Wonderful is the continuity in the growth of any great Science, and equally so the persistency of any radical error that once gets fairly imbedded within it. As we saw fully in the last chapter Money is nothing in the world but a convenient, intermediate, equivalent, and easily measurable merchandise; but almost as soon as men began to analyze Sales and to generalize from their data, a notion nestled way down in their work, that Sales against Money were somehow or other different from Sales against other merchandise; and thence sprang up, particularly among the Romans, what we have called the Bullion Theory. The broad and the true view was held indeed from the beginning, and was maintained even among the Romans, as we learn from an interesting passage in the Roman Law,—"Sabinus and Cassius think Value can dwell in another thing than money too, whence is that which was commonly said, Buying and Selling is carried on in the exchange of goods, and that view of purchase and sale is very old; but the opinion of Procullus has deservedly prevailed, who says, Exchange is a particular kind of transaction different from Selling."

Science has indeed sloughed off this old and vital error, and most of its sequels; but Public Opinion in many countries is full of it still; and Legislation, in our own country at least, is all the time trying or threatening to transmute merchandise (say silver) into money, as if that could raise its value or change its nature.

It was but a single step from the Bullion Theory to the Mercantile System. If money be somehow different from and better than merchandise, then each nation should strive to handle its foreign trade so as to get back from other nations more money than it renders to them in exchange: in other words, each nation must try to sell to the rest more goods than it takes goods back in pay, so as to have a "balance" come in of gold and silver. How natural the transition from Bullionism to Mercantileism! And it was a step of genuine progress too. Goods are good, and there is profit in their exchange; but gold is somehow better than goods, and we must manage somehow to get a "balance" in that! If this position had only been sound, and one nation only been in possession of the precious secret, how nicely it might have worked for that nation! But all the leading Nations of Europe made the transition from Bullionism to Mercantileism at one and the same time, and they vexed and impoverished each other for three half-centuries, and went to war with each other besides, under the double illusion, (1) that gold could be practically gotten in that way, and (2) that if gotten it were one whit better than the goods for which it would have been at once spent.

Economics as a Science is now free from every taint of Mercantileism also, but it lingers on more or less in half-informed minds, and in the less-experienced nations; and the system itself merged itself three half-centuries ago into another, which is not another, namely, into Protectionism. If nation A must sell more goods to nation B than it takes back in goods, so as to get the coveted "balance" in gold from B, would it not help that cause along to put obstacles in the way of restrictions or prohibitions against the introduction of goods from B to A? Less goods, more gold, argues A. A forgets that the same mental processes are going forward in B's mind towards the same conclusion in relation to A. Now, cogitates A, what kind of goods from B had we better restrict or prohibit? A, by the way, consists of some millions of individuals, some of whom are always on the watch to get their axes ground at the government grindstone. What kind of goods shall we prohibit from B? Why, of course, those kinds which we are now making or growing. We can supply these for ourselves. It does not escape the notice of these makers and growers, that the restriction or prohibition of similar goods from B will raise the price at home of their own goods. Scarce is ever costly. On go the restrictions, ostensibly at first in behalf of an imaginary "balance" in gold, which fragile reason soon passes out of mind in the presence of a very real reason for such restrictions, namely, artificial high prices for certain domestic goods, paid indeed by the entire home community to the comparatively few makers or growers of the goods now "protected," as the current phrase is. Mercantileism has passed over into protectionism. The feeble friends of a "balance" have now become the strong friends of a "monopoly." Personal greed to grow rich at the expense of one's own countrymen thus becomes the single or combined force that puts on and keeps on and piles up the so-called "protective" restrictions and prohibitions.

Scientifically Protectionism is as dead as Mercantileism and Bullionism. There is not an Economist in Christendom, of any international or even national reputation, who now undertakes fairly and squarely by means of analysis and induction, to propound or defend a scheme so contrary to common sense and common honesty as this is, and which, universally applied, would annihilate the commerce of the world. But many of the nations are still tinctured more or less by the old subtlety, and powerful classes within them and specially within the United States, classes grown rich and powerful by what is nothing else than public plunder, are strenuous and successful advocates, not in open discussion and fair debate but by clandestine and corrupting methods and combinations, to maintain in the light of the nineteenth century an outworn and decrepit "something" worthy only of the dark ages. The old and foolish cry for a "balance of trade" is merged now in the United States into the insane and hateful clamor for the destruction of public trade in the behalf of private gain.

This is the sole reason why we must now undertake a careful chapter on Foreign Trade. There is no reason in the nature of things, or in the nature of trade, why Foreign Commerce should be treated of separately from Domestic Commerce. The two are precisely alike in all their principles and in all their results. In one as in the other, in every case and everywhere, there are (1) two persons, each of whom has a Service in his hands to sell against a Service in the hands of the other; (2) two reciprocal estimates, by which each owner concludes that he prefers the Service of the other to his own; (3) two mutual renderings, by which each Service comes into the possession, present or prospective, of the new owner; and (4) two personal satisfactions as the result of all, constituting the ultimate motive and the sole reward of Buying and Selling.

There are two possible differences in certain cases between Domestic and Foreign trade, both superficial and but barely worth the mention here. Foreign countries engaged in trade may be more remote from each other than places exchanging products within the same country. The distances, however, between Bangor selling ice to New Orleans for sugar, and Boston selling boots and shoes to San Francisco for fruits and wine, are much greater than those between Liverpool and St. Petersburg, or those between Stockholm and Palermo; so that, it may be said in general, that the trade between all the European countries confronts less distances, and presumably less costs of transportation, than the trade within the United States. And another thing is to be said in this connection: Foreign trade as a general rule is conducted by water-routes, and domestic trade under the same rule is carried on by land-routes; and, therefore, the costs of transportation by the latter are much more expensive.

The other possible difference is more considerable, and considerably more in favor of Foreign as compared with Domestic trade. We have learned perfectly already, and the point is fundamental, that all trade proceeds on the sole basis of a relative Diversity of Advantage as between the two parties exchanging. This relative superiority of each exchanger over the other at different points depends in domestic trade partly upon divergent natural gifts to individuals, partly upon their concentration of mind or muscle or both on a single class of efforts each, and partly upon the use and familiarity in the use of the gratuitous helps of Nature aiding that class of efforts. But in foreign trade there are commonly some additional grounds of Diversity, since the various countries of the earth have received from the hands of God a diversity of original gifts, in climate, soil, natural productions, position, and opportunity. And besides these original international differences, there has been developed of course in the history of the inhabitants of these countries a diversity of tastes, aptitudes, habits, strength, intelligence, and skill to avail themselves of the forces of Nature around them. International trade, accordingly, is somewhat more broadly and firmly based than the home trade can be, inasmuch as these international differences are apt to be more inherent and less flexible than domestic differences between individuals; it is on these diversities, original, traditional and acquired, that international commerce hangs; it could never have come into existence without them; and it would cease instantly and completely were they to fade out. Men engage in foreign trade,—not for the pleasure of it,—but for the sake of the mutual gain derivable to both parties; they desist from it so soon as that mutual gain disappears; and there is no gain in any series of exchanges, unless each party has a superior power in producing that which is rendered, compared with his power in producing that which is received.

With these few preliminaries, we pass now, in the first place, to unfold in order the common and universal principles of foreign trade. For the sake of illustrating these, we will now take a simple supposed case, a trade between England and France in cottons and silks, and follow it through clearly to the end.

1. When will it be mutually profitable for England, that is, for certain English merchants, to send cottons to France to buy silks with, and for France, that is, for certain French traders, to send silks to England to buy cottons with? Money and all other commodities except these two, silks and cottons, are wholly out of the question now and should be wholly out of our minds the while, though for simplicity's sake we shall use the denominations of money for comparing the respective efforts, translating pounds and francs into dollars. The answer is easy: the trade will be mutually profitable, when efforts bestowed in France upon silks will procure through exchange with England more of cottons than the same amount of efforts bestowed in France upon cottons will produce of cottons directly; and then, when efforts bestowed upon cottons in England will procure more of silks through exchange with France than the same amount of efforts bestowed in England upon silks will produce of silks directly. It is not a question of the absolute cost of either commodity to the parties producing it, or of a comparison of those absolute costs at all, but a question of the relative cost of that produced in either country compared with what would be the cost of the other commodity were it to be produced in that country. So long as there is a difference of relative efficiency in the production of the two commodities in the two countries, so long, setting aside the costs of carriage, may there be a profitable exchange of the two. A demand in each country for the product of the other is of course presupposed in the illustration.

Suppose now, that Efforts in England on certain cottons be gauged at $100, and that Efforts in France on certain silks be gauged at $80, and that these finished commodities then exchange even-handed against each other: is that a losing trade for England and a gainful trade for France? That is more than we can tell yet. That depends upon the further decisive question, whether the Efforts gauged at $100 if expended in England in the manufacture of silks will procure as many and as good silks as the same obtain in exchange with France; and whether the Efforts gauged at $80 if expended in France on cottons directly will secure as many of them as if expended on silks directly and then traded off for cottons. In effect the Frenchmen ask, Can we get more and better cottons by working on silks and then trading them off for English cottons than we can get by equivalent Efforts in working on cottons at home? Likewise the Englishmen ask, Can we get more and better silks by working on cottons at home and then trading with France for silks than we can get by trying to make silks directly? France by climate and soil and habitudes is better adapted to silks than cottons: England by virtue of the same is better adapted to cottons than silks.

2. How does the Diversity of relative Advantage practically work in foreign trade? Let us suppose that while the cottons cost $100 in England, it would cost $120 to manufacture there as good silks as can be made in France for $80; and that while the silks cost but $80 in France, it would cost $96 to make cottons there as good as the English can make for $100. On this supposition France can make both the silks and the cottons at a cheaper absolute cost than England can. What of it? Does that destroy the motive and the gain of an exchange between the countries in these two articles? Let us see. By an exchange with England, France gets for $80 in silks, cottons which would otherwise cost her $96, which is a handsome gain of 20%; while England gets for cottons costing her $100 silks which would otherwise have cost her $120, which is another handsome gain of 20%. Although France can make each commodity for less absolute money than England can make either of them, there is a Diversity of relative Advantage; and, therefore, there might be in this case, as there is actually in many such cases, a very profitable trade. The efficiency of France in making silks relatively to the efficiency of England in making silks is in the ratio of 80 to 120, namely, a difference of 50%; while the aptitudes of France in making cottons relatively to that of England in making the same is only in the ratio of 96 to 100, namely, a difference of 4¹/₆%. So long as England offers in cottons a good market for French silks, how utter the folly and large the loss of France in going to work to make cottons!

In the majority of cases, doubtless, foreign trade takes place in articles, in the production of one of which each of the respective countries has an absolute advantage over the other; but an every way advantageous trade may be carried on in commodities, in the production of both of which one nation shall have an absolute superiority over the other, provided only that this superiority be relatively diverse in the two commodities, as has just been shown. This is an effectual answer to the ignorant clamor of some, we take it, who make objection to importing articles which might be made at home for the same sum of money as foreigners expend in making them; admitted, that they might be so made, does it follow that the country importing them would get them as cheaply by making them itself? By no means does that follow. Let no nation, then, be in haste to drop a trade, because it thinks it can make the goods received in exchange as cheaply as the other nation makes them, so long as it has an advantage absolute or relative over the other in making the goods rendered in exchange; and when that advantage ceases, it may be sure, that the trade will drop of itself; because it always takes motives to make the mare go.

3. What are the extreme limits of the Value of cottons and silks in the case supposed, and when will a third nation be able to undersell either in the ports of the other? This is the answer: the extreme value of French silks in English cottons will be 80 and 96; they cannot fall below 80 because they cost the French that to manufacture them; they cannot rise above 96, because at that rate the French can make cottons, and there would be no motive, that is, no gain, in their exchanging for cottons. Nations, that is to say, individuals, will never get themselves served at a greater effort than that at which they can serve themselves. If a given effort does not realize more through exchange than it would do directly, then that exchange ceases of necessity, as fire goes out for lack of fuel. The extreme limits of the value of English cottons in French silks will be 100 (lowest) and 120 (highest) for reasons precisely similar in the case of the English. Therefore, the highest profits possible to both nations under the conditions of the trade are 20% each. France would be glad to take the cottons at a return of 80 in silks, at which rate her gain would be 20%, and she cannot under any circumstances offer quite 96, at which rate her gain would disappear.

No third nation, accordingly, in a trade of silks for cottons can expel the French from the English ports, until it is prepared to offer nearly 96 (or more) in silks in return for English cottons; that is to say, until its efficiency in making silks relatively to that of England in making them presents a greater difference than the difference of efficiency between France and England in making silks, which is a difference of 50%. England would be glad to take the silks from France at a return of 100 in cottons, at which rate her gain also is 20%, and she cannot possibly offer quite 120 in cottons, because at that rate her gain would wholly vanish. England could be undersold in the French ports, when somebody is ready to offer nearly 120 (or more) in cottons against the French silks, whose quantum in the exchange may vary from 80 towards 96. Here is the whole doctrine of one nation underselling another in the ports of a third nation. Silks stand here for sample of all French commodities of whatever name and cottons for all English goods whatsoever; and England and France stand in the illustration for any and all nationalities. Any nation obtains any share or a greater share in the commerce of the world solely in virtue of a greater relative efficiency in producing something valuable, as compared with some other nation's power in producing something else that is valuable.

4. How does the varying play of International Demand affect the value of articles in foreign trade? The answer is clear and easy: if the demand for French silks in England just answers to the demand for English cottons in France, so that the silks offered by France just pay for the cottons offered by England, then, cost of carriage aside, the gains of the trade will be equally divided between the two sets of merchants, and each will realize 20% profits, because neither will have any motive to lower the value of its commodity below its highest value. The Frenchmen from their point of view will offer 80 in silks and take 96 in cottons: the Englishmen from their standpoint will offer 100 in cottons and get 120 in silks. Demand and Supply are equalized at a point of value most favorable to both parties, and one really determined by the relative cost of production.

This case of equalization, though possible, is likely rarely to occur in practice. On any terms of exchange first offered, there is likely to be a stronger demand in one country for the product of the other than in this country for the product of that. This will of course lead to a change of Value, and a new division of Profits. The product for which the demand is less will find its market sluggish, and in order to tempt further and brisker exchanges will be compelled to offer more favorable conditions. He who enters a market in quest of what is more in demand with a service which is less in demand, will have to lower his terms, or not trade. The equalization of Supply and Demand will only be reached in this case, by quickening the demand for the commodity now less in demand through an offer of better terms in trade. Thus, if the demand for French silks in the English ports be slack, in comparison with the demand for English cottons in France, at the rate of exchange first established, say, 80 for 96, the French merchant has no resource, if he wishes to continue the trade, but to agree to give more silks, for the same amount of cottons, say, 85 for 96. If this actual reduction prove sufficient to cancel the account in cottons with the account in silks, then the trade will proceed on this new basis for a while, because the equalization of demand and supply has been reached through a new valuation of the two commodities, and there is now consequently a new division of the profits. France gains less than 13% by her trade with England, while England gains 27% in her trade with France.

