operation in increasing the price of two or three of the leading
articles protected. Take paper for example. The duty on that commodity
is twenty per cent. ad valorem. Most of the articles which enter
into its manufacture or are required in the process of making it are
increased in price by protection. The result is that the price of paper
to the consumer is increased nearly fifteen per cent.; that is, if the
tariff were taken off paper and the articles used in its manufacture,
paper would be fifteen per cent. cheaper to the buyer. The paper-mills
for five years have produced nearly one hundred millions of dollars'
worth of paper a year. The consumers have been compelled to pay fifteen
millions a year to the manufacturer more than the paper could have
been bought for without the tariff. In five years this has amounted to
$75,000,000, an immense sum paid to protection. It is a tax upon books
and newspapers; it is a tax upon intelligence; it is a premium upon
ignorance. So heavy had the burden of this tax become that every
newspaper man in the district I have the honor to represent has appealed
to Congress to take the duty off. The government has derived little
revenue from the paper duty. It has gone almost entirely to the
manufacturer, who himself has not been benefited as anticipated, as will
presently be seen. These burdens have been imposed to protect the paper
manufacturer against the foreigner, in face of the confident prediction
made by one of the most experienced paper men in the country, that
if all protection were taken off paper and the material used in its
manufacture, the manufacturer would be able to successfully compete with
the foreigner in nearly every desirable market in the world.
Take blankets also for example. The tariff on coarse blankets is nearly
one hundred per cent. ad valorem. They can be bought in most of the
markets of the world for two dollars a pair. Yet our poor, who use the
most of that grade of blankets, are compelled to pay about four
dollars a pair. The government derives little revenue from it, as the
importation of these blankets for years has been trifling. This tax
has been a heavy burden upon the poor during this severe winter, a tax
running into the millions to support protection. Heaven save a country
from a system which begrudges to the shivering poor the blankets to make
them comfortable in the winter and the cold!
Secondly, protection has diminished the income of the laborer from his
wages. The first factor in the ascertainment of the value of wages is
their purchasing power, or how much can be bought with them. If in one
country the wages are five dollars a day and in another only one dollar,
if the laborer can in the one country with the one dollar, purchase more
of the necessary articles required in daily consumption, he, in fact,
is better paid than the former in the other who gets five dollars a day.
Admit for a moment that protection raises the wages of the laborer, it
also raises the price of nearly all the necessaries of life, and what he
makes in wages he more than loses in the increase of prices of what he
is obliged to buy. As already stated, a head of a family who earns $400
per year is compelled to pay $100 more for what he needs, on account of
protection. What difference is it to him whether the $100 are taken out
of his wages before they are paid, or taken from him afterward in the
increased price of articles he cannot get along without? In both cases
he really receives only $300 for his year's labor. The statistics show
that the average increased cost of twelve articles most required in
daily consumption in 1874 over 1860 was ninety-two per cent., while the
average increase of wages of eight artisans, cabinet-makers, coopers,
carpenters, painters, shoemakers, tail-ors, tanners, and tinsmiths, was
only sixty per cent., demonstrating that the purchasing power of labor
had under protection in thirteen years depreciated 19.5 per cent.
But protection has not even raised the nominal wages in most of the
unprotected industries. I find that the wages of the farm hand, the day
laborer, and the ordinary artisan are in most places now no higher than
they were in 1860.
But it is confidently asserted that the wages of laborers in the
protected industries are higher because of protection. Admit it. I have
not the figures for 1880, but in 1870 there were not 500,000 of them;
but of the laborers in other industries there were 12,000,000, exclusive
of those in agriculture, who were 6,000,000 more. Why should the wages
of the half million be increased beyond their natural rate, while
those of the others remain unchanged? More--why should the wages of
the 18,000,000 be diminished that those of the half million may be
increased? For an increase cannot be made in the wage rate of one class
without a proportionate decrease in that of others. But the wages
of labor in protected industries are not permanently increased by
protection. Another very important factor in ascertaining the value
of wages is the continuance or the steadiness of the employment. Two
dollars a day for half the year is no more than a dollar a day for the
whole year. Employment in most protected industries is spasmodic. In the
leading industries for the past ten years employment has not averaged
more than three fourths of the time, and not at very high wages. Within
the last year manufacturers of silk, carpets, nails and many other
articles of iron, of various kinds of glassware and furniture, and coal
producers have shut down their works for a part of the time, or reduced
the hours of labor. Production has been too great. To stop this and
prevent the reduction of profits through increasing competition, the
first thing done is to diminish the production, thus turning employes
out of employment. Wages are diminished or stopped until times are flush
again. With the time estimated in which the laborers are not at work,
the average rate of wages for the ten years preceding 1880 did not equal
the wages in similar industries for the ten years preceding 1860 under a
revenue tariff. Indeed, in many branches the wages have not been so high
as those received by the pauper labor, so-called, in Europe. But it is
manifest that the wages in these industries cannot for any long period
be higher than the average rate in the community, for, if the wages be
higher, labor will crowd into the employments thus favored until the
rate is brought down to the general level. So true is this, that it
is admitted by many protectionists that wages are not higher in the
protected industries than in others.
