Oscar Wilder Underwood, orator and magazine writer, was born at Louisville, Kentucky, May 6, 1862. He is the grandson of Joseph Rogers Underwood, a celebrated Kentucky statesman of the old regime. Mr. Underwood was prepared for the University of Virginia at the Rugby School of Louisville. In 1884 he was admitted to the bar and entered upon the practice of his profession at Birmingham, Alabama, his present home. He was prominent in Alabama politics prior to his election to the lower house of Congress, in 1895, as the representative of the Ninth Alabama district; and he has been regularly returned to that body ever since. Mr. Underwood is chairman of the committee on ways and means of the Sixty-second Congress, as well as majority leader of the House. In the Democratic pre-convention presidential campaign of 1912, the South almost unanimously endorsed Mr. Underwood for the nomination. Led by Alabama he was hailed in many quarters as the first really constructive statesman the South has sent to Congress in more than twenty years; further, his friends said, he has devoted his life to the study of the tariff and is now the foremost exponent of the subject living; his tariff policy is simply this: stop protecting the profits of the manufacturers; and that Underwood is Democracy's best asset. Earlier in the year, Mr. Underwood had been attacked by William J. Bryan, and his retorts in the House were so severe and unanswerable, he being the only man up to that time able to cope with the Colonel, that, of course, he had that distinguished gentleman's influence against him at the Baltimore convention. Nevertheless, every roll-call found him in third place, just behind Champ Clark, who was also born in Kentucky, and Woodrow Wilson, governor of New Jersey. He was running so strong as the convention neared its close, that at least one Kentucky editor came home and wrote a long editorial calling upon the Kentucky delegation to change its vote from Clark to Underwood; but on the following day the governor of New Jersey was nominated. A few of Mr. Underwood's contributions to periodicals may be pointed out: two articles in The Forum on "The Negro Problem in the South;" "The Corrupting Power of Public Patronage;" "What About the Tariff?" (The World To-day, January, 1912); "The Right and Wrong of the Tariff Question" (The Independent, February 1, 1912); and "High Tariff and American Trade Abroad" (The Century, May, 1912). By friend and foe alike Mr. Underwood is admitted to be the greatest living student of the tariff; and his speeches in Congress and out of it on this subject have given him a national reputation.

Bibliography. The World's Work (March, 1912); Harper's Weekly (June 1, 1912); North American Review (June, 1912).

THE PROTECTION OF PROFITS

[Delivered before the Southern Society of New York City (December 16, 1911)]

The kaleidoscope of political issues must and will continually change with the changing conditions of our Republic but there is one question that was with us in the beginning and will be in the end, and that is the most effective, efficient and fairest way of equalizing the burdens of taxation that are levied by the National Government. Of all the great powers that were yielded to the Federal Government by the States when they adopted the Constitution of our country, the one indispensable to the administration of public affairs is the right to levy and collect taxes. Without the exercise of that power we could not maintain an army and navy; we could not establish the courts of the land; the government would fail to perform its function if the power to tax were taken away from it. The power to tax carries with it the power to destroy, and it is, therefore, a most dangerous governmental power as well as a most necessary one.

There is a very clear and marked distinction between the position of the two great political parties of America as to how power to tax should be exercised in the levying of revenue at the custom houses.

The Republican party has maintained the doctrine that taxes should not only be levied for the purpose of revenue, but also for the purpose of protecting the home manufacturer from foreign competition. Of necessity protection from competition carries with it a guarantee of profits. In the last Republican platform this position of the party was distinctly recognized when they declared that they were not only in favor of the protection of the difference in cost at home and abroad but also a reasonable profit to American industries.

The Democratic party favors the policy of raising its taxes at the custom house by a tariff that is levied for revenue only, which clearly excludes the idea of protecting the manufacturer's profits. In my opinion, the dividing line between the positions of the two great parties on this question is very clear and easily ascertained in theory. Where the tariff rates balance the difference in cost at home and abroad, including an allowance for the difference in freight rates, the tariff must be competitive, and from that point downward to the lowest tariff that can be levied it will continue to be competitive to a greater or less extent. Where competition is not interfered with by levying the tax above the highest competitive point, the profits of the manufacturer are not protected. On the other hand, when the duties levied at the custom house equalizes the difference in cost at home and abroad and in addition thereto they are high enough to allow the American manufacturer to make a profit before his competitor can enter the field, we have invaded the domain of the protection of profits. Some men assert that the protection of reasonable profits to the home manufacturer should be commended instead of being condemned, but in my judgment, the protection of any profit must of necessity have a tendency to destroy competition and create monopoly, whether the profit protected is reasonable or unreasonable.

