PROTECTIONISM EXAMINED ON ITS OWN GROUNDS
20. It is the peculiar irony in all empirical devices in social science
that they not only fail of the effect expected of them, but that
they produce the exact opposite. Paper money is expected to help the
non-capitalist and the debtor and to make business brisk. It ruins the
non-capitalists and the debtors, and reduces industry and commerce
to a standstill. Socialistic devices are expected to bring about
equality and universal happiness. They produce despotism, favoritism,
inequality, and universal misery. The devices are, in their operation,
true to themselves. They act just as an unprejudiced examination of
them should have led any one to expect that they would act, or just as
a limited experience has shown that they must act. If protectionism
is only another case of the same kind, an examination of it on its
own grounds must bring out the fact that it will issue in crippling
industry, diminishing capital, and lowering the average of comfort. Let
us see.
(_A_) ASSUMPTIONS IN PROTECTIONISM.
21. Obviously the doctrine includes two assumptions. The first is,
that if we are left to ourselves, each to choose, under liberty, his
line of industrial effort, and to use his labor and capital, under
the circumstances of the country, as best he can, we shall fail of
our highest prosperity. Secondly, that, if Congress will only tax us
(properly) we can be led up to higher prosperity. Hence it is at once
evident that free trade and protection here are not on a level. No free
trader will affirm that he has a device for making the country rich, or
saving it from hard times, any more than a respectable physician will
tell us that he can give us specifics and preventives to keep us well.
On the contrary, so long as men live they will do foolish things, and
they will have to bear the penalty; but if they are free, they will
commit only the follies which are their own, and they will bear the
penalties only of those. The protectionist begins with the premise that
we shall make mistakes, and that is why he, who knows how to make us go
right, proposes to take us in hand. He is like the doctor who can give
us just the pill we need to “cleanse our blood” and “ward off chills.”
_Hence either prosperity in a free-trade country, or distress in a
protectionist country, is fatal to protectionism_, while distress in
a free-trade country, or prosperity in a protectionist country proves
nothing against free trade. Hence the fallacy of all Mr. R. P. Porter’s
letters is obvious. (§§ 52, 92, 102, 154.)
22. The device by which we are to be made better than ourselves is to
select some of ourselves, who certainly are not the best business men
among ourselves, to go to Washington, and there turn around and tax
ourselves blindly, or, if not blindly, craftily and selfishly. Surely
this would be the triumph of stupidity and ignorance over intelligent
knowledge, enterprise and energy. The motive which would control each
of us, if we were free, would be the hope of the greatest gain. We
should have to put industry, prudence, economy, and enterprise into
our business. If we failed, it would be through error. How is the
congressional interference to act? How is it to meet and correct our
error? It can appeal to no other motive than desire for profit, and can
only offer us a profit where there was none before, if we will turn out
of the industry which we have selected, into one which we do not know.
It offers a greater profit there only by means of what it takes from
somebody else and somewhere else. Or, is congressional interference to
correct the errors of John, James and William, and to make the idle,
industrious, and the extravagant prudent? Any one who believes it must
believe that the welfare of mankind is not dependent on the reason and
conscience of the interested persons themselves, but on the caprices of
blundering ignorance, embodied in a selected few, or on the trickery of
lobbyists, acting impersonally and at a distance.
(_B_) NECESSARY CONDITIONS OF SUCCESSFUL PROTECTIVE LEGISLATION.
23. Suppose, however, that it were true that Congress had the power
(by some exercise of the taxing function) to influence favorably the
industrial development of the country: is it not true that men of sense
would demand to be satisfied on three points, as follows?
24. (_a_) If Congress can do this thing, and is going to try it,
_ought it not, in order to succeed, to have a distinct idea of what
it is aiming at and proposes to do_? Who would have confidence in any
man who should set out on an enterprise and who did not satisfy this
condition? Has Congress ever satisfied it? Never. They have never had
any plan or purpose in their tariff legislation. Congress has simply
laid itself open to be acted upon by the interested parties, and the
product of its tariff legislation has been simply the resultant of
the struggles of the interested cliques with each other, and of the
log-rolling combinations which they have been forced to make among
themselves. In 1882 Congress did pay some deference, real or pretended,
to the plain fact that it was bound, if it exercised this mighty
power and responsibility, to bring some intelligence to bear on it,
and it appointed a Tariff Commission which spent several months in
collecting evidence. This Commission was composed, with one exception,
of protectionists. It recommended a reduction of twenty-five per cent
in the tariff, and said: “Early in its deliberations the Commission
became convinced that a substantial reduction of tariff duties is
demanded, not by a mere indiscriminate popular clamor, but by the best
conservative opinion of the country.” “Excessive duties are positively
injurious to the interests which they are supposed to benefit. They
encourage the investment of capital in manufacturing enterprises by
rash and unskilled speculators, to be followed by disaster to the
adventurers and their employees, and a plethora of commodities which
deranges the operations of skilled and prudent enterprise.” (§ 111.)
