to regulate commerce. As soon as the Constitution came to be put into
operation, the manner and objects of the regulation of commerce by
Congress became a public question. Many other considerations were
complicated with it. It was necessary for the United States to obtain
a revenue, and this could most easily be done by a tariff of duties on
imports. It was necessary for the Federalist majority to consider the
party interests both in the agricultural States, which would object
to protective duties, and in the States which demanded them. But the
highest consideration in the mind of Hamilton and the most influential
leaders of the party seems to have been the maintenance of the
Union. The repulsive force of the States toward one another was still
sufficiently strong to be an element of constant and recognized danger
to the Union. One method of overcoming it, as a part of the whole
Hamiltonian policy, was to foster the growth of manufactures as an
interest entirely independent of State lines and dependent on the
national government, which would throw its whole influence for the
maintenance of the Union. This feeling runs through the speeches even of
Madison, who prefaced his remarks by a declaration in favor of "a trade
as free as the policy of nations would allow." Protection, therefore,
began in the United States as an instrument of national unity, without
regard to national profit; and the argument in its favor would have been
quite as strong as ever to the mind of a legislator who accepted every
deduction as to the economic disadvantages of protection. Arguments for
its economic advantages are not wanting; but they have no such form and
consistency as those of subsequent periods. The result of the discussion
was the tariff act of July 4, 1789, whose preamble stated one of its
objects to be "the encouragement and protection of manufactures." Its
average duty, however, was but about 8.5 per cent. It was followed by
other acts, each increasing the rate of general duties, until, at the
outbreak of the War of 1812, the general rate was about 21 per cent. The
war added about 6 per cent, to this rate.
Growth toward democracy very commonly brings a curious bias toward
protection, contrasted with the fundamental free-trade argument that a
protective system and a system of slave labor have identical bases. The
bias toward a pronounced protective system in the United States makes
its appearance with the rise of democracy; and, after the War of 1812,
is complicated with party interests. New England was still the citadel
of Federalism. The war and its blockade had fostered manufactures in New
England; and the manufacturing interest, looking to the Democratic
party for protection, was a possible force to sap the foundations of the
citadel. Dallas, of Pennsylvania, Secretary of the Treasury, prepared,
and Calhoun carried through Congress, the tariff of 1816. It introduced
several protective features, the "minimum" feature, by which the
imported article was assumed to have cost at least a certain amount in
calculating duties, and positive protection for cottons and woollens.
The duties paid under this tariff were about 30 per cent. on all
imports, or 33 per cent. on dutiable goods. In 1824 and 1828, under the
lead of Clay, tariffs were adopted which made the tariff of duties still
higher and more systematically protective; they touched high-water
mark in 1830, being 40 per cent. on all imports, or 48.8 per cent. on
dutiable goods. The influence of nullification in forcing through the
compromise tariff of 1833, with its regular decrease of duties for ten
years, has been stated in the first volume.
Under the workings of the compromise tariff there was a steady decrease
in the rate on all imports, but not in the rate on dutiable goods, the
comparison being 22 per cent. on total to 32 per cent. on dutiable for
1833, and 16 per cent. on total to 32 per cent. on dutiable for 1841.
The conjunction of the increase in non-dutiable imports and the approach
of free trade, with general financial distress, gave the Whigs
success in the elections of 1840; and in 1841 they set about reviving
protection. Unluckily for them, their chosen President, Harrison, was
dead, and his successor, Tyler, a Democrat by nature, taken up for
political reasons by the Whigs, was deaf to Whig eloquence on the
subject of the tariff. After an unsuccessful effort to secure a
high tariff and a distribution of the surplus among the States, the
semi-protective tariff of 1842 became law. Its result for the next four
years was that the rate on dutiable goods was altered very little, while
the rate on total imports rose from 16 per cent. to 26 per cent. The
return of the Democrats to power was marked by the passage of the
revenue tariff of 1846, which lasted, with a slight further reduction
of duties in 1857, until 1861. Under its operation the rates steadily
decreased until, in 1861, they were 18.14 per cent, on dutiable goods,
and 11.79 per cent. on total imports.
