134. The younger a nation is the more important trade is to it (cf. §§ [127] ff.). The younger a nation is the more it wins by trade, for it offers food and raw materials which are objects of greatest necessity to old nations. The things England buys of us are far more essential to her than what she buys of France or Germany. The strong party in an exchange is not the rich party, or the old party, but the one who is favored by supply and demand—the one who brings to the exchange the thing which is more rare and more eagerly wanted.[24] If a poor woman went into Stewart’s store to buy a yard of calico, she did not have to pay more because Stewart was rich. She paid less because he used his capital to serve her better and at less price than anybody else could. England takes 60 per cent of all our exports. We sell, first, wheat and provisions, prime articles of food; second, cotton, the most important raw material now used by mankind; third, tobacco, the most universal luxury and the one for which there is the intensest demand; fourth, petroleum, the lighting material in most universal use. These are things which are rare and of high demand. We are, therefore, strong in the market. Protection only robs us of part of our advantage (§ [116]).
(Q) That we Need Protection to Get Ready for War.
135. We have no army, or navy, or fortifications worth mentioning. We are wasting more by protective taxes in a year than would be necessary to build a first-class navy and fortify our whole seacoast. It is said that, in some way, the taxes get us ready for war, and yet in fact we are not ready for war. It is plain that this argument is only a pretense put forward to try to cover the real motives of protection. If we prefer to go without army, navy, and fortifications, as we now do, then the best way to get ready for war, consistently with that policy, is to get as rich as we can. Then we can count on buying anything in the world which anybody else has got and which we need. Protection, then, which lessens our wealth, is only diminishing our power for war.
(R) That Protectionism Produces some Great Moral Advantages.
136. It is a very suspicious thing when a man who sets out to discuss an economic question shifts over on the “moral” ground. Not because economics and morals have nothing to do with each other. On the contrary, they meet at a common boundary line, and, when both are sound, straight and consistent lines run from one into the other. Capital is the first requisite of all human effort for goods of any kind, and the increase of capital is therefore the expansion of chances that intellectual, moral, and spiritual good may be won. The moral question is: How will the chances be used? If, then, the economic analysis shows that protective taxes lessen capital, it follows that those taxes lessen the regular chances for all higher good.
137. It is argued that hardship disciplines a man and is good for him; hence, that the free traders, who want people to do what is easiest, would corrupt them, and that protectionists, by “making work,” bring in salutary discipline for the people. This is the effect upon those who pay the taxes. The counter-operation on the beneficiaries of the system I have never seen developed. Bastiat said that the model at which the protectionist was aiming was Sisyphus, who was condemned in Hades to roll a stone to the top of a hill, from which, as soon as he got it there, it rolled down again to the bottom. Then he rolled it up again, and so on to all eternity. Here then was infinity of effort, zero of result; the ultimate type to which the protectionist system would come. Somebody pitied Sisyphus, to whom he replied: “Thou fool! I enjoy everlasting hope!” If Sisyphus could extract moral consolation from his case, I am not prepared to deny but that a New England farmer, ground between the upper millstone of free competition, in his production, with the Mississippi Valley, and the nether millstone of protective taxes on all his consumption, may derive some moral consolation from his case. There are a great many people who are apparently ready to inflict salutary chastisement on the American citizen for his welfare—and their own advantage.
138. The protectionist doctrine is that if my earnings are taken from me and given to my neighbor, and he spends them on himself, there will be important moral gains to the community which will be lost if I keep my own earnings, and spend them on myself. The facts of experience are all to the contrary. When a man keeps his own earnings he is frugal, temperate, prudent, and honest. When he gets and lives on another man’s earnings, he is extravagant, wasteful, luxurious, idle, and covetous. The effects on the community in either case correspond.
139. The truth is that protectionism demoralizes and miseducates a people (§§ [89], [153], [155]). It deprives them of individual self-reliance and energy, and teaches them to seek crafty and unjust advantages. It breaks down the skill of great merchants and captains of industry, and develops the skill of lobbyists. It gives faith in monopoly, combinations, jobbery, and restriction, instead of giving faith in energy, free enterprise, public purity, and freedom. Illustrations of this occur all the time. Objection has been made to the introduction of machines to stop the smoke nuisance because they would interfere in the competition of anthracite and bituminous coal. People have resisted the execution of ordinances against gambling houses because said houses “make trade” for their neighbors. The theater men recently made an attempt to get regulations adopted against skating rinks—purely on moral grounds. The industries of the country all run to the form of combinations.[25] Our wisdom is developed, not in the great art of production, but in the tactics of managing a combination, and while we sustain all the causes and all the great principles of this system of business we denounce “monopoly” and “corporations.”
(S) That a “Worker may Gain More by Having his Industry Protected than he will Lose by Having to Pay Dearly for what he Consumes. A System which Raises Prices all round—like that in the United States at present—is Oppressive to Consumers, but is Most Disadvantageous to those who Consume without Producing anything, and Does Little, if Any, Injury to those who Produce More than they Consume.”
140. This is an English contribution to the subject dropped in passing by a writer on economic history.[26] It is a noteworthy fact that the “historical economists” and others who deride political economy as a science do not desist from it, but at once set to work to make very bad political economy of the “abstract” or “deductive” sort. The passage quoted involves three or four fallacies already noticed, and an assumption of the truth of protectionism as a philosophy. As we have abundantly established, “workers” gain nothing by protection in their production (§ [48]). Also, “a system which raises prices all around” must either lessen the demand and requirement for money, i.e., restrict business and the supply of goods (§ [112]), or it must increase the amount of money. In the former case it could not but injure “workers”; in the latter case we should find ourselves dealing with a greenback fallacy. But passing by that, who are they who consume more than they produce? I can think only of (1) princes, pensioners, sinecurists, protected persons, and paupers, who draw support from taxes, and (2) swindlers, confidence men, and others who live by their wits on the produce of others. Those under (1), if they receive fixed money grants or subsidies, find an advance in price most disadvantageous. So the protected, of course, as consumers of others’ products, when they spend what they have received by protection, suffer. Who are they who produce more than they consume? I can think only of (1) taxpayers, and (2) victims of fraud and of those economic errors which give one man’s earnings to another’s use. Rise in price is just as advantageous to this class as it was disadvantageous to the other, on the same hypothesis, viz., if they pay fixed money taxes to the parasites, and can sell their products for more money. Evidently the writer did not understand correctly what his two classes consisted of, and he put the protected “workers” in the wrong one. If in industry a person should produce more than he consumes, he could give it away, or it would decay on his hands. If he should consume more than he produced, he would run in debt and become bankrupt.[27] Protection has nothing to do with that.