117. This doctrine issued from the Agricultural Bureau. It has been thought a grand development of the protectionist argument. It is a simple logical fallacy based on some misconstrued statistics. The value of land depends on supply and demand. The demand for land is population. Hence where the population is dense the value of land is great. Manufactures can be carried on only where there is a supply of labor, that is, where the population is dense. Hence high value of land and manufacturing industry are common results of dense population. The statistician of the Agricultural Bureau connected them with each other as cause and effect, and the New York Tribune said that it was the grandest contribution to political economy since “the fingers of Horace Greeley stiffened in death”; which was true.
118. If manufactures spring up spontaneously out of original strength, and by independent development, of course they “add value to land,” that is to say, the district has new industrial power and every interest in it is benefited; but if the manufactures have to be protected, paid for, and supported, they do not do any good as manufactures but only as a device for drawing capital from elsewhere, as tribute. In this way, protective taxes do alter the comparative value of land in different districts. This effect can be seen under some astonishing phases in Connecticut and other manufacturing states. The farmers are taxed to hire some people to go and live in manufacturing villages and carry on manufacturing there. This displacement of population, brought about at the expense of the rural population, diminishes the value of agricultural land and raises that of city land right here within the same state. The hillside population is being impoverished, and the hillside farms are being abandoned on account of the tribute levied on them to swell the value of mill sites and adjoining land in the manufacturing towns (§§ 120, 137).
119. This is an arithmetical fallacy. It proposes to get three pints out of a quart. The farmer is out for the tax and the farm produce and he can not get back more than the tax because, if the factory owes its existence to the protective taxes, it cannot make any profit outside of the taxes. The proposition to the farmer is that he shall pay taxes to another man who will bring part of the tax back to buy produce with it. This is to make the farmer rich. The man who owned stock in a railroad and who rode on it, paying his fare, in the hope of swelling his own dividends, was wise compared with a farmer who believes that protection can be a source of gain to him.
120. Since, as I have shown (§ 101), protective taxes act like a reduction in the fertility of the soil, they lower the “margin of cultivation,” and raise rent. They do not, however, raise it in favor of the agricultural land owner, for, by the displacement just described, they take away from him to give to the town land owner. Of course, I do not believe that the protective taxes have really lowered the margin of cultivation in this country, for they have not been able to offset the greater richness of the newest land, and the advance in the arts. What protection costs us comes out of the exuberant bounty of nature to us. Still I know of very few who could not stand it to be a great deal better off than they are, and the New England farmer is the one who has the least chance, and the fewest advantages, with which to endure protection.
121. Since the farmers pay the taxes by which this operation is supposed to be produced, a simple question is raised, viz., how much can one afford to pay to buy off competition in his business? He cannot afford to pay anything unless he has a monopoly which he wants to consolidate. Our farmers are completely open to competition on every side. The immigration of farmers every three or four years exceeds all the workers in all the protected trades. Hence the farmers, if they take the view which is recommended to them, instead of gaining any ground, are face to face with a task which gets bigger and bigger the longer they work at it. If one man should support another in order to get rid of the latter’s competition as a producer, that would be the case where the taxpayer supports soldiers, idle pensioners, paupers, etc. A protected manufacturer, however, by the hypothesis, is not simply supported in idleness, but he is carrying on a business the losses of which must be paid by those who buy off his competition in their own production. On the other hand, when farmers come to market, they are in free competition with several other sources of supply. Hence, if they did any good to agricultural industry by hiring the artisans to go out of competition with them, they would have to share the gain with all their competitors the world over while paying all the expense of it themselves.
