Protection Free Trade
An examination of the tariff question with especial regard to the interests of labor
Condensed by F. C. R. Douglas
Robert Schalkenbach Foundation
Protection or Free Trade
Library of Congress control number: 2008935014
Copyright © 2008 by the
Robert Schalkenbach Foundation
First printing, 2008
Publisher’s Foreword by Mark A. Sullivan
Protection As a Universal Need
Protection and Producers
Tariffs for Revenue
Tariffs for Protection
Encouragement of Industry
Exports and Imports
from the Use of Money
Do High Wages Necessitate Protection?
Of Advantages and Disadvantages
as Reasons for Protection
Protection and Producers
Protection and Wages
The Abolition of Protection
Inadequacy of the Free Trade Argument
The Real Strength of Protection
The Robber that Takes All that is Left
True Free Trade
Free Trade and Socialism
Afterword: Trade, Economics and the
Cultural Narrative byAdele Wick
To the memory of those illustrious Frenchmen of a century ago, Quesnay, Turgot, Mirabeau, Condorcet, Dupont, and their fellows, who, in the night of despotism, foresaw the glories of the coming day.
In this book I have endeavored to determine whether protection or free trade better accords with the interests of labor, and to bring to a common conclusion on this subject those who really desire to raise wages.
I have not only gone over the ground generally traversed, and examined the arguments commonly used, but, carrying the inquiry farther than the controversialists on either side have yet ventured to go, I have sought to discover why protection retains such popular strength in spite of all exposures of its fallacies; to trace the connection between the tariff question and those still more important social questions, now rapidly becoming the “burning questions” of our times; and to show to what radical measures the principle of free trade logically leads. While pointing out the falsity of the belief that tariffs can protect labor, I have not failed to recognize the facts which give this belief vitality, and, by an examination of these facts, have shown, not only how little the working classes can hope from that mere “revenue reform” which is miscalled “free trade,” but how much they have to hope from real free trade. By thus harmonizing the truths which free traders perceive with the facts that to protectionists make their own theory plausible, I believe I have opened ground upon which those separated by seemingly irreconcilable differences of opinion may unite for that full application of the free-trade principle which would secure both the largest production and the fairest distribution of wealth.
By thus carrying the inquiry beyond the point where Adam Smith and the writers who have followed him have stopped, I believe I have stripped the vexed tariff question of its greatest difficulties, and have cleared the way for the settlement of a dispute which otherwise might go on interminably. The conclusions thus reached raise the doctrine of free trade from the emasculated form in which it has been taught by the English economists to the fullness in which it was held by the predecessors of Adam Smith, those illustrious Frenchmen with whom originated the motto Laissez Faire, and who, whatever may have been the confusions of their terminology or the faults of their method, grasped a central truth which free traders since their time have ignored.
My effort, in short, has been to make such a candid and thorough examination of the tariff question, in all its phases, as would aid men to whom the subject is now a perplexing maze to reach clear and firm conclusions. In this I trust I have done something to inspire a movement now fainthearted with the earnestness and strength of radical conviction, to prevent the division into hostile camps of those whom a common purpose ought to unite, to give to efforts for the emancipation of labor greater definiteness of purpose, and to eradicate that belief in the opposition of national interests which leads peoples, even of the same blood and tongue, to regard each other as natural antagonists.
— Henry George
Many people today question the idea of free trade. There may be good reasons for this — national policies and international agreements that claim to implement “free trade” are often imposed by force upon working people who have little or no choice in the matter and who get very little in return for the wealth they produce for others. By contrast, for trade to be truly free the potential traders must be in a position to refuse to trade — they must be free to not trade.
Many of the world’s poorest countries today export virtually all the wealth their people produce, getting little in return beside debt consolidation and new loans. Such decisions are not made by, or in the interest of, those who actually produce the wealth. Instead, these decisions are imposed upon them. There is little freedom or fairness in this. Although many speak of “free trade” and “fair trade” as antithetical, in the final analysis, for trade to be fair it must also be free — truly free.
Henry George understood what makes trade truly free. He understood that monopolies are violations of the freedom to trade, and that the most fundamental and powerful monopoly is property in land. As an economic factor, land encompasses all natural opportunities for human beings to live and produce. Those who control access to land control the production and exchange of wealth. In today’s world, land includes untapped underground (and underwater) resources, prime urban locations and air rights, and desirable locations on the electromagnetic spectrum and in orbital paths beyond Earth’s atmosphere. Land includes resources necessary not only for technological progress, but also for basic human survival.
