OPERATION OF PROTECTIVE LAWS.
The essential question which has grown up between political parties in the United States respecting our foreign trade, is whether a duty should be laid upon any import for the direct object of protecting and encouraging the manufacture of the same article at home. The party opposed to this theory does not advocate the admission of the article free, but insists upon such rate of duty as will produce the largest revenue and at the same time afford what is termed "incidental protection." The advocates of actual free-trade according to the policy of England—taxing only those articles which are not produced at home—are few in number, and are principally confined to doctrinaires. The instincts of the masses of both parties are against them. But the nominal free- trader finds it very difficult to unite the largest revenue from any article with "incidental protection" to the competing product at home. If the duty be so arranged as to produce the greatest amount of revenue, it must be placed at that point where the foreign article is able to undersell the domestic article and thus command the market to the exclusion of competition. This result goes beyond what the so-called American free-trader intends in practice, but not beyond what he implies in theory.
The American protectionist does not seek to evade the legitimate results of his theory. He starts with the proposition that whatever is manufactured at home gives work and wages to our own people, and that if they duty is even put so high as to prohibit the import of the foreign article, the competition of home producers will, according to the doctrine of Mr. Hamilton, rapidly reduce the price to the consumer. He gives numerous illustrations of articles which under the influence of home competition have fallen in price below the point at which the foreign article was furnished when there was no protection. The free-trader replies that the fall in price has been still greater in the foreign market, and the protectionist rejoins that the reduction was made to compete with the American product, and that the former price would probably have been maintained so long as the importer had the monopoly of our market. Thus our protective tariff reduced the price in both countries. This has notably been the result with respect to steel rails, the production of which in America has reached a magnitude surpassing that of England. Meanwhile rails have largely fallen in price to the consumer, the home manufacture has disbursed countless millions of money among American laborers, and has added largely to our industrial independence and to the wealth of the country.
While many fabrics have fallen to as low a price in the United States as elsewhere, it is not to be denied that articles of clothing and household use, metals and machinery, are on an average higher than in Europe. The difference is due in large degree to the wages paid to labor, and thus the question of reducing the tariff carries with it the very serious problem of a reduction in the pay of the artisan and the operative. This involves so many grave considerations that no party is prepared to advocate it openly. Free-traders do not, and apparently dare not, face the plain truth—which is that the lowest priced fabric means the lowest priced labor. On this point protectionists are more frank than their opponents; they realize that it constitutes indeed the most impregnable defense of their school. Free-traders have at times attempted to deny the truth of the statement; but every impartial investigation thus far has conclusively proved that labor is better paid, and the average condition of the laboring man more comfortable, in the United States than in any European country.
An adjustment of the protective duty to the point which represents the average difference between wages of labor in Europe and in America, will, in the judgment of protectionists, always prove impracticable. The difference cannot be regulated by a scale of averages because it is constantly subject to arbitrary changes. If the duty be adjusted on that basis for any given date, a reduction of wages would at once be enforced abroad, and the American manufacturer would in consequence be driven to the desperate choice of surrendering the home market or reducing the pay of workmen. The theory of protection is not answered, nor can its realization to attained by any such device. Protection, in the perfection of its design as described by Mr. Hamilton, does not invite competition from abroad, but is based on the controlling principle that competition at home will always prevent monopoly on the part of the capitalist, assure good wages to the laborer, and defend the consumer against the evils of extortion.
TENDENCY OF OVER-PRODUCTION.
An argument much relied upon and strongly presented by the advocates of free-trade is the alleged tendency to over-production of protected articles, followed uniformly by seasons of depression and at certain intervals by financial panic and wide-spread distress. These results are unhappily too familiar in the United States, but the protectionists deny that the cause is correctly given. They aver indeed that a glut of manufactured articles is more frequently seen in England than in the United States, thus proving directly the reverse of the conclusion assumed by the free-traders, and establishing the conservative and restraining power of a protective tariff. The protectionists direct attention to the fact that the first three instances in our history in which financial panic and prolonged depression fell upon the country, followed the repeal of protective tariffs and the substitution of mere revenue duties,—the depression of 1819-24, that of 1837-42, and that of 1857-61. They direct further attention to the complementary fact that, in each of these cases, financial prosperity was regained through the agency of a protective tariff, the operation of which was prompt and beneficent.
On the other hand the panic of 1873 and the depression which lasted until 1879 undoubtedly occurred after a protective tariff had been for a long time in operation. Free-traders naturally make much of this circumstance. Protectionists, however, with confidence and with strong array of argument, make answer that the panic of 1873 was due to causes wholly unconnected with revenue systems,—that it was the legitimate and the inevitable outgrowth of an exhausting war, a vitiated and redundant currency, and a long period of reckless speculation directly induced by these conditions. They aver that no system of revenue could have prevented the catastrophe. They maintain however that by the influence of a protective tariff the crisis was long postponed; that under the reign of free-trade it would have promptly followed the return of peace when the country was ill able to endure it. They claim that the influence of protection would have put off the re-action still longer if the rebuilding of Chicago and Boston, after the fires of 1871 and 1872, had not enforced a sudden withdrawal of $250,000,000 of ready money from the ordinary channels of trade to repair the loss which these crushing disasters precipitated.
The assailants of protection apparently overlook the fact that excessive production is due, both in England and in America, to causes beyond the operation of duties either high or low. No cause is more potent than the prodigious capacity of machinery set in motion by the agency of steam. It is asserted by an intelligent economist that, if performed by hand, the work done by machinery in Great Britain would require the labor of seven hundred millions of men,—a far larger number of adults than inhabit the globe. It is not strange that, with this vast enginery, the power to produce has a constant tendency to outrun the power to consume. Protectionists find in this a conclusive argument against surrendering the domestic market of the United States to the control of British capitalists, whose power of production has no apparent limit. When the harmonious adjustment of international trade shall ultimately be established by "the Parliament of man" in "the Federation of the world," the power of production and the power of consumption will properly balance each other; but in traversing the long road and enduring the painful process by which that end shall be reached, the protectionist claims that his theory of revenue preserves the newer nations from being devoured by the older, and offers to human labor a shield against the exactions of capital.