122. The movement of men over the earth and the movement of goods over the earth are complementary operations. Passports to stop the men and taxes to stop the goods would be equally legitimate. Since it is, once for all, a fact that some parts of the earth have advantages for one thing and other parts for other things, men avail themselves of the local advantages either by moving themselves to the places, or by trading what they produce where they are for what others produce in the other places. The passenger trains and the freight trains are set in motion by the same ultimate economic fact. Our exports are all bulky and require more tonnage than our imports. On the westward trip, consequently, bunks are erected and men are brought in space where cotton, wheat, etc., were taken out. The tariff, by so much as it lessens the import of goods, leaves room which the ship owners are eager to fill with immigrants. To do this they lower the rates. Hence the tariff is a premium on immigration. The protectionists have claimed that the tariff does favor immigration. But nine-tenths of the immigrants are laborers, domestic servants, and farmers.23 Probably more than one-third of the total number, including women, find their way to the land. As we have seen, the tariff also lowers the profits of agriculture, which discourages immigration and the movement to the land. Therefore, if the farmer believes what the protectionist tells him, he must understand that the taxes he pays bring in more people, and raise the value of land by settling it, and that they also bring more competition, which the farmer must buy off by lowering the profits of his own (the farming) industry. Then, too, so far as the immigrants are artisans, the premium on immigration is a tax paid to increase the supply of labor, that is, to lower wages, although the protectionists say that the tariff raises wages. Hence we see that when a tax is laid, in our modern complicated society, instead of being a simple and easy means or method to be employed for a specific purpose, its action and reaction on transportation, land, wages, etc., will produce erratic, contradictory, and confused effects, which cannot be predicted or analyzed thoroughly, and the protectionist, when he pleads three or four arguments for his system, is alleging three or four features of it which, if properly analyzed and brought together, are found to be mutually destructive, and cumulative only as to the mischief they do (see §§ 29, 101).
123. Those who say this think only of manufacturing establishments as “industries.” They also talk of “our” industries. They mean those we support by the taxes we pay; not those from which we get dividends. No industry will ever be given up except in order to take up a better one, and if, under free trade, any of our industries should perish, it would only be because the removal of restrictions enabled some other industry to offer so much better rewards that labor and capital would seek the latter. It is plain that, if a man does not know of any better way to earn his living than the one in which he is, he must remain in that, or move to some other place. If any one can suppose that the population of the United States could be forced, by free trade, to move away, he must suppose that this country cannot support its population, and that we made a mistake in coming here. This argument is especially full of force if the articles to be produced are coal, iron, wool, copper, timber, or any other primary products of the soil. For, if it is said that we cannot raise these products of the soil in competition with some other part of the earth’s surface, all it proves is that we have come to the wrong spot to seek them. If, however, the soil can support the population under an arrangement by which certain industries support themselves, and those which do not pay besides, then it is plain that the former are really supporting the whole population—part directly and part indirectly, through a circuitous and wasteful organization. Hence the same strong and independent industries could certainly still better support the whole population, if they supported it directly.
124. I have been asked whether we should have had any steel works in this country, if we had had no protection. I reply that I do not know; neither does anybody else, but it is certain that we should have had a great deal more steel, if we had had no protection.
125. “But,” it is said, “we should import everything.” Should we import everything and give nothing? If so, foreigners would make us presents and support us. Should we give equal value in exchange? If so, there would be just as much “industry” and a great deal less “work” in that way of getting things than in making them ourselves. The moment that ceased to be true we should make and not buy. Suppose that a district, A, has two million inhabitants, one million of whom produce a million bushels of wheat, and one million produce a million hundredweight of iron; and suppose that a bushel of wheat exchanges for a hundredweight of iron. Now, by improved transportation and emigration, suppose that a new wheat country, B, is opened, and that its people bring wheat to the first district, offering two bushels for a hundredweight of iron. Plainly they must offer more than one bushel for one hundredweight, or it is useless for them to come. Now the people of A, by putting all their labor and capital in iron production, produce two million hundredweight. They keep one million hundredweight, and exchange one million hundredweight of iron for two million bushels of wheat. The destruction of their wheat industry is a sign of a change in industry (unifying and not diversifying) by which they have gained a million bushels of wheat. Such is the gain of all trade. If the gain did not exist, trade would not be a feature of civilization.
126. This would be only maintaining public workshops at the expense of the taxpayers, and would be open to all the objections which are conclusive against public workshops. The expense would be prodigious, and the return little or nothing. This argument shows less sense of comparative cost and gain than any other which is ever proposed.
