Principles of Political Economy

by Arthur Latham Perry

Take an illustration, please. The national Census of 1890 gives the Pig-iron production of the Census year as 9,579,779 tons of 2000 lbs. each. This is an increase over the production of the Census year, 1880, of 255 per centum,—3,781,021:9,579,779. Fortunately the present Census adds the net imports for the two years respectively, with these results: the per capita consumption of Pig-iron in 1880 was 196 lbs., of which 126 was home production, and 70 of foreign import; while in 1890 the consumption was 320 lbs. per capita, of which 299 was domestic, and 21 foreign. That is to say, in 1880, 65% of the pig-iron consumed in this country was of home production, and 35% was of foreign production. At that time the tariff-tax on imported pig was $7 per ton. Government secured this tax on a little more than one-third of what was consumed, while a small circle of citizens banded together for that purpose secured for themselves this tax on the remaining two-thirds of all pig-iron consumed that year, and the whole people paid the tax on the entire three-thirds. As we shall see fully a little further on, our national Government has no constitutional or other right to tax the people one penny except to supply its own needs as such; if, therefore, the $7 impost per ton were put on as a legitimate tax, there should have been an excise or internal-tax to the same amount put on the pig-iron produced at home. That would have cost the people no more, and the Government would have gotten twice as much more as it did get from the tax. If there be an axiom in Taxation, one point indisputable by any rational human being, it is this: The Treasury should receive all that the people are made to give up under a public tax.

In 1890, this particular matter came to be much more flagrant. Only 21 parts out of 320 parts were in that year foreign pig-iron; that is, a little less than 7%, while 93% was domestic pig-iron; the tariff-tax at that date was .3 of a cent per pound, or $6.72 per ton of 2240 lbs.; the tax was sufficient practically to exclude foreign pig, although the Scotch pig as more fluent is very much desired here in some branches of the iron manufacture, particularly in making steel rails; Government received the proceeds of its own tax on only one-fourteenth of that, which really paid the tax on its whole fourteen-fourteenths; where did the tax on the thirteen-thirteenths go to? If this were a matter of genuine taxation, ought there not to have been an excise on the domestic corresponding to the impost on the foreign?

Precisely that is what we do in the case of other articles not protectionized. For example, in the fiscal year 1889, the excise or internal-tax on "distilled spirits and wines" realized to the Treasury $74,312,200, and the tariff-tax on the same realized $7,123,062, total, $81,435,268; on "malt or fermented liquors" the same year, the excise was $23,723,835, the impost only $663,337, total, $24,387,172; and on "tobacco" the excise was $31,866,860, the impost $11,194,486, total, $43,061,346. These figures are official.

An ostentatious display of private figures and price-lists is often made, with a design to show that the prices of home-made products protectionized are not lifted so high to consumers or buyers as those of foreign-made products with the tariff-taxes added. The main sophistry in these figures is this: the pure assumption, that the quality of the home-made products alleged to be cheaper than the tax-added price of the foreign, is the same as that of the foreign. Unluckily, things are often called by the same names, and even described by the same technical terms, which are very different sorts of things in reality. A subordinate sophistry in these figures, often allowed to pass, but not requiring any sharp insight to detect, is, that the selected price-lists are not the results of an average extending throughout years, but are picked at points when (owing to other causes than the taxes) the current prices of protectionized home products are lower than the average of the years. One easy way to expose the putters-forth of these figures, as not themselves really believing in them, is, gravely to propose to lower or remove the tariff-taxes, which (it is alleged) do not have the effect to lift much, if any, domestic prices. This simple experiment has several times been tried, with ludicrous effect upon the figure-mongers; they cannot spare one iota of present taxes on foreign products: if the smallest fraction be removed, they can no longer make and vend their wares; indeed, heavier tariff-taxes are needed at this very moment, in order to lift the domestic prices higher; and, presto! another set of figures are forthcoming at once to prove the disabilities, either in respect to Labor or Capital, under which the poor protectionized producers are staggering in order to keep the home market!