Under these new terms of exchange, it is quite possible that silks may again become heavy in reference to cottons, and a new decline take place in their relative value. If the French are obliged in consequence to offer 90 for 96, in order to obtain the cottons they want, their own profits will sink to 6%, while the same causes will lift the English profits to 35%. If, in any contingency, the French were driven by the state of the market to concede something near to 96 in silks for 96 in cottons, the trade would cease in that case, just as every transaction ceases when the motive for it ceases. We must remember of course, that the cottons of England are just as likely to become slack in reference to silks, as the silks are relative to the cottons; and when this happens, the English dealers will have to lower their terms, and thus surrender a larger share of the profits to the French. By this ceaseless play of Supply and Demand, within the outermost limits drawn by the relative Cost of Production at the time, is the Value of commodities determined in Foreign Trade; and no degree of complication in the variety of articles, or in circuitous exchanges, affects, for substance, these fundamental principles.

5. What are the causes deciding the exportable articles of any nation, and their order of precedence in Export? Watch a little at this point, and the true answer will loom up steady and certain. If, instead of one article, say cottons, England sends two or ten kinds of goods to France in payment for silks or wines or whatnot, she will of course send in preference that commodity in which her own commercial efforts are relatively most efficient, so long as the French demand will receive it, because her own profits will be the greatest on that; then, when obliged to lower terms on that down to the point of relative advantage at which her next available article stands, she will send that next in quantities regulated by the demand for that; and so on down to the end of the list of possible exportables to France. France is guided as to her exportables to England by precisely the same principles and prospects of profit. So of all commercial nations whatsoever. No matter whether the articles be one or many; no matter whether the trade be a direct or indirect trade; the profits in international commerce depend in all cases, first, upon the ratio of the cost of what is rendered to what would otherwise be the cost of what is received, secondly, upon the relative intensity of the two Demands.

It follows logically and necessarily from all this, that what a nation purchases by its exports, it purchases by its own most efficient Production, and consequently at the cheapest possible rate to itself, and at the highest possible profit to its merchants. Under a decent freedom of international choice and action, of sale and delivery, only those things are ever exported, for the procuring of which a nation possesses decided advantages relatively to other nations, and relatively to its own advantages in producing directly what is received in return; and hence, the return cargoes, no matter what they have cost their original producers, are purchased by this nation as cheaply as if they had been produced by its own most advantageously expended Effort. This is a wholly impregnable position; and the advocates of restricting and prohibiting Foreign Trade are challenged to try their hand a little or a good deal (as best suits them) at its bristling defences.

It follows also from the discussion under this head, what shallow thinkers are they, who deem it needful that each nation should be able "to compete" with other nations in every branch of production. Why are they not consistent enough to apply their favorite catchword, "compete," to domestic exchanges also, and require that the clergyman shall have artificial and governmental facilities for "competing" with the lawyer, the tailor with the blacksmith, the farmer with the manufacturer, the publisher with the author? Will folks never learn that all Exchanges, domestic as well as foreign, hang on relative superiority at different points, and that any Nation trying to make its success in production equal at all points would be just as stupid as an artisan trying to learn and practice all the trades at once? Suppose the said nation to succeed, what then? It would supply its wants at a certain low average efficiency of effort; whereas, by a thorough development of all its own peculiar resources, it could command by exchange the products of the whole world at a cost not exceeding that of its own most productive and efficient Exertion. The precious metals, whether produced at home or obtained from other nations by another series of exchanges, whether coined or in the form of bullion, stand here in the same relations as other commodities, and are frequently the most profitable articles that a nation can export. In one word, whatever justifies individuals in selecting diverse paths of production according to their capacities and opportunity, the same (and even more) justifies the Nations in fully drawing out their own best capabilities under the conditions in which God has placed them; and then, exchanging what costs them little for what would otherwise cost them much, in enjoying all that the world offers at the least possible expenditure of irksome effort. Such wise and wide action promotes the common good of all the nations, and makes the best of all accessible to all, and arms each with the power of all; while the narrow and senseless policy of drawing into one's own shell after putting up barricades against one's neighbors, by lessening everywhere the Diversities of relative Advantage, so far forth incapacitates all for profitable and progressive Exchanges.

6. How do new improvements in machinery and other enhanced facilities of Production in one country affect its foreign trade? A cheering response will be drawn out, if we now apply this question to the conditions of our old trade in silks and cottons. Suppose France by new methods of silk culture to become able to make the silk which before cost $80 for $50, cottons in France and silk and cottons in England remaining in natural cost as before, does France alone gain the entire advantage of the increased cheapness of silk? Wait a minute, and we will see. The production of silk in France is greatly quickened by the cheaper methods, more is produced, more is carried to England to buy cottons with, but at the old rate of 80 for 96, the English will not take any more silks, and the French who can now abundantly afford it, since their nominal 80 is really 50, will offer more silks for 96 in cottons, in order to tempt a brisker and broader sale. They offer, say, 96 in silks for 96 in cottons, and if that reduction of Value of silks in cottons be enough for the equalization of the respective Demands, the trade will proceed on that basis, at least for a time; and as there is now a larger difference of relative advantage than before, there will be, as always in such cases, larger profits to be divided between the two parties. The 96 now in silks to the English is really only 60 in cost to the French, so that the French gain in the trade is largely increased; because they now get for what costs them 60 what would otherwise cost them 96, a clear gain of 60%. Before the new methods of silk culture were introduced they could gain but 20% at the utmost.

But the English have also reaped largely from the ingenuity and diligence of their neighbors. Before, they gained only 20% in the exchange at best; but now they get for what cost them $100 that which would otherwise cost them $144, a handsome profit of 44%. Indeed, it might easily happen, through the incessant changes in International Demand, that even a larger share of the benefit of the French improvements should accrue to the English than to the French themselves; the share of the French all the while being large, and much larger, than if, greedily endeavoring to keep all the benefit, they should refuse to trade at all. Thus we reach again from another outlook, a grand and universal doctrine of Exchange, that each party is benefited by the progress and prosperity of the other. Indeed, the only possible way in which all nations can share in the thrift and enterprise and improvements of each other, is through mutual international exchanges; and when each nation sees to it that it have a few commodities at least for which there is a strong demand among foreigners, and in the production of which themselves have a strong superiority, it may rest assured that it buys all it buys from abroad, gold included, at the cheapest rate to itself, and shares a part of the prosperity of every nation with which it trades.

7. Which party in foreign trade pays the Costs of Carriage, or do each pay them in equal proportion? It is plain, that the aggregate cost of transportation to the foreign markets is just so much added to the Cost of Production, and is a deduction of so much from what would otherwise be the whole gain of the Commerce; but it is plainly not true, that each party necessarily pays the whole of his own freights; and, therefore, that the party carrying bulky articles is at a disadvantage compared with the other. He may or may not be at a disadvantage on that account. That will depend on the effect of the new expense for freight, however divided, on the Demand in each country for the product of the other. We will suppose, that in the outset England pays the whole cost of carrying cottons to France, and France the whole cost of sending silks to England; but as cottons are many times more bulky than silks proportionably to value, a larger bill of freights would fall of course to England; and cottons would therefore fall in value relatively to silks; but cottons and silks have both risen absolutely, that is, with reference to any given effort, or with reference to a money standard.

Suppose now that France, instead of 80 for 96, has to render 82 for 96; and England, instead of 100 for 120, now has to give 105 for 120. The French gain in the trade is reduced from 20 to nearly 17%, and the English gain from 20 to nearly 14%; but it is by no means certain, that the commerce would go on precisely on these terms; the enhanced value of silks might well deaden the demand for them in England, more than the relatively less enhanced value of cottons in France would affect the demand for them. Silks have risen in England 5%, but cottons have risen in France only 2½%; it is therefore very likely that thereafter the demand for cottons will be stronger than the demand for silks, and if so, the French will have to offer better terms, or, what is the same thing, to be obliged to pay a part of the English freights; so that there is nothing in the true state of the case to justify the conclusion jumped at by some people, that they who carry heavy goods are at a disadvantage compared with those who carry light goods. That will depend wholly upon the Equation of International Demand as between the two kinds of goods. Nothing in the nature of things hinders, that each party shall in effect pay the freights of the other, or one even really pay the freights of both.

8. Lastly, what is the effect upon international commerce of the constant play of the Par of Foreign Exchange. This is a point of great importance, that has been but little discussed in this connection, because it has not been popularly understood or scarcely even popularly explained. In the light of the full unfolding of "Credits" in our Fourth Chapter, and in the light of these simple principles now under discussion, there will be no great difficulty to any intelligent reader in fully understanding this matter of Foreign Exchange,—a matter never before so vital to the commercial interests of the United States as now. For the sake of general illustration we will take the "Exchange" as between the United States and Great Britain, since the same fundamental principles apply as between all commercial countries.

When merchants export goods, say from New York to London, or vice versa, they do not wait for their pay till the goods be actually marketed abroad, but draw at once Bills of Exchange to the amount of the home value of the goods on the parties to whom the goods are sent, and then put these bills on present sale with brokers or middlemen at home. There thus becomes a market or prices current in New York for commercial bills drawn on London, and similarly a market in London for bills drawn on New York. The New York exporter, accordingly, is not certain of getting in money the full face of his bill minus interest for the time it has to run, because a great many such exporters may have thrown their similar bills upon the market the same day, which always tends so far forth to depress the price of the bills in accordance with an universal law of Economics. Scarce is ever costly: plenty is ever cheap.

Who buys these bills when exposed for sale in New York? Who wants them? Clearly, only those who have commercial debts to pay in London. A bill of exchange drawn in New York on London is nothing but a debt due from somebody in London to anybody whom the drawer in New York chooses to make the payee. The debtor lives in London, and it is every way cheap and convenient for all parties, that he settle his debt with a creditor living in London. So it happens, that parties in London who have sold goods in New York and drawn bills on them for present payment, expose those bills for sale in London to the parties who have debts to pay in New York. If now, London or those whom London represents in these transactions, have sold but few goods to New York or to those whose business is settled in New York relatively to the amounts sold by New York to London, then London bills will be relatively scarce as compared with the New York bills drawn on London. In other words, New York has more debts to pay in London than London has in New York, and, consequently, the parties in London who want bills to pay New York debts with, have to buy them in a relatively scarce market. They have to bid for them, as it were. The effect of this is always to carry up the price of that, for which the buyers are many and the sellers relatively few. So, under perfectly natural causes, London bills on New York come to a premium; that is to say, the London sellers get more than the face of their bills drawn, and the trade with New York becomes extra profitable to them.

Suppose London bills of Exchange on New York are selling for 101, thus giving 1% extra profit to English exporters; for precisely the same reasons that they are so selling, New York bills on London are selling in New York for 99, thus subtracting 1% from what would otherwise be the gains of the New York exporters to England under the common principles of Foreign Trade. It is evident, therefore, that the causes of the course of the international Par of Exchange are an essential part of the principles of foreign Commerce; and whatever tends to derange or upset the natural course of the Par, as a constant or constantly recurring cause, must receive careful attention in a book like the present. We have begun at the very beginning of this matter, and we are now going to follow it up to the very end.

The Diversity of relative advantage in the Production of the two commodities exchanged, is the first and chief ground of mutual Profit in foreign trade; the varying Intensity of relative Desire on the part of each exchanger for the product of the other, is the second and secondary ground on which foreign trade must go on; and the third and final difference as between the two parties, which goes to make or mar the profit of each of them in the trade, is the current Price of the Bill of Exchange drawn by each creditor on his debtor abroad. It is plain that these three things must always be taken into account simultaneously by prudent exporters and importers, in order to estimate the prospect of a profitable trade then and there; and it is plain also, that one or even two of these three differences of relative advantage might fade out for a time, and a profitable trade still proceed, provided the other two or one of these differences were sufficiently pronounced. For example, to take an extreme case, silks from France might still go to England for cottons to the advantage of both countries for a time, though "exchange" were exactly at "par" between them and the "demand" for silks were precisely met by the "demand" for cottons, on the strength of a marked and persistent diversity in relative cost of production of the two textiles.

Here is another of the trinities of Political Economy. Here is complication indeed, but a complication regulated and beautified by inflexible laws of Nature and the scarcely less inflexible laws of human Motives.

So far the argument has proceeded on the supposition of a common standard of Value, say gold, between England and France, London and New York, and by implication all other commercial countries. Commerce rejoices in, and progresses by, a common measure of Values. By an experience of 2000 years the world has proven gold to be the best international Measure. From a simple comparison of the weights of pure metal in the standard coins of the nations is established a fixed monetary "par" as between them. Thus the dollar of the United States contains 23.22 grains of pure gold, and the English pound sterling contains 113.001 grains of the same; consequently, there are $4.8665 to the £ sterling, and this is and has been since 1834 the monetary "par" between the United States and Great Britain. Similarly, the par between France and the United States is $1 to 5 fr. 18 centimes, since the franc is 19.29 cents gold for gold. The monetary par, accordingly, as between any two nations using the gold standard, is a matter easily ascertained and kept in mind; while the constantly variable prices current of Bills of Exchange are reckoned in and from this monetary par. Thus, if a commercial bill drawn in New York on London sells for $4.8665 minus current interest for the time it has to run, English "exchange" with us is said to be at "par"; if it sell for more than that, exchange is technically said to be "against" us, although the excess in price is just so much additional profit to the American exporter; and if it sell for less than that, exchange is said to be in our "favor," although the difference is just so much subtracted from the gains of the American exporter.

The close of the second week in July, 1890, found in New York "Sterling exchange dull but firm, with actual business at $4.84¾ for 60-day bills and $4.89 for demand bills: the posted rates were $4.85½ and $4.89½ respectively." Exchange, accordingly, had turned "against" the United States, that is to say, American exporters could get a little more for their bills on London than the monetary par. Under such circumstances it may be cheaper to send the gold to liquidate a British debt than to buy bills and send them. Just this happened last week: $2,000,000 in gold went (mainly under this impulse) from New York to London. There is a limit, therefore, to any further rise in the price of "exchange," when it reaches in an upward direction the then present cost of sending gold to foreign creditors. The limit in the downward direction to the price of exchange is the last margin of profit to the exporter as such. Thus, when the New York exporter can only get, say, $4.83 for his sight bill of exchange on London, his loss in the trade so far forth is 1%; and it may be doubtful, whether his possible gains at the other two points, namely, relative cost of production and relative intensity of demand, will overbalance this certain loss and leave a sufficient margin of profit.