127. I will only refer to what I have already said about China and Japan (§ 69) as types of what this plan produces. If a number of families from among us should be shipwrecked on an island, their greatest woe would be that they could not trade with the rest of the world. They might live there “self-contained” and “independent,” fulfilling the ideal of happiness which this proposition offers, but they would look about them to see a surfeit of things which, as they know, their friends at home would like to have, and they would think of all the old comforts which they used to have, and which they could not produce on their island. They might be contented to live on there and make it their home, if they could exchange the former things for the latter. If now a ship should chance that way and discover them and should open communication and trade between them and their old home, a protectionist philosopher would say to them: “You are making a great mistake. You ought to make everything for yourselves. The wise thing to do would be to isolate yourselves again by taxes as soon as possible.” We sent some sages to the Japanese to induct them into the ways of civilization, who, as a matter of fact, did tell them that the first step in civilization was to adopt a protective tariff and shut up again by taxes the very ports which they had just opened.
128. It is said that English manufacturers once combined to lower prices in order to kill out American manufactures, and that they then put up their prices to monopoly rates. If they did this, why did not their other customers send to the United States and buy the goods here in the first instance, and why did not the Americans go and buy the goods of the Englishmen’s other customers in the second instance? If the Englishmen put down their prices for their whole market in the first instance, why did they not incur a great loss? and, if they raised it for their whole market in the second instance, why did they not yield the entire market to their competitors? The Englishmen are said to be wonderfully shrewd, and are here credited with the most stupid and incredible folly.
129. The protective system puts us certainly in the hands of a home monopoly for fear of the impossible chance that we may fall into the hands of a foreign monopoly. Before the war we made no first quality thread. We got it at four cents a spool (retail) of an English monopoly. Under the tariff we were saved from this by being put into the hands of a home monopoly which charged five cents a spool. In the meantime the foreign monopoly lowered thread to three cents a spool (retail) for the Canadians, who were at its mercy. Lest we should have to buy nickel of a foreign monopolist, Congress forced us to buy it of the owner of the only mine in the United States, and added thirty cents a pound to any price the foreigner might ask.
130. That a thing can be true in theory and false in practice is the most utter absurdity that human language can express. For, if a thing is true in practice (protectionism, for instance) the theory of its truth can be found, and that theory will be true. But it was admitted that free trade is true in theory. Hence two things which are contradictory would both be true at the same time about the same thing. The fact is, that protectionism is totally impracticable. It does not work as it is expected to work; it does not produce any of the results which were promised from it; it is never properly and finally established to the satisfaction of its own votaries. They cannot let it alone. They always want to “correct inequalities,” or revise it one way or another. It was they who got up the Tariff Commission of 1882. Their system is not capable of construction so as to furnish a normal and regular status for industry. One of them said that the tariff would be all right if it could only be made stable; another said that it ought to be revised every two years. One said that it ought to include everything; another said that it would be good “if it was only laid on the right things.”
131. If all nations had free trade, no one of them would have any special gain from it, just as, if all men were honest, honesty would have no commercial value. Some say that a man cannot afford to be honest unless everybody is honest. The truth is that, if there was one honest man among a lot of cheats, his character and reputation would reach their maximum value. So the nation which has free trade when the others do not have it gains the most by comparison with them. It gains while they impoverish themselves. If all had free trade all would be better off, but then no one would profit from it more than others. If this were not true, if the man who first sees the truth and first acts wisely did not get a special premium for it, the whole moral order of the universe would have to be altered, for no reform or improvement could be tried until unanimous consent was obtained. If a man or a nation does right, the rewards of doing right are obtained. They are not as great as could be obtained if all did right, but they are greater than those enjoy who still do wrong.
132. It is evidently meant by this that trade involves a struggle or contest of competition. It might, however, as well be said that practicing law is war, because it is contentious; or that practicing medicine is war, because doctors are jealous rivals of each other. The protectionists do, however, always seem to think of trade as commercial war. One of them was reported to have said in a speech, in the late campaign, that nations would not fight any more with guns but with taxes. The nations are to boycott each other. One would think that the experience our Southerners made of that notion in the Civil War, upon which they entered in the faith that “cotton is king,” would have sufficed to banish forever that antique piece of imbecility, a commercial war. If trade is war, all the tariff can do about it is to make A fight B’s battles, although A has his own battles to fight besides.