Another complete refutation of the false position of the protectionists, namely, that the domestics are not lifted in price on the average to the price of the foreigns of the same quality with the tariff-taxes added, is their utter failure and inability to project any reason in the nature of things or the motives of men, why the home-prices should not be thus lifted! What impulse, pray, on the earth or under the earth, can serve to depress them on the whole average below that point? Does any one say, that "domestic competition" will depress and keep depressed the prices of home goods of the same grade below the prices of the foreign taxes paid? Did this astute objector ever hear of "domestic combination" to keep prices up to the highest possible point? To shut down mills and factories, to avoid depressing prices? To sell surplus stocks abroad for what can be gotten for them, in order to make prices at home up to the usual scarcity point? In July, 1890, the Boston Commercial Bulletin, the special organ of Protectionism in New England, and special spokesman for the wool-and-woollens industry, spoke thus of that industry, after 30 years of public hiring the growers and manufacturers to carry it on with a bonus, just at a time when the worsted tariff-taxes had been advanced, alleged custom-house frauds stopped, and still higher tariff-taxes on their way from the so-called McKinley Bill in Congress: "The woollen goods industry was probably never in much worse condition in this country. The slowness of its development may be judged from the fact, that, despite an average yearly increase of over a million in population, the increase in the number of wool cards in this country is less than a hundred a year, while the proportion of woollen machinery shut down between June 1 and September 1 bids fair to be the largest ever known. The market is dull, deadly dull. The large amount of silent machinery is making its presence felt. The sluggish sales of wool are due to most of the big mills being closed. Depression in business is the cause of so many woollen mills closing, and the news comes this week of four woollen mills, three in the Bay State and one in Pennsylvania, that will close for periods ranging from two weeks to several months."

Not only is it true, that the purpose and usual effect of tariff-taxes is to hoist the price of domestics protectionized up to the limit of the corresponding foreigns with the taxes added, but it sometimes happens that the home products are carried for considerable periods at a level a good deal above that. A conspicuous instance of this, commented on at the time by all the Boston papers, was brought to notice a couple of years ago in connection with the steel beams purchased by the city for the new and noble Boston Court-House. The beams were bought in Belgium at $28 a ton, paid at the Boston Custom-house "one and one-fourth cents a pound," that is, just $28 a ton, making their cost to the city $56 a ton. But domestic steel beams of the same general description were selling here at $73 a ton. Their price had been raised here twice in one summer, about fifty cents a ton each time. One of the conglomerated curses of cutting off by law the natural competition in such products is, that the unnatural competition still permitted by law is sluggish in coming into operation, and the monopoly becomes even more such than was intended by the law.

The tariff-tax on steel rails is $17 a ton, formerly $28 a ton, proposed in the McKinley bill to be reduced to $11.20 a ton. That even this last is wholly needless, or any tax at all on steel rails, is proven by the fact, that in March, 1890, Pittsburg rail-makers sold 5000 tons of rails at Vera Cruz at lower prices than the corresponding European rails were offered for in Mexico. Another fact that proves the same thing is this: James M. Swank, the mouth-piece of the Pennsylvania iron and steel interests, describes the year 1885 as one of unprecedented prosperity in the steel-rail industry, and gives a formidable list of new establishments opened in that year. But steel rails were much lower in that exceptional year than in any year before or since. A tariff-tax of $5 a ton would have been in that year absolutely prohibitory, for steel rails were worth less than $28 a ton the greater part of that year. Yet that very year was the year of greatest prosperity, Mr. Swank being the competent witness! But the fact in general, which ought to overwhelm the iron and steel protectionists with confusion, if they were capable of any such emotion, is, that iron and steel in every form of both, owing to the unprecedented bounty of God to this good land, costs less both in labor and capital here than in any other country in the world. The official figures of the current Census demonstrate this, authentic statements of practical operators at the iron mines and furnaces and foundries throughout the Tennessee Valley confirm it, and there is not one particle of evidence to the contrary of any name or nature.

Let the reader notice carefully the following quotation from a private letter to the writer, dated July 30, 1890, written by a graduate of this college, in whom all who know him have the fullest confidence:

"We began to open the mines here just three years ago this Fall, and began shipping the following Spring. Our price for the ore was then about $1.50 a ton, depending on the analysis. We mined in the old-fashioned way—with picks and shovels—and I am safe in saying it cost us all we got for it. I know I was continually making drafts on my father to keep me out of debt. I did not figure on the cost at that time—I was afraid of the figures. My only thought was how to reduce the cost. We had a Steam Shovel in Pennsylvania, and I got my father to send it to me for trial in this ore. We found we could use it to advantage by using also plenty of powder, and I was soon able to buy the second shovel. Of course that reduced the cost of production still lower, and as there was a market for all I could do, I got the third, and am now putting in the fourth, and the fifth is bought and to be delivered inside of 60 days. This doubling up of the shovels made me get locomotives to carry the ore in the mines instead of mules. I have now two locomotives. You will understand how it would make a saving at that point. It would require 15 mules to do that work, and it could not be done so promptly.

During the month of May we shipped about 14,500 tons with the use of three shovels, and at a cost per ton for labor and fuel and powder of 33 cents. We have reduced the cost on a week's run, in good weather and with no lack of empty cars, to 29 cents, but it never came lower on the month's average than 33. I expect this Fall, with five shovels instead of three, and two locomotives instead of one, to lower the cost of production.