This report was entirely thrown aside, and Congress, ignoring it
entirely, began again in exactly the old way. The Act of 1883 was not
even framed by or in Congress. It was carried out into the dark, into a
conference committee,[3] where new and gross abuses were put into the
bill under cover of a pretended revision and reduction. When a tariff
bill is before Congress, the first draft starts with a certain rate on
a certain article, say twenty per cent. It is raised by amendment to
fifty, the article is taken into a combination and the rate put up to
eighty per cent; the bill is sent to the other house, and the rate on
this article cut down again to forty per cent; on conference between
the two houses the rate is fixed at sixty per cent. He who believes in
the protectionist doctrine must, if he looks on at that proceeding,
believe that the prosperity of the country is being kicked around the
floor of Congress, at the mercy of the chances which are at last to
determine with what per cent of tax these articles will come out. And
what is it that determines with what tax any given article will come
out? Any intelligent knowledge of industry? Not a word of it. Nothing
in the case of a given tax on a given article, but just this: “Who is
behind it?” The history of tariff legislation by the Congress of the
United States throws a light upon the protective doctrine which is
partly grotesque and partly revolting.
25. (_b_) If Congress can exert the supposed beneficent influence on
industry, _ought not Congress to understand the force which it proposes
to use_? Ought it not to have some rules of protective legislation so
as to know in what cases, within what limits, under what conditions,
the device can be effectively used? Would that not be a reasonable
demand to make of any man who should propose a device for any purpose?
Congress has never had any knowledge of the way in which the taxes
which it passed were to do this beneficent work. It has never had,
and has never seemed to think that it needed to get, any knowledge of
the mode of operation of protective taxes. It passes taxes, as big as
the conflicting interests will allow, and goes home, satisfied that
it has saved the country. What a pity that philosophers, economists,
sages, and moralists should have spent so much time in elucidating the
conditions and laws of human prosperity! Taxes can do it all.
26. (_c_) If Congress can do what is affirmed and is going to try
it, is it not the part of common sense to demand that _some tests
be applied to the experiment after a few years to see whether it is
really doing as was expected_? In the campaign of 1880 it was said
that if Hancock was elected we should have free trade, wages would
fall, factories would be closed, etc. Hancock was not elected, we did
not get any reform of the tariff, and yet in 1884 wages were falling,
factories were closed, and all the other direful consequences which
were threatened had come to pass. _Bradstreet’s_ made investigations in
the winter of 1884–1885 which showed that 316,000 workmen, thirteen per
cent of the number employed in manufacturing in 1880, were out of work,
17,550 on strike, and that wages had fallen since 1882 from ten to
forty per cent, especially in the leading lines of manufacturing which
are protected. What did these calamities all prove then? If we had had
any revision of the tariff, should we not have had these things alleged
again and again as results of it? Did they not, then, in the actual
case, prove the folly of protection? Oh, no! that would be attacking
the sacred dogma, and the sacred dogma is a matter of faith, so that,
as it never had any foundation in fact or evidence, it has just as much
after the experiment has failed as before the experiment was made.
27. If, now, it were possible to devise a scheme of legislation which
should, according to protectionist ideas, be just the right jacket of
taxation to fit this country to-day, _how long would it fit_? Not a
week. Here are certain millions of people on three and a half million
square miles of land. Every day new lines of communication are opened,
new discoveries made, new inventions produced, new processes applied,
and the consequence is that the industrial system is in constant
flux and change. How, if a correct system of protective taxes was a
practicable thing at any given moment, could Congress keep up with
the changes and readaptations which would be required? The notion is
preposterous, and it is a monstrous thing, even on the protectionist
hypothesis, that we are living under a protective system which was set
up in 1864. The weekly tariff decisions by the treasury department may
be regarded as the constant attempts that are required to fit that
old system to present circumstances, and, as it is not possible that
new fabrics, new compounds, and new processes should find a place in
schedules which were made twenty years before they were invented, those
decisions carry with them the fate of scores of new industries which
figure in no census, and are taken into account by no congressman.
Therefore, even if we believed that the protective doctrine was sound
and that some protective system was beneficial, and that the one which
we have was the right one when it was made, we should be driven to the
conclusion that one which is twenty years old is sure to be injurious
to-day.
28. There is nothing then in the legislative machinery by which the
tariff is to be made which is calculated to win the confidence of a
man of sense, but everything to the contrary; and the experiments
of such legislation which have been made have produced nothing but
warnings against the device. Instead of offering any reasonable ground
for belief that our errors will be corrected and our productive powers
increased, an examination of the tariff as a piece of legislation
offers to us nothing but a burden, which must cripple any economic
power which we have.
(_C_) EXAMINATION OF THE MEANS PROPOSED, _viz._, TAXES.