The platform of the Republican party in the election of 1856 made no
declaration for or against free trade or protection. The results of the
election showed that the electoral votes of Pennsylvania and Illinois
would have been sufficient to give the party a victory in 1856. Both
party policy and a natural regard to its strong Whig membership dictated
a return to the protective feature of the Whig policy. In March,
1860, Mr. Morrill introduced a protective tariff bill in the House of
Representatives, and it passed that body; and, in June, the Republican
National Convention adopted, as one of its resolutions, a declaration
in favor of a protective system. The Democratic Senate postponed the
Morrill bill until the following session. When it came up again
for consideration, in February, 1861, conditions had changed very
considerably. Seven States had seceded, taking off fourteen Senators
opposed to the bill; and it was passed. It was signed by President
Buchanan, March 2, 1861, and went into operation April 1, raising the
rates to about 20 per cent. In August and in December, two other acts
were passed, raising the rates still higher. These were followed by
other increases, which ran the maximum up, in 1868, to 48 per cent. on
dutiable goods, the highest rate from 1860 to date. It may be noted,
however, that the rate of 1830--48.8 per cent. on dutiable goods--still
retains its rank as the highest in our history.
The controlling necessity for ready money, to prevent the over-issue of
bonds and green-backs, undoubtedly gained votes in Congress sufficient
to sustain the policy of protection, as a means of putting the capital
of the country into positions where it could be easily reached by
internal-revenue taxation. This conjunction of internal revenue and
protection proved a mutual support until the payment of the war debt
had gone so far as to provoke the reaction. The Democratic National
Convention of 1876 attacked the tariff system as a masterpiece of
iniquity, but no distinct issue was made between the parties on this
question. In 1880 and 1884, the Republican party was the one to force
the issue of protection or free trade upon its opponent, but its
opponent evaded it.
In 1884, both parties admit the necessity of a reduction in the rates
of duties, if for no other reason, in order to reduce the surplus of
Government receipts over expenditures, which is a constant stimulus
to congressional extravagance. The Republican policy is in general
to retain the principle of protection in the reduction; while the
Democratic policy, so far as it is defined, is to deal as tenderly as
possible with interests which have become vested under a protective
system. What influence will be exerted by the present over-production
and depression in business cannot, of course, be foretold; but the
report of Mr. McCulloch, Secretary of the Treasury, in December, 1884,
indicates an attempt to induce manufacturers to submit to an abandonment
of protection, as a means of securing a decrease in cost of production,
and a consequent foreign market for surplus product.
In taking Clay's speech in 1832 as the representative statement of the
argument for protection, the editor has consulted Professor Thompson,
of the University of Pennsylvania, and has been guided by his advice. On
the other side, the statement of Representative Hurd, in 1881, has been
taken as, on the whole, the best summary of the free-trade argument. In
both cases, the difficulty has been in the necessary exclusion of merely
written arguments.
HENRY CLAY,
OF KENTUCKY. (BORN 1777, DIED 1852.)
ON THE AMERICAN SYSTEM;
IN THE UNITED STATES SENATE, FEBRUARY 2-6, 1832.
THE question which we are now called upon to determine, is not, whether
we shall establish a new and doubtful system of policy, just proposed,
and for the first time presented to our consideration, but whether we
shall break down and destroy a long-established system, carefully and
patiently built up and sanctioned, during a series of years, again and
again, by the nation and its highest and most revered authorities. And
are we not bound deliberately to consider whether we can proceed to this
work of destruction without a violation of the public faith? The people
of the United States have justly supposed that the policy of protecting
their industry against foreign legislation and foreign industry was
fully settled, not by a single act, but by repeated and deliberate acts
of government, performed at distant and frequent intervals. In full
confidence that the policy was firmly and unchangeably fixed, thousands
upon thousands have invested their capital, purchased a vast amount of
real and other estate, made permanent establishments, and accommodated
their industry. Can we expose to utter and irretrievable ruin this
countless multitude, without justly incurring the reproach of violating
the national faith? * * *
When gentlemen have succeeded in their design of an immediate or gradual
destruction of the American system, what is their substitute? Free
trade! The call for free trade is as unavailing, as the cry of a spoiled
child in its nurse's arms, for the moon, or the stars that glitter in
the firmament of heaven. It never has existed, it never will exist.
Trade implies at least two parties. To be free, it should be fair,
equal, and reciprocal. But if we throw our ports wide open to the
admission of foreign productions, free of all duty, what ports of any
other foreign nation shall we find open to the free admission of our
surplus produce? We may break down all barriers to free trade on our
part, but the work will not be complete until foreign powers shall have
removed theirs. There would be freedom on one side, and restrictions,
prohibitions, and exclusions on the other. The bolts and the bars and
the chains of all other nations will remain undisturbed. It is, indeed,
possible, that our industry and commerce would accommodate themselves to
this unequal and unjust state of things; for, such is the flexibility
of our nature, that it bends itself to all circumstances. The wretched
prisoner incarcerated in a jail, after a long time, becomes reconciled
to his solitude, and regularly notches down the passing days of his
confinement.
