3d. A condition of the woollen manufacture characterized by a greater depression than that of any other branch of industry in the country, with the exception of ship-building; small profit accruing to a few, heavy losses to the many, with numerous and constantly recurring failures.
4th. An increase in the importations of foreign fabrics of wool; the imports of the fiscal year 1868 being returned at $32,458,884, and for 1869 at $34,620,943.
5th. Encouragement of smuggling and its apparent reduction to a system.
“In short,” concluded Mr. Wells after a full discussion of these points, “what is now needed to restore prosperity to the woollen industry, is a removal of all duties on the importation of foreign wools and dyestuffs, and a general reduction of the duties on manufactured woollen fabrics of every description to 25 per cent ad valorem. On this basis the most experienced woollen manufacturers in the country assure the commissioner that they can at once extend, diversify, and secure prosperity in their business. On this basis the cost of domestic fabrics will be so far reduced as to give great relief to the consumer, and lead to an immediate and largely increased consumption. And on this basis only can the wool-growers expect any immediate increased demand for his staple product of merino fleece; while in respect to the combing and the finer wools it is sufficient to say that the supply of these wools has not for the last few years increased in proportion to their consumption, and that the extension of their use in the American industry, which would inevitably follow a remission of the duties upon their import, would so far increase their demand as to give to the domestic producer all the encouragement that would prove necessary.”
Among the many cases which Mr. Wells analyzed in his reports none excited more interest than that of salt. Salt was so widely diffused in the United States, and its production in various sections had been so cheap and simple, that the price before the war was very low. The efforts of the states where it was found, particularly of New York State, had always been to keep it abundant and cheap. But so many persons had gone into the business in that state that there had been at times over-production and serious price-cutting, and as early as 1860 the New York salt men formed a company to put a stop to this sort of thing. By a clever manipulation of the State Assembly, which was the guardian of the salt-wells, they secured a law which permitted them to prevent the starting of any new salt-works. They then went to work to get control by buying or leasing all existing works. Succeeding in this they promptly shut down many of them and began to limit the output. The next year after the combination was formed came on the war, and the tariff on salt was raised to 12 cents a bushel (it had been 1½ cents in 1857). A year later it was raised to 18 cents, a duty equivalent to from 100 to 150 per cent of its value. This high rate practically put an end to foreign competition, and the exigencies of war taking the salt of Virginia and Louisiana out of the market, the Northern works had things pretty much their own way. Salt, which had sold at 20 cents a bushel in 1860, was selling five years later at 66 cents, and in 1869 at 48.
The Syracuse company made extraordinary profits under these circumstances. In 1861, the year after their first combination, 7 per cent. In 1862 they paid six dividends, one of them 12½ per cent. They soon issued a stock dividend of 100 per cent, and paid the same large cash dividends on this. In the first six years after the combination was formed it paid out $2,000,000 in dividends on a paid up capital of $160,000, and had a surplus of $600,000 on hand.
In the meantime the Michigan salt-works were growing rapidly. Their output which in 1860 had been but 4000 barrels became over a half million in 1864! But the same thing happened there as in Syracuse—too many companies. Sixty-six were operating there by 1866, and combination was applied, and the Michigan companies were soon consolidated into two. But the end of the war loosened the Southern works and competition was in danger of being restored. The New York and Michigan companies hastened to prevent such a disaster. They entered into negotiations with the Ohio River Company to limit the output, and the latter to make itself firmer leased the Kanawha, Virginia, Salt Springs for $75,000 a year and shut them down. Simultaneously with this campaign for making salt scarce at home, the industry began one to make it still dearer, an agitation for more duty—18 and 24 cents a hundred pounds were not enough, they wanted 30 and 42 cents, and this in spite of the fact that the internal revenue tax had been removed from salt. If the copper and wool men could get special bills through, why not they? There seemed no good reason to the House of Representatives—and they actually passed the measure—though the Senate did not concur, for lack of time, and the bill never became a law.
This interesting combination had not only succeeded through the tariff in making salt scarce and dear, but they had, as all such combinations do, given the lie to their claim that they could not produce it at a cost which would enable them to sell it cheaper, by exporting in 1868 some 500,000 bushels, which they had sold in competition with foreign salt, and by offering the New England fishermen who were allowed to import salt without duty, prices as low as those abroad; that is, they had one price for the land and another for the sea, one for Canada and another for the United States.
Mr. Wells’s evidence on the salt monopoly was complete—it had made a necessity of life dear through a tariff much higher than the internal tax and the higher wage of American labor called for. The greater part of the extra price the consumers were paying was going not into the pockets of the laborers, but into those of the operators.
After salt the portion of the reports which attracted the most attention dealt with the tariff on iron. Pig-iron was still enjoying the protection of $9.00 a ton, given it in the spring of 1865, and this, though practically all internal revenue taxes on it had been removed. Its price had risen from $22.70 a ton in 1860 to an average in 1869 of $40.61. The cost of producing this iron in the United States, including interest, repairs, and incidentals, was from $24.00 to $26.00 a ton, and it could be bought in England at $27.12. Mr. Wells’s conclusion, after examining all the elements in the problem, was that the cost of pig-iron to the American consumers was from $8.00 to $10.00 per ton more than was necessary to pay the American laborer his higher wage, and give the American manufacturer a fair profit; that is, the iron men were receiving a bonus of from $8.00 to $10.00 a ton from the country. Of course, this high price of pig-iron affected the cost of production in all sorts of industries. The most telling illustration of its effect was that of ship-building. The year the Civil War broke out the tonnage of the merchant marine of the United States was 5,539,813. Twice as many American vessels entered British ports as British entered American ports. The American Clipper was famous all seas over. We were building vessels for the foreigners, and everybody was quoting with pride a remark of John Bright in the House of Commons that the finest vessels sailing between England and Australia were built in the United States. Iron vessels were at this time beginning to replace wooden. England had taken the lead in their building, but we were beginning the industry, and our success in all related industries made it certain that we should succeed here. The war, of course, interrupted trade sadly. But the alarming thing was, that the war over, there was no recovery of the loss. On the contrary, it increased. In 1869 the tonnage had fallen to 4,246,507. Instead of American vessels filling British ports, British filled ours. A trade between the United States and Brazil carried on in 1860 in 345 American and 178 foreign vessels was almost exactly reversed. Shipyards all along the coast were shutting down. Why was it? The ship-builders did not hesitate to say: “The day of the iron ship has come, but it cannot be built in America. The ship that costs $88,000 in Scotland, costs $138,000 here.” It is not the superior cost of labor the ship-builders contended. The advantage the Scotch and English ship-builders have in cheap labor is compensated for with us by superior efficiency and by labor-saving devices. It is the cost of materials that cripples us. Just as the increased cost of copper, through a high duty, had put an end to copper bottoming and repairing of wooden ships in American ports, so the high tariff on iron and lumber was putting an end to ship-building.