29. Every tax is a burden, and in the nature of the case can be
nothing else. In mathematical language, every tax is a quantity
affected by a minus sign. If it gets peace and security, that is, if
it represses crime and injustice and prevents discord, which would be
economically destructive, then it is a smaller minus quantity than
the one which would otherwise be there, and that is the gain by good
government. Hence, like every other outlay which we make, taxes must
be controlled by the law of economy--to get the best and most possible
for the least expenditure. Instead of regarding public expenditure
carelessly, we should watch it jealously. Instead of looking at
taxation as conceivably a good, and certainly not an ill, we should
regard every tax as on the defensive, and every cent of tax as needing
justification. If the statesman exacts any more than is necessary to
pay for good government economically administered, he is incompetent,
and fails in his duty. I have been studying political economy almost
exclusively for the last fifteen years, and when I look back over
that period and ask myself what is the most marked effect which I
can perceive on my own opinion, or on my standpoint, as to social
questions, I find that it is this: I am convinced that nobody yet
understands the multiplied and complicated effects which are produced
by taxation. I am under the most profound impression of the mischief
which is done by taxation, reaching, as it does, to every dinner-table
and to every fireside. _The effects of taxation vary with every change
in the industrial system and the industrial status_, and they are so
complicated that it is impossible to follow, analyze, and systematize
them; but out of the study of the subject there arises this firm
conviction: taxation is crippling, shortening, reducing all the time,
over and over again.
30. Suppose that a man has an income of one thousand dollars, of which
he has been saving one hundred dollars per annum with no tax. Now a tax
of ten dollars is demanded of him, no matter what kind of a tax or how
laid. Is he to get the tax out of the nine hundred dollars expenditure
or out of the one hundred dollars savings? If the former, then he must
cut down his diet, or his clothing, or his house accommodation, that
is, lower his standard of comfort. If the latter, then he must lessen
his accumulation of capital, that is, his provision for the future.
Either way his welfare is reduced and cannot be otherwise affected,
and, through the general effect, the welfare of the community is
reduced by the tax. Of course it is immaterial that he may not know the
facts. The effects are the same. In this view of the matter it is plain
what mischief is done by taxes which are laid to buy parks, libraries,
and all sorts of grand things. The tax-layer is not providing public
order. He is spending other people’s earnings for them. He is deciding
that his neighbor shall have less clothes and more library or park.
But when we come to protective taxes the abuse is monstrous. The
legislator who has in his hands this power of taxation uses it to
say that one citizen shall have less clothes in order that he may
contribute to the profits of another citizen’s private business.
31. Hence if we look at the nature of taxation, and if we are examining
protectionism from its own standpoint, under the assumption that it is
true, instead of finding any confirmation of its assumptions, in the
nature of the means which it proposes to use, we find the contrary.
Granting that people make mistakes and fail of the highest prosperity
which they might win when they act freely, we see plainly that more
taxes cannot help to lift them up or to correct their errors; on the
contrary, _all taxation, beyond what is necessary for an economical
administration of good government, is either luxurious or wasteful_,
and if such taxation could tend to wealth, waste would make wealth.
(_D_) EXAMINATION OF THE PLAN OF MUTUAL TAXATION.
32. Suppose then that the industries and sections all begin to tax each
other as we see that they do under protection. Is it not plain that
the taxing operation can do nothing but _transfer_ products, never by
any possibility create them? The object of the protective taxes is to
“effect the diversion of a part of the capital and labor of the country
from the channels in which it would run otherwise.” To do this it must
find a fulcrum or point of reaction, or it can exert no force for the
effect it desires. The fulcrum is furnished by those who pay the tax.
Take a case. Pennsylvania taxes New England on every ton of iron and
coal used in its industries. Ohio taxes New England on all the wool
obtained from that state for its industries.[4] New England taxes
Ohio and Pennsylvania on all the cottons and woolens which it sells to
them. What is the net final result? It is mathematically certain that
the only result can be that (1) New England gets back just all she paid
(in which case the system is nil, save for the expense of the process
and the limitation it imposes on the industry of all), or, (2) that New
England does not get back as much as she paid (in which case she is
tributary to the others), or, (3) that she gets back more than she paid
(in which case she levies tribute on them). Yet, on the protectionist
notion, this system extended to all sections, and embracing all
industries, is the means of producing national prosperity. When it
is all done, what does it amount to except that _all Americans must
support all Americans_? How can they do it better than for each to
support himself to the best of his ability? Then, however, all the
assumptions of protectionism must be abandoned as false.