133. If there is any labor or capital which is idle, that fact is a symptom of industrial disease; especially is this true in the United States. If a laborer is idle he is in danger of starving to death. If capital is idle it is producing nothing to its owner, who depends on it, and is suffering loss. Therefore, if labor or capital is idle, some antecedent error or folly must have produced a stoppage in the industrial organization. The cure is, not to lay some more taxes, but to find the error and correct it. If then things are in their normal and healthy condition, the labor and capital of the country are employed as far as possible under the existing organization. We are constantly trying to improve our exchange and credit systems so as to keep all our capital all the time employed. Such improvements are important and valuable, but to make them cost more thought and skillful labor than to invent machines. Hence Congress cannot do that work by discharging a volley of taxes at selected articles, and leaving those taxes to find out the proper points to affect, and to exert the proper influence. It takes intelligent and hard-working men to do it. The faith that anything else can do it is superstition.
134. The younger a nation is the more important trade is to it (cf. §§ 127 ff.). The younger a nation is the more it wins by trade, for it offers food and raw materials which are objects of greatest necessity to old nations. The things England buys of us are far more essential to her than what she buys of France or Germany. The strong party in an exchange is not the rich party, or the old party, but the one who is favored by supply and demand—the one who brings to the exchange the thing which is more rare and more eagerly wanted.24 If a poor woman went into Stewart’s store to buy a yard of calico, she did not have to pay more because Stewart was rich. She paid less because he used his capital to serve her better and at less price than anybody else could. England takes 60 per cent of all our exports. We sell, first, wheat and provisions, prime articles of food; second, cotton, the most important raw material now used by mankind; third, tobacco, the most universal luxury and the one for which there is the intensest demand; fourth, petroleum, the lighting material in most universal use. These are things which are rare and of high demand. We are, therefore, strong in the market. Protection only robs us of part of our advantage (§ 116).
135. We have no army, or navy, or fortifications worth mentioning. We are wasting more by protective taxes in a year than would be necessary to build a first-class navy and fortify our whole seacoast. It is said that, in some way, the taxes get us ready for war, and yet in fact we are not ready for war. It is plain that this argument is only a pretense put forward to try to cover the real motives of protection. If we prefer to go without army, navy, and fortifications, as we now do, then the best way to get ready for war, consistently with that policy, is to get as rich as we can. Then we can count on buying anything in the world which anybody else has got and which we need. Protection, then, which lessens our wealth, is only diminishing our power for war.
136. It is a very suspicious thing when a man who sets out to discuss an economic question shifts over on the “moral” ground. Not because economics and morals have nothing to do with each other. On the contrary, they meet at a common boundary line, and, when both are sound, straight and consistent lines run from one into the other. Capital is the first requisite of all human effort for goods of any kind, and the increase of capital is therefore the expansion of chances that intellectual, moral, and spiritual good may be won. The moral question is: How will the chances be used? If, then, the economic analysis shows that protective taxes lessen capital, it follows that those taxes lessen the regular chances for all higher good.
137. It is argued that hardship disciplines a man and is good for him; hence, that the free traders, who want people to do what is easiest, would corrupt them, and that protectionists, by “making work,” bring in salutary discipline for the people. This is the effect upon those who pay the taxes. The counter-operation on the beneficiaries of the system I have never seen developed. Bastiat said that the model at which the protectionist was aiming was Sisyphus, who was condemned in Hades to roll a stone to the top of a hill, from which, as soon as he got it there, it rolled down again to the bottom. Then he rolled it up again, and so on to all eternity. Here then was infinity of effort, zero of result; the ultimate type to which the protectionist system would come. Somebody pitied Sisyphus, to whom he replied: “Thou fool! I enjoy everlasting hope!” If Sisyphus could extract moral consolation from his case, I am not prepared to deny but that a New England farmer, ground between the upper millstone of free competition, in his production, with the Mississippi Valley, and the nether millstone of protective taxes on all his consumption, may derive some moral consolation from his case. There are a great many people who are apparently ready to inflict salutary chastisement on the American citizen for his welfare—and their own advantage.