In the context of increasing globalization, the monopolization of land has been analyzed and criticized as the privatization of the commons — and rightly so, for it is a grand theft of what nature gives freely to humanity. In practice it disadvantages the working poor and favors those with financial resources to spare. How ironic that this basic violation of the freedom to produce and exchange has been falsely identified as part and parcel of free trade itself. Certainly this misperception is partly due to obfuscating claims that recent international trade agreements (full, as they are, of generous “investor protections” and corporate welfare) constitute free trade. They don’t.
controversies over the merits and demerits of globalization, the Robert Schalkenbach Foundation is pleased to contribute this new
edition of the classic abridgment, by F. C. R. Douglas, of Henry George’s Protection
or Free Trade. In a new design by Lindy Davies, it reproduces, with minor
changes, the 1932
In 1932 the world was in the throes of the Great Depression and devastating war was on the horizon. Humanity today is beset with similar problems and challenges. War, poverty, social inequality, financial crises, ecological degradation, and human rights violations have become the common concern of people around the world — people interconnected as never before by quantum leaps in information technology. This progress makes international trade more powerful, and the understanding of its costs and benefits more critical, than ever.
To the enduring truths expressed by Henry George in the 19th century, we are happy to add not only a foreword from the 21st, but a timely afterword by our foundation president, Adele Wick. It is our hope that this book, published on paper and online, will help bring needed insights into the public dialogue on poverty, fairness, and free trade.
— Mark A. Sullivan, Administrative Director Robert Schalkenbach Foundation September; 2008
In this abridgment an endeavor has been made to condense the discussion and to eliminate local and ephemeral allusions, so as to present the author’s argument in its permanent perspective as applicable to all countries and to all times. For this purpose a few minor alterations have been made, some passages have been transposed, and the division into chapters has been altered somewhat from that in the unabridged version.
This abridged edition is
dedicated by the Trustees of the Henry George Foundation of
— F. C. R. Doug/as (1930)
Near the window by which I write a great bull is tethered by a ring in his nose. Grazing round and round, he has wound his rope about the stake until now he stands a close prisoner, tantalized by rich grass he cannot reach, unable even to toss his head to rid him of the flies that cluster on his shoulders. Now and again he struggles vainly, and then, after pitiful bellowings, relapses into silent misery.
This bull, a very type of massive strength, who, because he has not wit enough to see how he might be free, suffers want in sight of plenty, and is helplessly preyed upon by weaker creatures, seems to me no unfit emblem of the working masses.
In all lands, men whose toil creates abounding wealth are pinched with poverty, and, while advancing civilization opens wider vistas and awakens new desires, are held down to brutish levels by animal needs. Bitterly conscious of injustice, feeling in their inmost souls that they were made for more than so narrow a life, they, too, spasmodically struggle and cry out. But until they trace effect to cause, until they see how they are fettered and how they may be freed, their struggles and outcries are as vain as those of the bull. Nay, they are vainer. I shall go out and drive the bull in the way that will untwist his rope. But who shall drive men into freedom? Till they use the reason with which they have been gifted, nothing can avail. For them there is no special providence.
Under all forms ol government the ultimate power lies with the masses. It is not kings nor aristocracies, nor landowners nor capitalists, that anywhere really enslave the people — it is their own ignorance. Most clear is this where governments rest on universal suffrage. Working men may mold to their will legislatures, courts, and constitutions. Politicians strive for their favor and political parties bid against one another for their vote. But what avails this? The little finger of aggregated capital must be thicker than the loins of the working masses so long as they do not know how to use their power.
My aim in this inquiry is to ascertain beyond peradventure whether protection or free trade best accords with the interests of those who live by their labor. I differ with those who say that with the rate of wages the state has no concern. I hold with those who deem the increase of wages a legitimate purpose of public policy. To raise and maintain wages is the great object that all who live by wages ought to seek, and working men are right in supporting any measure that will attain that object. Nor in this are they acting selfishly, for while the question of wages is the most important of questions to laborers, it is also the most important of questions to society at large. Whatever improves the condition of the lowest and broadest social stratum must promote the true interests of all. Where the wages of common labor are high, and remunerative employment is easy to obtain, prosperity will be general. Where wages are highest, there will be the largest production and the most equitable distribution of wealth. There will invention be most active and the brain best guide the hand. There will be the greatest comfort, the widest diffusion of knowledge, the purest morals, and the truest patriotism. If we would have a healthy, a happy, an enlightened, and a virtuous people, if we would have a pure government, firmly based on the popular will and quickly responsive to it, we must strive to raise wages and keep them high. I accept as good and praiseworthy the ends avowed by the advocates of protective tariffs. What I propose to inquire is whether protective tariffs are in reality conducive to these ends. To do this thoroughly I wish to go over all the ground upon which protective tariffs are advocated or defended, to consider what effect the opposite policy of free trade would have, and to stop not until conclusions are reached of which we may feel absolutely sure.