33. In 1676 King Charles II granted to his natural son, the Duke of
Richmond, a tax of a shilling a chaldron on all the coal which was
exported from the Tyne. We regard such a grant as a shocking abuse
of the taxing power. It is, however, a very interesting case because
the mine owner and the tax owner were two separate persons, and the
tax can be examined in all its separate iniquity. If, as I suppose
was the case, the Tyne Valley possessed such superior facilities for
producing coal that it had a qualified monopoly, the tax fell on the
coal mine owner (landlord); that is, the king transferred to his son
part of the property which belonged to the Tyne coal owners. In that
view the case may come home to some of our protectionists as it would
not if the tax had fallen on the consumers. If Congress had pensioned
General Grant by giving him seventy-five cents a ton on all the coal
mined in the Lehigh Valley, what protests we should have heard from
the owners of coal lands in that district! If the king’s son, however,
had owned the coal mines, and worked them himself, and if the king had
said: “I will authorize you to raise the price of your coal a shilling
a chaldron, and, to enable you to do it, I will myself tax all coal
but yours a shilling a chaldron,” then the device would have been
modern and enlightened and American. We have done just that on emery,
copper, and nickel. Then the tax comes out of the consumer. Then it is
not, according to the protectionist, harmful, but the key to national
prosperity, the thing which corrects the errors of our incompetent
self-will, and leads us up to better organization of our industry than
we, in our unguided stupidity, could have made.
(_E_) EXAMINATION OF THE PROPOSAL TO “CREATE AN INDUSTRY.”
34. The protectionist says, however, that he is going to create
an industry. Let us examine this notion also from his standpoint,
assuming the truth of his doctrine, and see if we can find anything to
deserve confidence. A protective tax, according to the protectionist’s
definition (§ 13), “has for its object to effect the diversion of a
part of the labor and capital of the people ... into channels favored
or created by law.” If we follow out this proposal, we shall see what
those channels are, and shall see whether they are such as to make us
believe that protective taxes can increase wealth.
35. _What is an industry?_ Some people will answer: It is an enterprise
which gives employment. Protectionists seem to hold this view,
and they claim that they “give work” to laborers when they make an
industry. On that notion we live to work; we do not work to live. But
we do not want work. We have too much work. We want a living; and work
is the inevitable but disagreeable price we must pay. Hence we want
as much living at as little price as possible. We shall see that the
protectionist does “make work” in the sense of lessening the living
and increasing the price. But if we want a living we want capital.
If an industry is to pay wages, it must be backed up by capital.
Therefore protective taxes, if they were to increase the means of
living, would need to increase capital. How can taxes increase capital?
Protective taxes only take from A to give to B. Therefore, if B by
this arrangement can extend his industry and “give more employment,”
A’s power to do the same is diminished in at least an equal degree.
Therefore, even on that erroneous definition of an industry, there is
no hope for the protectionist.
36. _An industry is an organization of labor and capital for satisfying
some need of the community._ It is not an end in itself. It is not a
good thing to have in itself. It is not a toy or an ornament. If we
could satisfy our needs without it we should be better off, not worse
off. How, then, can we create industries?
37. If any one will find, in the soil of a district, some new power to
supply human needs, he can endow that district with a new industry. If
he will invent a mode of treating some natural deposit, ore or clay,
for instance, so as to provide a tool or utensil which is cheaper and
more convenient than what is in use, he can create an industry. If he
will find out some new and better way to raise cattle or vegetables,
which is, perhaps, favored by the climate, he can do the same. If he
invents some new treatment of wool, or cotton, or silk, or leather, or
makes a new combination which produces a more convenient or attractive
fabric, he may do the same. The telephone is a new industry. What
measures the gain of it? Is it the “employment” of certain persons in
and about telephone offices? The gain is in the satisfaction of the
need of communication between people at less cost of time and labor. It
is useless to multiply instances. It can be seen what it is to “create
an industry.” It takes brains and energy to do it. How can taxes do it?
38. Suppose that we create an industry even in this sense--_What is the
gain of it?_ The people of Connecticut are now earning their living by
employing their labor and capital in certain parts of the industrial
organization. They have changed their “industries” a great many times.
If it should be found that they had a new and better chance hitherto
undeveloped, they might all go into it. To do that they must abandon
what they are now doing. They would not change unless gains to be made
in the new industry were greater. Hence the gain is the _difference_
only between the profits of the old and the profits of the new. The
protectionists, however, when they talk about “creating an industry,”
seem to suppose that the total profit of the industry (and some of
them seem to think that the total expenditure of capital) measures
their good work. In any case, then, even of a true and legitimate
increase of industrial power and opportunity, the only gain would be a
margin. But, by our definition, “a protective duty has for its object
to effect the diversion of a part of the capital and labor of the
people out of the channels in which it would otherwise run.” Plainly
this device involves coercion. People would need no coercion to go
into a new industry which had a natural origin in new industrial power
or opportunity. No coercion is necessary to make men buy dollars at
ninety-eight cents apiece. The case for coercion is when it is desired
to make them buy dollars at one hundred and one cents apiece. Here
the statesman with his taxing power is needed, and can do something.