This chance of profit or loss from casual turns in the commercial "exchanges" is a very small matter in foreign trade in comparison with the other two grounds of possible profit or loss. The main thing for every commercial nation to see to is, that it have at least a few (the more the better) commodities in general use throughout the world, in the cost of the production of which it has a relative advantage over all competitors, and the demand for which by foreigners is relatively intense and constant. And it will never come amiss for any nation with these two crucial advantages to keep a sharp watch over a class of its own citizens, lest they, shrewdly and greedily, for special reasons of their own, get laws passed the result of which can only be to increase the costs of production of these few exportables, and at the same time lessen the foreign demand for them. Eternal vigilance is the price of liberty of commerce.

As a general rule for the last half century commercial "exchanges" have been "against" Great Britain, that is, her exporters have been able to get more than "par" for goods sent abroad in the price of the bills drawn on them, and her commerce has been profitable to her so far as this cause is concerned; which during the same interval of time the "exchanges" have been "in favor" of the United States, that is, her exporters have been obliged to sell their bills drawn for less than "par," and her commerce so far forth has been unprofitable to her. We may only briefly indicate here the causes of this state of things.

(a) Great Britain has been during this period a vast loaner of Capital to other countries, and particularly to the United States; while the United States has been a vast borrower of Capital, particularly from Great Britain. The interest on these loans from Britain, and the principal also so far as it has been repaid, has been constantly remitted thither in goods for the most part, and bills of exchange drawn on these goods have been sold at all ports, and particularly at New York; the abundance of these bills has tended of course to lower their price at the place of sale, and so far forth to heighten in effect the relatively less abundant British bills drawn on exports thence; and the creditor country for this reason is apt to sell its bills above "par," and the debtor country its bills below par. It makes no difference at this point how the borrowed funds have been invested by the borrowing country, since the interest and the principal must be repaid at some time chiefly in the manner just indicated.

(b) With the exception of a dozen or two articles customs-taxed for simple revenue, Great Britain in this period has kept her ports absolutely open to imports from all the world, and of course to all imports from the United States, which has tended to swell the volume of imports into that country, and the volume of foreign bills drawn on them, particularly of United States bills; while the United States during the same time has excluded imports by customs-taxes designed for that very purpose, to the number of over 4000, and in many cases to a height of tax involving prohibition of import. The Constitution of the United States expressly forbids customs-taxes upon exports, so that goods may indeed go out freely, so far as tariff-barriers are concerned; but as the only impulse that ever carries goods out is to get back more desirable goods in pay, and as these return-goods are greatly restricted or virtually prohibited by the United States, the Constitutionally-free exports are not large enough to help much in keeping down below "par" the price of bills of exchange drawn here. It should also be said that Great Britain is restrained in her exports to the United States by the latter's legal unwillingness to receive them, which tends of course to keep the price of bills drawn on the exports she can and does send still more above "par."

(c) The enormous customs-taxes in the United States on ship-building materials and on almost everything else have practically destroyed the ocean merchant-marine of the country. The bulk of the Freights, therefore, on what foreign commerce there is left to us under the Chinese-wall policy of our Government,—the bulk of the freights both ways,—has to be paid to foreigners, mostly to the British, and these payments too are made in exportable goods, which wretched fact (looked at in its causes) increases exports hence relatively to imports hither, and of course diminishes pro tanto the current price of mercantile bills drawn here. So far as these extra exports to meet freight charges are carried to England, they tend to lift there in the usual way the price of bills drawn on British exports. It is a million pities, no matter from what point of view one looks at it, that the present governing classes of this country totally misapprehend the Nature of foreign trade, and by short-sighted legislation minimize its Benefits to the people.

So far we have been unfolding the causes and courses of foreign exchange on the hypothesis, that both the nations exchanging employ the same standard in measuring Values. While the present paragraphs were in process of composition, the President of the United States signed (July 14, 1890) the so-called "Compromise Silver Bill," which is to go into operation after thirty days, and the effect of which in the judgment of some of the best economists and financiers of the country may be to bring down the national measure of Values from the gold dollar to the silver dollar. We are bound at this point, therefore, to explain the action and reaction on the course of the "exchanges," of a monetary standard lower in general value than the standard prevailing in the commercial world. We have all the data needful for clearing up this matter completely, at once in the inflexible laws of Money and in the actual experience of several of the Nations. For example, England has the gold standard, and India the silver standard; there is an immense commerce between the two countries; silver is merchandise and not money in London, and gold is merchandise and not money in India; every cargo, accordingly, to and from either has to have its value "changed" through the price of current bills into the current money of the other country; the price of silver in gold in London (average) between 1852 and 1867 was 61¹/₃ pence per ounce; at 60 pence per ounce the ratio of gold to silver is 1:15.716; between 1875 and 1882 silver drooped (with many fluctuations) in the London market, bearing about the average of 52¹/₃ pence per ounce, which is a ratio with gold of 1:18; during the first half of 1890 the price of silver in London was as nearly as possible 43 pence per ounce, which is a ratio with gold of 1:21.93; so that, the prices of India bills in London and of London bills in Bombay have yielded up to the careful observer all the secrets of the "exchanges" between high-standard and low-standard countries.

But we have no need to go out of our own country for illustrations of all this. Between May, 1862, and January, 1879, the "Greenback Dollar" was the measure of current Values. It was depreciated every day of that interval as compared with the gold dollar, and it fluctuated in the comparison more or less nearly every business day. The New York importer bought his foreign goods for gold, paid the customs-taxes on them in gold, and then sold them against greenbacks. How much must he charge for his goods in order to make himself whole? The current premium in gold over greenbacks was posted every day, and perhaps every hour, but was that a safe guide to greenback prices for our importer? Wholesales are rarely for immediate realization in money, and even if they were, the money would have to be rechanged into gold in the future for repurchases abroad. In the uncertainty of greenback values, the importer must insure himself in his prices to-day against a possible further depreciation next week, or next month. In other words, he must speculate in the prospective gold premium. Suppose his industrial cycle to be one month. If he sell his foreign goods in greenbacks to-day as these stand in comparison with gold, and greenbacks fall still lower before the month is out, he will lose money in those transactions; if greenbacks should rise in the interval, he would gain money, because he could get more gold for them in the next turn. To the credit of human nature be it said, that in 9 cases out of 10 a merchant will raise the present prices of his goods in order to make himself as sure as possible in a case where all is uncertain. There can be no reasonable doubt that in the fifteen years of depreciated greenback units, retail prices to ultimate consumers were lifted 10% above the average reckoning of goods in greenbacks from this cause alone.

In regard to exports at that time the facts and principles are still clearer. These exports were sold in Europe for gold. But the bills of exchange drawn on them were sold in New York for greenbacks. Take wheat, for example, of which there was a large export in all those years. The New York broker or banker in buying these bills was obliged to make the conversion from greenbacks to gold. He had to estimate as well as he could what the value of greenbacks would be when the gold-bill became payable in London. In other words, he had to speculate in greenbacks, because he had to take the risk of their declining or advancing value for an interval of time, say, one month. He would not take this risk without virtually making a charge sufficient in his judgment to cover it, and leave him a good profit in any case. This charge came out of the price of the wheat ultimately paid to the growers thereof. The bill of exchange was sold in New York or Chicago in order to get present pay for the farmers who furnished the wheat, and present profit for the commission-merchants or middlemen. But the bill brought less greenbacks than the quoted premium on gold would warrant for that day, on account of the risk, the uncertainty, the speculation. Therefore, less went to the farmers for their wheat per bushel or centner. The masses of the people lose the immense losses of that depreciated money. And during these very years also the Government put customs-taxes to a then unheard-of height on imports from abroad, not primarily for the sake of the revenue to come from the taxes, but chiefly with a view to keep certain foreign goods out of the country altogether, in order that some citizens might be able to sell their own product to the rest at artificially enhanced prices. Thus the natural market abroad for wheat and pork and petroleum and other provisions was enormously lessened by the prohibition of imports,—a market for products is products in market,—at the same moment when the actual prices for products exported were still further diminished by the action of depreciated money on the par of commercial exchange.

Our neighboring Republic of Mexico has had for a long time the so-called bi-metallic standard of Money, the same as the United States have had.[9] When the great fall of silver in gold took place in the London market as indicated above, gold was rapidly exported from Mexico, and soon disappeared from circulation, in accordance with Gresham's Law. For many years now the simple silver standard has prevailed in Mexico. Its entire working in foreign trade through the "exchanges" has been sufficiently demonstrated; and as there is more than a possibility, more even than a bare probability, that the United States under the law of 1890, and other and earlier extremely complicated laws of Money, may drop from bi-metallism to silver monometallism in the near future, in the way of premonition and warning to our own people we may fitly close our discussion of foreign "Exchanges" by briefly stating what of hazard and disaster under the silver standard is now going forward among our neighbors to the southward.

The effect of estimating Mexican transactions in silver money, while all the nations with which they trade estimate theirs in gold, is seen in an artificial enhancement of prices to the Mexicans on all their imports, and an artificial depression of prices to them on their exports. Look first at imports. There is of course a current discount on Mexican silver as compared with the gold in which the imported goods are bought. This discount is now over 20% throughout the commercial world, the London price of silver in gold giving the key to that song. But this is not all by any means; the discount is variable from day to day and from month to month; in changing his gold prices present into silver prices future, the Mexican importers must insure themselves. This necessitates a speculation in the future of silver. What the risk may be will depend somewhat on the activity of the silver market: if silver be rapidly fluctuating in price, the importer will add more to his silver prices additional to the current premium on gold, than if silver be comparatively stable; but in all cases he will add enough to cover all prospective risks. It is quite likely that five per centum is added on the average to wholesale prices by Mexican importers on this ground alone, which addition with all the usual increments must be borne by retail and ultimate prices.

Now look at Mexican exports. The larger part in value of these exports is silver in some form, mostly in the form of silver dollars. But these silver dollars are merchandise in London, and quite variable in price there, as has already been shown; and bills of exchange drawn on this silver in any form, and sold in Mexico to parties remitting gold values to London, are subject to constant depression on account of the uncertainty as to the value of silver in gold when the bills reach London. It follows from this, that the use of the silver standard in Mexico actually depresses the value of silver there. By means of the "exchanges" both ways, silver tends to be still further depreciated in comparison with gold, retail prices of all importables enhanced in silver, and the chief exportable (silver) depressed in value all the while! Truly, the Mexicans are between the upper and nether millstones. Poor Money never pays.

In confirmation of this fact that Mexico has not lifted the relative value of silver by making it the sole Measure of Value, we have the corresponding fact that the herculean efforts of the United States since 1878 to advance the value of silver to a parity with that of gold in the legal ratio of 1:15.98, have issued in the constant relative decline of silver here; and, what is more surprising, in an almost constant increase of the yearly production of silver here. The following table tells the whole instructive story: the figures are official: commercial "fine ounces" are .915 of technically "fine" silver.

These Seven, then, are the essential Principles of Foreign Trade, brought out, it is hoped, as clearly and consecutively as the relative and complicated nature of the transactions will allow; in the light of these Principles it is very clear, that Foreign Trade is just as legitimate as, and may be more profitable than, Domestic Trade; that it rests on the same ultimate and unchangeable grounds in the constitution of Man, and in the Providential arrangements of Nature; that the Profit of it is mutual to both parties, or it would never come into being, or, coming into being, would cease of itself; that to prohibit it, or restrict it, otherwise than in the interest of Morals, Health, or Revenue, must find its justification, if any at all, wholly outside the pale of Political Economy; and that for any Government to say to its citizens (of whom Government itself is only a Committee), who may wish to render commercial services to foreigners in order to receive back similar services in return, that such services shall neither be rendered nor received, is not only to destroy a Gain to both parties, but also to interfere losingly with a natural and inalienable Right belonging to both.

If the reader pleases, we will turn now, in the second place, to the Methods and Motives in vogue to restrict and prohibit Foreign Trade. The instrument for this purpose is called a Tariff. The origin of the word Tariff, its nature and kinds, will throw much light upon what has been a vexed question, but is one easily solvable, and indeed long ago resolved.

1. Origin.—When the Moors from Africa conquered Spain in the year of our Lord 711, they fortified the southernmost point of the peninsula where it juts down into the Straits of Gibraltar, and by means of their castle and town, called in their Barbary language Tarifa, compelled all vessels passing through the Straits to stop and to pay to these Moorish lords of the castle a certain part (determined by themselves) of the value of the cargoes. This payment appears to have been blackmail pure and simple; it was certainly extorted by force; and whether there were any pretence of a return-service in the form of promised exemption from further pillage or not, that made no real difference in the nature of the transaction. Eleven centuries later, the United States demonstrated what they thought about similar extortions on American commerce practised in the same waters by the descendants of these same Moors, by despatching Commodore Decatur with a strong fleet to Algiers and Tunis and Tripoli; to which piratical states they had already paid in twenty-five years two millions of dollars in "tribute" or "presents" for exemptions of their Mediterranean commerce from plunder; who captured the pirate ships and compelled the terrified Dey of Algiers (and the rest) to renounce all claim thereafter to American "tribute" or "presents" of any kind. The word Tarifa, accordingly, in English and other modern languages, a word which seems to be very dear to some men's hearts, does not appear to have had a very respectable origin, though that is not sufficient of itself to condemn the thing described by the word. That will depend upon its nature and purposes.

2. Its nature.—There never was one particle of doubt on the part of those compelled to pay the Moorish demands at Tarifa, or on the part of the United States compelled to pay "tribute" to the Algerines for a quarter of a century, about the nature of the transaction. The sign at Tarifa was minus, and not plus. To the credit of those pirates let it be said, that they never pretended to take what they took for the benefit of those from whom they took it. They took it for their own benefit. The action was abominable, but it was aboveboard. There was no deceit and no pretence about it. Both parties knew perfectly what was going on. What was delivered was just so much out from what would otherwise have been the gains of the voyage. And the truth is, the thing, tariff, is always true to the origin of the word, tariff, so far as this, that a tariff always takes, and never gives. The only phrase a tariff speaks, or can speak, is, Thou shalt pay! There is lying open on the table of the writer at this moment a stout volume of 417 pages, printed, with nearly as many more interleaved, entitled Tariff Compilation, published by the United States Senate in 1884, containing every item of all the tariffs passed by Congress from 1789 to the present time. One may read this volume from beginning to the end, or he may read it from the end backwards to the beginning, or he may begin in the middle and read both ways, and all he will find between the covers is a series of Demands made upon somebody to pay something. These demands, of course, are made upon, and realized from, the citizens of the United States, who are the only people under the authority and jurisdiction of the Congress. A tariff, then, may be correctly defined as a body of takings or taxings levied upon the people of any country by their own government on their exchanges with foreigners. How anybody can intelligently suppose that a body of taxes, which their own countrymen will have to pay, can be so cunningly adjusted as to become to them a positively productive agent, a blessing and enrichment to the payers, a spur to the progress of their Society, they may be properly called upon to explain who pretend to believe such an absurdity in the nature of things.

3. Its kinds.—There are two kinds of Tariffs under our general definition, very diverse from each other in their respective purposes, principles, incidence, and results.

