LETTER V
My dear Judd:
The next thing we want to understand is the tariff, and how that works to take money out of the pockets of the poor and put it into the pockets of the rich.
The government has to have money, like any other business. We all desire government services, and should pay our proper share, honestly and openly calculated. But we haven’t an honest government, nor an honest social system; nobody wants to pay his share of anything, and taxes are unpopular; therefore the politicians put their wits to work and devise what are called “indirect taxes,” ways of getting your money without your knowing it. Among these ways is the “protective tariff.”
This was another great issue of the McKinley days, and well I remember the campaign slogans, devised for tricking the poor voters! “Protection and Prosperity; the Full Dinner Pail; the Foreigner Pays the Tax!” We liked the last one especially; we hated the foreigner, and were strong for making him pay—though just why we should have expected foreigners to put up the money to support the government of the United States, was something we might have been puzzled to explain!
A tariff is a tax imposed on all goods brought into the country. A protective tariff is a tax high enough to shut out foreign competition, by raising the cost of imported goods. Who pays the tax? The importer pays it, and he at once adds it to the price of the goods, so that the tax is passed on to the person who uses the goods, the ultimate consumer. He is the man who pays, always and everywhere; and the effect of the tariff is simply to boost prices in a whole line of commodities. If the government got all this boost, it wouldn’t be so bad; but the government gets only a small fraction, and the rest is a fat and juicy graft for the “protected” manufacturers.
But, say the newspapers and campaign orators of the “Grand Old Party,” it is the workingman as well as his boss who is “protected”; if it were not for the tariff, our wage scales would be dragged down to the levels of Europe; the labor-sweating foreigner would “dump” his goods on us! Well, Judd, for the workingman to try to improve his condition by a tariff, is as if a man should make himself rich by taking money out of his right-hand pocket and putting it into his left-hand pocket. If you look only at the left side of this man, you will think he is enjoying “prosperity”; and that is what the newspapers and the campaign orators did—and the poor workingman too, alas; for the subject is complicated, and the workingman does not have much time to think.
But you can see, Judd, that after the workingman has got his protected job and has collected his protected wages, he has to go to the stores and spend his money, and there he pays higher prices for everything he buys, because all these things have been “protected” from foreign competition, and the manufacturers of the things have been able to form trusts and fix the prices at higher levels. Just how much higher are the levels? The answer is easy; they are always a little higher than the wages! The whole story was told in the figures I gave you as to the movement of real wages in our country. Following the example of the “Grand Old Party,” let me give you a slogan:
The protective tariff in the past thirty-five years has reduced the real wages of the American workingman by five per cent!
And what about the farmer? The farmer does not get much protection on his products, but has to buy vast quantities of manufactured goods at “protected” prices. Take the United States Census Reports, and study the growth of farm mortgages from 1890 to 1920. This is the final test, you understand; for the farmer does not give the banker a mortgage on his land because he loves the banker, but solely and simply because the cost of running his farm is greater than the income derived from the farm. We find that in 1890 there were mortgages on 27.8% of our farms, and in 1920 on 37.2%. So here is a slogan for the farmers:
The protective tariff has increased the enslavement of the farmers to the bankers by thirty-three per cent in thirty years!
And what has been the effect of the protective tariff upon our politics? That also is easy to answer: it has made them a football to be kicked about by rival greedy interests; it has made our government a fat oyster to be opened and eaten at the banquets of trust magnates. The lobbyists of the big manufacturing interests have swarmed to Washington with their pockets full of bribes, and our congressmen and senators have been hogs at a swill-trough. Our political conventions have been bargain-counters, where candidates have met in secret hotel-rooms with the agents of the trusts, and have sold their honor and the welfare of the people. When the campaigns begin, the protected interests are frightened into putting up huge sums—“frying out the fat” is the phrase; and then we have red fire and torch-light processions and banners and a wild hurrah, and the voters are herded to the polls like sheep—at the standard price of two dollars per sheep.