Whether protection does or does not increase national wealth, whether it does or does not benefit the laborer, are questions that from their nature must admit of decisive answers. That the controversy between protection and free trade, widely and energetically as it has been carried on, has as yet led to no accepted conclusion cannot therefore be due to difficulties inherent in the subject. It may in part be accounted for by the fact that powerful pecuniary interests are concerned in the issue, for it is true, as Macaulay said, that if large pecuniary interests were concerned in denying the attraction of gravitation, that most obvious of physical facts would have disputers. But that so many fair-minded men who have no special interests to serve are still at variance on this subject can only, it seems to me, be fully explained on the assumption that the discussion has not been carried far enough to bring out that full truth which harmonizes all partial truths.
Adam Smith demonstrated clearly enough that protective tariffs hamper the production of wealth. But Adam Smith either did not deem it prudent to go farther, or, as is more probable, was prevented from seeing the necessity of doing so by the atmosphere of his time and place. He at any rate failed to carry his great inquiry into the causes which from “that original state of things in which the production of labor constitutes the natural recompense or wages of labor” had developed a state of things in which natural wages seemed to be only such part of the produce of labor as would enable the laborer to exist. And, following Smith, came Malthus, to formulate a doctrine which throws upon the Creator the responsibility for the want and vice that flow from man’s injustice — a doctrine which has barred from the inquiry which Smith did not pursue even such high and generous minds as that of John Stuart Mill. Some of the publications of the Anti-Corn-Law1 League contain indications that if the struggle over the English corn laws had been longer continued, the discussion might have been pushed farther than the question of revenue tariff or protective tariff; but, ending as it did, the capitalists of the Manchester school were satisfied, and in such discussion as has since ensued English free traders, with few exceptions, have made no farther advance.
On the other hand, the advocates of protection have evinced a like indisposition to venture on burning ground. They extol the virtues of protection as furnishing employment, without asking how it comes that anyone should need to be furnished with employment; they assert that protection maintains the rate of wages, without explaining what determines the rate of wages.
That, so far as it has yet gone, the controversy between protection and free trade has not been carried to its logical conclusions is evident from the positions which both sides occupy. Let it be ours to carry the inquiry wherever it may lead. The fact is, that fully to understand the tariff question we must go beyond the tariff question as ordinarily debated. And here, it may be, we shall find ground on which honest divergences of opinion may be reconciled, and facts which seem conflicting may fall into harmonious relations.
that IS urged in current discussions of the tariff question has no validity whatever,
and however it may serve the purpose of controversy, cannot aid in the
discovery of truth. That a thing exists with or follows another thing is no
proof that it is because of that other thing. This assumption is the ftllacy post hoc, ergo propter
hoc, which leads, if admitted, to the most preposterous conclusions. Wages
As for reliance upon statistics, that involves the additional difficulty of knowing whether we have the right statistics. Though “figures cannot lie,” there is in their collection and grouping such liability to oversight and such temptation to bias that they are to be distrusted in matters of controversy until they have been subjected to rigid examination. The value of most arguments turning upon statistics is well illustrated in the story of the government clerk who, being told to get up the statistics of a certain question, wished first to know which side it was desired that they should support. Under their imposing appearance of exactness may lurk the gravest errors and wildest assumptions.
The protective theory has certainly the weight of most general acceptance. It should be remembered, however, that the presumption in favor of any belief generally entertained has existed in favor of many beliefs now known to be entirely erroneous, and is especially weak in the case of a theory which, like that of
protection, enlists the support of powerful special interests.
I do not mean to say that the pecuniary interests which protection enlists suffice to explain the widespread acceptance of its theories and the tenacity with which they are held; but it is plain that these interests do constitute a power of the kind most potent in forming opinion and influencing legislation, and that this fact weakens the presumption the wide acceptance of protection might otherwise afford, and is a reason why those who believe in protection merely because they have constantly heard it praised should examine the question for themselves.
Protection, moreover, has always found an effective ally in those national prejudices and hatreds which are in part the cause and in part the result of the wars that have made the annals of mankind a record of bloodshed and devastation, prejudices and hatreds which have everywhere been the means by which the masses have been induced to use their own power for their own enslavement.
Working men generally feel that they do not get a fair reward for their labor. They know that what prevents them from successfully demanding higher wages is the competition of others anxious for work, and they are naturally disposed to favor the doctrine or party that proposes to shield them from competition. This, its advocates urge, is the aim of protection. And whatever protection accomplishes, protectionists at least profess regard for the working classes, and proclaim their desire to use the powers of government to raise and maintain wages. Protection, they declare, means the protection of labor. So constantly is this reiterated that many suppose that this is the real derivation of the term, and that “protection” is short for “protection of labor.”
On the other hand, the doctrines of free trade have been intertwined with teachings that throw upon the laws of nature responsibility for the poverty of the laboring class, and foster a callous indifference to their sufferings. While protesting against restrictions upon the production of wealth, free-trade economists have ignored the monstrous injustice of its distribution, and have treated as fair and normal that competition in which human beings, deprived of their natural opportunities of employing themselves, are compelled by biting want to bid against one another.