What? He can say: “If you will buy a dollar at one hundred and one
cents, I can and will tax John over there two cents for your benefit;
one to make up your loss and the other to give you a profit.” Hence,
_on the protectionist’s own doctrine_, his device is not needed, and
cannot come into use, when a new industry is created in the true and
only reasonable sense of the words, but _only when and because he
is determined to drive the labor and capital of the country into a
disadvantageous and wasteful employment_.
39. Still further, it is obvious that the protectionist, instead of
“creating a new industry,” has _simply taken one industry and set it
as a parasite to live upon another_. Industry is its own reward. A
man is not to be paid a premium by his neighbors for earning his own
living. A factory, an insane asylum, a school, a church, a poorhouse,
and a prison cannot be put in the same economic category. We know that
the community must be taxed to support insane asylums, poorhouses, and
jails. When we come upon such institutions we see them with regret.
They are wasting capital. We know that the industrious people all
about, who are laboring and producing, must part with a portion of
their earnings to supply the waste and loss of these institutions.
Hence _the bigger they are the sadder they are_.
40. As for the schools and churches, we know that society must pay for
and keep up its own conservative institutions. They cost capital and
do not pay back capital directly, although they do indirectly, and in
the course of time, in ways which we could trace out and verify if that
were our subject. Here, then, we have a second class of institutions.
41. But the factories and farms and foundries are the productive
institutions which must provide the support of these consuming
institutions. If the factories, etc., put themselves on a line with
the poorhouses, or even with the schools, what is to support them and
all the rest too? They have nothing behind them. If in any measure or
way they turn into burdens and objects of care and protection, they
can plainly do it only by part of them turning upon the other part,
and this latter part will have to bear the burden of all the consuming
institutions, _including the consuming industries_. For a protected
factory is not a producing industry. _It is a consuming industry!_ If a
factory is (as the protectionist alleges) a triumph of the tariff, that
is, if it would not be but for the tariff (and otherwise he has nothing
to do with it), then it is not producing; it is consuming. It is a
burden to be borne. _The bigger it is the sadder it is._
42. If a protectionist shows me a woolen mill and challenges me to
deny that it is a great and valuable industry, I ask him whether it is
due to the tariff. If he says “no,” then I will assume that it is an
independent and profitable establishment, but in that case it is out of
this discussion as much as a farm or a doctor’s practice. If he says
“yes,” then I answer that the mill is not an industry at all. We pay
sixty per cent tax on cloth _simply in order that that mill may be_.
It is not an institution for getting us cloth, for if we went into the
market with the same products which we take there now and if there
were no woolen mill, we should get all the cloth we want. The mill is
simply _an institution for making cloth cost per yard sixty per cent
more of our products than it otherwise would_. That is the one and only
function which the mill has added, by its existence, to the situation.
I have called such a factory a “nuisance.” The word has been objected
to. The word is of no consequence. He who, when he goes into a debate,
begins to whine and cry as soon as the blows get sharp, should learn
to keep out. What I meant was this: A nuisance is something which by
its existence and presence in society works loss and damage to the
society--works against the general interest, not for it. A factory
which gets in the way and hinders us from attaining the comforts which
we are all trying to get--which makes harder the terms of acquisition
when we are all the time struggling by our arts and sciences to make
those terms easier--is a harmful thing, and noxious to the common
interest.
43. Hence, once more, starting from the protectionist’s hypothesis, and
assuming his own doctrine, we find that he cannot create an industry.
He only fixes one industry as a parasite upon another, and just as
certainly as he has intervened in the matter at all, just so certainly
has he forced labor and capital into less favorable employment than
they would have sought if he had let them alone. When we ask which
“channels” those are which are to be “favored or created by law,”
we find that they are, by the hypothesis, and by the whole logic of
the protectionist system, _the industries which do not pay_. The
protectionists propose to make the country rich by laws which shall
favor or create these industries, but these industries can only waste
capital, so that if they are the source of wealth, _waste is the source
of wealth_. Hence the protectionist’s assumption that by his system
he could correct our errors and lead us to greater prosperity than we
would have obtained under liberty, has failed again, and we find that
he wastes what power we do possess.
(_F_) EXAMINATION OF THE PROPOSAL TO DEVELOP OUR NATURAL RESOURCES.
44. “But,” says the protectionist, “do you mean to say that, if we have
an iron deposit in our soil, it is not wise for us to open and work
it?” “You mean, no doubt,” I reply, “open and work it _under protective
help and stimulus_; for, if there is an iron deposit, the United States
does not own it. Some man owns it. If he wants to open and work it,
we have nothing to do but wish him God-speed.” “Very well,” he says,
“understand it that he needs protection.” Let us examine this case,
then, and still we will do it assuming the truth of the protectionist
doctrine. Let us see where we shall come out.
The man who has discovered iron (on the protectionist doctrine), when
there is no tax, does not collect tools and laborers and go to work. He
goes to Washington. He visits the statesman, and a dialogue takes place.
Iron man.--“Mr. Statesman, I have found an iron deposit on my farm.”
