A Biography of Henry Clay, the Senator from Kentucky / Containing Also, a Complete Report of All His Speeches; Selections From His Private Correspondence; Eulogies in the Senate and House; and a Poem, by George D. Prentice, Esq.

by Unknown

In respect to woollens, every gentleman’s own observation and experience will enable him to judge of the great reduction of price which has taken place in most of these articles, since the tariff of 1824. It would have been still greater, but for the high duty on the raw material, imposed for the particular benefit of the farming interest. But, without going into particular details, I shall limit myself to inviting the attention of the senate to a single article of general and necessary use. The protection given to flannels in 1828 was fully adequate. It has enabled the American manufacturer to obtain complete possession of the American market; and now, let us look at the effect. I have before me a statement from a highly respectable mercantile house, showing the price of four descriptions of flannel during six years. The average price of them, in 1826, was thirty-eight cents and three quarters; in 1827, thirty-eight; in 1828, (the year of the tariff,) forty-six; in 1829, thirty-six; in 1830, (notwithstanding the advance in the price of wool,) thirty-two; and in 1831, thirty-two and one quarter. These facts require no comments. I have before me another statement of a practical and respectable man, well versed in the flannel manufacture in America and England, demonstrating that the cost of manufacture is precisely the same in both countries; and that, although a yard of flannel which would sell in England at fifteen cents, would command here twenty-two, the difference of seven cents is the exact difference between the cost in the two countries, of the six ounces of wool contained in a yard of flannel.

Brown sugar, during ten years, from 1792 to 1802, with a duty of one and a half cents per pound, averaged fourteen cents per pound. The same article, during ten years, from 1820 to 1830, with a duty of three cents, has averaged only eight cents per pound. Nails, with a duty of five cents per pound, are selling at six cents. Window glass, eight by ten, prior to the tariff of 1824, sold at twelve or thirteen dollars per hundred feet; it now sells for three dollars seventy-five cents.

The gentleman from South Carolina, sensible of the incontestable fact of the very great reduction in the price of the necessaries of life, protected by the American system, has felt the full force of it, and has presented various explanations of the causes to which he ascribes it. The first is, the diminished production of the precious metals, in consequence of the distressed state of the countries in which they are extracted, and the consequent increase of their value, relative to that of the commodities for which they are exchanged. But, if this be the true cause of the reduction of price, its operation ought to have been general, on all objects, and of course upon cotton among the rest. And, in point of fact, the diminished price of that staple is not greater than the diminution of the value of other staples of our agriculture. Flour, which commanded some years ago, ten or twelve dollars per barrel, is now sold for five. The fall of tobacco has been still more. The kite-foot of Maryland, which sold at from sixteen to twenty dollars per hundred, now produces only four or five. That of Virginia has sustained an equal decline. Beef, pork, every article almost, produced by the farmer, has decreased in value. Ought not South Carolina, then, to submit quietly to a state of things which is general, and proceeds from an uncontrollable cause? Ought she to ascribe to the ‘accursed’ tariff, what results from the calamities of civil and foreign war, raging in many countries?

But, sir, I do not subscribe to this doctrine, implicitly. I do not believe that the diminished production of the precious metals, if that be the fact, satisfactorily accounts for the fall in prices; for I think that the augmentation of the currency of the world, by means of banks, public stocks, and other facilities arising out of exchange and credit, has more than supplied any deficiency in the amount of the precious metals.

It is further urged, that the restoration of peace in Europe, after the battle of Waterloo, and the consequent return to peaceful pursuits of large masses of its population, by greatly increasing the aggregate amount of effective labor, had a tendency to lower prices; and undoubtedly such ought to have been its natural tendency. The same cause, however, must also have operated to reduce the price of our agricultural produce, for which there was no longer the same demand in peace as in war; and it did so operate. But its influence on the price of manufactured articles, between the general peace of Europe in 1815, and the adoption of our tariff in 1824, was less sensibly felt, because, perhaps, a much larger portion of the labor, liberated by the disbandment of armies, was absorbed by manufactures than by agriculture. It is also contended, that the invention and improvement of labor-saving machinery, have tended to lessen the prices of manufactured objects of consumption; and undoubtedly this cause has had some effect. Ought not America to contribute her quota of this cause, and hasshe not by her skill and extraordinary adaptation to the arts, in truth, largely contributed to it?

This brings me to consider what I apprehend to have been the most efficient of all the causes in the reduction of the prices of manufactured articles, and that is COMPETITION. By competition, the total amount of the supply is increased, and by increase of the supply, a competition in the sale ensues, and this enables the consumer to buy at lower rates. Of all human powers operating on the affairs of mankind, none is greater than that of competition. It is action and reaction. It operates between individuals in the same nation, and between different nations. It resembles the meeting of the mountain torrent, grooving, by its precipitous motion, its own channel, and ocean’s tide. Unopposed, it sweeps every thing before it; but, counterpoised, the waters become calm, safe, and regular. It is like the segments of a circle or an arch; taken separately, each is nothing; but in their combination they produce efficiency, symmetry, and perfection. By the American system this vast power has been excited in America, and brought into being to act in coöperation or collision with European industry. Europe acts within itself, and with America; and America acts within itself, and with Europe. The consequence is the reduction of prices in both hemispheres. Nor is it fair to argue from the reduction of prices in Europe, to her own presumed skill and labor exclusively. We affect her prices, and she affects ours. This must always be the case, at least in reference to any articles as to which there is not a total non-intercourse; and if our industry, by diminishing the demand for her supplies, should produce a diminution in the price of those supplies, it would be very unfair to ascribe that reduction to her ingenuity, instead of placing it to the credit of our own skill and excited industry.