You should bear in mind that to establish a business in a foreign country requires a vast outlay both in time and capital. Should the foreigner manufacturer attempt to establish himself in this country he must advertise his goods, establish selling agencies and points of distribution before he can successfully conduct his business. After he has done so, if the home producer is protected by a law that not only equals the difference in cost at home and abroad, but also protects a reasonable or unreasonable profit, it is only necessary for him to drop his prices slightly below the point that the law has fixed to protect his profits and his competitor must retire from the country or become a bankrupt, because he would then have to sell his goods at a loss and not a profit, if he continued to compete. The foreign competitor having retired, the home producer could raise his prices to any level that home competition would allow him and it is not probable that the foreigner who had already been driven out of the country would again return, no matter how inviting the field, as long as the law remained on the Statute Books that would enable his competitor to again put him out of business.

Thirty or forty years ago, when we had numbers of small manufacturers, when there was honest competition without an attempt being made to restrict trade and the home market was more than able to consume the production of our mills and factories, the danger and the injury to the consumer of the country was not so great or apparent as it is to-day, when the control of many great industries has been concentrated in the hands of a few men or a few corporations, because domestic competition was prohibited. When we cease to have competition at home and the law prohibits competition from abroad by protecting profits, there is no relief for the consumer except to cry out for government regulation. To my mind, there is no more reason or justice in the government attempting to protect the profits of the manufacturers and producers of this country than here would be to protect the profits of the merchant or the lawyer, the banker or the farmer, or the wages of the laboring man. In almost every line of industry in the United States we have as great natural resources to develop as that of any country in the world. It is admitted by all that our machinery and methods of doing business are in advance of the other nations. By reason of the efficient use of American machinery by American labor, in most of the manufactures of this country, the labor cost per unit of production is no greater here than abroad. It is admitted, of course, that the actual wage of the American laborer is in excess of European countries, but as to most articles we manufacture the labor cost in this country is not more than double the labor cost abroad. When we consider that the average ad valorem rate of duty levied at the custom house on manufactures of cotton goods is 53% of the value of the article imported and the total labor cost of the production of cotton goods in this country is only 21% of the factory value of the product, that the difference in labor cost at home and abroad is only about as one is to two, and that ten or eleven per cent of the value of the product levied at the custom house would equal the difference in the labor wage, it is apparent that our present tariff laws exceed the point where they equalize the difference in cost at home and abroad, and we realize how far they have entered into the domain of protecting profits for the home manufacturer. This is not only true of the manufacture of cotton goods, but of almost every schedule in the tariff bill. To protect profits of necessity means to protect inefficiency. It does not stimulate industry because a manufacturer standing behind a tariff wall that is protecting his profits is not driven to develop his business along the lines of greatest efficiency and greatest economy. This is clearly illustrated in a comparison of the wool and the iron and steel industries. Wool has had a specific duty that when worked out to an ad valorem basis amounts to a tax of about 90% of the average value of all woolen goods imported into the United States, and the duties imposed have remained practically unchanged for forty years. During that time the wool industry has made comparatively little progress in cheapening the cost of its product and improving its business methods. On the other hand, in the iron and steel industry the tariff rate has been cut every time a tariff bill has been written. Forty years ago the tax on steel rails amounted to $17.50 a ton, to-day it amounts to $3.92. Forty years ago the tax on pig iron was $13.60 a ton, to-day it is $2.50. The same is true of most of the other articles in the iron and steel schedule, and yet the iron and steel industry has not languished; it has not been destroyed and it has not gone to the wall. It is the most compact, virile, fighting force of all the industries of America to-day. It has long ago expanded its productive capacity beyond the power of the American people to consume its output and is to-day facing out towards the markets of the world, battling for a part of the trade of foreign lands, where it must meet free competition, or, as is often the case, pay adverse tariff rates to enter the industrial fields of its competitor.

Which course is the wiser for our government to take? The one that demands the protection of profits the continued policy of hot-house growth for our industries? The stagnation of development that follows where competition ceases, or, on the other hand, the gradual and insistent reduction of our tariff laws to a basis where the American manufacturer must meet honest competition, where he must develop his business along the best and most economic lines, where when he fights at home to control his market he is forging the way in the economic development of his business to extend his trade in the markets of the world. In my judgment, the future growth of our great industries lies beyond the seas. A just equalization of the burdens of taxation and honest competition, in my judgment, are economic truths; they are not permitted to-day by the laws of our country; we must face toward them, and not away from them.

What I have said does not mean that I am in favor of going to free trade conditions or of being so radical in our legislation as to injure legitimate business, but I do mean that the period of exclusion has passed and the era of honest competition is here.

Let us approach the solution of the problem involved with the determination to do what is right, what is safe, and what is reasonable.