138. The protectionist doctrine is that if my earnings are taken from me and given to my neighbor, and he spends them on himself, there will be important moral gains to the community which will be lost if I keep my own earnings, and spend them on myself. The facts of experience are all to the contrary. When a man keeps his own earnings he is frugal, temperate, prudent, and honest. When he gets and lives on another man’s earnings, he is extravagant, wasteful, luxurious, idle, and covetous. The effects on the community in either case correspond.
139. The truth is that protectionism demoralizes and miseducates a people (§§ 89, 153, 155). It deprives them of individual self-reliance and energy, and teaches them to seek crafty and unjust advantages. It breaks down the skill of great merchants and captains of industry, and develops the skill of lobbyists. It gives faith in monopoly, combinations, jobbery, and restriction, instead of giving faith in energy, free enterprise, public purity, and freedom. Illustrations of this occur all the time. Objection has been made to the introduction of machines to stop the smoke nuisance because they would interfere in the competition of anthracite and bituminous coal. People have resisted the execution of ordinances against gambling houses because said houses “make trade” for their neighbors. The theater men recently made an attempt to get regulations adopted against skating rinks—purely on moral grounds. The industries of the country all run to the form of combinations.25 Our wisdom is developed, not in the great art of production, but in the tactics of managing a combination, and while we sustain all the causes and all the great principles of this system of business we denounce “monopoly” and “corporations.”
140. This is an English contribution to the subject dropped in passing by a writer on economic history.26 It is a noteworthy fact that the “historical economists” and others who deride political economy as a science do not desist from it, but at once set to work to make very bad political economy of the “abstract” or “deductive” sort. The passage quoted involves three or four fallacies already noticed, and an assumption of the truth of protectionism as a philosophy. As we have abundantly established, “workers” gain nothing by protection in their production (§ 48). Also, “a system which raises prices all around” must either lessen the demand and requirement for money, i.e., restrict business and the supply of goods (§ 112), or it must increase the amount of money. In the former case it could not but injure “workers”; in the latter case we should find ourselves dealing with a greenback fallacy. But passing by that, who are they who consume more than they produce? I can think only of (1) princes, pensioners, sinecurists, protected persons, and paupers, who draw support from taxes, and (2) swindlers, confidence men, and others who live by their wits on the produce of others. Those under (1), if they receive fixed money grants or subsidies, find an advance in price most disadvantageous. So the protected, of course, as consumers of others’ products, when they spend what they have received by protection, suffer. Who are they who produce more than they consume? I can think only of (1) taxpayers, and (2) victims of fraud and of those economic errors which give one man’s earnings to another’s use. Rise in price is just as advantageous to this class as it was disadvantageous to the other, on the same hypothesis, viz., if they pay fixed money taxes to the parasites, and can sell their products for more money. Evidently the writer did not understand correctly what his two classes consisted of, and he put the protected “workers” in the wrong one. If in industry a person should produce more than he consumes, he could give it away, or it would decay on his hands. If he should consume more than he produced, he would run in debt and become bankrupt.27 Protection has nothing to do with that.
141. This is Professor Sidgwick’s doctrine.28 It has given great comfort to our protectionists because it is put forward by an Englishman and a Cambridge professor. It is offered under the “art” of political economy. It is a new thing; an a priori art. The “may” in it deprives it of the character of a doctrine or dogma such as our less cultivated protectionists give us—“Protective taxes come out of the foreigner”—but it is not a maxim of art. It has the air of a very astute contrivance (see § 3), and is therefore very captivating to many people, and it is very difficult to dissect and to expose in a simple and popular way. It has therefore given great trouble and done great mischief. It is, however, a complete error. It is not possible in any way or in any degree to use duties so as to make the foreigner pay for protection.
142. Professor Sidgwick states the hypothetical instance which he sets up to prove by illustration that there “may” be such a case, as follows: “Suppose that a five per cent duty is imposed on foreign silks, and that, in consequence, after a certain interval, half the silks consumed are the product of native industry, and that the price of the whole has risen 2½ per cent. It is obvious that, under these circumstances, the other half, which comes from abroad, yields the state five per cent, while the tax levied from the consumers on the whole is only 2½ per cent; so that the nation, in the aggregate, is at this time losing nothing by protection, except the cost of collecting the tax, while a loss equivalent to the whole tax falls on the foreign producer.”