(1) There is a tariff for Revenue. The sole purpose of a revenue tariff as such is to get money by this mode of indirect taxation out of the pockets of the People for the coffers of the Government, in order to be then expended, governmentally, for the general benefit of those who have paid the money in for that single end. The underlying thought of this kind of tariff, a tariff for revenue only, is, that the Government itself shall get all the money which the people are obliged to pay under these taxes, except the bare cost of collecting them; that only such taxes shall be levied at all as will come bodily and readily into the general Treasury for public uses; and no intelligent and justice-loving people will long tolerate tariff-taxes laid with any other intent than the economical support of their government, or laid in any other way than shall bring into the Treasury all that is taken out of the People. A Revenue Tariff, therefore, may be properly defined as a schedule of taxes levied on certain imported goods with an eye only to just and general taxation.

There are three vital principles on which a revenue tariff as such must always be levied. (a) As the sole object is to get money for the national treasury, and as money can only be gotten as the foreign goods taxed are allowed to come in, such taxes must be levied at a low rate on each article taxed, so as not to interfere essentially with the bringing in of that class of goods with a profit to the importers, and not at all to encourage the smuggling of them in. (b) A varied experience of all the commercial nations has shown, that it is not needful in order to derive a large and growing revenue to lay even low rates on all goods imported, but only on certain classes of them, so as to burden at as few points as possible the successful ongoing of international exchanges; since the prosperity ever induced by commercial freedom enables a country to import and to pay for in its own quickened products vast quantities of the articles subjected to the tax, so that large revenues come from low rates levied at few points. Here we lay bare the ground of a great income in the exemption of the bulk of imports from any tax at all. (c) Custom-taxes should be laid wholly or at least mainly on articles procured from abroad, and not also produced at home; for otherwise the incidence of the tax on the portion imported will necessarily raise the price also of that portion made or grown at home; and thus the people will pay more money in consequence of the tax than the Government gets from the tax in revenue. Three points, then, in a revenue tariff, namely, low duties on few articles, and these wholly foreign.

The best modern example of a purely revenue tariff is that of Great Britain since 1860. All duties are on one or other of the following sixteen items, namely, Beer, Cards, Chiccory, Chocolate, Cocoa, Coffee, Fruit, Malt, Pickles, Plate, Spirits, Spruce, Tea, Tobacco, Vinegar, and Wine. Of these, Spruce yielded no revenue in 1880; Cards, Malt, Pickles, and Vinegar, yielded in the aggregate that year only £1.491; leaving the other eleven items to furnish practically all the customs revenue; but of these Coffee and its three substitutes with Beer and Plate, furnished only £337.258, so that, the remaining five articles yielded £18.915.489, or 98% of the whole income in 1880. In other words, Fruit, Spirits, Tea, Tobacco, and Wine, brought in all but 2% of the customs-taxes of Great Britain in 1880. In 1890, the duties on certain Wines and Spirits having been lifted, there was a large surplus of revenue over the Estimates, which has just been devoted to the enlargement of the Navy. Every other European commercial country had a deficit that year as compared with its Estimates of the year preceding. The figures are not now at hand for an exact statement, but there can be little reasonable doubt that the "Five Articles" rendered at least 98½% of the tariff-taxes of England last year. If there be also some domestic production of any article taxed by the British tariff, a corresponding excise-tax on that part produced at home, which part would otherwise be raised in price by the tariff-tax to no advantage of the Revenue, enables that Government to get easily all that the people are made to pay in consequence of the tariff-tax on the imported part.

(2) There is a tariff under Protectionism so-called. The ruling aim in this second kind of tariff is not at all to obtain income for Government in order to promote the general good, but on the contrary by means of heavy taxes on foreign articles to raise the prices of corresponding domestic ones for the exclusive benefit of a few producers of these home goods at the expense of all home buyers of them. If these special tariff-taxes be so high and complicated as to keep out altogether the foreign articles, and so the Treasury realize nothing at all from the taxes on them, so much the more "protectionist" do they become, and so much the better pleased are the special domestic producers with the entire monopoly of the home market at their own prices. Such taxes are prohibitory and protectionist at the same time. Prohibition is the perfection of Protectionism. A Protectionist Tariff, accordingly, may be justly defined as a body of taxes laid on specified imported goods with a single eye to raise thereby the prices of certain home commodities.

The vital points of a protectionist tariff are also three, but these are the exact opposites and antipodes of the three points of a revenue tariff, so that it is self-contradictory and impossible to combine in one tariff-bill the two sets of contrary elements. A revenue tariff with incidental protectionism is a solecism. (a) If a tariff-rate is to be protectionist in character, that is, competent to raise the price of home products, it must be high, so as either to exclude altogether the corresponding foreign products, in which case there is no revenue at all, or else to make their price by means of the duty added reach the point at which the home producers plan to sell their own, in which case there will be very little revenue. For instance, when the Bessemer steel companies asked in 1870 for two cents a pound tariff-tax on foreign steel rails, they called it in terms in their "confidential" statement to the Ways and Means "exceptional protection," and admitted in so many words that they expected to supply the home market entirely, and so the Government would get nothing in revenue and the people be compelled to pay $44.80 extra for their home steel rails per ton. It is a little bit of comfort to think, that they only obtained $28 per ton, or 1¼ cents per pound, which was not quite prohibitory, so that the Government got a little revenue on steel rails, and the people paid for some years only about double for their rails what they were worth in a free market! To reach its end a protectionist tariff-tax must be high of necessity.

(b) No system of protectionist tariff-taxes can be entered upon or continued in any country except by means of many persons who all alike want their special products artificially lifted in price by legislation, and who are obliged to combine in order to get and keep what they want, so that protectionist taxes on a few things only were rarely or never found in a tariff; so contrary are such taxes to the common sense and common interests of man, that only strong combinations of many special interests can begin or maintain them, whence there must be many taxes if any under this strongly selfish scheme; and by an actual count of them by the writer in 1868 there were found to be 2317 distinct rates of tax assessed on different foreign articles in the Tariff of the United States, which was strikingly in contrast with the Revenue Tariff of Britain in point of the number of things taxed. So needful is log-rolling to the maintenance of protectionism, that the passage of the "knit-goods bill" in the summer of 1882, for example, was contingent on the contemporaneous passage of the famous "River and Harbor bill" of that year.

(c) While Revenue Taxes select by preference things wholly imported, Protectionist Taxes are placed of course on such foreign goods as are also and especially made or grown at home, otherwise their plain and sole purpose would be thwarted, which completes the contrast between the two kinds of tariffs. For illustration, Tea and Coffee are the best things possible to tax in a tariff for revenue, because (1) they are in universal consumption, and (2) they are wholly imported, and taxes upon them do not raise the price of anything else, and so the Government gets all that the people pay under them; for this very reason the taxes upon Tea and Coffee, which had yielded for years some $20,000,000 of revenue yearly, were thrown off in 1872 under protectionist leadership, by the deceptive cry of "a free breakfast table," in the subtle interest of commercial bondage; seeking to give the impression on the one hand that everything on the breakfast table was to be free, whereas nothing on it or around was to be free except the two beverages mentioned, and on the other hand that the removal of these two taxes was a great boon to the people, whereas the motive for the removal of these was to continue on the people burdens tenfold heavier. Eighteen years have rolled away since then, and Tea and Coffee are still upon the free list; the incompatibility of the two kinds of tariff-taxes is demonstrated in the fact, that there has not been for years a single tax primarily for revenue in the United States tariff,[10] the opposite protectionist idea having logically wrought itself out there; and the same incompatibility is shown in the British tariff, in which there has been no protectionist tax since 1860. Each aim logically carried out completely excludes the other aim.

The best and worst specimen of a protectionist tariff that the world has ever seen, has been in operation in the United States for thirty years, 1861-1890. Its inner history is not yet fully known by the public, but enough is known to expose the motives and to condemn the action of all those, whether constituents or congressmen, who knowing what they were doing, contributed to build up gradually that mass of incongruities and iniquities, under which the entire agricultural class of the country (nearly one-half of the people) has become impoverished, by much the larger part of the farming lands of the Union covered by heavy mortgages, and the ocean-marine of a naturally nautical people almost totally destroyed. Attempts more or less successful have been made at various times and at different points to conceal from the Public the impulses really behind the provisions of this tariff, and even the amount and the mode of the incidence of its taxes; many of the most protectionist taxes have been complex, combining upon the same article specific and advalorem rates, as for instance, upon blankets "50 cents per pound and 35% advalorem," so that it was difficult or rather impossible for the common reader or buyer to ascertain how much the tariff-tax really was; much of the language of the tariff-bills has been to the last degree involved and uncertain, often leading to perplexing disputes and costly litigations, and sometimes covering up a half-hidden purpose; importers have been bribed, as it were, in cases of doubtful legality, to pay the maximum rates demanded, by the prospect and promise that the extra sums if ultimately found by the courts illegal should be repaid bodily to them and not to the people who in the mean time had bought and paid for the goods thus enormously enhanced in price, and millions of the people's money have gone back in that way to importers and to spies and informers; a careless wording in tariff-descriptions has again and again covered goods not designed to be touched, as the lastings and rubber webbings of the shoemakers to the consternation of that great interest, which asked for no protectionist privilege for itself, but wanted its raw materials at their natural price; and the iron industry of Pennsylvania was bitterly angry at Secretary Sherman, who construed a line of the tariff relating to cotton ties used at the South more favorably to the planters than to the iron-workers, although the latter were strongly privileged at every point of the tariff (even at this) in the teeth of the interests of the consumers of iron, and the later honorable ambition of the Secretary to become a candidate for the Presidency of the United States was largely thwarted in consequence by the hostility of these miserable and revengeful monopolists.

There were fifty descriptions of iron and steel taxed by the tariff in 1879, and the average rate of tax on these at that time was 77% advalorem, and this was about the average rate for the thirty years under the consideration. On special articles of prime necessity and universal consumption, as steel rails, the tax varied under the rate of $28 per ton put on in 1870 from 85% to 100% advalorem; and the purpose of this particular tax was plainly seen in an average price of domestic steel rails in this country $24.44 a ton higher than in England for better rails under a longer guarantee for the eleven years, 1870-80; in other words, 87% of the tax paid on the smaller and better part imported was added to the average price of the larger and worser part produced at home during those eleven years. That the English rails were better and even regarded as cheaper under their guarantee with the $28 a ton added to their price, is proven by the fact that the N. Y. Central railroad company relaid their tracks with the English rails, and were putting them down in Detroit in plain sight of simultaneous track-laying across the river in Canada, where the same kind of English rails were costing $28 a ton less. Every passenger and ton of freight carried by steel-track roads in the United States in this interval contributed his and its share to make up to the roads this extra price paid for steel rails. In 1883 the tariff-tax on steel rails was reduced to $17 per ton. That this enormous artificial price of iron and steel products under tariff-taxes redounded wholly to the profit of the capitalists concerned, and not at all to the benefit of the laborers concerned, is shown by the Census of 1880, which gives $393 as the average pay for that year of the persons employed in the iron and steel industries of the country; and the late Senator Beck of Kentucky demonstrated on the floor of the Senate, nemine contradicente, that only 8.8% of the value of the products of the Bessemer steel industry in 1881 went to the laborers employed in it, while 66.9% of the same went to the capitalists as profits. Let the thoughtful reader remember at this point, that iron and steel products are only one of an indefinite number coddled and privileged by the tariff at the expense of the masses of consumers.

It is impossible to tell exactly how much more the people of the United States were compelled to pay for their commodities under tariff-taxes, whose ground-thought was to compel them to pay more and the more the better, than the Treasury received as the direct product of these taxes during 1861-90, but an approximation can be made within the truth whose results are fitted to startle the minds of all good citizens. For convenience' sake only, and because the official figures are complete for the shorter period, let us take for comparison the twenty years, 1863-82. The annual average tariff-income for those 20 years was in round numbers $158,000,000; but the ground-thought of the tariff-scheme in all those years was not to get an income for Government, but factitious prices for capitalists privileged by law; and during the last half of the time there were no tariff-taxes on Tea and Coffee, which had been before the principal revenue taxes. If, now, we may fairly suppose, that for each one foreign article paying a tax into the Treasury there were four domestic articles raised each in price as much as the foreign article paid in customs-tax, then it follows, that the People paid in each of those 20 years under customs chiefly protectionist, $632,000,000, or $12,640,000,000 in all, no penny of which went into the Treasury of the United States. That this supposition of 4:1 is wholly reasonable, appears partly from the known proportion (officially reported) between Domestic and Imported as to several leading articles, for example, of steel rails in 1880 the Domestic was 20 times the Imported, and the People paid 19 times more under the tax than the Treasury got; and on woollen blankets in 1881 the Treasury took in less than $2000, while the People paid in the extra price of blankets more than 1000 times that sum that year; and on iron and steel goods of all kinds the average tariff-taxes were about 77% in that interval of time and the vast bulk of the iron and steel goods consumed was boasted to be of domestic production.

Let us confirm these striking results by another more than reasonable supposition taken from the opposite quarter. The census of 1870 gave $4,232,000,000 as the value of home manufactures for that year, which we may fairly take as the average of the 20 years under consideration; now, if we throw off one-third of those home products as not affected by the tariff at all, and reckon that the rest were only raised in price 22%, which was only one-half of the average rate of tax on dutiable goods,—the average rate on these was officially pronounced in 1880 at 44%,—then almost precisely the same results will follow as before: two-thirds of $4,232,000,000 is $2,880,000,000, and 22% on that sum is $633,600,000. An acknowledged statistical expert of national reputation, Mr. J. S. Moore, calculated from data quite diverse from our own, that the People paid $1,000,000,000 in the one year, 1882, extra to the sum reaching the Treasury that year, under protectionist tariff-taxes. We see, then, clearly the methods, by which Protectionism reaches its ends, and we cannot but conclude, that these methods issue in monstrously unjust burdens on the masses of the People.

It remains, under this second general head, to examine the motives of those men, who have gotten the protectionist tariff-taxes put upon the different classes of imported goods in this country. Fortunately we have data of unquestionable authority, covering the entire first century of our national existence, which prove these two propositions: first, that no protectionist tax has ever been put on by our Congress from the first day until this day except at the instance and under the pressure of the very men personally and pecuniarily interested to secure thereby an artificial rise of price for their own domestic wares; and second, that these very men have been almost, if not quite, as active and determined to keep off protectionist taxes on other goods used by them in their processes of production, whether raw material, machinery, or accessories. These two propositions, taken together, demonstrate beyond a cavil the motives of the protectionists as a class. Of course, they have had their dupes and tools. Out of their own mouths and out of their own actions are they to be judged. One hundred years is long enough of time in order to display perfectly the motives of a prominent and persistent class of men, under that Government of the world, whose key-note is Exposure, and under that maxim of the world, Actions speak louder than words.

