At this time the divided opinions in favour of raising or lowering duties commenced to play an important part in politics. Protective tariff and tariff reduction were the watchwords of the two parties. In 1842 the Protectionist party got the reins of government, and at once put heavy duties on iron, paper, glass, and cotton and woollen goods. Four years later, tariffs were somewhat reduced, owing to Democratic influences; but the principle of protection was still asserted, as is shown by the fact that tea and coffee, which were not grown in the country, were not taxed, while industrial manufactured articles were taxed on the average 30 per cent. The Democrats continued to assert their influence, and won a victory here and there. Wool was admitted free in 1857. Then came bad times. After a severe commercial crisis, imports decreased and therewith the customs revenues. The demand for high tariff then increased, and the Republicans got control of Congress, and enacted in the year 1861 the Morrill Tariff, which, although strongly protective, was even more strongly a Republican party measure. It aimed to discriminate in protecting the industries of those states which the Republican party desired to win over. Then came the Civil War, the enormous expense of which required all customs and taxes to be greatly increased.
The war tariff of 1864 was enacted for the sake of revenue, but its effect was decidedly protective. And when the war was over, and tariffs might have been reduced so far as revenue went, industries were so accustomed to the artificial protection that no one was willing to take off duties. Some customs, even such as those on woollen and copper, were considerably increased in the next few years, while those on coffee and tea were again entirely removed.
In general, it was a time of uncertain fluctuations in the tariff until the year 1883, when the whole matter was thoroughly revised. In certain directions, the customs were lowered; in others, increased. Specially the higher grades of manufactured articles were put under a higher tariff, while the cheaper articles used by the general public were taxed more lightly. A short time after this, President Cleveland, as leader of the Free-Trade Democrats, came out with a famous message against protection. The unexpected result was, that after the tariff question had thus once more been brought to the front, the Republicans gained a complete victory for their side, and enacted a tariff more extreme than any which had gone before, and which protected not only existing industries, but also such as it was hoped might spring up. Even sugar was now put on the free list, because it had been taxed merely for revenue, and not for protection. While, on the other hand, almost all manufactured articles which were made in the country were highly protected. This was specially the case with velvet, silk, woollen, and metal goods. This was the well-known McKinley Tariff.
The Democrats won the next election, although not on the issue of industrial legislation, and as soon as they came into power they upset the high tariffs. Their Wilson Tariff Bill of 1894, the result of long controversies, showed little internal consistency. Too many compromises had been found necessary with these or those influential industries in order to pass the bill at all. Yet, on the whole, customs were considerably lowered, and for the first time in a long while raw materials, such as wool, were put on the free list. But Democratic rule did not last long. McKinley was victorious in 1896, and in the following year the Dingley Tariff was passed in accordance with Republican ideas of protection, and it is still in force.
The total revenues derived from this source in the year 1902 were $251,000,000, and in 1903 were $280,000,000. Let us analyze the first amount. Its relative importance in the total revenue may be seen from the fact that the internal duties on liquor, tobacco, etc., amounted to $271,000,000, and that the postal budget for the year was $121,000,000. The customs duties of $251,000,000 are officially divided into five classes. The first is live animals and breadstuffs, with sugar at the head bringing in $52,000,000. The sugar duty had not existed ten years before, but the Wilson Tariff of 1894 could not have been enacted if the beet-sugar Senators from Louisiana had not been tossed a bone. In 1895 the revenue on sugar amounted to $15,000,000, and in 1901 to $62,000,000. After sugar, in this year of 1903, came fruits and nuts with 5, vegetables with 3, meat, fish, and rice with only 1 million dollars each. The second class comprises raw materials. Wool yielded 10.9, skins 2.6, coal 1 million dollars, and every other class still less. In the third class are the semi-manufactured products, with chemicals yielding 5.4, tin plate 2.9, wooden-ware 1.8, silk 1.1, and fur 1 million dollars. The fourth class comprises finished products. Linen goods yielded 14, woollen goods 13, cotton goods 10, metallic wares 6, porcelain 5.6, leather goods 3.1, and wooden and paper wares each 1 million dollars. Articles of luxury make the last class, with tobacco bringing 18.7, silk goods 16, laces 13, alcoholic drinks 10, jewelry 2.4, feathers 1.4, and toys 1.3 million dollars. The total imports for the year were $903,000,000, of which $396,000,000 entered free of duty; but of these last only 10 per cent. were half or wholly finished products, 90 per cent. being food or raw materials. The duty was collected from imports worth $507,000,000, and 64 per cent. came from manufactured articles. Thus the Dingley Tariff was a complete victory for protection.