To admit that labor needs protection is to acknowledge its inferiority; it is to acquiesce in an assumption that degrades the workman to the position of a dependent, and leads logically to the claim that the employee is bound to vote in the interest of the employer who provides him with work. There runs through protectionist professions of concern for labor a tone of condescending patronage more insulting to men who feel the true dignity of labor than frankly expressed contempt could be — an assumption that pauperism is the natural condition of labor, to which it must everywhere fall unless benevolently protected.
What is labor that it should so need protection? Is not labor the creator of capital, the producer of all wealth? Is it not the men who labor that feed and clothe all others? Is it not true, as has been said, that the three great orders of society are “working men, beggarmen, and thieves”? How, then, does it come that working men alone need protection?
When we consider that labor is the producer of all wealth, is it not evident that the impoverishment and dependence of labor are abnormal conditions resulting from restrictions and usurpations, and that instead of accepting protection, what labor should demand is freedom?
PROTECTION, as the term has come to signify a certain national policy, means the levying of duties upon imported commodities for the purpose of protecting from competition the home producers of such commodities. Protectionists contend that to secure the highest prosperity of each nation it should produce for itself everything it is capable of producing, and that to this end its home industries should be protected against the competition of foreign industries. They also contend that to enable workmen to obtain as high wages as possible they should be protected by tariff duties against the competition of goods produced in countries where wages are lower.
The protective theory, it is to be observed, asserts a general law, as true in one country as in another. It implies that by virtue of social laws, as immutable as the physical laws, each nation must stand jealously on guard against every other nation and erect artificial obstacles to national intercourse. It implies that a federation of mankind, such as that which prevents the establishment of tariffs between the states of the American Union, would be a disaster to the race, and that in an ideal world each nation would be protected from every other nation by a cordon of tax collectors, with their attendant spies and informers.
Religion and experience alike teach us that the highest good of each is to be sought in the good of others; that the true interests of men are, harmonious, not antagonistic; that prosperity is the daughter of good will and peace; and that want and destruction follow enmity and strife. The protective theory, on the other hand, implies the opposition of national interests; that the gain of one people is the loss of others; that each must seek its own good by constant efforts to get advantage over others and to prevent others from getting advantage over it. It makes of nations rivals instead of co-operators; it inculcates a warfare of restrictions and prohibitions and searchings and seizures, which differs in weapons, but not in spirit, from that warfare which sinks ships and burns cities. Can we imagine the nations beating their swords into plowshares and their spears into pruninghooks and yet maintaining hostile tariffs?
Every political truth must be a moral truth. Yet who can accept the protective theory as a moral truth?
Conscientious men will (until they get used to them) shrink from false oaths, from bribery, or from other means necessary to evade a tariff, but even of believers in protection are there any who really think such evasions wrong in themselves?
That unscrupulous men, for their own private advantage, break laws intended for the general good proves nothing; but that no one really feels smuggling to be wrong proves a good deal. Whether we hold the basis of moral ideas to be intuitive or utilitarian, is not the fact that protection thus lacks the support of the moral sentiment inconsistent with the idea that tariffs are necessary to the well-being and progress of mankind?
To make that a crime by statute which is no crime in morals is inevitably to destroy respect for law; to resort to oaths to prevent men from doing what they feel injures no one is to weaken the sanctity of oaths. Corruption, evasion, and false swearing are inseparable from tariffs. Can that be good of which these are the fruits?
Consider how sharply this theory of protection conflicts with common experience and habits of thought. Who would think of recommending a site for a proposed city or a new colony because it was very difficult to get at? Yet, if the protective theory be true, this would really be an advantage.
Whether protectionists or free traders, we all hear with interest and pleasure of improvements in transportation by water or land; we are all disposed to regard the opening of canals, the building of railways, the deepening of harbors, the improvement of steamships as beneficial. But if such things are beneficial, how can tariffs be beneficial? The effect of such things is to lessen the cost of transporting commodities; the effect of tariffs is to increase it. If the protective theory be true, every improvement that cheapens the carriage of goods between country and country is an injury to mankind unless tariffs be commensurately increased.
It is not only improvements in transportation that are antagonistic to protection, but all labor-saving invention and discovery. Tariffs are maintained for the avowed purpose of keeping out the products of cheap foreign labor; yet machines are daily invented that produce goods cheaper than the cheapest foreign labor. Clearly the only consistent protectionism is that which would not only prohibit foreign commerce, but forbid the introduction of labor-saving machinery.