Thomas H. Benton, a United States Senator from Missouri for 30 years, 1820-50, himself in all that time a prominent leader and debater, and always an indefatigable investigator, published an Abridgment of the Debates in Congress from 1789 to 1856 in 15 large volumes. Each important tariff Debate for the first 70 years of our national history is distinctly brought out in these volumes, and the impulses and motives behind each leading speaker may be discerned as clear as day. The present writer has been over these debates with great care, and has mastered them in their substance and motives on both sides; and he has been besides a deeply interested reader and excerptor of all Congressional tariff-debates for more than 30 years just past; and now invites his present readers to take a cursory glance over this broad field, and satisfy themselves as to the motives personal and associate of the protectionist debaters from the first to the present time.

Because the new Constitution prescribed that "all bills for raising revenue shall originate in the House of Representatives," the main debates on the first tariff-act of 1789 were in that branch of the national Legislature. Nothing could be simpler or sounder than the basis of the new tariff as proposed by Madison, the acknowledged leader in the debates, namely, the so-called Revenue System of 1783, as adopted by the old Congress, and ratified by all the States in succession, excepting New York. That was, small specific taxes on eight articles, namely, Wines, Spirits, Tea, Coffee, Cocoa, Molasses, Sugar, and Pepper. In the earlier part of the discussion no other end than revenue was mentioned in connection with the taxes. Madison said: "I own myself the friend of a very free system of commerce: if industry and labor are left to take their own course they will generally be directed to those objects which are most productive, and that in a manner more certain and direct than the wisdom of the most enlightened legislature could point out; nor do I believe that the national interest is more promoted by such legislative directions than the interests of the individuals concerned." It is significant of after times that the first word in this debate respecting any other word than revenue through the tariff-taxes came from Pennsylvania; and equally significant, that the next and strongest words for something else than revenue came from Massachusetts; and more significant than either was the junction of the two States in influence and votes when it came to the final adjustment of the actual tariff-rates. Pennsylvania had already gotten well forward in the manufacture of iron and steel products, particularly of nails, and wanted "encouragement," that is, protectionist taxes upon the foreign products corresponding. Said Hartley of Pennsylvania: "I am therefore sorry that gentlemen seem to fix their mind to so early a period as 1783; for we very well know our circumstances are much changed since that time: we had then but few manufactures among us, and the vast quantities of goods that flowed in upon us from Europe at the conclusion of the war rendered those few almost useless; since then we have been forced by necessity, and various other causes, to increase our domestic manufactures to such a degree as to be able to furnish some in sufficient quantity to answer the consumption of the whole Union, while others are daily growing into importance. Our stock of materials is, in many instances, equal to the greatest demand, and our artisans sufficient to work them up even for exportation. In these cases, I take it to be the policy of every enlightened nation to give their manufactures that degree of encouragement necessary to perfect them, without oppressing other parts of the community."

Massachusetts was not a whit behind Pennsylvania in asking for discriminations in her own favor at the obvious expense of the rest of the country. New England rum was made out of molasses, and Jamaica rum was its competitor in public favor; distillers in the neighborhood of Boston and Salem wanted therefore a high tax on Jamaica rum, and a low one on the imported molasses used in the home manufacture. Madison was willing to discourage rum-making and rum-selling both in the interest of temperance, and proposed a tax of eight cents a gallon on molasses and fifteen cents on Jamaica rum, which called out this indignant burst from Goodhue of Massachusetts: "Molasses is a raw material, essentially requisite for the well-being of a very extensive and valuable manufacture. It ought likewise to be considered a necessary of life. In the Eastern States it enters into the diet of the poorer classes of people, who are, from the decay of trade and other adventitious circumstances, totally unable to bear such a weight as a tax of eight cents would be upon them. I cannot consent to allow more than two cents. Massachusetts imports from 30,000 to 40,000 hogsheads annually, more than all the other States together. Fifteen cents, the sum laid on Jamaica spirits, is about one-third part of its value: now eight cents on molasses is considerably more: the former is an article of luxury, therefore that duty may not be improper; but the latter cannot be said to partake of that quality in the substance, and when manufactured into rum is no more a luxury than Jamaica spirits."

The Senate in the First Congress sat with closed doors, and was thus more open than the House to the influence of interested petitions which soon began to pour in upon it, asking for amendments to the House bill in the line of protectionism; and through such amendments the Massachusetts and Pennsylvania members, with a few other members similarly inclined, partially carried their points into the first Tariff. The tax on molasses was fixed at 2½ cents a gallon, and on Jamaica rum at ten cents a gallon; nails were taxed one cent per pound imported; and an accepted Senate amendment classed Hemp and Cotton together as two products of the soil worth "encouraging," hemp at ³/₅ of a cent per pound and cotton at three cents a pound; yet hemp constantly "encouraged" to this day at the cost of ship building and other industries has never risen to the rank of a staple. Coal was also taxed protectionistly, at the instance of Virginia, then the coal-producing State. Note the three universal features of Protectionism in the original application of it to the United States; (1) the purely selfish call to tax one's neighbor in order to lift the price of one's own wares (nails), (2) the equally selfish resistance to such a tax as falls on one's raw materials (molasses), and (3) the final log-rolling among those legally privileged at different points (Massachusetts and Pennsylvania and Virginia).

Take a second instance of the same general point from our second Tariff, passed in 1816. Two Massachusetts young men, Lowell and Jackson, brothers-in-law, had started a modern cotton-mill in Waltham, near Boston, in 1813, and constructed in it, with the help of an ingenious mechanic named Moody, a power-loom; as soon as the war with England was over, and Congress in consequence began to talk about a new Tariff, Lowell went to Washington, and by personal influence with Mr. Calhoun, then the leading man in the House, with Mr. Lowndes his colleague from South Carolina, who afterwards reported the new bill, and with other members of Congress, contributed largely to the introduction into this Tariff of protectionist features towards cottons. Lowell struck strong at the start. He represented (doubtless with entire honesty) to Calhoun and Lowndes, both from a cotton-planting State, that a domestic market for raw cotton in addition to the foreign market would raise the price of that agricultural staple. Both were easily convinced that such would be the case, although both found ample reasons afterwards for altering their opinion in that regard. Lowell, the "cotton city" on the Merrimack, founded in 1821, was named from the successful lobbyist of 1816. Lowndes reported a tax on cottons of 33¹/₃% advalorem, with a proviso that all cottons should be assumed at the custom-house to have cost at least 25 cents to the square yard. This was the famous principle of the "minimum," a device to increase the protectionism without seeming to do so.

The debate on this feature of the bill was a marvel in many ways. The penetrating reader will not be at a loss for the reason of this. John Randolph moved to strike out from the bill the proviso for the cotton minimum, and argued at some length "against the propriety of promoting the manufacturing establishments to the extent and in the manner proposed by the bill, and against laying up 8000 tons of shipping now employed in the East India trade, and levying an immense tax on one portion of the community to put money into the pockets of another." Calhoun rejoined: "Until the debate assumed this new form, he had determined to be silent; participating, as he largely did, in that general anxiety which is felt, after so long and laborious a session, to return to the bosom of our families. It has been objected to that bill, that it will injure our marine, and consequently impair our naval strength. How far it is fairly liable to this charge, he was not prepared to say. He hoped and believed it would not, at least to any alarming extent, have that effect immediately; and he firmly believed that its lasting operation would be highly beneficial to our commerce. The trade to the East Indies would certainly be much affected; but it was stated in debate that the whole of that trade employed but six hundred sailors. The cotton and woollen manufactures are not to be introduced: they are already introduced to a great extent; freeing us entirely from the hazards, and in a great measure, the sacrifices experienced in giving the capital of the country a new direction. The restrictive measures and the war, though not intended for that purpose, have by the necessary operation of things turned a large amount of capital to these new branches of industry. But it will no doubt be said, if they are so far established, and if the situation of the country be so favorable to their growth, where is the necessity of affording them protection? It is to put them beyond the reach of contingency."

Thus Calhoun goes on, making the greatest mistake of his life which he regretted to his dying day, to give plausible reasons for his insistence and his vote, but he does not even touch upon the real reason. If he had detailed his conversations with Lowell, it would have been far more to the point. His motive, like that of every other man in Congress who has urged protectionist schemes, was the special benefit of some of his constituents at the more or less concealed expense of their countrymen. But, as always happens when men really act from unavowed motives, he was suspected of having them; and he guarded himself: "He was no manufacturer; he was not from that portion of the country supposed to be peculiarly interested. Coming as he did from the South, and having in common with his immediate constituents, no interest but in the cultivation of the soil, in selling its products high, and buying cheap the wants and conveniences of life, no motives could be attributed to him but such as were disinterested." But Randolph still charged, that the discussion showed "a strange and mysterious connection" between this measure and the National Bank bill which had just passed. This was a loophole of escape for Calhoun: "he wished merely to reply to the insinuation of a mysterious connection between this bill and that to establish the Bank. He denied any improper or unfair understanding, and could challenge the House to support the charge."

A beautiful instance of the confession, which all protectionists make in action when it comes to the pinch, that a rise of price is at once the object and the result of protectionist tariff-taxes, is found in the awkward attempt of Congress to relieve indirectly the burnt-out citizens of Chicago in 1871. The great fire occurred in October of that year. In the winter following a bit of legislation took place in Congress in consequence, which is too instructive to be passed by without notice, because in all the parts of it taken together we have in epitome the motives and the processes and the prompt confessions of Protectionism. Contributions were taken up all over the country, and even in Europe, for the relief of the people of Chicago. As Whittier puts it:

But cannot Congress do something to help rebuild the ruined city? April 5, 1872, President Grant set his signature to a congressional bill enacted to last one year only, and for the express benefit of Chicago alone, to exempt all building materials except lumber from the operation of tariff-taxes. As a public and emphatic confession on the part of Congress, that tariff-taxes raise the prices of protectionist goods, and that the remission of such taxes lowers the prices of such goods and becomes a boon to the buyers, all this is refreshing and satisfactory; but why was lumber, by much the most important of the building materials needed, excepted from the bounty of the legislators to the unfortunates of Chicago? The bill applied to Chicago only, and was to last but one year at best! The bill as drawn and debated included all building materials. Why was lumber excepted? Because, while the bill was still pending, a special car filled with the lumber-lords of Michigan and Wisconsin was rolled to Washington in haste, and the potent influence of these men was sufficient to cause the express exemption of their product from the intended cheapening (for one year) of the building materials for desolated Chicago. The brief official record of this curious transaction will be found in U.S. Statutes for 1872, page 33. It needs no comment but the obvious one, that here is the whole matter of protectionism in a nutshell;—the motive, the open confession, the greedy lobby determined to thrive on their neighbors' misfortunes, the inhumanity, the spirit of monopoly, the infernalism,—a game of grab from beginning to end!

Shameless as the protectionist debates in Congress have been from the start, in letting it be plainly seen, that the sole motive of their efforts is an artificial rise of price in certain goods which their fellow-citizens would be compelled under the law to pay, the debate in the House of Representatives in the spring of 1883 was by far the most shameless and avowed in this respect of any that ever transpired there. In the last days of that debate all pretence of any action for the good of the country at large dropped utterly out of the discourse: the old fallacies and disguises and subterfuges of "home markets" and "higher wages" and "commercial independence" were no longer put forward even in word under the clash of selfish interests, and in the eagerness to secure for their wares a factitious price to be paid by their countrymen; proposed reductions in tariff-taxes were fought off by these men, and in many instances still higher taxes were urged on, under their unabashed avowal that, unless home prices were thus stiffened and uplifted, they could not make and sell their wares at a profit; one honorable member from New Jersey brought his pottery wares upon the floor of the House, and tried to demonstrate to his fellow-members that, unless these very goods were hoisted in price, by taxes on his foreign competitors, he could no longer tread his clay and work his wheels with profit to himself: in other words, he and others like-circumstanced, by lobbying and log-rolling, persuaded Congress to pass so-called laws to compel their countrymen to hire them to carry on what they publicly alleged were unprofitable branches of business. By their own confession, the only trouble with their goods was, that they were inferior in quality and superior in price to otherwise similar goods in the open market of the world.

One more, and the latest instance, out of hundreds equally accessible and equally conclusive, will suffice for a demonstration of the point in hand. In the early summer of 1890, a Massachusetts member of the House of Representatives, an avowed protectionist from an alleged protectionist district of that State, waxed so warm in arguing against a protectionist tax upon a certain raw material useful in tanning leather, that he took off his coat and proceeded in his shirt-sleeves! One would suppose, both from his zeal and the tenor of his speech, that he was a veritable free-trader! But no! He had argued a hundred times that protectionist taxes (to be paid by other people) were a good thing for the payers, and enriched the whole country; but lo! it turned out in this case that he himself was a buyer of this particular material, and lo! he did not relish the tax-lifted prices caused by the tariff. They were all wrong. They must be fought off at all hazards, even in the hottest weather! This is a very respectable gentleman, well thought of by his neighbors in Worcester County, but his protectionism is not respectable. It is chameleon-colored. It is one thing in one light, and an opposite thing in another light. Indeed, the protectionist congressman has never yet been discovered in this country, who was fond of paying protectionist taxes himself, or willing that his immediate and powerful constituents should pay them! It has been proven many times over, that the very strongest friends of a Free List in this broad land have been certain so-called protectionist Senators and Representatives.

From these few sample-examples, the reader of penetration will perceive, that there is no element of logical coherence or moral decency or even outward respectability in Protectionism. There is no principle in it or of it. It does not hang together. It walks in darkness and not in light. It is full of deceit. It is fond of disguises. It is contrary to common sense. It offends justice. Morality frowns at it. It has no basis in any Science, least of all in the Science of Buying and Selling, whose best impulses it feebly tries to deny, and whose largest and most innocent gains it fain would destroy.

Next in order we will examine, in the third place, a few of the chief Fallacies and Falsehoods, by which Protectionism has striven to give itself a standing in the commercial world. In our day at least, these are, without exception, afterthoughts and subterfuges. We have just seen under the last head the real impulses, plain as a mountain peak, which put on and keep on and pile up these taxes on the masses of the people; but these real motives will not bear inspection and public criticism, and so plausible reasons must be found or at least propounded, which shall do the double duty of covering the real reasons, and of seeming to convince while they only perplex the victims of the scheme. These plausibilities we propose now to analyze and to expose. The test of any alleged truth is its harmony with acknowledged truths: the test of any propounded error is its incongruity with and contradiction of acknowledged truths. On a logical comparison, therefore, of any false proposition with any known truth, the latter will be sure to fling out its flat contradiction and floor the falsehood forever. Protectionism contradicts economic truths at practically innumerable points, but we will now watch the collisions at the principal points only.

