Rural Wealth and Welfare: Economic Principles Illustrated and Applied in Farm Life

by Geo. T. Fairchild

For abundant examples in support of these various propositions, appeal is made to the history of the world by comparing countries developed under a restrictive tariff with less developed ones free from such restrictions. The history of our own country, under the ups and downs of tariff legislation, is also appealed to. Even the extra cost of certain articles to the whole [pg 217] people, which is the sole basis of advantage to the fostered interest, is thought to be more than compensated by the direct advantage of increasing competition at home, where it will have the most wholesome effect upon the market price. Proof of this, too, is sought in the rapid development of iron and steel manufacture, where protective tariffs have been most persistent.

Reasons against protective tariff.—Against a system of protective tariffs many strong arguments are not wanting. It is contended that a tariff on iron goods, for instance, is just so much an added burden upon all consumers of iron, and, since the bulk of consumption enters into the cost of articles of universal use, the greater part of the burden is borne by the poorer classes of people, who consume as much as the more wealthy. If the restrictive tariff actually limits the introduction of foreign goods, as must be the case if it acts as a stimulant in production, the revenues received are far from being in due proportion with the cost to the people, since essentially the same tariff is paid by the consumer whether the article is imported or manufactured at home. Although it is not true that in every instance the tariff is a tax, in so far as it benefits the home manufacturer by advanced prices it must be. In so far as it operates for protection of favored industries, it certainly fails to serve the purposes of revenue. The diversity of employment evidently fostered by tariff is said to be unnatural and likely to continue expensive, and any advantages of market at home are sure to be overestimated, especially with reference to staple products of the farm, since the surplus necessarily forming [pg 218] a basis for prices must be sold in foreign countries without the advantage of direct exchange for articles of their own production. That is, if our tariff restrictions limit the market of a foreign people, they also limit the ability of that people to purchase the products which we are obliged to sell them. It is contended further that a rapid development of varied industries, instead of maintaining soil fertility, tends to more rapid exhaustion by making more probable the consumption of cruder products of the farm in villages and cities too remote for return of fertility, although within the same country. The development of natural resources under stimulant of a tariff is admitted by its opponents, but represented as a waste of effort, since the tendency is to withdraw capital and labor from more productive industries into less productive, and that, too, at the expense of the more productive. If factories cannot give an equal profit with farming, it is absurd to tempt capital away from the farms into factories. So, although wealth may be accumulated in showy enterprises, the people, as a whole, are less thrifty and bear unequal burdens. It is further contended that the total labor of the community, when a part is used in unprofitable development of resources, is made on the whole less productive, and therefore the people are less able to buy their neighbors' products, and must live with diminished comforts. In that case all the haste in developing natural resources is actual waste.

If, on the other hand, the restrictive tariff invites capital from abroad for the sake of gaining the trade of a country, the diminished profit of labor in some foreign [pg 219] country compels emigration, and such emigrants are likely to follow the capital. Only the poorest of foreign laborers will be compelled to help themselves by emigration, and only those will gain by the change of location. Thus it is said a restrictive tariff encourages the least desirable form of immigration. This is illustrated in the development of the mining industry through the fostering effects of the tariff.

There can be no question that any restriction upon trade may foster the contrivance of combination to secure monopoly. Hence it is often claimed that the existence of trusts is due in great measure to tariff restrictions, preventing the competition natural in the commercial world. It is certainly true that the restriction of a patent right may make possible the abuses of a trust. If trusts were confined to protected industries or to countries maintaining protective systems, the weight of the argument would be stronger. It is certainly true, however, that the wider the range of competition without restriction, the greater the protection against combination for sake of monopoly. The monopoly in kerosene oil would be a greater menace but for the possible check of competition from abroad.

Such artificial restrictions, again, prevent the naturally rapid growth of international commerce, which gives the surest foundation for more permanent conditions of peace and greater extension of welfare over the world. The tremendous interests of the commercial world are the strongest safeguard against unnecessary warfare, and the best protection to any nation is the fact that it makes itself needed by all the rest of the world.