Clearly, if there is any truth in the protective theory it must apply not only to the grand political divisions but to all their parts. If a country ought not to import from other countries anything which its own people can produce, the same principle must apply to every subdivision; and each state, each county and each township must need its own protective tariff.2
But to follow the protective theory to its logical conclusions we cannot stop with protection between state and state, township and township, village and village. If protection be needful between nations, it must be needful not only between political subdivisions, but between family and family. If nations should never buy of other nations what they might produce at home, the same principle must forbid each family to buy anything it might produce. A social condition in which the principle of protection was thus fully carried out would be a condition of utter barbarism.
Protection implies prevention. To protect is to preserve or defend. What is it that protection by tariff prevents? It is trade.
To speak more exactly, it is that part of trade which consists in bringing in from other countries commodities that might be produced at home.
But trade, from which “protection” essays to preserve and defend us, is not, like flood, earthquake, or tornado, something that comes without human agency. Trade implies human action. There can be no need of preserving from or defending against trade, unless there are men who want to trade and try to trade. Who, then, are the men against whose efforts to trade “protection” preserves and defends us ?
If I had been asked this question before I had come to think over the matter for myself, I should have said that the men against whom “protection” defends us are foreign producers who wish to sell their goods in our home markets. This is the assumption that runs through all protectionist arguments — the assumption that foreigners are constantly trying to force their products upon us, and that a protective tariff is a means for defending ourselves against what they want to do.
Yet a moment’s thought will show that no effort of foreigners to sell us their products could of itself make a tariff necessary. For the desire of one party, however strong it may be, cannot of itself bring about trade. To every trade there must be two parties who mutually desire to trade, and whose actions are reciprocal. No one can buy, unless he can find someone willing to sell; and no one can sell unless there is some other one willing to buy.
In point of fact, not only is it impossible for one nation to sell to another unless that other wants to buy, but international trade does not consist in sending out goods to be sold. The great mass of the imports of every civilized country consists of goods that have been ordered by the people of that country and are imported at their risk. It is the demand of purchasers at retail that causes goods to be imported. Thus a protective tariff is a prevention by a people, not of what others want to do to them, but of what they themselves want to do.
Trade is not invasion. It
does not involve aggression on one side and resistance on the other, but mutual
consent and gratification. There cannot be a trade unless the parties to it
agree, any more than there can be a quarrel unless the parties to it differ.
Civilized nations, however, do not use their armies and fleets to open one another’s ports to trade. What they use their armies and fleets for, is, when they quarrel, to close one another’s ports. And their effort then is to prevent the carrying in of things even more than the bringing out of things — importing rather than exporting. For a people can be more quickly injured by preventing them from getting things than by preventing them from sending things away. Trade does not require force. Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do. Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same — to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace, what enemies seek to do to us in time of war.
What difference does it make whether it would be possible or impossible for me to make for myself the thing for which I trade? If I did not want the thing I am to get more than the thing I am to give, I would not wish to make the trade. Here is a farmer who proposes to exchange with his neighbor a horse he does not want for a couple of cows he does want. Would it benefit these farmers to prevent this trade on the ground that one might breed his own horses and the other raise his own cows? Yet if one farmer lived on the American and the other lived on the Canadian side of the line this is just what both the American and Canadian governments would do. And this is called “protection.”
In no one place will nature yield to labor all that man finds useful. Adaptation to one class of products involves non-adaptation to others. Trade, by permitting us to obtain each of the things we need from the locality best fitted for its production, enables us to utilize the highest powers of nature in the production of them all, and thus to increase enormously the sum of various things which a given quantity of labor expended in any locality can secure.
But, what is even more important, trade also enables us to utilize the highest powers of the human factor in production. All men cannot do all things equally well. There are differences in physical and mental powers which give different degrees of aptitude for different parts of the work of supplying human needs. And far more important still are the differences that arise from the development of special skill. By devoting himself to one branch of production a man can acquire skill which enables him, with the same labor, to produce enormously more than one who has not made that branch his specialty.
And as there are differences between individuals which fit them for different branches of production, so, but to a much greater degree, are there such differences between communities. Not to speak again of the differences due to situation and natural facilities, some things can be produced with greater relative advantage where population is sparse, others where it is dense, and differences in industrial development, in habits, customs, and related occupations, produce differences in relative adaptation. Such gains, moreover, as attend the division of labor between individuals, attend also the division of labor between communities, and lead to that localization of industry which causes different places to become noted for different industries. Wherever the production of some special thing becomes the leading industry, skill is more easily acquired, and is carried to a higher pitch, supplies are most readily procured, auxiliary and correlative occupations grow up, and a larger scale of production leads to the employment of more efficient methods. Thus in the natural development of society trade brings about differentiations of industry between communities as between individuals, and with similar benefits.