Fallacy A: that a nation may still sell to foreign nations while prohibiting the buying from them. Protectionism is multiplied prohibitions on the buying of goods from foreigners. Between four and five thousand of such prohibitions deface our national Statute-book at the present moment. All the while, however, the assumption underlies this policy, and the express proposition is often heard in different forms along the lines, that our citizens may still sell their products to foreigners, nevertheless. England has got to buy our cotton or starve: the Continent is compelled to take our pork products, for they are the cheapest food in the world: how can China or India help taking the silver from our mines? Softly. Buying and selling from the very nature of it is never compulsory, but always voluntary. A commercial service is never rendered but in plain view of a return-service to be received. The mental estimation of each buyer is couched in the very terms of what is offered in return by each seller. Buying and selling from its inmost nature is always one act of two persons acting conjointly and inseparably to the advantage of each. How, then, can the individuals of one country sell anything to individuals of another country without at the same instant buying of these in return? The act of selling is just as much buying as it is selling, and the act of buying is just as much selling as it is buying. As we have abundantly seen already, the introduction of Money as a medium in the transaction makes no difference in the nature of the exchange of commodities internationally. The postulate, therefore, that the people of one country can continue to sell products to the people of another while refusing to take their products of some kind in return, is an absurdity in the nature of things and an impossibility in the world of facts. A market for products is products in market.

All known facts confirm this irrefragable reasoning, and discredit utterly the fallacy in hand. When France and Germany a few years ago gave back to our protectionists a dose of their own medicine, and prohibited American pork-products, ostensibly because they feared the trichinÆ but really to cajole their own farmers under the plea of protectionism, their brethren in the faith have made up all sorts of faces ever since, have wound up the respective diplomatic clocks to strike twelve against the too presumptuous countries which ventured to restrict American products in their ports, have protested and proclaimed. What is the matter? Is not sauce for the goose sauce for the gander also? Have not American protectionists shut out French and German products 100:1 under the same plea now used on the Continent? "But we cannot sell our products abroad," cry the angered Western farmers. Of course they cannot, because restrictions on buying are restrictions on selling; and additional restrictions of the same kind put on French and German buying are of course still further restrictions on American selling. And the farmers are, as usual, the victims both ways.

To hear an ordinary American protectionist talk, one would think that Great Britain is the enemy of mankind for admitting into her ports practically without let or hindrance the goods of all the world. Free Trade England! Let us look a moment. England has to pay for all these goods received from all quarters. In what does she pay? In her own goods, of course. What is her market? The whole world. Is that market ever slack on the whole? Never. Is she ever flooded with cheap goods? The more she buys the more she sells of necessity. How much does she sell per capita of her people? More than twice as much as the United States sells per capita. How can she sell so much of her own stuff? Because she buys freely other stuff from all the world. What are the limits to her capacity to sell her own goods to foreigners? Precisely the limits of her willingness to take in pay other goods from foreigners. Cannot these limits be overpassed in either direction? By no possibility: when people can no longer pay for what they buy, the buying ceases; and when they are not permitted to take their pay for what they sell, the selling ceases. Is this free trade profitable to Great Britain? Immensely so in every way. Whither has it carried up her ocean-marine? To the topmost notch. Is capital abundant in England in bulk, and are its loanable rates low? England is the richest country in the world, and all nations resort thither to buy. What is the source of this vast volume of Capital? The only source of Capital is savings from the natural gains of Buying and Selling.

Is Great Britain willing to take in goods from the United States? Certainly, under the universal conditions of taking in foreign goods at all. Is the United States willing to take in British goods in pay for her own goods exported thither? She is not, except over protectionist barriers averaging 47%. Is it a good thing for the United States, that Great Britain takes in her goods freely? We should suppose so! Does the former already sell to the latter and through the latter more goods than to all the world besides? Much more. Could this profitable trade be easily increased? It could be quadrupled in a very short time. How? By simply according to our citizens a decent liberty, which is their inalienable right. Would the United States like it to be commercially treated by Britain exactly as the former treats the latter? It would bankrupt the United States in six months. Would our protectionists like it? It would make them howl. Is it the commercial salvation of the United States that Britain is immovably for free trade with her and the rest of the world? Nothing else saves her from commercial ruin. Can the ghost of a reason be given, commercial or other, why the United States should continue to fling double fists into the face of British goods seeking a market and so making one? Not a shadow of a shade of a good reason was ever given for such folly, or ever can be.

It is more than a pleasure to acknowledge at this point the great service done by James G. Blaine, Secretary of State, during the summer of 1890, to Country and Commerce, by his courageous avowal contrary to his own personal record and to the vehement behest of his party, that the economic principle just enunciated is sound, and should be at once applied by the United States in connection with all the countries of Latin America. In a letter to the Senate on the results of the recent Pan-American Conference, he said: "The Conference believed that while great profit would come to all the countries, if reciprocity treaties could be adopted, the United States would be by far the greatest gainer." The principle of reciprocity is the principle of free trade applied by both parties to the trade. It is the sound principle, that goods buy goods and pay for goods at the same instant to a mutual profit. Manifold reiterations of this principle came from the Secretary that summer, especially in vigorous protestations against the McKinley tariff-bill then pending, alleging with truth that "there is not a line or a section in the bill which opens a market for another bushel of wheat or another barrel of pork." The unequivocal statements of a favorite statesman have roused the somewhat indifference of thousands of citizens, and make certain the speedy prevalence in the United States of the unassailable doctrine, that any People must buy freely if they would sell broadly.

Fallacy B: that tariff-taxes are needful in order to start infant industries. There is no analogy whatever between Child-bearing and Child-growing and any form of Buying and Selling at any time, but the deceit in the wretched simile has cost the world billions of dollars of pure loss. To bring up infants from birth to maturity is indeed a good deal of a task for the parents, but it is not in any sense an economical task: the parents neither ask for nor receive a return-service in kind: the transaction is wholly moral in its character, and not economical at all: there is no party of the second part in the premises: there is a free giving, and that is all. Buying and Selling, on the contrary, has no infancy, and no maturity and no old age. This particular Minerva springs at once full-grown and full-armed from the brain of Jove. The conditions of Trading are forever the same; with no reference to the age of the parties, the antiquity of the industry, or any other such irrelevant thing. If any person anywhere (old or young) has got something to sell, and finds (directly or indirectly) any other person anywhere who wants his wares and can pay for them,—all the conditions of mutual profit are present, and everything else is an impertinence.

Much more than this. Tariff-taxes have to be paid by somebody. Their payment is inexorable at the custom-house, and interest and other charges are added before the sum reaches the ultimate payer. But the ultimate sum however made up is exactly so much out of the commercial gains of the payer. The sign is every time minus and not plus. When egregiously high tariff-taxes are multiplied in number, and all the additions are made to them, they become an incalculably large sum, every cent of which has to be paid out of the gains of current Industry. Now, what a queer way that is to foster industries! What a queer way to help start them! It takes Capital to start new industries, and to carry on old ones; but tariff-taxes (with all their accretions) take just so much out from what would otherwise naturally become Capital. That is to say, all Capital is savings from the gains of Exchanges; and these gains are reduced by every tariff-tax that touches them directly or indirectly. Taxes from their very nature can help nobody. They hurt everybody. What a device this is to start new industries with, namely, to pick the pockets of the very men, who are to start the industries, if they ever are to start at all! Lower your reservoir to begin with, in order to give head and force to your faucet flow!

But this is not half of it. On what industries do the protectionist taxes fall at first to weaken and discourage them? Of course on the natural and profitable ones, which only ask to be let alone in order to maintain a healthful life and growth. If, under natural conditions, any industry is in existence, one may be perfectly sure it is profitable, since Profit is the only thing in the world that can start and build up an industry: when the profit ceases, the trade ceases of necessity: the motive to it is gone. In behalf of what sort of industries are these taxes ostensibly and plausibly levied? Only, if we are to believe the protectionists, the weak and presently unprofitable ones. It is the infant industries that need the nursing-bottle! That is to say, tax down and perhaps destroy the profitable industries, the industries that pay, that can paddle their own canoe and no thanks to anybody, in order to bring forward certain other industries, which by confession and open proclamation are unprofitable, and can only start by taxing their neighbors! Of course, there is a cat in this meal, and we shall let her out of the bag in plain sight presently; but we are taking now our friends, the protectionists, at their own word, and exhibiting their marvellous wisdom under the terms of their own choosing. What a blessed way for a nation to grow rich, to smite down with high taxes the active and enterprising and independent and therefore profitable industries with one hand, and grope around with the other to find some poor and inactive and unfrugal and naturally unprofitable industries, in order to fetch forward these by means of the plunder filched from the others!

To go back for historical illustration to Washington's first administration, when the first (extremely mild) protectionist taxes were levied in this country, we have the highest authority for knowing that many of the leading branches of manufactures were prosperous and profitable. They had no artificial help in order to start, but on the contrary had had continual discouragement for a century under the miserable protectionist policy of the mother country. Washington himself was inaugurated in a dark brown suit of woollen cloth of American manufacture: so was John Adams inaugurated first Vice-President of the United States about the same time in a garb of wholly native manufacture.[11] This was in April, 1789. In November of the same year, Washington returned to New York from his first tour in New England "astonished both at the marvellous growth of commerce and manufactures in New England and the general contentment of its inhabitants with the new government" (Schouler, p. 117). Alexander Hamilton, the first Secretary of the Treasury, in his famous Report to Congress on Manufactures, in 1791, enumerated seventeen branches as then thriving so as to fairly supply the home market, and settle into regular trades. These were, skins and leather, flax and hemp, iron and steel, brick and pottery, starch, brass and copper, tinware, carriages, painter's colors, refined sugars, oils, soaps, candles, hats, gunpowder, chocolate, snuff and chewing tobacco. It is plain enough from the debates of the time as well as from the nature of the case, that the protectionist taxes in our first two Tariffs, already considered here in detail, although they were comparatively slight in number and amount, fell in the way of discouragement on these incipient yet independent manufactures as well as upon all the farmers of the land. There can be but little rational question, that the woollen industry was sounder at the core in 1789, when Washington was inaugurated in native woollens, than in 1889, when Harrison was inaugurated in the same, the ostentatious gift of a firm of protectionist woollen manufacturers shortly afterwards adjudged to be bankrupt and fraudulently so.

The best point, after all, to make against this hollow fallacy, is the practical one, that no industry whatever, whether "infant" or other, has ever come in this country into an acknowledged self-sustaining position under a whole century's tariff-taxes. Salt, hemp, coal, cottons, woollens, nails, and iron and steel products generally, were the chief articles protectionized at first, and have been protectionized ever since, but no one of them all has ever come into a condition of self-support according to the view of the privileged beneficiaries. Each one of them was an old industry, and a relatively rich industry, when it was taken under the "fostering care" of the tariff-taxes, levied for their further enrichment on the masses of the people; and it was only greedy and secret combinations among these for that purpose, which put them at first and has kept them ever since in the rank of public beneficiaries. The simple truth is, that diversity of employments is rooted in human nature and in the circumstances amid which God has placed men, and so far is it from being true that taxes and restrictions are needful in order to foster manufactures, taxes and prohibitions cannot prevent them from springing into life! They are just as natural to men and to colonies as agriculture is. Indeed, agriculture can scarcely take a step without them. The farmer must have ploughs and carts and other implements; and, depend upon it, there are some natural mechanics in that colony. Clothes are as needful as food, and spinning and weaving in some form will begin at once, and prohibitions will be powerless to stop them.

Deadly to the fallacy in hand is the word of unquestionable History. Any one may read in Palfrey and Bancroft and Hildreth such facts as these, scattered all along through the noble volumes. The manufacture of linen and woollen and cotton cloth was begun in Massachusetts in 1638, in Rowley, by some families from Yorkshire; and became so remunerative in a couple of years that some acts of the General Court designed to stimulate it were repealed. Brick-making and glass-works and the manufacture of salt were all begun in Massachusetts before 1640. In 1643, the younger Winthrop established iron-works in Braintree and Lynn, which after some losses were successfully prosecuted. Within less than twenty years thereafter, tannery and shoemaking had made such strides, that boots and shoes became articles of export. That these were no fancy beginnings in manufactures, we may strikingly learn from an Act of Parliament passed in 1698. Notice the date. This law is a sample of many more:—"After the first day of December, 1699, no wool, or manufacture made or mixed with wool, being the produce or manufacture of any of the English plantations in America, shall be loaden in any ship or vessel, upon any pretence whatsoever,—nor loaden upon any horse, cart, or other carriage,—to be carried out of the English plantations to any other of the said plantations, or to any other place whatsoever." Thus the fabrics of Massachusetts were forbidden to find a market in Connecticut, or to be carried to Albany to traffic with the Five Nations. "That the country which was the home of the beaver might not manufacture its own hats, no man in the colonies could be a hatter or a journeyman at that trade, unless he had served an apprenticeship of seven years. No hatter might employ more than two apprentices. No American hat might be sent from one plantation to another." In 1701 the three charter colonies are reproached by the lords of trade "with promoting and propagating woollen and other manufactures proper to England." In 1721 New England alone had six furnaces and nineteen forges, and there were many others in Pennsylvania and Virginia. Parliament enacted in 1750 that no more mills should be erected in America for slitting or rolling iron, or forges for hammering it, or furnaces for making steel; and in certain cases, agents of the crown were authorized to tear down such establishments as "nuisances." How far all the arts of navigation had been carried in the Colonies before the Revolution, every one may read in Burke's famous speech on Conciliation with America. How far the products of the loom, the forge, and the anvil, were already being exported, in spite of British legislation, to other countries, any one may see in Lord North's last proposals and concessions to ward off Independence.

Protectionism having once fed its petted beneficiaries from the public crib, that is to say, from taxes wrenched from the many to enrich the few, invariably clamors for more and more rations for its pets from the same public source. Not only does no industry become self-supporting by its bite and its sup, but each becomes according to its own facile representations and representatives, more and more helpless in itself, more and more shameless in its demands, more and more entitled to public charity, and less and less inclined to surrender one iota of past or present privilege. The daughters of the horse-leech cry continually, Give! Give! The following schedule relates to woollens mainly, but it is a fair sample of many other protectionized classes of goods under the successive tariffs in this country, in point of increased taxes on the people in their behoof. While these lines are being written, the McKinley tariff-bill, so-called, having passed the House, is pending in the Senate. It is significant, that this piece of legislation, whether it be finally enacted or not, proposes to open the second century of the United States Protectionism by largely hoisting the tariff-taxes along the main line. Infant industries indeed!

It is also significant in this connection to read an extract from the Report of Mr. William Whitman, President of the National Association of Wool Manufacturers, dated March 29, 1890, to the Stockholders of the Arlington Mills, Massachusetts. "I have been your Treasurer for a consecutive period of twenty years. During this period the average earnings have been 20⁸/₁₀ per centum upon the capital. The earnings of the last year were nearly three and a half times those of the year previous, and there is every indication that the current year will be the most profitable one in the company's history."

Fallacy C: that a home market is better and broader than a foreign market. Professor Thompson of Pennsylvania has publicly and repeatedly stated, that, by a persistent policy of Protectionism a "home market" would be created for all the bread-stuffs that this great country produces; and John Roach, the shipbuilder, expatiated at length before the Tariff Commission of 1882 on the advantages the farmer derives from the better "home market" already created by Protectionism. To come nearer home in place and further down in time, there was organized in Eastern Massachusetts with headquarters at Boston in some connection with the national election of 1888, a so-called "Home Market Club" of large proportions. It is generally understood in the State, that a large minority, if not a majority, of the members, are displeased with the McKinley Bill of 1890, declaring that the mustard is carried to fanaticism in this bill, that neither the "home market" nor any other can profit by such a series of prohibitions.