Gentlemen deceive themselves. It is not free trade that they are
recommending to our acceptance. It is, in effect, the British colonial
system that we are invited to adopt; and, if their policy prevails, it
will lead substantially to the recolonization of these States, under the
commercial dominion of Great Britain. * * *
I dislike this resort to authority, and especially foreign and
interested authority, for the support of principles of public policy. I
would greatly prefer to meet gentlemen upon the broad ground of fact, of
experience, and of reason; but, since they will appeal to British names
and authority, I feel myself compelled to imitate their bad example.
Allow me to quote from the speech of a member of the British Parliament,
bearing the same family name with my Lord Goderich, but whether or not
a relation of his, I do not know. The member alluded to was arguing
against the violation of the treaty of Methuen--that treaty not less
fatal to the interests of Portugal than would be the system of gentlemen
to the best interests of America,--and he went on to say:
"It was idle for us to endeavor to persuade other nations to join with
us in adopting the principles of what was called 'free trade.' Other
nations knew, as well as the noble lord opposite, and those who acted
with him, what we meant by 'free trade' was nothing more nor less than,
by means of the great advantages we enjoyed, to get a monopoly of all
their markets for our manufactures, and to prevent them, one and all,
from ever becoming manufacturing nations. When the system of reciprocity
and free trade had been proposed to a French ambassador, his remark was,
that the plan was excellent in theory, but, to make it fair in practice,
it would be necessary to defer the attempt to put it in execution for
half a century, until France should be on the same footing with Great
Britain, in marine, in manufactures, in capital, and the many other
peculiar advantages which it now enjoyed. The policy that France acted
on was that of encouraging its native manufactures, and it was a wise
policy; because, if it were freely to admit our manufactures, it would
speedily be reduced to the rank of an agricultural nation, and therefore
a poor nation, as all must be that depend exclusively upon agriculture.
America acted, too, upon the same principle with France. America
legislated for futurity--legislated for an increasing population.
America, too, was prospering under this system. In twenty years, America
would be independent of England for manufactures altogether. * * * But
since the peace, France, Germany, America, and all the other countries
of the world, had proceeded upon the principle of encouraging and
protecting native manufacturers." * * *
I regret, Mr. President, that one topic has, I think, unnecessarily been
introduced into this, debate. I allude to the charge brought against the
manufacturing system, as favoring the growth of aristocracy. If it were
true, would gentlemen prefer supporting foreign accumulations of wealth
by that description of industry, rather than in their own country? But
is it correct? The joint-stock companies of the North, as I understand
them, are nothing more than associations, sometimes of hundreds, by
means of which the small earnings of many are brought into a common
stock, and the associates, obtaining corporate privileges, are enabled
to prosecute, under one superintending head, their business to better
advantage. Nothing can be more essentially democratic or better devised
to counterpoise the influence of individual wealth. In Kentucky, almost
every manufactory known to me is in the hands of enterprising and
self-made men, who have acquired whatever wealth they possess by patient
and diligent labor. Comparisons are odious, and but in defence would
not be made by me. But is there more tendency to aristocracy in a
manufactory, supporting hundreds of freemen, or in a cotton plantation,
with its not less numerous slaves, sustaining perhaps only two white
families--that of the master and the overseer?
I pass, with pleasure, from this disagreeable topic, to two general
propositions which cover the entire ground of debate. The first is,
that, under the operation of the American system, the objects which it
protects and fosters are brought to the consumer at cheaper prices than
they commanded prior to its introduction, or, than they would command if
it did not exist. If that be true, ought not the country to be contented
and satisfied with the system, unless the second proposition, which I
mean presently also to consider, is unfounded? And that is, that the
tendency of the system is to sustain, and that it has upheld, the prices
of all our agricultural and other produce, including cotton.
And is the fact not indisputable that all essential objects of
consumption affected by the tariff are cheaper and better since the act
of 1824 than they were for several years prior to that law? I appeal for
its truth to common observation, and to all practical men. I appeal to
the farmer of the country whether he does not purchase on better
terms his iron, salt, brown sugar, cotton goods, and woollens, for his
laboring people? And I ask the cotton-planter if he has not been better
and more cheaply supplied with his cotton-bagging? In regard to this
latter article, the gentleman from South Carolina was mistaken in
supposing that I complained that, under the existing duty, the Kentucky
manufacturer could not compete with the Scotch. The Kentuckian furnishes
a more substantial and a cheaper article, and at a more uniform and
regular price. But it was the frauds, the violations of law, of which I
did complain; not smuggling, in the common sense of that practice, which
has something bold, daring, and enterprising in it, but mean, barefaced
cheating, by fraudulent invoices and false denominations.