143. It is necessary, in the first place, to complete the hypothesis which is included in this case. Let us assume that the consumption of silk, when all was imported, was 100 yards and that the price was $1 per yard. Then the following points are taken for granted, although not stated in the case as it is put: (1) That the state needs $5 revenue; (2) that it has determined to get this out of the consumers of silk; (3) that the advance in price does not diminish the consumption; (4) that the tax forces a reduction of price for the silk in the whole outside market; (5) that the “silk” in question is the same thing after the tax is laid as before. Of these assumptions, 3, 4, and 5 are totally inadmissible, but, if they be admitted in the first instance, and if the doctrine of the case which is put be deduced, it is this: If the part imported multiplied by the tax is equal to the total consumption multiplied by the advance in price, the consumers can pay the latter in protection, for it is equal to the former, and the former, which is paid to the government by the foreigner, is what the consumers of silk must otherwise have paid.
144. Obviously this deduction is arithmetically incorrect, even on the hypothesis. In the first place, the government has not obtained $5 revenue which it needed, but $2.50 (5 cents on 50 yards). In the second place, the foreigner sells at $1.02½ (net 97½) the silk which he used to sell for $1. He therefore gets back from the consumers 2½ cents per yard on 50 yards, or $1.25 out of the $2.50 which he has paid to the government. Also, the domestic silk to compete must be equal to the dollar imported silk which now sells for $1.02½. Hence, the consumers really pay in protection only 2½ cents on 50 yards, i.e. $1.25. This case, then, is, that the foreigner pays $1.25 revenue, and the consumers pay $1.25 revenue and $1.25 protection. Hence the result is not at all what is asserted, and there is no such operation of the contrivance as was expected. But the government needs $2.50 more revenue, the operation of its tax having been interfered with by protection. As there is no equivalence or compensation in the case as it already stands, it is evident that the effect of any further tax, instead of bringing about equivalence or compensation, will be to depart from such a result still further.
145. It is, however, impossible to admit assumptions 3, 4, and 5 above, or to deal with any economic problem by any arithmetical process. The result above reached is totally incorrect and only serves to clear the ground for a correct analysis. The producer may have to bear part of a tax, if he is under the tax jurisdiction, or if he has a monopoly. If he has no monopoly, and is not under the tax jurisdiction, and works for the world’s market, he cannot lower his price in order to assume part of the tax. What he does is that he differentiates his commodity. This is the fact in the art of production which is established by abundant experience. It is the explanation of the constant complaint, under the protective system, of “fraud” and of the constant demand for subclassification in the tariff schedules. The protected product never is, at least at first, as good in quality as the imported article which it aims to supersede. Hence the foreigner, if he desires to retain the protected market, can prepare a special quality for that market. The “silk” after the tax is laid is not the same silk as before. It nets to the foreign producer 97½ cents, and pays him business profits at that price. Therefore when he sells it at $1.02½ he gets back the whole tax from the consumers. The domestic silk sold at $1.02½ is no better than might have been obtained for 97½ cents. Hence the consumers are paying a tax for protection which is full and equal to the revenue rate. The fact that the price has fallen to $1.02½, and is not $1.05, evidently proves that instead of disproving it, as many believe.
146. Thus this case falls to pieces. It gains a momentary plausibility from the erroneous assumptions which are implicit in it. The foreign producer may suffer a narrowing of his market and a reduction of his aggregate profits, but there is no way to make him tributary (unless he has a monopoly) either to the treasury or the protected interests of the taxing country.29 If it was true in general, or in any limited number of cases, that a country which lays protective taxes can make foreigners pay those taxes, then England, which has had no protective taxes since (say) 1850, and has been surrounded by countries which have had more or less protective taxes, must have been paying tribute to them all this time and must have been steadily impoverished accordingly.
