VII.

REQUIRE A REVOLUTION

65

their industry of rebuilding the wooden houses.1 This seems absurd enough, but it is absurd only because the interest is a small one. But consider the case of our near neighbours. Of the 39 millions of population in France, nearly one-half are interested in agriculture. Most of them are small peasant proprietors. They are the salt of France. But these peasants could not compete with foreign grain introduced free. Free Trade would mean an entire reorganisation of agriculture, and, probably, of the land system. It would be an economic revolution.

Here is one vested interest which extends over half a nation, and makes it impossible for any ministry such as France has known for thirty years to even mention the free import of grain.

But America never had an economic revolution such as we had. She had no need to protect her agriculture. Hence her people could always get the prime necessaries of life cheap and good. They never knew what it was to have wheat at 80s. the price which, it was thought, the agricultural interests in this country should have for their own safety; and they, consequently, never saw rents rising, and one privileged class flourishing, while the people starved. This cheap agricultural produce, moreover, they could export, and with it buy what they wanted of other things. But at an early stage they adopted Protection for

1 At the end of the eighteenth century, the southern counties of England petitioned Parliament against the opening of the Great North Road, on the ground that it would bring the products of the northern counties into the London market.

E

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HISTORY OF PROTECTION

CHAP.

their manufactures, and the beginning of it was perfectly natural and explicable.

Up till 1808, the nation had remained very much as when it was a number of British colonies -exclusively agricultural; importing manufactures, and paying for them (1) by exports of agricultural produce to the West Indies and to those countries of Europe where the French armies were trampling down the fields, and (2) by the invisible exports of shipping, shipbuilding being then a chief industry of New England.

Then came the Berlin and Milan Decrees of Napoleon, the Embargo, and the Non-Intercourse Act of 1809, followed by the war with England in 1812. Practically all foreign trade was stopped, and America thrown on her home resources.

This, of course, gave an enormous stimulus to those branches of industry whose produce had before been imported, and the manufacture of cotton goods, woollen cloth, iron, glass, pottery, and other articles sprang up like mushrooms.

When the war was over, there remained, naturally, a feeling in favour of these manufactures, and higher duties were imposed to give them a chance in competition with the English goods which then began to pour in.1 This was

1 "The manufacturers of Great Britain, well knowing the needs of the American markets, made haste to send over their goods, which, in the early summer of 1815, began to arrive in fleets of merchant vessels, in such quantities as had never before been known. Coming over consigned to nobody, the goods were hurried by the supercargoes and captains in charge of them to the auction block, where, to the surprise of the owners, high prices were obtained by the sharp competition of eager buyers. .. During April, May, and June,

VII.

IN AMERICA

67

strengthened by our shutting out of foreign agricultural produce under the Corn Laws. It was, in fact, very much our stringent protective policy which forced America into manufacturing for herself. She was not allowed to pay for her imports by agricultural exports. For twenty years from 1816, the protective policy was continuous, and it was based on the Infant Industry argument. By 1830, or perhaps earlier, the "diversified industry" was attained; the Infant Industry argument lost its force. In 1833, for instance, it was said that the cotton industry was ready and able to meet imports on a free-trade footing. Between that and 1860, there was great vacillation in the tariff policy; high and low tariffs succeeding each other without any continuity of principle. From 1846, indeed, the country seemed to be approaching Free Trade.

Then, unhappily, came again the old spring and excuse of Protection. To raise revenue for carrying on the Civil War which began in 1860,

1815, the duties paid at the New York custom houses on goods, wares, and merchandise brought from England amounted to 3,960,000 dollars. When the news of the quick sales and great profits at auction reached Great Britain, whole fleets of vessels were loaded and despatched to America. One day in November, 1815, twenty square-rigged ships came up the harbour of New York. On another day fifteen ships and eight brigs arrived; and what went on at New York was repeated at every seaport along the Atlantic coast. The gainers by this unusual trade were the British manufacturers, the British ship-owners, the auctioneers, and the Federal and State treasuries. The sufferers were the American importers, manufacturers, and wholesale merchants, who without delay appealed to Congress for protection."-Prof. M'Master in Cambridge Modern History, vol. vii., p. 354.

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PROTECTION IN AMERICA

CH. VII.

every possible article, home and foreign, was taxed, and taxed heavily. The statesmen in power were protectionists, and Protection ran riot. After the war, the removal of internal and excise taxation was not accompanied by removal of the customs tariff. The war tariff of 1864 remained in force for twenty years without reduction. The growing feeling towards Free Trade disappeared. Many industries had grown up, or been greatly extended, under the influence of the war legislation. That some were unsuitable to the country did not appeal to those who had sunk their fortunes in them. The infant industry, crippled from its birth, appeared as good a subject for protection as the infant industry that only required benevolent care during its early years.1

And, ever since, the Vested Interest has riveted its hold. The employers in practically all manufacturing industries cry out, in the name of justice, for equal Protection; and the workers are easily persuaded that their living depends on the continuance of these industries.

At the back of it all are the two facts that America is a country of such vast natural resources that it would be difficult for any fiscal system to keep back its progress, and that, within its great area, there is absolute free trade.

1See passim Taussig's Tariff History of the United States, and Rabbeno's American Commercial Policy.

CHAPTER VIII.

THE PRINCIPLE OF A PROTECTIVE TARIFF.

What principle regulates the differentiation of rates in a tariff? Is it prohibition, or equalisation of labour costs, or equalisation of costs generally? Whatever principle be alleged, experience shows that rates are determined by warring interests, either as a victory or as a compromise.

So much for the genesis of Protection and its continuance. It does not arise from a thought-out policy: the economists are not consulted. During the restriction of a war, a country starts making things for itself, without regard to "natural advantages," or, indeed, to anything but necessity. When the war is over, it is thought that the producers have deserved well of their countrymen ; the government undertakes to secure them from rapid extinction at the hands of more advanced nations; and it is only a question of time till the vested interests can neither be overlooked nor silenced.1

1 This, of course, does not account for the rise of Protection in our self-governing Colonies. Here the explanation is the natural tendency of a tariff for revenue to pass into a tariff for protection. Every colony, however new, needs a revenue. It is difficult to