It is characteristic of all the inventions and discoveries that are so rapidly increasing our power over nature that they require the greater division of labor, and extend trade. Thus every step in advance destroys the independence and increases the interdependence ot men. The appointed condition of human progress is evidently that men shall come into closer relations and become more and more dependent upon each other. Thus the restrictions which protectionism urges us to impose upon ourselves are about as well calculated to promote national prosperity as ligatures, that would impede the circulation of the blood, would be to promote bodily health and comfort.
Men of different nations trade with each other for the same reason that men of the same nation do — because they find it profitable; because they thus obtain what they want with less labor than they otherwise could. Goods will not be imported into any country unless they can be obtained more easily by producing something else and exchanging it for them, than by producing them directly. And hence, to restrict importations must be to lessen productive power and reduce the fund from which all revenues are drawn.
Through all protectionist arguments runs the notion that transporters and traders are non-producers, whose support lessens the amount of wealth which other classes can enjoy. This is a shortsighted view. In the full sense of the term transporters and traders are as truly producers as are miners, farmers, or manufacturers, since the transporting of things and the exchanging of things are as necessary to the enjoyment of things as is extracting, growing, or making. There are some operations conducted under the forms of trade that are in reality gambling or blackmailing, but this does not alter the fact that real trade, which consists in exchanging and transporting commodities, is a part of production — a part so necessary and so important that without it the other operations of production could only be carried on in the most primitive manner and with the most niggard results.
And not least important of the functions of the trader is that of holding things in stock, so that those who wish to use them may be able to get them at such times and places, and in such quantities, as are most convenient. The profits of traders and “middlemen” may sometimes be excessive (and anything which hampers trade and increases the capital necessary to carry it on tends to make them excessive), but they are in reality based upon the performance of services in holding and distributing things as well as in transporting things.
It each consumer had to go to the producer for the small quantities individually demanded, the producer would have to charge a higher price on account of the greater labor and expense of attending to such small transactions. On the other hand, the going to the producer direct would involve an enormous increase of cost and trouble to the consumer, even when such a method of obtaining things would not be utterly impossible. What “middlemen” do is to save to both parties this trouble and expense.
And further than this, these middlemen between producer and consumer effect an enormous economy in the amount of commodities that it is necessary to keep in stock to provide for a given consumption, and consequently vastly lessen the loss from deterioration and decay. Let anyone consider what amount of stores would be needed to keep in their accustomed supply, even for a month, a family used to easy access to those handy magazines of commodities which retail dealers maintain. He will see at once that there are a number of things such as fresh meat, fish, fruits, etc., which it is impossible to keep on hand, so as to be sure of having them when needed. And of the things that would keep longer, such as flour, sugar, oil, etc., he will see that but for the retail dealer it would be necessary that much greater quantities should be kept in each house, with a much greater liability to loss from decay or accident. But it is when he comes to things not constantly needed, but which, when needed, though it may not be once a year or once a lifetime, may be needed very badly — that he will realize fully how the much-abused “middleman” economizes the capital of society
and increases the opportunities of its members.
That in civilized society today there seem to be too many storekeepers and other distributors is quite true. But so there seem to be too many professional men, too many mechanics, too many farmers, and too many laborers. What may be the cause of this most curious state of things it may hereafter lie in our way to inquire, but at present I am only concerned in pointing out that the trader is not a mere “useless exchanger,” who “adds nothing to the real wealth of society,” but that the transporting, storing, and exchanging of things are as necessary a part of the work of supplying human needs as is growing, extracting, or making.
Nor should it be forgotten that the investigator, the philosopher, the teacher, the artist, the poet, the priest, though not engaged in the production of wealth, are not only engaged in the production of utilities and satisfactions to which the production of wealth is only a means, but by acquiring and diffusing knowledge, stimulating mental powers and elevating the moral sense, may greatly increase the ability to produce wealth. For man does not live by bread alone.
He who by any exertion of mind or body adds to the aggregate of enjoyable wealth, increases the sum of human knowledge or gives to human life higher elevation or greater fullness — he is in the large meaning of the words, a “producer,” a “working man,” a “laborer,” and is honestly earning honest wages. But he who, without doing aught to make mankind richer, wiser, better, happier, lives on the toil of others — he, no matter by what name of honor he maybe called, or how lustily the priests of Mammon may swing their censers before him, is in the last analysis but a beggarman or a thief.
The PURPOSE in which tariffs originate is that of raising revenue. The idea of using them for protection is an afterthought. And before considering the protective function of tariffs it will be well to consider them as a means for collecting revenue.
It is usually assumed, even by the opponents of protection, that tariffs should be maintained for revenue. Most of those who are commonly called free traders might more properly be called revenue tariff men. They object, not to the tariff, but only to its protective features, and propose, not to abolish it, but only to restrict it to revenue purposes. And if not useful for protection, the only justification for any tariff is that it is a good means of raising revenue. Let us inquire as to this.
Duties on imports are indirect taxes. Therefore the question whether a tariff is a good means of raising revenue involves the question whether indirect taxation is a good means of raising revenue.