Statesman.--“Have you, indeed? That is good news. Our country is richer
by one new natural resource than we have supposed.”
Iron man.--“Yes, and I now want to begin mining iron.”
Statesman.--“Very well, go on. We shall be glad to hear that you are
prospering and getting rich.”
Iron man.--“Yes, of course. But I am now earning my living by tilling
the surface of the ground, and I am afraid that I cannot make as much
at mining as at farming.”
Statesman.--“That is indeed another matter. Look into that carefully
and do not leave a better industry for a worse.”
Iron man.--“But I want to mine that iron. It does not seem right to
leave it in the ground when we are importing iron all the time, but
I cannot see as good profits in it at the present price for imported
iron as I am making out of what I raise on the surface. I thought that
perhaps you would put a tax on all the imported iron so that I could
get more for mine. Then I could see my way to give up farming and go to
mining.”
Statesman.--“You do not think what you ask. That would be authorizing
you to tax your neighbors, and would be throwing on them the risk of
working your mine, which you are afraid to take yourself.”
Iron man (aside).--“I have not talked the right dialect to this man.
I must begin all over again. (Aloud.) Mr. Statesman, the natural
resources of this continent ought to be developed. American industry
must be protected. The American laborer must not be forced to compete
with the pauper labor of Europe.”
Statesman.--“Now I understand you. Now you talk business. Why did you
not say so before? How much tax do you want?”
The next time that a buyer of pig iron goes to market to get some, he
finds that it costs thirty bushels of wheat per ton instead of twenty.
“What has happened to pig iron?” says he.
“Oh! haven’t you heard?” is the reply. “A new mine has been found down
in Pennsylvania. We have got a new ‘natural resource.’”
“I haven’t got a new ‘natural resource,’” says he. “It is as bad for me
as if the grasshoppers had eaten up one-third of my crop.”
45. That is just exactly the significance of a new resource on the
protectionist doctrine. We had the misfortune to find emery here.
At once a tax was put on it which made it cost more wheat, cotton,
tobacco, petroleum, or personal services per pound than ever before. A
new calamity befell us when we found the richest copper mines in the
world in our territory. From that time on it cost us five (now four)
cents a pound more than before. By another catastrophe we found a
nickel mine--thirty cents (now fifteen) a pound tax! Up to this time we
have had all the tin that we wanted above ground, because beneficent
nature has refrained from putting any underground in our territory. In
the metal schedule, where the metals which we unfortunately possess are
taxed from forty to sixty per cent, tin alone is free. Every little
while a report is started that tin has been found. Hitherto these
reports have happily all proved false. It is now said that tin has been
found in West Virginia and Dakotah. We have reason devoutly to hope
that this may prove false, for, if it should prove true, no doubt the
next thing will be forty per cent tax on tin. The mine-owners say that
they want to exploit the mine. They do not. They want to make the mine
an excuse to exploit the taxpayers.
46. Therefore, when the protectionist asks whether we ought not by
protective taxes to force the development of our own iron mines, the
answer is that, on his own doctrine, he has developed a new philosophy,
hitherto unknown, by which “natural resources” become national
calamities, and the more a country is endowed by nature the worse off
it is. Of course, if the wise philosophy is not simply to use, with
energy and prudence, all the natural opportunities which we possess,
but to seek “channels favored or created by law,” then this view of
natural resources is perfectly consistent with that philosophy, for it
is simply saying over again that _waste is the key of wealth_.
(_G_) EXAMINATION OF THE PROPOSAL TO RAISE WAGES.
47. “But,” he says again, “we want to raise wages and favor the poor
working man.” “Do you mean to say,” I reply, “that protective taxes
raise wages--that that is their regular and constant effect?” “Yes,”
he replies, “that is just what they do, and that is why we favor them.
We are the poor man’s friends. You free-traders want to reduce him to
the level of the pauper laborers of Europe.” “But here, in the evidence
offered at the last tariff discussion in Congress, the employers all
said that they wanted the taxes to protect them _because_ they had to
pay such high wages.” “Well, so they do.” “Well then, if they get the
taxes raised to help them out when they have high wages to pay, how
are the taxes going to help them any unless the taxes _lower_ wages?
But you just said that taxes raise wages. Therefore, if the employer
gets the taxes raised, he will no sooner get home from Washington than
he will find that the very taxes which he has just secured have raised
wages. Then he must go back to Washington to get the taxes raised to
offset that advance, and when he gets home again he will find that he
has only raised wages more, and so on forever. You are trying to teach
the man to raise himself by his boot straps. Two of your propositions
brought together eat each other.”
48. We will, however, pursue the protectionist doctrine of wages a
little further. It is totally false that protective taxes raise wages.
As I will show further on (§ 91 and following), protective taxes lower
wages. Now, however, I am assuming the protectionist’s own premises and
doctrines all the time. He says that his system raises wages. Let us
go to see some of the wages class and get some evidence on this point.