Thirdly, the effect of protection is disastrous to most of the protected
industries themselves. We have seen that many of them have in recent
years been compelled to diminish production. The cause of this is
manifest. Production confines them to the American market. The high
prices they are compelled to pay for protected materials which enter
into the manufacture of their products disable them from going into the
foreign market. The profits which they make under the first impulse of
protection invite others into the same business. As a result, therefore,
more goods are made than the American market can consume. Prices go down
to some extent through the competition, but rarely under the cost
of production, increased, as we have seen, by the enhanced price of
material required. The losses threatened by such competition are sought
to be averted by the diminution of production. Combinations of those
interested are formed to stop work or reduce it until the stock on hand
has been consumed. Production then begins again and continues until
the same necessity calls again for the same remedy. But this remedy is
arbitrary, capricious, and unsatisfactory. Some will not enter into the
combination at all. Others will secretly violate the agreement from the
beginning. Others still, when their surplus stock has been sold, and
before the general price has risen, will begin to manufacture again.
There is no power to enforce any bargain they have made, and they find
the plan only imperfectly curing the difficulty. They remain uncertain
what to do, embarrassed and doubtful as to the future. They have through
protection violated the natural laws of supply and demand, and human
regulations are powerless to relieve them from the penalty.
Take, as an illustration of the operation of the system, the article of
paper. One of the first effects of the general tariff was to increase
the price of nearly every thing the manufacturer required to make the
paper. Fifteen mil-lions of dollars a year through the protection are
taken from the consumer. The manufacturer himself is able to retain
but a small part of it, as he is obliged to pay to some other protected
industry for its products, they in turn to some others who furnished
them with protected articles for their use, and so on to the end. The
result is that nominal prices are raised all around; the consumers pay
the fifteen millions, while nobody receives any substantial benefit,
because what one makes in the increased price of his product he loses
in the increased price he is obliged to pay for the required products
of others. The consumer is the loser, and though competition may
occasionally reduce prices for him to a reasonable rate, it never to any
appreciable extent compensates him for the losses he sustains through
the enhanced price which the protective system inevitably causes.
It is not to be disputed that many of the protected manufacturers have
grown rich. In very many cases I think it can be demonstrated that their
wealth has resulted from some patent which has given them a monopoly in
particular branches of manufacturing, or from some other advantage which
they have employed exclusively in their business. In such cases they
would have prospered without protection as with it. I think there are
few, except in the very inception of a manufacturing enterprise, or in
abnormal cases growing out of war or destruction of property, or the
combinations of large amounts of capital, where protection alone has
enriched men. The result is the robbery of the consumer with no ultimate
good to most of the protective industries.
At a meeting of the textile manufacturers in Philadelphia the other
day, one of the leading men in that interest said: "The fact is that the
textile manufacturers of Philadelphia, the centre of the American trade,
are fast approaching a crisis, and realize that something must be done,
and that soon. Cotton and woollen mills are fast springing up over the
South and West, and the prospects are that we will soon lose much of
our trade in the coarse fabrics by reason of cheap competition. The
only thing we can do, therefore, is to turn our attention to the higher
plane, and endeavor to make goods equal to those imported. We cannot do
this now, because we have not a sufficient supply either of the culture
which begets designs, or of the skill which manipulates the fibres."
What a commentary this upon protection, which has brought to such
a crisis one of the chief industries protected, and which is here
confessed to have failed, after twenty years, to enable it to compete
even in our own markets with foreign goods of the finer quality! What
is true of textile manufacturing is also true of many other industries.
What remedy, then, will afford the American manufacturer relief? Not
the one here suggested of increasing the manufacture of goods of finer
quality, for, aside from the impracticability of the plan, this will
only aggravate the difficulty by adding to the aggregate stock in the
home market. * * * The American demand cannot consume what they produce.
They must therefore enlarge their market or stop production. To adopt
the latter course is to invite ruin. The market cannot be increased in
this country. It must be found in other countries. Foreign markets must
be sought. But these cannot be opened as long as we close our markets
to their products, with which alone, in most instances, they can buy; in
other words, as long as we continue the protective system.