As to ease and cheapness of collection indirect taxation is certainly not a good means of raising revenue. While there are direct taxes, such as taxes on real estate and taxes on legacies and successions, from which great revenues can easily and cheaply be collected, the only indirect taxes from which any considerable revenue can be obtained require large and expensive staffs of officials and the enforcement of vexatious and injurious regulations.
So with the collection of indirect taxes upon imports.
Land frontiers must be guarded and sea-coasts watched; imports must be forbidden except at certain places and under regulations which are always vexatious and frequently entail wasteful delays and expenses; consuls must be maintained all over the world, and no end of oaths required; vessels must be watched from the time they enter harbor until the time they leave, and everything landed from them examined, down to the trunks and satchels and sometimes the persons of passengers.
But in spite of prohibitions, restrictions, searchings, watchings, and swearings, indirect taxes on commodities are largely evaded, sometimes by the bribery of officials and sometimes by the adoption of methods for eluding their vigilance, which though costly in themselves, cost less than the taxes. All these costs, however, whether borne by the government or by the first payers (or evaders) of the taxes, together with the increased charges due to increased prices, finally fall on consumers, and thus this method of taxation is extremely wasteful, taking from the people much more than the government obtains.
A still more important objection to indirect taxation is that when imposed on articles of general use (and it is only from such articles that large revenues can be had) it bears with far greater weight on the poor than on the rich. Since such taxation falls on people not according to what they have, but according to what they consume, it is heaviest on those whose consumption is largest in proportion to their means. As much sugar is needed to sweeten a cup of tea for a working girl as for the richest lady in the land, but the proportion of their means which a tax on sugar compels each to contribute to the government is in the case of the one much greater than in the case of the other. So it is with all taxes that increase the cost of articles of general consumption. They bear far more heavily on married men than on bachelors; on those who have children than on those who have none; on those barely able to support their families than on those whose incomes leave them a large surplus. If the millionaire chooses to live closely he need pay no more of these indirect taxes than the mechanic.
Even if cheaper articles were taxed at no higher rates than the more costly, such taxation would be grossly unjust; but in indirect taxation there is always a tendency to impose heavier taxes on the cheaper articles used by all than on the more costly articles used only by the rich. This arises from the necessities of the case. Not only do the larger amounts of articles of common consumption afford a wider basis for large revenues than the smaller amounts of more costly articles, but taxes imposed on them cannot be so easily evaded. Even where discrimination of this kind is not made in the imposition of indirect taxation, it arises in its collection. Specific taxes fall more heavily upon the cheaper than the costlier grades of goods, while even in the case of ad valorem taxes, under-valuation and evasion are easier in regard to the more valuable grades.
That indirect taxes thus bear far more heavily on the poor than on the rich is undoubtedly one of the reasons why they have so readily been adopted. The rich are ever the powerful, and under all forms of government have most influence in forming public opinion and framing laws, while the poor are ever the voiceless. And while indirect taxation causes no loss to those who first pay it, it is collected in such insidious ways from those who finally pay it that they do not realize it. It thus affords the best means of getting the largest revenues from the body of the people with the least remonstrance against the amount collected or the uses to which it is put. This is the main reason that has induced governments to resort so largely to indirect taxation. A direct tax, where its justice and necessity are not clear, provokes outcry and opposition which may at times rise to successful resistance; but not only do those indirectly taxed seldom realize it, but it is extremely difficult for them to refuse payment. They are not called on at set times to pay definite sums to government agents, but the tax becomes indistinguishably blended with the cost of the goods they buy. When it reaches those who must finally pay it, together with all costs and profits of collection, it is not a tax yet to be paid, but a tax which has already been paid, some time ago, and many removes back, and which cannot be separated from other elements which go to make up the cost of goods. There is no choice save to pay the tax or go without the goods.
If a tax-gatherer stood at the door of every store and levied a tax of twenty-five percent on every article bought, there would quickly be outcry; but the very people who would fight rather than pay a tax like this, will uncomplainingly pay higher taxes when they are collected by storekeepers in increased prices.
It is no wonder that princes and ministers anxious to make their revenues as large as possible should prefer a method that enables them to “pluck the goose without making it cry,” nor is it wonderful that this preference should be shared by those who get control of popular governments; but the reason which renders indirect taxes so agreeable to those who levy taxes is a sufficient reason why a people jealous of their liberties should insist that taxes levied for revenue only should be direct, not indirect.
It is not merely the ease
with which indirect taxes can be collected that urges to their adoption.