Practical men understand very well this state of the case, whether they do or do not comprehend the causes which produce it. I have in my possession a letter from a respectable merchant, well known to me, in which he says, after complaining of the operation of the tariff of 1828, on the articles to which it applies, some of which he had imported, and that his purchases having been made in England, before the passage of that tariff was known, it produced such an effect upon the English market, that the articles could not be resold without loss, he adds: ‘for it really appears that, when additional duties are laid upon an article, it then becomes lower instead of higher.’ This would not probably happen, where the supply of the foreign article did not exceed the home demand, unless upon the supposition of the increased duty having excited or stimulated the measure of the home production.

The great law of price is determined by supply and demand. Whatever affects either, affects the price. If the supply is increased, the demand remaining the same, the price declines; if the demandis increased, the supply remaining the same, the price advances; if both supply and demand are undiminished, the price is stationary, and the price is influenced exactly in proportion to the degree of disturbance to the demand or supply. It is, therefore, a great error to suppose that an existing or new duty necessarily becomes a component element to its exact amount of price. If the proportions of demand and supply are varied by the duty, either in augmenting the supply, or diminishing the demand, or vice versa, price is affected to the extent of that variation. But the duty never becomes an integral part of the price, except in the instances where the demand and the supply remain after the duty is imposed, precisely what they were before, or the demand is increased, and the supply remains stationary.

Competition, therefore, wherever existing, whether at home or abroad, is the parent cause of cheapness. If a high duty excites production at home, and the quantity of the domestic article exceeds the amount which had been previously imported, the price will fall. This accounts for an extraordinary fact stated by a senator from Missouri. Three cents were laid as a duty upon a pound of lead, by the act of 1828. The price at Galena, and the other lead mines, afterwards fell to one and a half cents per pound. Now it is obvious that the duty did not, in this case, enter into the price; for it was twice the amount of the price. What produced the fall? It was stimulated production at home, excited by the temptation of the exclusive possession of the home market. This state of things could not last. Men would not continue an unprofitable pursuit; some abandoned the business, or the total quantity produced was diminished, and living prices have been the consequence. But break down the domestic supply, place us again in a state of dependence on the foreign source, and can it be doubted that we should ultimately have to supply ourselves at dearer rates? It is not fair to credit the foreign market with the depression of prices produced there by the influence of our competition. Let the competition be withdrawn, and their prices would instantly rise. On this subject, great mistakes are committed. I have seen most erroneous reasoning in a late report of Mr. Lee, of the free-trade convention in regard to the article of sugar. He calculates the total amount of brown sugar produced in the world, and then states, that what is made in Louisiana is not more than two and a half per centum of that total. Although his data may be questioned, let us assume their truth, and what might be the result? Price being determined by the proportions of supply and demand, it is evident that when the supply exceeds the demand, the price will fall. And the fall is not always regulated by the amount of that excess. If the market at a given price, required five or fifty millions of hogsheads of sugar, a surplus of only a few hundred might materially influence the price, and diffuse itself throughoutthe whole mass. Add, therefore, the eighty or one hundred thousand hogsheads of Louisiana sugar to the entire mass produced in other parts of the world, and it cannot be doubted that a material reduction of the price of the article, throughout Europe and America, would take place. The Louisiana sugar substituting foreign sugar in the home market, to the amount of its annual produce, would force an equal amount of foreign sugar into other markets, which being glutted, the price would necessarily decline, and this decline of price would press portions of the foreign sugar into competition in the United States with Louisiana sugar, the price of which would also be brought down. The fact has been in exact conformity with this theory. But now let us suppose the Louisiana sugar to be entirely withdrawn from the general consumption, what then would happen? A new demand would be created in America for foreign sugar, to the extent of the eighty or one hundred thousand hogsheads made in Louisiana; a less amount by that quantity, would be sent to the European markets, and the price would consequently every where rise. It is not, therefore, those who, by keeping on duties, keep down prices, that tax the people, but those who, by repealing duties, would raise prices, that really impose burdens upon the people.

But it is argued, that if, by the skill, experience, and perfection, which we have acquired in certain branches of manufacture, they can be made as cheap as similar articles abroad, and enter fairly into competition with them, why not repeal the duties as to those articles? And why should we? Assuming the truth of the supposition, the foreign article would not be introduced in the regular course of trade, but would remain excluded by the possession of the home market, which the domestic article had obtained. The repeal, therefore, would have no legitimate effect. But might not the foreign article be imported in vast quantities, to glut our markets, break down our establishments, and ultimately to enable the foreigner to monopolize the supply of our consumption? America is the greatest foreign market for European manufactures. It is that to which European attention is constantly directed. If a great house becomes bankrupt there, its store-houses are emptied, and the goods are shipped to America, where, in consequence of our auctions, and our custom-house credits, the greatest facilities are afforded in the sale of them. Combinations among manufacturers might take place, or even the operations of foreign governments might be directed to the destruction of our establishments. A repeal, therefore, of one protecting duty, from some one or all of these causes, would be followed by flooding the country with the foreign fabric, surcharging the market, reducing the price, and a complete prostration of our manufactories; after which the foreigner would leisurely look about to indemnify himself in the increased prices which he would be enabled to command by hismonopoly of the supply of our consumption. What American citizen, after the government had displayed this vascillating policy, would be again tempted to place the smallest confidence in the public faith, and adventure once more in this branch of industry?