I say, therefore, to the American manufacturer, sooner or later you
must choose between the alternatives of ruin or the abandonment of
protection. Why hesitate in the decision? Are not Canada and South
America and Mexico your natural markets? England now supplies them with
almost all the foreign goods they buy. Why should not you? Your coal
and iron lie together in the mountain side, and can almost be dropped
without carriage into your furnaces; while in England the miners must
go thousands of feet under the earth for those products. * * * The
situation is yours. Break down your protective barrier. All the world
will soon do the same. Their walls will disappear when ours fall. Open
every market of the world to your products; give steady employment to
your laborers. In a little while you will have the reward which nature
always gives to those who obey her laws, and will escape the ruin
which many of your most intelligent opera-tors see impending over your
industries.
I have not time to-day to more than refer to the ruinous effect of
protection upon our carrying trade. In 1856, seventy-five per cent.
of the total value of our imports and exports was carried in American
vessels; while in 1879 but seventeen per cent. was carried in such
vessels, and in 1880 the proportion was still less. In 1855, 381 ships
and barks were built in the United States, while in 1879 there were
only 37. It is a question of very few years at this rate until American
vessels and the American flag will disappear from the high seas.
Protection has more than all else to do with the prostration of this
trade. It accomplishes this result (1) by enhancing the price of the
materials which enter into the construction of vessels, so that our
ship-builders cannot compete with foreigners engaged in the same
business; (2) by increasing the cost of domestic production so that
American manufactured goods cannot profitably be exported; and (3) by
disabling our merchants from bringing back on their return trips foreign
cargoes in exchange for our products.
Nor will I say any thing as to the increase of the crime of smuggling
under protection, a crime which has done incalculable harm to honest
dealers, particularly on the border, and a crime out of which some of
the largest fortunes in the country have been made.
There are many who will admit the abstract justice of much that I have
said who profess to believe that it will not do to disturb the
tariff now. But for the protectionist that time never comes. When the
depression in business was universal, they said you must not disturb
the tariff now, because the times are so hard and there is so much
suffering. Now, when business has improved, they say you must not
interfere with the tariff, because times are good and you may bring
suffering again. When the present tariff was first levied it was
defended as a temporary expedient only, required as a necessity by war.
Now that a quarter of a century nearly has passed by and peace has
been restored for fifteen years, the advocates for protection are as
determined to hold on to the government bounty as ever. If they are to
be consulted upon the subject as to when the people shall have relief,
the system will be perpetual.
It is said we must not disturb the tariff because we must raise so much
revenue. I do not propose to disturb it to diminish revenue, but to
increase it. The plan I propose will add one fifth at least to the
revenue of the country. It is protection I propose to get rid of, not
revenue. It has been well said that revenue ceases where protection
begins.
It is claimed that by taking away protection you will embarrass many
industries by compelling them to close up and discharge their employees.
I do not believe that the changing of the present tariff to a
revenue tariff will produce this result. I believe that at once every
manufacturer will make more in the diminished cost of production than
he will lose in the taking away of protection. But if there should
be danger to any industry I would provide against it in the law which
changes the tariff so that if there should be any displacement of labor
there will be no loss in consequence.
No more perfect illustration of the effect of free trade has been shown
than in the history of the United States. Very much of our prosperity is
due to the fact that the productions of each State can be sold in every
other State without restriction. During the war the most potent argument
for the cause of the Union was found in the apprehension that disunion
meant restriction of commerce, and particularly the placing of the mouth
of the Mississippi River under foreign control. The war was fought,
therefore, to maintain free trade, and the victory was the triumph of
free trade. The Union every day exhibits the advantages of the system.
Are these due to the accident of a State being a member of that Union
or to the beneficent principle of the system itself? What would prevent
similar results following if, subject only to the necessities of
government, it were extended to Mexico, to Canada, to South America, to
the world? In such extension the United States have everything to gain,
nothing to lose. This country would soon become the supply house of the
world. We will soon have cattle and harvests enough for all nations.
Our cotton is everywhere in demand. It is again king. Its crown has
been restored, and in all the markets of the world it waves its royal
sceptre. Out of our coal and minerals can be manufactured every thing
which human ingenuity can devise. Our gold and silver mines will supply
the greater part of the precious metals for the use of the arts and
trade.
With the opportunity of unrestricted exchange of these products, how
limitless the horizon of our possibilities! Let American adventurousness
and genius be free upon the high seas, to go wherever they please and
bring back whatever they please, and the oceans will swarm with American
sails, and the land will laugh with the plenty within its borders. The
trade of Tyre and Sidon, the far extending commerce of the Venetian
republic, the wealth-producing traffic of the Netherlands, will be as
dreams in contrast with the stupendous reality which American enterprise
will develop in our own generation. Through the humanizing influence of
the trade thus encouraged, I see nations become the friends of nations,
and the causes of war disappear. I see the influence of the great
republic in the amelioration of the condition of the poor and the
oppressed in every land, and in the moderation of the arbitrariness of
power. Upon the wings of free trade will be carried the seeds of free
government, to be scattered everywhere to grow and ripen into harvests
of free peoples in every nation under the sun.
IX.--FINANCE AND CIVIL SERVICE REFORM.
