Monopoly privileges.—Government monopolies have been a favorite method in past ages of fostering particular enterprises. These are in the nature of an exclusive privilege, granted to individuals or corporations for the manufacture or sale of particular commodities, and occasionally for special public services. These were once a method of showing royal favor, and the word monopoly has in its very nature the idea of inequality. Hence they are unpopular under all circumstances, except when permanent and universal advantage is secured.
License.—The monopoly of service is secured by the issue of a license. If granted through official favoritism, the wrong is easily appreciated; if granted to all who conform to necessary requirements for the general welfare, as in showing qualifications for teaching, compounding of drugs, or practice of medicine, the license is recognized as useful. In fact, it seems to furnish security for satisfactory governmental service, and is the basis of all promised reform in civil administration.
Patent and copyright.—The chief illustrations of a genuine monopoly maintained by government authority are found in the patent upon inventions and the copyright upon publications. A patent is conferred upon the inventor of “any new and useful art, machine, manufacture or composition of matter, or any improvement thereof,” upon proof that the invention is original, not previously in use anywhere, and likely to be beneficial rather than detrimental. This patent secures to the inventor the sole right to make, use or exchange articles manufactured after the pattern described, or upon the principle involved in construction. This monopoly is limited usually to a term of years supposed to be sufficient to secure to the inventor a reward for his exertion. The patent laws of the United States protect the rights of an inventor for seventeen years, entitling him to damages upon proof in the proper court of infringement upon his patent. Such protection extends, of course, only throughout the territory under the same government. It may be secured, however, in foreign nations under special regulation, so as to cover [pg 211] the most of the civilized world. The copyright serves the same purpose, and is limited in much the same way, for securing to the products of thought or of taste a proper reward for the powers exerted. It gives to an author control over publication of his thoughts during a period of twenty-eight years, in order that the users of his thoughts may actually pay what they are worth. This, too, is confined to the limits of the government issuing it, unless by agreement an international copyright is provided by the laws of the several countries.
Franchises.—A still more noticeable monopoly is granted by municipalities under what is called a franchise for the establishment and maintenance of water supply, public means of artificial lighting and heating, or means of public transportation. These are under government control usually in cities, because they employ the public streets for carrying on the enterprise. The franchise is really an extension of the license in particular directions. This is usually issued with the expectation of great public benefit from a large investment of capital which would not be made without relief from competition, because not immediately profitable. The franchise usually carries with it certain restrictions as to use of public highways and limitation to a term of years. It necessarily involves the right of government inspection and control for the general welfare.
Difficulties from monopoly privileges.—All of these monopolies are granted for the purpose of conferring upon the whole community benefits that could not [pg 212] otherwise be secured. They are wise only so far as they secure this result. If the patent right system wastes the energies of inventors in contrivance of useless devices, there is loss; if it builds up a class of mere speculators, there is waste; if it fosters monopoly beyond the giving of a fair reward for invention, it is robbery. The exact limit of time during which a patent is good stimulates to the utmost exertion for wide introduction of its benefits, and at the same time prevents the burden of lasting monopoly. The dangers are chiefly in the administration of patent laws, from the careless issue of undeserved patents, or in a combination under a series of patents to maintain a constant monopoly. It is a safe rule to issue patents only for particular applications of scientific principles and not for the discovery of the principle, which can be protected in publication by copyright. Departures from this rule cut off the possibility of more perfect contrivances and fair competition in devices and methods. There can be no question of the general advantage of protecting a genuine inventor from the trespass of others to secure him a fair compensation. No other plan for a fair exchange of such services has even been suggested. The unsettled question is the proper limit of time for a patent to run.
The advantages and disadvantages of copyright are essentially the same in character, though the dangers are less. Since the large part of the reward of an author or an artist is in the repute he may secure, there is little danger of fostering an unfair spirit of monopoly. The franchise is subject to the same principles, [pg 213] but its dangers in practice are very great. So long as the advantages to the corporation securing the franchise may be enormous, if it is sufficiently extended, there is great temptation to bribery, both in the original issue and in the maintenance of inspection and municipal control. Nothing has so interfered with good government of cities as the manipulation of franchises. These abuses underlie the popular call for municipal ownership of water works, lighting plants and street railways.