We will take three wage-workers, a boot man, a hat man, and a cloth
man. First we ask the boot man, “Do you win anything by this tariff?”
“Yes,” he says, “I understand that I do.” “How?” “Well, the way they
explain it to me is that when anybody wants boots he goes to my boss,
pays him more on account of the tax, and my boss gives me part of it.”
“All right! Then your comrades here, the hat man and the cloth man, pay
this tax in which you share?” “Yes, I suppose so. I never thought of
that before. I supposed that rich people paid the taxes, but I suppose
that when they buy boots they must do it too.” “And when you want a
hat you go and pay the tax on hats, part of which (as you explain
the system) goes to your friend the hat man; and when you want cloth
you pay the tax which goes to benefit your friend the cloth man?” “I
suppose that it must be so.” We go, then, to see the hat man and have
the same conversation with him, and we go to see the cloth man and
have the same conversation with him. Each of them then gets two taxes
and pays two taxes. Three men illustrate the whole case. If we should
take a thousand men in a thousand industries we should find that each
paid nine hundred and ninety-nine taxes, and each got nine hundred and
ninety-nine taxes, if the system worked as it is said to work. What is
the upshot of the whole? Either they all come out even on their taxes
paid and received, or _some of the wage receivers are winning something
out of other wage receivers to the net detriment of the whole class_.
If each man is creditor for nine hundred and ninety-nine taxes, and
each debtor for nine hundred and ninety-nine taxes, and if the system
is “universal and equal,” we can save trouble by each drawing nine
hundred and ninety-nine orders on the creditors to pay to themselves
their own taxes, and we can set up a clearing house to wipe off all the
accounts. Then we come down to this as the net result of the system
when it is “universal and equal,” that _each man as a consumer pays
taxes to himself as a producer_. That is what is to make us all rich.
We can accomplish it just as well and far more easily, when we get up
in the morning, by transferring our cash from one pocket to the other.
49. One point, however, and the most important of all, remains to be
noticed. How about the thousandth tax? How is it when the boot man
wants boots, and the hat man hats, and the cloth man cloth? He has to
go to the store on the street and buy of his own boss, at the market
price (tax on), the very things which he made himself in the shop. He
then pays the tax to his own employer, and the employer, according to
the doctrine, “shares” it with him. Where is the offset to that part
which the employer keeps? There is none. The wages class, even on the
protectionist explanation, may give or take from each other, but to
their own employers they give and take not. At election time the boss
calls them in and tells them that they must vote for protection or he
must shut up the shop, and that they ought to vote for protection,
because it makes their wages high. If, then, they believe in the
system, just as it is taught to them, they must believe that it causes
him to pay them big wages, out of which they pay back to him big taxes,
out of which he pays them a fraction back again, and that, but for this
arrangement, the business could not go on at all. A little reflection
shows that this just brings up the question for a wage-earner: _How
much can I afford to pay my boss for hiring me?_ or, again, which is
just the same thing in other words: _What is the net reduction of my
wages, below the market rate under freedom, which results from this
system?_ (See § 65.)
50. Let it not be forgotten that this result is reached by accepting
protectionism and reasoning forward from its doctrines and according
to its principles. In truth, the employees get no share in any taxes
which the boss gets out of them and others (see § 91 ff. for the truth
about wages). Of course, when this or any other subject is thoroughly
analyzed, it makes no difference where we begin or what line we follow,
we shall always reach the same result if the result is correct. If
we accept the protectionist’s own explanation of the way in which
protection raises wages we find that it proves that protection lowers
wages.
(_H_) EXAMINATION OF THE PROPOSAL TO PREVENT COMPETITION BY FOREIGN
PAUPER LABOR.
51. The protectionist says that he does not want the American laborer
to compete with the foreign “pauper laborer” (see § 99). He assumes,
that if the foreign laborer is a woolen operative, the only American
who may have to compete with him is a woolen operative here. His
device for saving our operatives from the assumed competition is to
tax the American cotton or wheat grower on the cloth he wears, to make
up and offset to the woolen operative the disadvantage under which he
labors. If then, the case were true as the protectionist states it,
and if his remedy were correct, he would, when he had finished his
operation, simply have allowed the American woolen operative to escape,
by transferring to the American cotton or wheat grower the evil results
of competition with “foreign pauper labor.”
(_I_) EXAMINATION OF THE PROPOSAL TO RAISE THE STANDARD OF PUBLIC
COMFORT.
52. But the protectionist reiterates that he wants to make our
people well off, and to diffuse general prosperity, and he says that
his system does this. He says that the country has prospered under
protection and on account of it. He brings from the census the figures
for increased wealth of the country, and, to speak of no minor errors,
draws an inference that we have prospered _more than we should have
done under free trade_, which is what he has to prove, without noticing
that the second term of the comparison is absent and unattainable. In
the same manner I once heard a man argue from statistics, who showed by
the _small_ loss of a city by fire that its fire department cost too
much. I asked him if he had any statistics of the fires which we should
have had but for the fire department (see § 102).