With the election of 1876 and the inauguration of President Hayes, March
4, 1877, the Period of Reconstruction may be said to have closed. The
last formal act of that period was the withdrawal of the national troops
from the South by President Hayes soon after his inauguration. During
the last two decades the "Southern Question," while it has been
occasionally prominent in political discussions,--especially in
connection with the Lodge Federal Elections Bill, 1889-91, has,
nevertheless, occupied a subordinate place in public interest and
attention. As an issue in serious political discussions and party
divisions the question has disappeared.
In addition to the subject of the Tariff, considered in the previous
section, public attention has been directed chiefly, during the last
quarter of a century, to the two great subjects, Finance and Civil
Service Reform.
The Financial question has been like that of the Tariff,--it has
been almost a constant factor in political controversies since the
organization of the Government.
The financial measures of Hamilton were the chief subject of political
controversy under our first administration, and they formed the basis
of division for the first political parties under the Constitution. The
funding of the Revolutionary debt, its payment dollar for dollar
without discrimination between the holders of the public securities,
the assumption of the State debts by the National Government, and
the establishment of the First United States Bank, these measures of
Hamilton were all stoutly combated by his opponents, but they were
all carried to a successful conclusion. It was the discussion on the
establishment of the First United States Bank that brought from Hamilton
and Jefferson their differing constructions of the Constitution. In
his argument to Washington in favor of the Bank, Hamilton presented
his famous theory of implied powers, while Jefferson contended that
the Constitution should be strictly construed, and that the "sweeping
clause"--"words subsidiary to limited powers"--should not be so
construed as to give unlimited powers. Madison and Giles in the House
presented notable arguments in support of the Jeffersonian view. For
twenty years after 1791 our financial questions were chiefly questions
of administration, not of legislation. In 1811 the attempt to recharter
the First United States Bank was defeated in the Senate by the casting
vote of Vice-President Clinton. The financial embarrassments of the
war of 1812, however, led to the establishment, in 1812, of the second
United States Bank,--by a law very similar in its provisions to the act
creating the First Bank in 1791. The bill chartering the Second United
States Bank was signed by Madison, who had strenuously opposed the
charter of the First Bank. The financial difficulties in which the
war had involved his administration had convinced Madison that such an
institution as the Bank was a "necessary and proper" means of carrying
on the fiscal affairs of the Government. The Second Bank was, however,
opposed on constitutional grounds, as the First had been; but in 1819 in
the famous case of McCulloch vs. Maryland, the Supreme Court sustained
its constitutionality, Chief-Justice Marshall rendering the decision.
The Court held, in this notable decision, that the Federal Government
was a government of limited powers, and these powers are not to be
transcended; but wherein a power is specifically conferred Congress
might exercise a sovereign and unlimited discretion as to the means
necessary in carrying that power into operation.
The next important chapter in our financial history is the war upon the
Second United States Bank begun and conducted to a finish by President
Jackson. A bill rechartering the Bank was passed by Congress in 1832,
four years before its charter expired. Jackson vetoed this bill, chiefly
on constitutional grounds, in the face of Marshall's decision of 1819.
The political literature of Jackson's two administrations is full of
the Bank controversy, and this literature contains contributions from
Webster, Clay, Calhoun, Benton, and other of the ablest public men of
the day. No subject of public discussion in that day more completely
absorbed the attention of the people.
On these important subjects, which engaged public attention during the
first half-century of our national history, there may be found many
valuable speeches. These, however, are largely of a Constitutional
character. It has been since the opening of our civil war that
our financial discussions have assumed their greatest interest and
importance. We can attempt here only a meagre outline of the financial
history of the last thirty years,--a history which suggests an almost
continuous financial struggle and debate.
Leaving on one side the questions of taxation and banking, the financial
discussion has presented itself under two aspects,--the issue and
redemption of Government paper currency, and the Government policy
toward silver coinage. The issue, the funding, and the payment of
Government bonds have been incidentally connected with these questions.
The first "legal-tender" Act was approved February 25, 1862. Mr. Blaine
says of this Act that it was "the most momentous financial step ever
taken by Congress," and it was a step concerning which there has ever
since been the most pronounced difference of opinion. The Act provided
for the issue of $150,000,000 non-interest-bearing notes, payable
to bearer, in denominations of not less than $5, and legal tender in
payment of all debts, public and private, except duties on imports and
interest on the public debt. These notes were made exchangeable for 6
per cent. bonds and receivable for loans that might thereafter be made
by the Government. Supplementary acts of July 11, 1862, and January
17, 1863, authorized additional issues of $150,000,000 each, in
denominations of not less than one dollar, and the time in which to
exchange the notes for bonds was limited to July 1, 1863. It was under
these Acts that the legal-tender notes known as "greenbacks," now
outstanding, were issued.