I grant you, Judd, that it might have been a reasonable policy for the American people to tax themselves to build up their industries at the beginning, when the industries were young and needed help. But what are we to say when these carefully nourished “infant industries” grow up into highwaymen that knock us on the head? It happened that in 1917 our country went to war “to make the world safe for democracy”; and that was surely a time for patriotic sacrifices on the part of these beneficiaries of protection! From a report of the Secretary of the Treasury I take a few figures concerning the profits they made in that year. One woolen mill, hiding behind the carefully constructed tariff wall, made 1770% on its capital stock; and in case that Wall Street method of figuring should puzzle you, Judd, I put it into your kind of figures; you build a house for $1,000, and sell it for $18,700. Seventeen woolen mills reported profits of over 100% on their capital stock—that is, the stockholders got back in one year’s profit the total amount of their investment. The great American Woolen Company, with its capital stock of $60,000,000, made a net profit of $28,560,342. Canners of fruits and vegetables, tariff protected, made as high as 2032%. Clothing and dry goods stores, tariff protected, made a profit of 9826%. One steel mill, tariff protected, made as high as 290,999%. This, you will say, must be a joke; but I am quoting the figures of Secretary of the Treasury McAdoo: the capital stock of the concern was $5,000, and the net profits were $14,549,952. The great steel trust, our billion dollar infant, made in two years a net profit exceeding its capital stock.
These of course, are war-time profits; but I assure you, Judd, such things are being done right along, up to this hour. Take our textile industry, highly protected, and paying starvation wages to its horde of wretched slaves. The great Amoskeag Company, manufacturing many kinds of cotton goods, had in 1907 a capital of $4,000,000, which it has increased to $44,500,000, all out of profits. Last year it made a net profit of $2,851,131, which is 71% on the original investment. Or take the bread trust, which feeds—or feeds upon—the poor in our slum tenements. In 1922 the General Baking Company earned at the rate of 117% on each share of its original common stock. This stock rose from $2 in 1916 to $1,350 in 1925; and I assure you that is not a misprint—it is exactly as written! In this morning’s paper I read how the president of this company has just paid $200,000 for a box at the opera; the story tells how he rose from poverty, and we are expected to be proud of him!
Some understanding of the tariff robbery having begun to filter down to the people, our political masters promised us a reform. There was to be a “scientific” tariff; a commission was to study costs and prices, and provide exactly the right amount of protection. Well, last year this commission turned in a report, most “scientific,” showing how the sugar trust was exploiting the American people and advising the cutting of their tariff favors. And what did President Coolidge do with the report? He did his best to suppress the facts; and his action cost us a total of $53,000,000 in nine months!
Or again, take aluminum, used in making our kitchen utensils. This trust was organized in 1888, with a paid up capital of $20,000. Not one dollar more of real money has ever been put into it; but it has a tariff protection of 7 cents a pound, and in 1923 the concern paid a profit of 1000% on the original investment! The company’s circular now claims assets of $110,000,000, and last year a report of the Federal Trade Commission declared the company a monopoly which “threatened competitors with extermination unless obedient to the company’s will.” The United States Attorney-General declared, in February, 1925, that this company had violated provisions of the dissolution decree and had “shown itself indifferent to the provisions of the decree.”
And what did President Coolidge do about that? The answer is easy—he always does the same thing, which is nothing. And why? The Aluminum Company of America is another name for the Mellon family, and the head of this family, the third richest man in America, is President Coolidge’s Secretary of the Treasury, the man who determines the financial policy of our country. Since he took his high office he has had just one idea, which the entire propaganda department of Big Business has been hammering into the heads of our people—that the way to make prosperity for the poor is to reduce the taxes of the rich, so that the rich will start plenty of industries and pay big wages to the poor. You may see exactly how it works, when you learn that this rich law-breaker who sits in our cabinet pays his aluminum workers a wage of $3.36 per day! Figure the income of such a worker, on the basis of six days a week at full time, with no holidays whatever; and then consult last year’s income tax returns, and see what income is acknowledged by the Honorable Andrew W. Mellon; and so you get a perfect picture of the Coolidge idea of “prosperity.” It runs as follows:
For a wage-slave of the aluminum trust and his family, $88 a month; for a law-defying, whiskey-distilling Pittsburgh banker in the cabinet, $284,000 a month; and to help out the family, $178,000 a month for his brother!