Thus inter-dependence of nations rather than independence is the essential aim of those who seek the world's welfare. An alliance of two peoples for commercial purposes is the best guaranty of mutual support of national institutions.

In proof of all these statements, the experience of the world in widely varying regions is appealed to. The natural breaking down of prohibitory tariffs has given opportunity for observation. Especially has the commerce between states of the Union, where it is absolutely free, shown the general advantage of such freedom in rapid development of wealth and welfare. While these states have a common interest in government, they are nevertheless widely distinguished in peculiarities of local government and in characteristics of people. While, therefore, there is possible doubt as to the wisdom of rapid removal of restrictions, there is every probability that such restrictions will gradually be outgrown. Even the temptation to make retaliatory duties, where other governments restrict against our products, is growing less with increasing experience of the true advantage in exchanges. The world is gradually coming to see that the better market any region of country affords for the rest of the world, the better market the rest of the world affords for it.

Incidental tendencies from tariff.—The incidental effects of restrictive tariffs, and especially of the necessary instability of restrictive legislation, are too interesting to pass by, though very limited space can be afforded them. In the first place they contribute to a speculative enterprise which leads to waste of wealth in [pg 221] unpromising undertakings because of a necessary over-estimate of the advantage given. On the other hand, a reduction of the same tariff after a series of years is almost sure to bring panic in that line of industry previously fostered. So the fluctuations of tariff laws are one element in periodic expansion and contraction of business. The tariff laws are certain, also, to involve the worst element of influence through the lobby upon legislative bodies. Even though the charge of bribery be utterly false, the general respect for legislative bodies is lowered by charges and countercharges for political effect. As an occasion for such charges scarce any other form of legislation serves as well. Even the people themselves are easily assumed by their neighbors to weigh their opinions upon a tariff measure by their personal interests.

The indirect influence of a new tariff law upon the industries of a country can scarcely be foreseen. So interlocked are all the varieties of manufacture and trade that a change in price of any one article of commerce may affect hundreds of others, sometimes much more than the article restricted. It is easily seen that a duty upon iron of a particular shape or quality may actually prohibit the use of that iron in some product which already touches the margin of profit. These incidental effects can scarcely be foreseen by even the wisest statesman. The practical adjustment of conflicting interests in the framing of tariff laws should be the work of experts. If all parties could unite in establishing a bureau of commerce, domestic and foreign, as dignified as the Supreme Court of the United States, and [pg 222] as independent of party interference, such a body might frame a consistent tariff law, gradually perfecting it in adjustment to all interests and explaining its bearings to all parties. Such a body could take account of the great interests of agriculture in the commerce of the world, and weigh properly the indirect influence of restrictions. The marked influence of fluctuating tariff upon sheep raising, so familiar to all farmers, might then be fairly appreciated. Under present methods it is very certain that any tariff law is largely a compromise, with limited judgment, between agitating conflicts of interested promoters. The farmers, of all people, can afford to be conservative of all interests, and should favor such methods as will work toward enlargement of commerce without destruction of industries. If possible, they will wisely seek the removal of tariff questions from practical politics.

In concluding this subject, it is wise to suggest that the true principle of regulations for national industry are the same as those for true family economy. The family should so plan its work and ways as to make the best possible use of the powers of every member. It is no economy to buy cheap things unless the members of the family can be better occupied than in making them. It is poor economy to make those things which cost more time and effort than would be used in making something else for exchange. Home production is best when this makes the home labor more effectual, but worst when it interferes with the profit of labor. The farmer who stops harvesting to mend his harness when he might employ the harness-maker is wasteful; but if he [pg 223] mends it on a rainy day he saves time which would otherwise be less profitably used. So the nation whose capital and labor are not well employed may do wisely in developing new industries, even at a considerable expense for introducing the new industries. But if all the nation's energies are profitably employed, the costly development of resources may wisely wait for future capital and labor. So all special incentives require a constant inquiry as to beneficial results supposed to follow, and the policy of the government must conform to the needs of general welfare. Even vested rights are subject to the law of welfare involved in the original act establishing special privileges. Public use, not private interest, is the true reason for the existence of any such privileges or protection.