(E) That it is an Object to Diversify Industry, and that Nations which have Various Industries are Stronger than Others which have not Various Industries.
116. It is not an object to diversify industry, but to multiply and diversify our satisfactions, comforts, and enjoyments. If we can do this by unifying our industry, in greater measure than by diversifying it, then we should do, and we will do, the former. It is not a question to be decided a priori, but depends upon economic circumstances. If a country has a supremacy in some one industry it will have only one. California and Australia had only one industry until the gold mines declined in productiveness, that is, until their supreme advantage over other countries was diminished: they began to diversify when they began to be less well off. The oil region of Pennsylvania has a chance of three industries, the old farming industry, coal, and oil. It will have only one industry so long as oil gives chances superior to those enjoyed by any other similar district. When it loses its unique advantage by nature it will diversify. The “strongest” nation is the one which brings products into the world’s market which are of high demand, but which cost it little toil and sacrifice to get; for it will then have command of all the good things which men can get on earth at little effort to itself. Whether the products which it offers are one or numerous is immaterial. All the tariff has to do with it is that when the American comes into the world’s market with wheat, cotton, tobacco, and petroleum, all objects of high demand by mankind and little cost to him, it forces him to forego a part of his due advantage (§§ [125], [134]).
(F) That Manufactures Give Value to Land.
117. This doctrine issued from the Agricultural Bureau. It has been thought a grand development of the protectionist argument. It is a simple logical fallacy based on some misconstrued statistics. The value of land depends on supply and demand. The demand for land is population. Hence where the population is dense the value of land is great. Manufactures can be carried on only where there is a supply of labor, that is, where the population is dense. Hence high value of land and manufacturing industry are common results of dense population. The statistician of the Agricultural Bureau connected them with each other as cause and effect, and the New York Tribune said that it was the grandest contribution to political economy since “the fingers of Horace Greeley stiffened in death”; which was true.
118. If manufactures spring up spontaneously out of original strength, and by independent development, of course they “add value to land,” that is to say, the district has new industrial power and every interest in it is benefited; but if the manufactures have to be protected, paid for, and supported, they do not do any good as manufactures but only as a device for drawing capital from elsewhere, as tribute. In this way, protective taxes do alter the comparative value of land in different districts. This effect can be seen under some astonishing phases in Connecticut and other manufacturing states. The farmers are taxed to hire some people to go and live in manufacturing villages and carry on manufacturing there. This displacement of population, brought about at the expense of the rural population, diminishes the value of agricultural land and raises that of city land right here within the same state. The hillside population is being impoverished, and the hillside farms are being abandoned on account of the tribute levied on them to swell the value of mill sites and adjoining land in the manufacturing towns (§§ [120], [137]).
(G) That the Farmer, if he Pays Taxes to Bring into Existence a Factory, which would not otherwise Exist, will Win more than the Taxes by Selling Farm Produce to the Artisans.
119. This is an arithmetical fallacy. It proposes to get three pints out of a quart. The farmer is out for the tax and the farm produce and he can not get back more than the tax because, if the factory owes its existence to the protective taxes, it cannot make any profit outside of the taxes. The proposition to the farmer is that he shall pay taxes to another man who will bring part of the tax back to buy produce with it. This is to make the farmer rich. The man who owned stock in a railroad and who rode on it, paying his fare, in the hope of swelling his own dividends, was wise compared with a farmer who believes that protection can be a source of gain to him.
120. Since, as I have shown (§ [101]), protective taxes act like a reduction in the fertility of the soil, they lower the “margin of cultivation,” and raise rent. They do not, however, raise it in favor of the agricultural land owner, for, by the displacement just described, they take away from him to give to the town land owner. Of course, I do not believe that the protective taxes have really lowered the margin of cultivation in this country, for they have not been able to offset the greater richness of the newest land, and the advance in the arts. What protection costs us comes out of the exuberant bounty of nature to us. Still I know of very few who could not stand it to be a great deal better off than they are, and the New England farmer is the one who has the least chance, and the fewest advantages, with which to endure protection.
(H) That Farmers Gain by Protection, because it Draws so many Laborers out of Competition with them.
121. Since the farmers pay the taxes by which this operation is supposed to be produced, a simple question is raised, viz., how much can one afford to pay to buy off competition in his business? He cannot afford to pay anything unless he has a monopoly which he wants to consolidate. Our farmers are completely open to competition on every side. The immigration of farmers every three or four years exceeds all the workers in all the protected trades. Hence the farmers, if they take the view which is recommended to them, instead of gaining any ground, are face to face with a task which gets bigger and bigger the longer they work at it. If one man should support another in order to get rid of the latter’s competition as a producer, that would be the case where the taxpayer supports soldiers, idle pensioners, paupers, etc. A protected manufacturer, however, by the hypothesis, is not simply supported in idleness, but he is carrying on a business the losses of which must be paid by those who buy off his competition in their own production. On the other hand, when farmers come to market, they are in free competition with several other sources of supply. Hence, if they did any good to agricultural industry by hiring the artisans to go out of competition with them, they would have to share the gain with all their competitors the world over while paying all the expense of it themselves.