However this last may be, it is plain, that a ridiculous and most harmful fallacy underlies all references to a "home market" in any connection with foreign trade. It is simple Gospel charity to believe, that Thompson and Roach and the founders of the Home Market Club and all others, who repeat this wretched stuff, never stopped in their thoughts long enough to inquire what a "market" really is, never analyzed into its simple elements that composite thing called a "market," but each and all in turn have taken up a catch-word carelessly which seems on the surface to have some significance though in reality it has none.

All will agree, if they will stop to think, that a "market" is always made up of buyers with return-services in their hands. A bigger home market than before consists only in more domestic buyers than before, all ready with acceptable pay in all their hands. More persons than before, more services-in-return than before. Now, if Protectionism can enlarge the home market, it must be (1) either by increasing the number of births or diminishing the number of deaths in a given time in a given country. Precisely how big bundles of big taxes, which the whole population must pay in one form or another and over and over again, may be made to stimulate births or prolong lives, no reasonable man can see, and it is not unreasonable to deny that a protectionist can see it. But conceding that he can see and show this, his task is then but half done, for he must proceed to see and show how these same onerous taxes are able (2) to multiply the return-services in the hands of this increased population!

If he think at all, the protectionist is compelled to remember, that his system is always and everywhere a series of prohibitions on profitable trade. A profitable trade always gives birth to gains. It always gives birth to Capital. It always gives birth to Plenty. That is the nature of it, and the Divinely ordained blessing on it. But when the greater part of these gains are artificially cut off, when the possible capital is reduced in volume, when the scarcity comes in which is the primary purpose of Protectionism to create, it shall go hard if there be even as many return-services as when the process began. Not a better "home market," but a more meagre one, is the inevitable issue of restrictions and prohibitions.

If our protectionist try to get out of this snug place, in which he now finds himself, provided he is able to feel the force of any logic whatever, by claiming that his broader "home market" is to be made by new immigrants with old-world values in their hands to buy with, he certainly cannot escape by this route, because (1) he must in order to do this see and show what there is in big taxes enormously multiplied to invite immigrants here at all; and (2) our typical protectionist is scared to death by the handiwork of foreign "pauper labor" wherever exposed for sale, and of course he is not prepared to welcome the pauper laborers themselves, of which class as described by him the immigrants would mostly consist; and besides, the tariff would not admit to our shores the old-world values, which would be the immigrants' sole return-services to help make up the new market!

Within a week of the present writing, Senator Morrill of Vermont has broached from his place the idea in debate, that the industries of the United States can be so stimulated by protectionism as to cause the consumption of all the agricultural products of the United States. Well, when? The stimulus has been applied now just thirty years under Mr. Morrill's own eye, and by a tariff called by Mr. Morrill's own name, increasing its rates every little while, even in 1883, when the public pretence was to diminish them; and agricultural products of all kinds, including lard and pork and wool, have never been so "deadly dull" as in this interval of high protectionism. Scores of thousands of bushels of well-ripened Indian corn were burned for fuel in the more western States and Territories the very last winter, because the market for it was too poor to pay for its transportation to Chicago over protectionized rails, and in cars built of tariff-cursed lumber, every nail and bolt and screw in which doubled in price from the same general causes. If Mr. Morrill were not in his dotage, or if in his prime he had ever closely analyzed a single case of trade, foreign or domestic, he would see that the abandoned farms of his own State reckoned to be about one-third of the cultivated land on the eastern slope of the Green Mountains to the Connecticut River,—Mr. Morrill's own native region and residence,—abandoned farms for two years past assiduously sought by State officials to be filled in if possible by immigrants from Sweden virtually giving them the lands and farm-buildings,—fling out their flat contradictions to this senatorial drivel; that the constant decline for a quarter of a century of the farming population in every State in New England gives the lie to this miserable proposition; and that the constantly increasing area of mortgaged farms in every agricultural State in this Union is an overwhelming proof that the "home market" for farm staples has been growing constantly worse for years under this boasted protectionism.

The year 1890 is likely to prove the pivotal point of time in the swing of this whole proposition of Deceit, for two reasons, namely, (1) it is the year of the decennial Census, in which at least a half-hearted attempt is being made to bring out the aggregate area in each State of the mortgaged farming lands, and nothing can prevent the appearance in which of the lessening volumes of population in the purely agricultural communities; and (2) the year has already been marked by the political revolt from the party of protectionism of the masses of the farmers in the Mississippi Valley, and their organization into "Farmers' Alliances," naturally and demonstrably hostile to all Restrictions on the sale of farmers' produce.

Fallacy D: that protectionism tends to raise the wages of general laborers. In our third chapter, the whole doctrine of Wages was clearly and carefully laid down, and it is only needful now to remind the reader of two or three of those fundamental principles. The Labor-giver and the Labor-taker only touch each other at the old points of reciprocal Desires and Renderings. There are two persons standing in that relation each to each. A rate of Wages is always a result of a Comparison. If the Labor-takers, whoever they may be, more strongly desire the services of the Labor-givers, whoever they may be, other things remaining as before, there will be a rise in the rates of Wages, because Effects always follow the operation of Causes in Economics, as in all other scientific spheres; and if the Labor-takers, for any reason, desire less than before the services of Laborers, other things being equal, the general rates of Wages will decline of necessity.

Now, what is the necessary effect of Protectionism upon the general Demand for Laborers? How is the whole class of Labor-takers affected by prohibitory tariff-taxes? Note every time, that it is the presently and independently profitable industries, the industries that ask for nothing except to be let alone, that are struck and restrained by these tariff-taxes; the fact that any industry is successfully going forward under its own motives is sufficient proof of its own profitableness; these are the industries, in every case, which are curtailed by restrictive tariff-taxes, their former gains are lessened of course and by design, and their motives consequently to hire Laborers to carry on these branches of business now taxed and tormented are lessened; less Desire for Labor-givers gives laborers less every time round; the so-called argument of Protectionists is, to introduce alleged unprofitable industries by means of taxing down profitable ones; and pray, what effect must that have upon the general Desire to employ Labor-givers, and consequently what effect upon general rates of Wages?

Take one look further along this same line. Tariff-taxes of this character are designed to keep out, and do keep out, foreign wares, which are the natural and profitable market for domestic wares: how will this forced exclusion affect the Demand for laborers to make or grow the domestic wares whose market is now lost? And what is the influence on the Wages of those whose services are now in lessened Desire along the whole line? Causes produce their Effects everywhere and every time.

Dissatisfaction among, and actual disaster to, Labor-givers as a class, have always followed the imposition of protectionist tariff-taxes in this country, as a matter of plain observation and record; have followed increasingly and more disastrously increased restrictions and prohibitions on profitable trade; "Strikes" on the one hand to resist a lowering or secure a lifting of Wages, "Lockouts" on the other to bring laborers to terms, "Shut-downs" for pretended repairs in order to gain time to tide over the gluts that always accompany artificially restricted markets, semi-hostile relations between Employers and Employed, interruptions to travel and transportation, timidities of Capital fatal to new and enlarged enterprises, have never characterized this country so strikingly as during the quarter-century of Protectionism culminating in 1890.

The following table accurately compiled by Editor Philpott of Iowa, from the National Census, shows in remarkable figures the relatively slow rate of progress of the Nation in thirteen essential items of growth under the Morrill Tariff, as compared with the rapid rates of progress in the leading lines under the Walker Tariff. The comparison lies in the per centum of increase over the previous decade of the period 1850-60 relatively to each of the two periods 1860-70 and 1870-80: the average of the last two periods is taken for the sake of an easier comparison of the progress of the one decade (Walker) with the average of the two later ones (Morrill).

The State of Massachusetts has been diligently and scientifically taking the Statistics of everything relating to Laborers as such for many years; and we take now by way of confirmation of what has just been written a few statements of fact from the official Reports. One-third of Massachusetts wage-earners were out of work one-third of the time under the benign influence of Protectionism [1887]. Wages went down in Massachusetts on the whole average 5 per centum 1872-83, while in the same interval of time they went up 9 per centum in Great Britain [1885]. Wages in Massachusetts advanced in 1830-60 (Walker) 52 per centum and in 1860-83 only 28 per centum (Morrill). What is called the needful cost of living increased in Massachusetts between 1860 and 1878 (Morrill) 14½ per centum in spite of immense cheapenings in costs of production and transportation [1885].

The U. S. Government has been gathering for a long time important Statistics relating to Laborers and their Wages and their Costs of Living, not only in the decennial Censuses but also in Consular Reports and in the Reports of a national Commission established for that purpose. We excerpt a few relevant statements from these almost at random. Wages in free-trade England are from 50 to 100 per centum higher than they are in any protectionized country on the Continent of Europe. The aggregate Values of this country increased 1850-60 (Walker) 126 per centum, and in 1870-80 (Morrill) only 80 per centum, after reducing the census values of 1870 to a gold basis. Vessels American-owned and American-built controlled three-fourths of our foreign carrying trade in 1856, and less than one-sixth of it in 1886.

The Census of 1880 gives the total number of persons employed in the great subdivisions of industry in the United States as follows:—

The following table compiled from the censuses of the last four decades will be found to yield food for thought in the light of the present paragraphs. It relates solely to manufactured goods at the four successive epochs.

Our manufactures were put down in the Census of 1880 as in value $5,369,579,191. But this sum contains $1,670,000,000 that does not strictly belong to manufactures, such as flouring, lumbering, blacksmithing, sugar-refining, coffee-roasting, slaughtering, and a few others. This sum being taken out, there is left in round numbers but $3,700,000,000. This is not a great amount for 50,000,000 of people, and for a land with such natural advantages for manufacturing as our own.

Fallacy E: that the costs of Wages to employers and of Materials to manufacturers somehow justify Protectionism. The harmful confusion is constantly made here between Rates of Wages and Costs of Labor—two very diverse matters. Rates of Wages depend on a very different set of circumstances from Costs of Labor. Failure to draw this distinction, and a desperate desire to clutch even at a straw with which to bolster up absurd Restrictions, have made a hotch-potch and a caricature of attempted argument at this point. Rates of Wages have always been relatively high in this country as compared with the countries of Europe for two general reasons: (1) the country is new, with enormous natural advantages of every sort, with comparatively few laborers competing steadily with each other for work, large numbers of persons passing constantly out of the employed into the employing classes; and (2) there has almost always been from the first, and there is likely to be again in the immediate future even if there be not at the present moment, a Money in this country depreciated below the gold standards of Europe, in which the rates of current wages are always reckoned, and which makes them seem to be higher than they actually are in purchasing-power. On the other hand, Costs of Labor have always been, and are now, low in this country as compared with Europe, for two general reasons also: (1) all classes of laborers are more efficient and skilled in this country than in Europe, working with more energy more hours in the week, under less cost of superintendence, being as a rule more temperate and healthful and educated persons, so that employers get more for what they give than do employers abroad; and (2) the cost of that to the employers in which the laborers are paid, whether money or other valuables, is always less here than abroad, because the money usually is depreciated money which costs less in commodities, and even if it be not, the current prices of general commodities are higher here than there, so that the cost of wages paid directly or indirectly in commodities is less here to employers.

A second and distinct and wholly convincing proof, that the Cost of Labor to employers has been less here than abroad during the first century of our national existence, has been the unquestioned fact, that the Rate of Profits has been higher. A constant stream of foreign Capital has come hither for investment, drawn solely by the higher rates of Profit. But if the rates of Profit have proven to be higher, the costs of Labor must have been lower, because laborers and capitalists divide the whole returns between them. Nobody else has any claim upon the conjoint proceeds. Profits are the Leavings of the Costs of Labor. If, therefore, these Leavings are larger in one country than another, then of necessity the Costs of Labor are lower in the first country.

Now, Protectionists have had the effrontery (largely the result of ignorance) to contend, that they are at a disadvantage as employers of laborers on account of the rates of Wages they are obliged to pay to them! Exactly the reverse is the truth. Instead of being at any disadvantage at this point, it is a matter of absolute demonstration, that American employers pay the smallest costs of Labor in the world! Employers as such have no interest in the rates of Wages as such, but only in the costs of Labor to themselves as capitalists. High rates of Wages not only usually accompany low costs of Labor, but also are a proof of them! The patient (not to say stupid) American People have consented for thirty years past to be abominably taxed for the exclusive benefit of a set of brazen mendicants, on the ostensible ground, that the said public beggars were unfortunately placed in comparison with European competitors, when the simple truth has been, that they had a constant advantage in the best, and cheapest (in cost to themselves), and steadiest and most intelligent (on the whole), laborers in the world.

What is the truth about raw materials in this country? Especially raw materials in those branches of industry, which have been most steadily protectionized from the first, like iron and copper, and cottons and woollens? Can any reason be found for legislatively excluding foreign products of these classes on the ground of any disadvantage of our producers on the score of raw materials? Look at iron ore, for example, now protectionized to the extent of 75 cents per ton. No country in the world possesses such deposits in quantity and quality and accessibility of iron ore as the United States of America. Vast beds of the best ore in the world, especially in wide regions along the whole course of the Tennessee River, lie directly upon the surface of the ground; and the so-called "Iron Mountain" in Missouri is said to have ore enough above the general surface of the country round to supply the wants of the entire United States for two centuries! Yet every ton of this ore is artificially lifted in price to the very People to whom God gave it in exceeding abundance. The average cost of mining, washing, screening, and loading upon steam freight-cars for transportation to market, of brown-hematite ore at one of the Mines in Tennessee during the summer and autumn of 1890, was 33 cents per ton, with a constant downward tendency in cost as machinery was multiplied and methods improved. This included the rent paid to the owners of the land holding the ore-beds, and every other item of cost carefully computed by the owner of the capital and manager at the mines. This statement is made on the authority of the said owner and manager over his own sign manual, with his consent given that it be printed as at present in the interest at once of Science and Righteousness.

It has often been publicly stated by experts, that there is more coal in deposit in the United States than in all the rest of the world put together. Nevertheless, bituminous coal has been protectionized since 1874 to the extent of 75 cents per ton, and slack or culm (another form of coal) 40 and 30 cents per ton. The bounty of God to the people of this country has been so far forth thwarted by the greed of mine-owners acting on the subservience of members of Congress to the few rich combined for that purpose to the impoverishment of the unorganized masses. Especially has every interest of New England both popular and manufacturing been sacrificed to the short-sighted selfishness of the mine-owners, because the British Provinces, just to the northward, are full of bituminous coal waiting for a market against New England goods.

