than prohibitory and if they were prohibitory, our abundance of tonnage would render the monopoly as nominal as the monopoly of manufacturing flour. The protecting duties are prohibitory and not fiscal, except to capitalists, and create an operating monopoly. Tonnage duties do not foster a dangerous and oppressive moneyed aristocracy; bounties to factories, levied upon consumptions, do. Tonnage duties fall on consumptions and go into the Treasury factory duties fall on consumptions, go into the pockets of capitalists; and, by expelling foreign ships, destroy or diminish the revenue drawn from them by tonnage duties. The design that foreign shipping should come here empty and pay a heavy tonnage, and that our shipping should return empty from foreign countries, having paid them a retaliating tonnage, is no bad epitome of the whole project. Have the Committee considered whether other nations will permit our ships to go to them loaded, if we force theirs to come to us empty? If we expel foreign ships, would not foreign nations expel ours? If we expel foreign commodities, will they not retaliate? Will these mutual expulsions foster commerce? We have been long engaged in what is called a war of reciprocity, and by the Committee a free commerce. Blow begets blow, and wound follows wound, and commerce is gasping in the battle. Now, say the committee, let us try “whether the transportation from one part of the country to another, of materials to supply our manufactories, and of manufactures back to the raiser of materials, and the export of manufactures, might not employ as much shipping and as many seamen, as the importation of foreign supply.” It is thus admitted, that the policy of the Committee is to give a settling blow to foreign commerce, from a hope that an equivalent domestick commerce will grow upon its grave. To effect this, our factories and raisers of materials must live a great way asunder, to give employment to shipping and seamen in plying between them; and this ferry is to raise sailors and keep up a navy, until we can export manufactures. Foreign nations are of course to admit our ships and these manufactures, when we have gotten them to export, because we have expelled theirs. The fewer have been our expedients of this character, the more has our commerce flourished; and hence it is highly probable, that the most efficacious mode of defeating foreign restrictions to which we can resort, would be to establish a really free commerce, which would enlist the merchants of all nations to evade and counteract them. We have not gained a single victory in a twenty years' war of restriction against restriction, and the harder we strike the enemy, the more severely the blow recoils upon ourselves. Unless we assail him with a new weapon, success seems hopeless. The Committee propose to surrender our foreign commerce, and thus put an end to the contest. Suppose, instead of retiring within our shell from the combat, we should oppose free trade to foreign restrictions. We once tried it, and found ourselves fighting with swords against daggers. I know of no nation which has entered into a commercial warfare in this armour, that has not been victorious.

The Committee observe, “that nature has not denied to the immense region watered by the Mississippi, the Ohio and the Lakes, the means of ship-building, or the supply of cargoes. Man refuses them a market, because he looks only abroad. Foreign commerce can present no preference over domestic.” This immense region must, for ages, probably for ever, be agricultural. No equally interiour country has ever yet been a considerable exporter of manufactures. If this is susceptible of success in such an adventure, that success must be at the distance of some centuries. It cannot even enter into a competition with maritime countries, until its deficiency in populousness is removed. In the mean time, ship-building will make its interest more thoroughly agricultural, than that of the Atlantick region. Ships, the product of the forest, freighted with the products of the land, are themselves and their cargoes, only rendered valuable by foreign commerce. But the committee say what I cannot understand, “man refuses them a market, because he looks only abroad.” Do they mean that our merchants look abroad for agricultural ships and cargoes, rather than purchase them at home? As such is not the case, and as I cannot discern any meaning in the expression, I am forced to consider it as an empty barrel, thrown out to draw off the attention of the western whale. Is it not obvious that this very branch of western commerce, destined soon to become highly valuable on account of the cheapness of timber, and its dearness in foreign countries, depends for prosperity on foreign commerce? Would these ships and their cargoes be purchased and eaten by domestick factories, Western or Atlantick? Why do the Committee endeavour to inspire a hope so absurd, by adding, “that foreign commerce can present no preference over domestic?” Will an undeniable truth establish an undeniable error? If horses are preferable to oxen, ought we therefore to destroy or hamstring our oxen? Far from inferring from the fact, that foreign commerce is not preferable to domestick; that therefore the destruction of the former will advance the western interest, there seems to be no stronger case than this ship-building and loading which they have selected, to prove the close connection between foreign and domestick commerce; and to show how necessary the one is to the prosperity of the other. Without foreign commerce, it is perfectly plain that the domestick commerce in western ships and their cargoes will dwindle and perish, even sooner than any other item of agricultural interest.

The objection is, that the protecting-duty policy will injure or destroy commerce, meaning foreign commerce, and the Committee justify this consequence by asserting that a domestick commerce between factories and raisers of raw materials will compensate us for the loss, because foreign commerce can present no preference over domestick. Foreign commerce is then condemned to death by this policy, leaving its partner, agriculture, as a legacy to capitalists.

[6.]Adam Smith (1723-1790), Scottish political economist, was “venerable” for AnInquiryinto the Nature and Causes of the Wealth of Nations (2 vols., 1776). He also wrote Theory of Moral Sentiments (1759). See Foreword, p. xx.