Flint's Letters from America, 1818-1820

by active 19th century James Flint

The import duties on foreign manufactures, high as in most cases they appear to be, have not the effect of protecting American artizans from competition with those of other countries, who work cheaper. This disadvantage has been produced by the profuse issues of a paper currency. Money of this sort not taking the market abroad, it remains in the country, where it operates against industry, by augmenting the nominal price of labour. Hence people are complaining of want of employment, while they depend on the labour of foreigners for almost every artificial modification of the materials raised on their own soil, or that lie unheeded under their feet. Import duties are not to be considered merely as enactments for promoting American manufactures, for they constitute the principal source of national revenue. It might be difficult to form a conception of a revenue {241} that could be collected at less expense, or of taxation raised in a more voluntary manner on the part of the people. But as moderating these duties must unquestionably, on every occasion, be injurious to home industry, and as augmenting them to the extent of the total prohibition of foreign goods would introduce smuggling, the two objects of the system are in some degree incompatible in the present state of money affairs.

The capital vested in uncultivated lands, is a mere dormant stock which cannot be applied to such active employments as the erection of workshops, machinery, and other outlays necessary for the establishment of manufactories, unless it is replaced by other funds. Neither is it so easy to procure money as formerly by mortgaging cultivated lands, now when the prices of produce are so low.

The expedients resorted to, in keeping base money in circulation, are, with respect to manufacturing interests, as impolitic as they are, in fact, unjust. Bankers, who are virtually insolvent, are to be ranked amongst the opposers of manufacturers, as it must be impossible for such men to contemplate the reduction of the quantity of money so essential to industry, without dreading the retribution that awaits them.

The present condition of the United States is well suited to convince the people of the expediency of making exertions for supplying their own wants. Europe is no longer to be relied on as a market for their produce, and Great Britain in particular has in effect excluded the grain and the timber of the United States from her markets, and prohibits Americans from trading with her West India colonies. Since these restrictions have taken place, great quantities of British manufactures have been imported into America, and the course {242} of exchange has shown, that a large money balance has arisen in favour of Britain. Some persons interested in the traffic, infer the prosperity of the United States from their being able to pay a balance of trade. Though general doctrines of this kind are sanctioned by several great economists, on the broad principle that an exportation of money indicates a corresponding importation of property, or in other words, an accumulation of wealth; before adopting an assumption of this kind in any particular case, it may be safe to inquire whether the import consist of articles, which are permanently beneficial, or of luxuries either of the more perishable kinds, or of those more conducive to ornament than utility. With regard to the late imports of the United States, it is thought sufficient to notice that they have not furnished the ability to continue them in their usual amount.

Farther, nothing can be more plain than the necessity of abridging the quantity of paper money in circulation; and when this is done to a sufficient extent, foreigners will find it impossible to procure dollars here on terms so easy as formerly. Were money rendered so scarce, that it would command three or four times the quantity of the necessaries of life that it does now, foreign labour would be excluded, and the American labourer, with a third or a fourth part of his present nominal wages, would find the only changes in his condition to be a greater demand for his work, and an immediate enlargement of his resources. The farmer would eventually find the means of increasing his produce, and the advantage of a home market; and capitalists now engaged in foreign commerce, would find employment for their funds in manufactures. Fortunately the impolitic course latterly {243} pursued is leading to its own correction. Specie is seldom to be seen in the ordinary transactions of business, except in small worn pieces of inferior denominations, and cut money, from which a portion of the metal has been fraudulently abstracted. The deficiency in weight prevents this part of the currency from being exported in direct payments, and nothing but the recent depreciation of paper seems to prevent these remnants of silver from being disposed of as bullion.