I plant myself upon this fact, of cheapness and superiority, as upon
impregnable ground. Gentlemen may tax their ingenuity, and produce a
thousand speculative solutions of the fact, but the fact itself will
remain undisturbed. Let us look into some particulars. The total
consumption of bar-iron in the United States is supposed to be about
146,000 tons, of which 112,866 tons are made within the country, and
the residue imported. The number of men employed in the manufacture is
estimated at 29,254, and the total number of persons subsisted by it at
146,273. The measure of protection extended to this necessary article
was never fully adequate until the passage of the act of 1828; and what
has been the consequence? The annual increase of quantity since that
period has been in a ratio of near twenty-five per centum, and the
wholesale price of bar-iron in the Northern cities was, in 1828,
$105 per ton; in 1829, $100; in 1830, $90; and in 1831, from $85 to
$75--constantly diminishing. We import very little English iron, and
that which we do is very inferior, and only adapted to a few purposes.
In instituting a comparison between that inferior article and our
superior iron, subjects entirely different are compared. They are made
by different processes. The English cannot make iron of equal quality to
ours at a less price than we do. They have three classes, best-best,
and best, and ordinary. It is the latter which is imported. Of the whole
amount imported there is only about 4,000 tons of foreign iron that
pays the high duty, the residue paying only a duty of about thirty per
centum, estimated on the prices of the importation of 1829. Our iron
ore is superior to that of Great Britain, yielding often from sixty to
eighty per centum, while theirs produces only about twenty-five. This
fact is so well known that I have heard of recent exportations of iron
ore to England.
It has been alleged that bar-iron, being a raw material, ought to be
admitted free, or with low duties, for the sake of the manufacturers
themselves. But I take this to be the true principle: that if our
country is producing a raw material of prime necessity, and with
reasonable protection can produce it in sufficient quantity to supply
our wants, that raw material ought to be protected, although it may be
proper to protect the article also out of which it is manufactured.
The tailor will ask protection for himself, but wishes it denied to the
grower of wool and the manufacturer of broadcloth. The cotton-planter
enjoys protection for the raw material, but does not desire it to
be extended to the cotton manufacturer. The ship-builder will ask
protection for navigation, but does not wish it extended to the
essential articles which enter into the construction of his ship. Each
in his proper vocation solicits protection, but would have it denied to
all other interests which are supposed to come into collision with his.
Now, the duty of the statesman is to elevate himself above these petty
conflicts; calmly to survey all the various interests, and deliberately
to proportion the measures of protection to each according to its nature
and the general wants of society. It is quite possible that, in the
degree of protection which has been afforded to the various workers in
iron, there may be some error committed, although I have lately read an
argument of much ability, proving that no injustice has really been done
to them. If there be, it ought to be remedied.
The next article to which I would call the attention of the Senate, is
that of cotton fabrics. The success of our manufacture of coarse cottons
is generally admitted. It is demonstrated by the fact that they meet
the cotton fabrics of other countries in foreign markets, and maintain
a successful competition with them. There has been a gradual increase
of the exports of this article, which is sent to Mexico and the South
American republics, to the Mediterranean, and even to Asia. * * *
I hold in my hand a statement, derived from the most authentic source,
showing that the identical description of cotton cloth, which sold
in 1817 at twenty-nine cents per yard, was sold in 1819 at twenty-one
cents, in 1821 at nine-teen and a half cents, in 1823 at seventeen
cents, in 1825 at fourteen and a half cents, in 1827 at thirteen cents,
in 1829 at nine cents, in 1830 at nine and a half cents, and in 1831
at from ten and a half to eleven. Such is the wonderful effect of
protection, competition, and improvement in skill, combined. The year
1829 was one of some suffering to this branch of industry, probably
owing to the principle of competition being pushed too far. Hence
we observe a small rise of the article of the next two years. The
introduction of calico-printing into the United States, constitutes an
important era in our manufacturing industry. It commenced about the
year 1825, and has since made such astonishing advances, that the whole
quantity now annually printed is but little short of forty millions of
yards--about two thirds of our whole consumption. * * *
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 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 flannels during six years. The average price of them, in
1826, was thirty-eight and three quarter cents; 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 and seventy-five cents. * * *