Limestone is a second indispensable requisite for the reduction of iron ores. God has put the ore and the coal and the lime in unfailing quantities in close proximity with each other throughout the entire valley of the Tennessee. So small is the natural cost of making iron in that favored region, that it has been transported this summer to Savannah by rail (freights heightened by tariff-taxes on steel rails and lumber), and then exported 3000 miles to Liverpool with good profits to the makers by their own confession.

Steel rails are protectionized at present to the extent of $17 per ton, formerly $28 per ton. Fortunately, we have at present a competent National Labor-Commissioner, heretofore in the service of Massachusetts in the same capacity, Carroll D. Wright, who has just made a Report to Congress on the comparative cost of producing steel rails here and abroad. The following table is national and official and indisputable. It shows the Element of Cost in one ton of steel rails in Eleven distinct establishments, the first Two being located in the United States, the next Seven in countries on the Continent of Europe, and the last Two in Great Britain. The first column gives the Cost of the Material in the several districts, the second the Cost of Labor, and the third the total cost of the rails.

The reader who knows how to read between the lines will observe the strong confirmation of this table to the point already made in these pages, namely, that the "pauper labor of Europe" costs much more at a given point than the more highly paid labor of England and the United States. Thus: the average Cost of Labor in a ton of rails in the two latter countries is $1.70; the average in the seven Continental countries is $2.63. The average total cost per ton in the nine foreign countries is $22.77; the average in the two establishments here is $26.23. It must be remembered, that the cost of the material and of all the processes of manufacture here is greatly enhanced by the device of the tariff-taxes: still the difference in cost is even then only $3.46 per ton greater than the foreigners' cost: considering that these foreign rails must be carried 3000 miles over sea, how comes it that a tariff-tax of $28 or $17 per ton is needful in order to foster rail-making in this country? Take off all the tariff-taxes the rail-makers and transporters have to pay out, and could they not well forego the additional taxes they now impose on their fellow-citizens? Is there anything anywhere in the natural costs of Materials and Labor here to put American manufacturers at any disadvantage in their natural lines of business as compared with foreigners in their natural lines of industry?

Fallacy F: that artificial tariff-burdens placed at one point may become a compensation for other such burdens placed at another point of the same general line. This fallacy has been luridly illustrated in this country since 1867, when in the Wool and Woollens Tariff of that year additional protectionism was accorded to Woollens ostensibly to compensate the manufacturers for protectionism then first accorded to raw wools. For a number of years the woollen manufacturers had succeeded in persuading the wool-growers not to demand of Congress tariff-taxes on raw wools, thus publicly confessing that such taxes raise the prices of materials to the manufacturers thereof. But the wool-raisers argued naturally, if protectionism be good for woollens, it must also be good for wools; the truth was, it was equally baneful to both, and to every other beneficiary of it in the long run; but the wool-workers had no answer to the simple logic of the wool-growers,—they gave their case away when they alleged that they could not live without government aid,—and so they were obliged to surrender to their already angered brethren of the fleeces in 1867, and higher tariff-taxes were put on the woollens in order to compensate the manufacturers for the anticipated rise in the price of wools. Of course it was supposed that the patient people would bear the now doubled burdens put upon them by two privileged sets of their fellow-citizens. If protectionist taxes made the manufacturers rich, why should they not also enrich the rural herdsmen? In short, why may not such taxes make everybody rich?

There were those at the time, and the present writer was one of them, who foresaw and foretold just what has actually happened, namely, that both allies in this scheme of popular plunder were going in to their own death as well as in to the impoverishment of their countrymen. How would any level-headed man, capable of seeing beyond the point of his nose, have prognosticated in the premises? Something like this: it takes many kinds of wools mixed, say six or eight, to make the best woollen cloths, and several kinds to make good cloths at all; the United States could only furnish two or three kinds, and these in quite limited quantities; the tariff-taxes would raise the price of the foreign wools by just so much, to the detriment of the manufacturers, who could no longer buy the foreign wools, needful for good cloths, and must consequently drop down to inferior cloths in their mills, using shoddy and cotton and what not: how will that affect the market for native wools, especially the fine Ohio and Vermont wools? Only as the manufacturers are prosperous in making good cloths that find a quick and wide market at home, can the growers find a good market for their wool; from these heavy taxes on their material and machinery and lumber and dye-stuffs and so on, the manufacture will surely droop, and employ itself on poor goods from cheap materials, and the market for native fleeces will droop in consequence, and the prices of home-wools will go down and down and down of necessity.

Precisely this has happened. The gold prices of wool were never before so low in this country as since the unholy alliance of 1867, and as a rule they have gone down lower and lower and lower. Why? Because the manufacturers could not, under the tax-laws of their country which they themselves had egged on, make the cloths demanding the native fine wools. Sheep-raising became unprofitable. Millions of fine-woolled sheep were slaughtered in a few years for their pelts and mutton in Ohio alone. The following official table from the Department of Agriculture exhibits the relative number of sheep in thirteen States of the Union, at the two epochs 22 years apart:—

The effect of the tariff-taxes on wools, accordingly, even during a period when the population of the country increased 65 per centum, has been to diminish the number of sheep in the hands of the farmers by more than one-half. The wool clip in the entire country has indeed increased since 1867, but it has been in Texas and on the free ranges of the extreme boundaries of civilization in the West, where about one pound in three of the gross fleece is clean wool, and the most favorable estimate of the present clip would only suffice to clothe about one-half of the people of the country. Does this look like becoming "independent" of the rest of the world in the matter of woollen clothing for our great People? Will our folks never learn that there is nothing "dependent" in Buying and Selling, that the more any individual or nation Buys and Sells the more independent they become of course, and that the hermit in his poverty-stricken cell is the best image of Protectionism?

The extra barriers heaped up in 1867 against foreign woollens not only did not lessen their importation, but in connection with the discouragements thrown upon the domestic manufacture as just explained increased the importations; so that, in 1877, imports of woollen goods stood at $25,000,000; and in 1882 had increased to $42,000,000, the latter being an increase in one year, from 1881, of 34 per centum. The people must be clothed at some rate, and many people will have good cloth at any cost; and the whole result of this imbecile policy of Prohibitions on wool and woollens has been demonstrated right before our eyes, (1) to kill off the sheep, (2) to compel the manufacture of poor goods, (3) to multiply foreign woollens in domestic use, and (4) to double in general the cost of clothing the American People. It is difficult to say whether the grangers as a class, or the manufacturers as a class, or the consumers of woollens, are more put out by this state of things. They are all in the slough together, and have only themselves to thank for their condition. And it is growing worse and worse. As a mere and small example, less than one-half the amount of woollen machinery is now in operation in Berkshire County, Massachusetts, that was running here 15 years ago; and three-fourths of all the woollen manufacturers doing business in the County have failed in the 20 years just now past. In one word, it is no compensation to one industry for artificial burdens piled upon it, to pile corresponding burdens upon other industries affiliated with it. All legitimate industries everywhere are intimately affiliated with each other.

Fallacy G: that because some kinds of prosperity sometimes accompany and follow after Protectionism, therefore they are caused by it. This is at once the commonest and the hollowest of the forms of false argumentation employed in this country to bolster up a monstrously unjust Privilege. The rapid growth of Chicago, for example, in the ten years following the first imposition of the Morrill tariff-taxes, was often referred to, as if the Taxes caused the Growth. Admitting for argument's sake, what would be the height of folly to admit in reality, that these Taxes were among the causes of that Growth, how absurd to refer to one antecedent the result of one hundred or one thousand antecedents! So of the growth of national population in the twenty years following the Wool and Woollens Tariff of 1867: population increased about 65 per centum in that interval: tariff-taxes on most of the necessaries of life increased in the same interval just about in the same proportion: was there any tie of Cause and Effect as between the rise of taxes and the rising tide of population? Any tendency in the one to bring the other? Because one thing follows another in point of time, is that any proof that the second is the result of the other in point of cause?

In the old classification of Logical Fallacies this particular one was called by the Romans "post hoc ergo propter hoc," that is, after something therefore on account of that thing. The thoughts and the speech of civilized men have always been full of some form of this incongruity of inference; but it is the stock in trade, the staple and body of protectionist argumentation. But it is utterly devoid of any significance whatever. Unless some natural tie of connection can be shown, as between precedent and consequent, unless it can be probably shown that nothing but the precedent could cause the consequent, unless taxes are adapted in their very nature to increase riches, unless repeated subtractions can be shown to be the same thing as multiplied additions, then all this sickening talk of cheapening prices and intensified activities and diffused popular blessings under an odious scheme of subtle taxes that only take and can never give, is to be treated with a silent and pitying contempt, whether used by the duped or the duping. A good instance of this empty form of reasoning,—much better because more uniform than any one ever sought to be applied in the realm of Trade,—would be this: the Day has uniformly followed after the Night ever since the dawn of Time, and therefore the Night is the cause of the Day!

It has been indeed hard work to destroy the commerce utterly of a great People by legal restraints however multiplied and by mountain-barriers however piled up, and some prosperity has pushed itself into prominence after all these and in spite of all these. Behold! cry the logical protectionists, behold in such prosperity the effects of our beautiful legislation! Immeasurable areas of fertile land to be had by all Immigrants for the asking; endless deposits on every hand of coal and of all the useful and precious metals; primeval forests and streams leaping with power from their mountain springs to mill-wheel and intervale; commodious land-locked ocean harbors on every side but one, and vast chains of inland "unsalted seas"; a salubrious climate, and an ingenious, well-trained people; self-organized and liberal governments, guaranteeing all rational liberties to the people—but one; all these antecedents and accompaniments go, as it were, for nothing in the minds and on the tongues of some of our citizens, as causes of accruing prosperity, in comparison with (as a cause) the commercial bondage at the one point possible under our liberal and blessed institutions.

These are seven of the fundamental Falsities of Protectionism. They might easily be made seven times seven, and even seventy times seven. But not one of them is to be forgiven. They are unpardonable sins against Science and Liberty and Progress. Any radical and comprehensive Falsehood, like Protectionism, practically contradicts the Truth at innumerable points. The test of any proposed truth is its harmony with other and acknowledged truths: the test of any suspected error is its contradiction to such truths. Enough has now been said to settle the place of any pretended right of a part of the people commercially to enslave the other part, and ultimately themselves also.

It only remains in this chapter, in the fourth place, to indicate briefly at a few points the course of Opinions in relation to commercial Restrictions and Prohibitions in general, such as exist at present in their most exaggerated forms within the United States, on the part of those best entitled by study and intellect and opportunity to form and formulate a candid judgment in such matters.

In respect to the personal motive and circumstances of those combining to frame such legal interferences with the natural liberty of their contemporaries, and the inevitable results of them, we will quote first from Sir Thomas More, a man of men, in his Utopia, written in 1516. "The rich are ever striving to pare away something further from the daily wages of the poor by private fraud, and even by public laws; so that the wrong already existing, for it is a wrong that those from whom the State derives most benefit should receive least reward, is made yet greater by means of the law of the State. It is nothing but a conspiracy of the rich against the poor. The rich devise every means by which they may in the first place secure to themselves what they have amassed by wrong, and then take to their own use and profit at the lowest possible price the work and labor of the poor. And so soon as the rich decide on adopting these devices in the name of the public, then they become law. The life of the labor-class becomes so wretched in consequence that even a beast's life seems enviable."

The utter folly of supposing that a Parliament or a Congress or a Committee of either is fit to determine, or to have any voice in deciding, what shall or what shall not be manufactured or grown, what shall or what shall not be exported and imported, was never more happily exposed than by Adam Smith in his Wealth of Nations, published in 1776. "The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but would assume an authority which could be safely trusted not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it."

Alexander Hamilton, our first Secretary of the Treasury, and in some respects the most brilliant of all our statesmen, has often been claimed and referred to as a protectionist by those unfamiliar with his writings; but the paragraph of those writings, or the phrase of any authenticated conversation of his, has never been quoted and never can be, because they do not exist, which proves him to have been a "protectionist" in the modern, or any other proper, sense of that word. On the contrary, his deliberate and well-founded opinion in the premises is given at length in number XXXV of the Federalist, this number printed early in 1788: "Exorbitant duties on imported articles serve to beget a general spirit of smuggling; which is always prejudicial to the fair trader, and eventually to the revenue itself: they tend to render other classes of the community tributary, in an improper degree, to the manufacturing classes, to whom they give a premature monopoly of the markets: they sometimes force industry out of its most natural channels into which it flows with less advantage; and in the last place, they oppress the merchant, who is often obliged to pay them himself without any retribution from the consumer. When the Demand is equal to the quantity of goods at market, the consumer generally pays the duty; but when the markets happen to be overstocked, the great proportion falls upon the merchant, and sometimes not only exhausts his profits, but breaks in upon his capital. I am apt to think, that a division of the duty between the seller and the buyer more often happens than is commonly imagined. There is no part of the administration of the Government that requires extensive information, and a thorough knowledge of the principles of Political Economy, so much as the business of taxation. The man who understands those principles best, will be least likely to resort to oppressive expedients, or to sacrifice any particular class of citizens to the procurement of revenue. It might be demonstrated that the most productive system of finance will always be the least burdensome."[12]

Shrewd old Benjamin Franklin, impersonation of common sense and common honesty, ridicules in his sly way the whole wretched business in the columns of the "Pennsylvania Gazette" in 1789. "I am a manufacturer, and was a petitioner for the act to encourage and protect the manufacturers of Pennsylvania. I was very happy when the act was obtained, and I immediately added to the price of my manufacture as much as it would bear, so as to be a little cheaper than the same article imported and paying the duty. By this addition I hoped to grow richer. But as every other manufacturer, whose wares are under the protection of the act, has done the same, I begin to doubt whether, considering the whole year's expenses of my family, with all these separate additions which I pay to other manufacturers, I am at all the gainer. And I confess, I cannot but wish that, except the protecting duty on my own manufacture, all duties of the kind were taken off and abolished."

In the first congressional debate on the Tariff after the new Government went into operation, that is, in 1789, Fisher Ames of Massachusetts, who had just before made the strongest plea against the Molasses Tax, the raw material of New England rum, became also the strongest stickler there for the protectionist view, that artificial manufactures may properly enough fasten and fatten upon Agriculture, like shell-fish upon ship-bottoms, and went to the root of the whole matter of that inevitable antagonism in a few frank and radical words, the best because the most truthful words that can be found upon that side in the century that has followed. "From the different situation of the manufacturers in Europe and America, encouragement is necessary. In Europe, the artisan is driven to labor for his bread. Stern necessity, with her iron rod, compels his exertion. In America, invitation and encouragement are needed. Without them, the infant manufacture droops, and those who might be employed in it seek with success a competency from our cheap and fertile soil."

Gouverneur Morris, one of the youngest and among the most gifted of the Revolutionary statesmen, had a clear insight into Economic realities. "Whatever saves Labor rewards Labor." "Those who will give the most for money, in other words, those who will sell cheapest, will have the most money." "Taxes can be raised only from revenue: push the matter further, and their nature is changed: it is no longer taxation, it is confiscation."