Protective duties.—A still more widely extended method of stimulating industry by special incentives is seen in what is called a protective tariff. This is a system of duties upon articles produced in foreign countries so levied as to check the natural competition by increasing their cost to consumers. The increased cost of such articles, if not too great to destroy the demand, increases the incentive to manufacture similar articles within the country.
The schedule of tariffs becomes then a very important element in all productive industry, and requires the nicest adjustment to the needs and abilities of the nation. If associated, as is usually the case, with the raising of government revenues, the adjustment becomes more difficult, and requires the judgment of experts in commerce as well as in statistical knowledge of industries and government necessities. While in any country the existing tariff is presumed to have been established to meet public need, the fact that there is necessarily a restriction upon freedom of exchange makes it always open to question. The tariff laws, like [pg 214] all laws restricting freedom of action, must always have evident reason for existing. The burden of proof rests with the one who defends such laws. This is especially true with reference to tariffs, because the trend of civilization is certainly toward greater freedom of intercourse in all directions. The barriers between nations are generally giving way before the introduction of ready transportation and quick communication. The statesman who maintains the necessity of restrictive tariff must always stand ready to explain this obstacle to more complete association. For this reason we have the constant agitation of tariff questions and the impossibility of permanent settlement in any particular.
For the same reason there are always two phases of a tariff discussion. The student of social science inquires chiefly as to the tendencies of advancing society with reference to such restriction, and, seeing the barriers becoming less and less, is likely to seek the final removal of every such restriction. The statesman, busied with the immediate conditions of the limited community whose interests he guards, is liable to be for or against any particular restriction as it fosters or hinders those interests. For this reason statesmen, of whatever party, are subject to the bias of local interests, and have even been known to change their views with a change of such interests. In our own country, when party lines are drawn upon the tariff, it is quite possible that sectional lines may also mark the party supremacy. In fact, it is possible for any man to believe in freedom of trade as the ultimate condition to be sought, while he favors in immediate practice restriction or even [pg 215] prohibition by a definite tariff. The purpose in this chapter is to give a brief outline of arguments for and against such tariff in general, leaving entirely to practical statesmanship the decision of special questions.
Reasons for protective tariff.—A system of restrictive tariffs is thought to contribute to the welfare of an entire community by artificially increasing the natural diversity of employments. If new enterprises can be fostered, exchanges are greatly increased, all the advantages of exchange are secured within the country, and the general intelligence of the people is increased. With this comes the enormous advantage of what is called a home market for the cruder products of industry. This is especially to the interest of farmers raising bulky products or those not likely to bear transportation. It is further thought to foster a better agriculture by a more natural return to the soil of elements removed in cropping, the nearer body of population making such return possible. It is also thought to make at once available the natural resources of a country in mines, quarries, water powers, etc., which might otherwise long remain useless. It is contended for as a means of checking unfair competition between a long established community with special advantages for factory methods, either in large accumulations of capital or low wages of laborers, and a newer country where capital is scarce and wages are high. It is sometimes held to be a means of maintaining a high standard of wages through the advantage actually conferred upon certain lines of industry, upon a supposition that competition at home without these favored industries would [pg 216] reduce the wages maintained in other industries. If a tariff on wool calls into profitable use a large amount of farm capital in sheep raising, every wheat raiser is at the same time benefited by reduction of competition in the wheat market. If the capital and labor employed are enticed from other countries, the effect is the same by increasing the demand at home for the wheat. That this does not operate so long as wheat raisers come to a market where a surplus must be consumed in other countries does not destroy the argument, since the tendency is to reduce the surplus. The system is also thought to encourage, in lines of industry likely to prove productive, a rapid development of labor-saving machinery and new methods of manufacture, which may some time give to a nation superiority in the markets of the world. To many there seems a much more important reason for restrictions, in order to establish every needed form of production for the sake of national independence. That nation which contains within its own borders the means of supplying all the wants of its people is supposed to be more capable of independent growth, and to be freed from hampering competitions of trade, that may lead to wars and, perhaps, to extreme suffering in case of foreign war.