147. I have now examined protectionism impartially on its own grounds, assuming them to be true, and adversely from ground taken against it, and have reviewed a series of the commonest arguments put forward in its favor. If now we return, with all the light we have obtained, to test the assumptions which we found in protectionism, that the people would not organize their industry wisely under liberty, and that protective taxes are the correct device for bringing about a better organization, we find that those two assumptions are totally false and have no semblance of claim upon our confidence. At every step the dogmas of protectionism, its claims, its apparatus, have proved fallacious, absurd, and impracticable. We can now group together some general criticisms of protectionism which our investigation suggests.
148. We have taken the protectionist’s own definition of a protective duty, and have found that such a duty, instead of increasing national wealth, must, at every step, and by every incident of its operation, waste labor and capital, lower the efficiency of the national industry, weaken the country in trade, and consequently lower the standard of comfort of the whole population. We have found that protected industries, according to the statement of the protectionists, do not produce, but consume. If then these industries are the ones which make us rich, consumption is production and destruction produces. The object of a protective duty is “to effect the diversion of a part of the capital and labor of the people out of the channels in which it would run otherwise, into channels favored or created by law” (§ 13). We have seen that the channels into which the labor and capital of the people are to be diverted are offered by the industries which do not pay. Hence protectionism is found to mean that national prosperity is to be produced by forcing labor and capital into employments where the capital cannot be reproduced with the same increase which could be won by it elsewhere. If that is so, then capital in those employments will be wasted, and the final outcome of our investigation, which must be made the primary maxim of the art of national prosperity under protectionism, is that Waste makes Wealth. Such is its outcome when regarded as an economic philosophy.
149. As regards the social and jural relations which are established between citizen and citizen, protectionism is proved by a half-dozen independent analyses of it to be simply a device for forcing us to levy tribute on each other. If the law brings a cent to A it must have taken it from B, or else it must have produced it out of nothing, that is, it must be magic. Every soul pays protective taxes. If, then, anybody gets anything from them, he needs to remember what they cost him, and he should insist on casting up both sides of the account. If anybody gets nothing from them, then he pays the taxes and gets no equivalent.
150. During the anti-corn-law campaign in England, a writer in the Westminster Review illustrated protectionism by the story of the monkeys in a cage, each of whom received for his dinner a piece of bread. Each monkey dropped his own piece of bread and grabbed his neighbor’s. The consequence was that soon the floor of the cage was strewn with fragments, and each monkey had to make the best dinner he could from these. It is a good and fair illustration. I saw a story recently in a protectionist newspaper about the peasants in the Soudan. Each owns pigeons, and at evening, when the pigeons come home, each tries to entice as many of his neighbors’ pigeons as he can into his own pigeon house. “All of them do the same thing, and therefore each gets caught in his turn. They know this perfectly well, but no Egyptian fellah could resist the temptation of cheating his neighbor.” They ought to tax each other’s pigeons all around. Then they would put themselves at once on the level of free and enlightened Americans. The protectionist assures me that it is for the good of the community and for my good that he should tax me. I reply that, in his language, “these are fine theories,” but that whether it is good for the community or not, and whether it is good for me or not, that he should tax me, I can see that it is for his good that he should tax me. Then he says: “Now you are abusive.”
151. If protectionism is anything else than mutual tribute, then it is magic. The whole philosophy of it comes down to questions like this: How much can I afford to pay a man for hiring me? How much can I afford to pay a man for trading with me? How much can I afford to pay a man to cease to compete with me in my production? How much can I afford to pay a man to go and compete with those who supply me my consumption? It is only an expensive way to get what we could get for nothing if it was worth having (§ 89). It is admitted that one man cannot lift himself by his boot straps. Suppose that a thousand men stand in a ring and each takes hold of the other’s boot straps reciprocally and they all lift, can the whole group lift itself as a group? That is what protection comes to just as soon as we have drawn out into light the other side, the cost side of it. Whatever we win on one side, we must pay for by at least equal cost on another. The losses will all be distributed as net pure injury to the community. The harm of protection lies here. It is not measured by the tax. It is measured by the total crippling of the national industry. We might as well say that it would be a good thing to put snags in the rivers, to fell trees across the roads, to dull all our tools, as to say that unnecessary taxation could work a blessing. Men have argued that to destroy machines was to do a beneficial thing, and I have recently read an article in a Boston paper, quoting a Massachusetts man who thinks that what we need is another war in the United States. Such men may believe that protective taxes work a blessing, but to those who will see the truth, it is plain that, when the whole effect of the protective system is distributed, it benefits nobody. It is a dead weight and loss upon everybody, and those who think that they win by it would be far better off in a community where no such system existed, but where each man earned what he could and kept what he earned.