In former times, when Europe furnished a market for almost every kind of produce, the strongest inducements to agricultural industry prevailed. The fertility and the vast extent of the United States enabled cultivators to increase in numbers, in a manner that would have produced a disagreeable competition, in a more thickly peopled country; but the recent state of commercial affairs shows that America is not wide enough to prevent the inconveniences of competition in a narrow market. The necessity of a new distribution of pursuits becomes every day more apparent, as without it the people cannot enjoy the articles of comfort and luxury hitherto imported. Some of the most popular newspapers now advocate the cause of manufactures, and several public societies take a deep interest in promoting the internal prosperity of the country. The society at Philadelphia for promoting American manufactures,[130] have in some of their papers reasoned in such a manner as to prove that they possess a comprehensive knowledge of the subject, both of its effects on national wealth, and of manufacturing business. The resolutions of the society lately instituted at Cincinnati for the promotion of agriculture, manufactures, and domestic economy, are subjoined, {244} as a mark of the patriotic spirit that now prevails.[131] The committee of this society consists of people of the greatest wealth and influence in the city and neighbourhood.

Of the essays in favour of manufactures which have been published, it may be observed generally, that they recommend the adoption of higher import duties. That these have not been resorted to, need excite no surprise, as the secretary of the treasury has shown that an increase of duties must be followed by a decrease of national revenue, {245} and as the ultimate substitute, internal taxation, would probably be unpopular, although imposed with the most sparing hand. The spontaneous decrease in the amount of money capital now going on, does not seem to be duly appreciated;—an occurrence that is evidently well calculated to give an impulse to American industry.

When the United States shall abandon the spurious money now in circulation, and proceed on a smaller but more substantial capital, a new era of national prosperity will commence. The government will be freed from the danger, or rather the certainty, of losing the revenue by a smuggled trade, and will feel less necessity for resorting to restrictive regulations. A less sum of money will be sufficient to defray the public expenses. The consequent cheapness of labour will give the agriculturist new advantages in foreign markets, and develop in a new degree the natural resources of the country. The home market, occasioned by a manufacturing population, will be secure, as being beyond the reach of foreign governments, whose caprice is hostile to the security of American trade. Whenever the country shall be able to manufacture the whole, or the greater part of its necessaries, the exports of produce must be attended with an importation of specie. The ingress of foreign capitalists may also be calculated on as one of the effects to be produced by the change of system.

The introduction of manufactures must promote internal improvements, as the making of roads and the construction of works, for facilitating inland navigation. The country will be rendered capable of supporting a greater population than it can under the present system, thereby removing much of the inconvenience that attends their present settlements; {246} better opportunities for mental improvement, and the means of more prompt national defence, will be acquired; foreign commerce and foreign relations will be abridged, so that the hazard of hostilities with other countries may be greatly lessened. A small shipping trade evidently requires less naval protection than an extensive foreign commerce, and the retrenchment may perhaps admit of some relaxation in the present construction of ships of war. The reverses so frequently injurious to the manufacturers of Britain are less to be dreaded in the United States. While their manufactures do not exceed their own wants, it will always be practicable to prevent the home market from being overstocked, and while the vacant back woods are held in reserve, a manufacturing population need not be reduced to pauperism by the want of a foreign market for their fabrics.

The erection of manufacturing establishments was recommended some time ago by intelligent citizens, who foresaw that the money capital of the country could not long supply the great efflux of specie. Now, a change of policy becomes a matter of necessity. It is chiefly to be regretted several State legislatures are too active in forcing the circulation of degraded money;—a procedure which, in the meantime, retards the natural subsidence of the convulsion, and keeps property out of the hands of its real owners. However far they may succeed in procuring indemnity for past peculations, their efforts must be impotent in opposition to the future interests of mankind. The paper currency that they strive to support falls in spite of their utmost exertions. I now find that my expense of living or of travelling is nominally the same that it was in the autumn of 1818. At that time I paid in specie, or in money, which {247} was considered as nearly equivalent to it, but of late I have on various occasions found that paper is accepted which is 50 per cent. worse than silver. A person who collected a salary to the amount of about eight hundred dollars, told me that he had received only five dollars of that sum in specie. You can easily perceive that, under this state of things, very few will give specie to the tavern-keeper, grocer, or others, while he can previously procure for it one and a half times, or twice its nominal amount, in what is called current paper. Most of the small towns have a person who follows the business of money changing; and merchants and other persons transact in that way, so that specie is almost entirely withdrawn from retail business, and applied to the purchase of public lands, or other objects, for which depreciated paper would not be accepted of in payment. Under this condition, an unsettled or precarious sort of internal trade is carried on, but it is impossible to import foreign goods as formerly.