53. The people of the United States have inherited an untouched
continent. The now living generation is practicing bonanza farming
on prairie soil which has never borne a crop. The population is only
fifteen to the square mile. The population of England and Wales is four
hundred and forty-six to the square mile; that of the British Islands
two hundred and ninety; that of Belgium four hundred and eighty-one;
of France one hundred and eighty; of Germany two hundred and sixteen.
Bateman[5] estimates that in the better part of England or Wales a
peasant proprietor would need from four and a half to six acres, and,
in the worse part, from nine to forty-five acres on which to support “a
healthy family.” The soil of England and Wales, equally divided between
the families there, would give only seven acres apiece. The land of the
United States, equally divided between the families there, would give
two hundred and fifteen acres apiece. These old nations give us the
other term of the comparison by which we measure our prosperity. They
have a dense population on a soil which has been used for thousands of
years; we have an extremely sparse population on a virgin soil. We have
an excellent climate, mountains full of coal and ore, natural highways
on the rivers and lakes, and a coast indented with sounds, bays, and
some of the best harbors in the world. We have also a population
of good national character, especially as regards the economic and
industrial virtues. The sciences and arts are highly cultivated among
us, and our institutions are the best for the development of economic
strength. As compared with old nations we are prosperous. Now comes the
protectionist statesman and says: “The things which you have enumerated
are not the causes of our comparative prosperity. Those things are all
vain. Our prosperity is not due to them. I made it with my taxes.”
54. (_a_) In the first place the fact is that we surpass most in
prosperity those nations which are most like us in their tax systems,
and those compared with whom our prosperity is least remarkable
are those which have by free trade offset as much as possible the
disadvantage of age and dense population. Since, then, we find greatest
difference in prosperity with least difference in tax, and least
difference in prosperity with greatest difference in tax, we cannot
regard tax as a cause of prosperity, but as an obstacle to prosperity
which must have been overcome by some stronger cause. That such is the
case lies plainly on the face of the facts. The prosperity which we
enjoy is the prosperity which God and nature have given us _minus what
the legislator has taken from it_.
55. (_b_) We prospered with slavery just as we have prospered with
protection. The argument that the former was a cause would be just as
strong as the argument that the lattes is a cause.
56. (_c_) The protectionists take to themselves as a credit all the
advance in the arts of the last twenty-five years, because they have
not entirely offset it and destroyed it.
57. (_d_) The protectionists claim that they have increased our wealth.
All the wealth that is produced must be produced by labor and capital
applied to land. The people have wrought and produced. The tax gatherer
has only subtracted something. Whether he used what he took well or
ill, he subtracted. He could not do anything else. Therefore, whatever
wealth we see about us, and whatever wealth appears in the census is
what the people have produced, _less_ what the tax gatherer has taken
out of it.
58. (_e_) If the members of Congress can establish for themselves some
ideal of the grade of comfort which the average American citizen ought
to enjoy, and then just get it for him, they have used their power
hitherto in a very beggarly manner. For, although the average status
of our people is high when compared with that of other people on the
globe, nevertheless, when compared with any standard of ideal comfort,
it leaves much to be desired. If Congress has the power supposed, they
surely ought not to measure the exercise of it by only making us better
off than Europeans.
59. (_f_) During the late presidential campaign the protectionist
orators assured the people that they meant to make everybody well off,
that they wished our people to be prosperous, contented, etc. I wish
so too. I wish that all my readers may be millionaires. I freely and
sincerely confer on them all the bounty of my good wishes. They will
not find a cent more in their pockets on that account. The congressmen
have no power to bless my readers which I have not, save one; that is,
the power to tax them.
60. (_g_) If the congressmen are determined to elevate the comfort
of the population by taxing the population, then every new ship load
of immigrants must be regarded as a new body of persons whom we must
“elevate” by the taxes we have to pay. It is said that an Irishman
affirmed that a dollar in America would not buy more than a shilling
in Ireland. He was asked why then he did not stay in Ireland. He
replied that it was because he could not get the shilling there. That
is a good story, only it stops just where it ought to begin. The next
question is: How does he get the dollar when he comes to America? The
protectionist wants us to suppose that he gets it by grace of the
tariff. If so he gets it out of those who were here before he came. But
plainly no such thing is true. He gets it by earning it, and he adds
two dollars to the wealth of the country while earning it. The only
thing the tariff does in regard to it is to lower the purchasing power
of the dollar, if it is spent for products of manufacture, to seventy
cents.
61. Here, again, then, we find that protective taxes, if they do
just what the protectionist says that they will do, produce the very
opposite effects from those which he says they will produce. They
lessen wealth, reduce prosperity, diminish average comfort, and lower
the standard of living. (See § 30.)