152. There is a school of political science in this country in whose deed of foundation it is provided that the professors shall teach how “by suitable tariff legislation, a nation may keep its productive industry alive, cheapen the cost of commodities, and oblige foreigners to sell to it at low prices, while contributing largely toward defraying the expenses of the government.”30 Is not that a fine thing? Those professors ought to likewise provide us a panacea, the philosopher’s stone, a formula for squaring the circle, and all the other desiderata of universal happiness. It would be only a trifle for them. The only fear is that they may write the secret which they are to teach in books, and that other nations to whom we are “foreigners,” may learn it. Then while Englishmen, Frenchmen, and Germans work for us at low prices and pay our taxes, we shall be forced to work for them at low prices and pay their taxes, and the old somber misery will settle down upon the world again the same as ever.
153. Some years ago we were told that protection was necessary because we had a big debt to pay. Well, we have paid the debt until we have reduced it from $78.25 per head to $28.41 per head. We, the people, have also raised our credit until the annual debt charge has been reduced from $4.29 per head to 95 cents per head. Now it is necessary to keep up the debt in order to keep up the taxes, and protectionism is now most efficient in forcing wasteful and corrupting expenditures to get rid of revenue, lest a surplus should furnish an argument for reducing taxation. This is right on the doctrine that waste makes wealth.
154. They tell us that protection has produced prosperity, and when we ask them to account for hard times in spite of the tariff, they say that hard times are caused by the free traders who will not keep still. Therefore the prosperity produced by protection is so precarious that it can be overthrown by only talking about free trade. They denounce laissez-faire, or “let alone,” but the only question is when to let alone, when to keep still. They do not let the tariff alone if they want to revise it to suit them, or want to make it “equitable.” When they get it “equitable” they will let it alone, but that insures agitation, and makes sure that they will cause it, for an indefinite time to come. On the other hand the victims of the tariff will not keep still. Their time to “let alone” is when it is repealed. If the tariff did not hurt somebody somewhere it would not do any good to anybody anywhere, and the victims will resist.31 Mr. Lincoln used to tell a story about hearing a noise in the next room. He looked in and found Bob and Tad scuffling. “What is the matter, boys?” said he. “It is Tad,” replied Bob, “who is trying to get my knife.” “Oh, let him have it, Bob,” said Mr. Lincoln, “just to keep him quiet.” “No!” said Bob, “it is my knife and I need it to keep me quiet.” Mr. Lincoln used the story to prove that there is no foundation for peace save truth and justice. Now, in this case, the man whose earnings are being taken from him needs them to keep him quiet. Our fathers fought for free soil, and if we are worthy to be their sons we shall fight for free trade, which is the necessary complement of free soil. If a man goes to Kansas to-day and raises corn on “free soil,” how does he get the good of it, unless he can exchange that corn for any product of the earth that he chooses on the best terms that the arts and commerce of to-day can give him?
155. The history of civil liberty is made up of campaigns against abuses of taxation. Protectionism is the great modern abuse of taxation; the abuse of taxation which is adapted to a republican form of government. Protectionism is now corrupting our political institutions just as slavery used to do, viz., it allies itself with every other abuse which comes up. Most recently it has allied itself with the silver coinage, and it is now responsible, in a great measure, for that calamity. The silver coinage law would have been repealed three years ago if the silver mining interest had not served notice on the protectionists that that was their share of protection, and the price of their coöperation. The silver coinage is the chief cause of the “hard times” of the last two or three years. In a well-ordered state it is the function of government to repress every selfish interest which arises and endeavors to encroach upon the rights of others. The state thus maintains justice. Under protectionism the government gives a license to certain interests to go out and encroach on others. It is an iniquity as to the victims of it, a delusion as to its supposed beneficiaries, and a waste of the public wealth. There is only one reasonable question now to be raised about it, and that is: How can we most easily get rid of it?