No one now asks to have the duties raised, but the Democratic party is trying all the time to have them lowered, so that the question is really whether they shall be lower or remain where they are. Of course, the Republicans have a capital argument which looks unanswerable—success. The history of American protection, they say, is the history of American industrial progress. The years during which native industry has been protected from foreign competition by means of heavy duties have been the times of great development, and years of depression, disaster, and panic have regularly followed whenever free-traders have removed duties. The tariff has never been higher than under the McKinley and the Dingley bills, and never has the economic advance been more rapid or forceful. What is the use, they say, of representing to the working-man that he could buy a suit so much cheaper if the tax on woollen goods were removed? For if it were, and free-trade were to be generally adopted, he would go about without employment, his wife and children would be turned out into the street, and he would be unable to buy even the cheapest suit. Whereas to-day, he is well able to pay the price which is asked. The wealth of fancy with which this sort of argument is constantly varied, and tricked out with word and phrase suited to every taste, is almost overpowering. But the alternative between the high wage which can afford to pay for the expensive suit, and the lower wage which cannot afford to pay for the cheap suit, becomes still more cogent since the fanatical protectionist is able to prove that under a high tariff wages have in fact risen, while the price of the suit has not. Yet the extreme free-trader can prove, with equal certainty, that under free-trade the suit would actually be much cheaper, while wages would in the end be even higher.
It cannot be doubted that a number of industries are to-day very prosperous which could not have gotten even a foothold except by a century of protection. And no Democrat denies this. But he doubts whether the hot-house forcing of such industries has benefited the country, and he believes that the artificial perpetuation of great industrial combinations, which have been able, by means of a protective tariff, to put an artificially high price on the food and other necessary articles used by the masses, has worked infinitely more harm than good.
It is undoubtedly true that many industries have not only been protected, but have actually been created. The tin plate industry is, perhaps, the best example of this. The United States used to obtain the tin plates needed in industry from Wales, and at unreasonably high prices. Twice the Americans tried to introduce the industry at home, but were at once undersold by the English and “frozen out.” Then the McKinley Tariff put a duty on tin plate of 70 per cent. ad valorem, and the American industry was able to make headway. In 1891, 1,036 million pounds of tin plate were imported, and none was produced at home; two years later only 628 million pounds were imported, and 100 million pounds manufactured at home; and ten years later only 117 million pounds came over the sea, while 894 million pounds were produced in this country. It has been much the same in the manufacture of watches. The United States imported all their watches a few years ago. They were then taxed 10 per cent. for revenue, being accounted articles of luxury, and could not be profitably made inside the country. But when Congress taxed them 25 per cent., the industry grew up. It produced at first watches after European models; but American ingenuity soon came to be extended to this field, improved machinery for the manufacture of watches was devised, and now a tremendous industry provides every American school-boy with a watch which is better and cheaper than the corresponding European article. Even the silk industry may well be considered the foster child of protection.
The free-traders reply, that all this may have been very well for a period of transition from an agricultural to an industrial state; but that the great change has now been completed, and the burdensome duties which keep our prices high might perfectly well be dropped, since our industries are now strong enough to compete with foreign industries.
But just at this point the Republican comes out less optimistically than before. He says that American industry has indeed developed with fabulous speed, and that the industrial exports of the country, which now amount to 30 per cent. of the total, are a great showing, but this is a symptom which ought not to be overrated. When prices throughout the rest of the world fell, and England was paralyzed for the moment, although the domestic demand had not yet reached its height, conditions combined so favourably, it is true, as to cause the export trade in American manufactured articles to increase rapidly. But this may not be permanent. Industry is still not able to fill all the demands of the home market; on the contrary, at the very time when American iron and steel industries seemed likely to conquer foreign markets, it was found that some sudden increase in domestic requirements necessitated large importations. While the iron and steel exports decreased by $25,000,000 between 1900 and 1903, the imports during the same time increased $31,000,000, and iron and steel include mostly unfinished products.