Indirect taxes always enlist active private interests in their favor. The first
rude device for making the collection of taxes easier to the governing power is
to let them out to farm. Under this system, which existed in
The tendency of the restrictions and regulations necessary for the collection of indirect taxes is to concentrate business and give large capital an advantage. But even in the absence of such regulations indirect taxation tends to concentration. Indirect taxes add to the price of goods not only the tax itself but also the profit upon the tax. The need of larger capital for dealing in goods that have been enhanced in cost by taxation, the restrictions imposed on trade to secure the collection of the tax, and the better opportunities which those who do business on a large scale have of managing the payment or evading the tax, tend to concentrate business, and, by checking competition, to permit large profits, which must ultimately be paid by consumers. Thus the first payers of indirect taxes are generally not merely indifferent to the tax, but regard it with favor.
That indirect taxation is of the nature of farming the revenue to private parties is shown by the fact that those who pay such taxes to the government seldom or never ask for their reduction or repeal, but on the contrary generally oppose such propositions. The manufacturers and dealers in tobacco and cigars have never striven to secure any reduction in the heavy taxes on those articles, and the importers who pay directly the immense sums collected by our customs-houses have never grumbled at the duties, however they may grumble at the manner of their collection.
That indirect taxes may sometimes serve purposes other than the raising of revenue I do not deny. The license taxes exacted from the sellers of liquor may be defended on the ground that they diminish the number of saloons and lessen a traffic injurious to public morals. And so taxes on tobacco and spirits may be defended on the ground that the smoking of tobacco and the drinking of spirits are injurious vices, which may be lessened by making tobacco and spirits more expensive, so that (except the rich) those who smoke may be compelled to smoke poorer tobacco, and those who drink to drink viler liquor. But merely as a means of raising revenue, it is clear that indirect taxes are to be condemned. They cost far more than they yield, bear with the greatest weight upon those least able to pay, add to corruptive influences, and lessen the control of the people over their government.
If we do not need a tariff for protection we need no tariff at all, and for the purpose of raising revenue should resort to some system which will not tax the mechanic as heavily as the millionaire, and will not call on the man who rears a family to pay on that account more than the man who shirks his natural obligation, and leaves some woman whom in the scheme of nature it was intended that he should support, to take care of herself as best she can.
Protective tariffs differ from revenue tariffs in their object, which is not so much that of obtaining revenue as that of protecting home producers from the competition of imported commodities.
The two objects, revenue and protection, are not merely distinct, but antagonistic. The same duty may raise some revenue and give some protection, but in proportion as one object is secured the other is sacrificed, since revenue depends on the bringing in of commodities; protection on keeping them out. The duties of a purely revenue tariff should fall only on commodities not produced in the country; or, if levied on commodities partly produced at home should be balanced by equivalent internal taxes to prevent incidental protection. In a purely protective tariff, on the other hand, commodities not produced in the country should be free and duties should be levied on commodities that are or may be produced in the country. And, just in proportion as it accomplishes its object, the less revenue will it yield.
As we have already considered the revenue functions of tariffs, let us now consider their protective functions.
Protection, as the word has come to be used to denote a scheme of national policy, signifies the levying of duties on the importation of commodities (as a means) in order (as an end) to encourage domestic industry.
It is sometimes said that protection does not increase prices. It is sufficient answer to ask, how then can it encourage? To say that a protective duty encourages the home producer without raising prices, is to say that it encourages him without doing anything for him. Wherever beneath this assertion, as regardless of fact as it is of theory, there is any glimmering of reason, it is either in the notion that protective duties do not permanently add to prices, because they bring about such a competition between home producers as finally carries prices down to the previous level; or else in a confused idea that it would be an advantage to home producers to be secured the whole home market, even if at no higher prices.
But as to the first, the only way in which a protective duty can increase home competition in the production of any commodity is by so increasing prices as to attract producers to the industry by the superior profits to be obtained. This competition, when free to operate, ultimately reduces profits to the general level.* But this is not to say that it reduces prices to what they would be without the duty. And even where there is no reason in natural or social conditions why a commodity should not be produced as cheaply as in any foreign country, the effect of the network of duties, of which the particular duty is but a part, is to increase the cost of production, and thus, though profits may fall, to keep prices above the point of free importation. If the price of a protected article were to fall to the point at which
‘The effect of protection upon profits in the protected industries will be more fully examined in Chapter 13. — H.G.
the foreign product could not be imported were there no duty, the duty would cease to protect, since the foreign product would not be imported it it were abolished, and the producers for whose production it was imposed would cease to care for its retention. In what instance has this been the case? Are any protected industries less clamorous for protection now than they were when protection was first given to them?
As to the second notion, it is to be observed that the only way in which a protective duty can give the home market to home producers is by increasing the price at which foreign products can be sold in it. Not merely does this increase in the price of foreign products compel an increase in the price of domestic products into which they enter, but the shutting out of foreign products must increase the price of similar domestic products.
In short, the protective system is simply a system of encouraging certain industries by enabling those carrying them on to obtain higher prices for the goods they produce. It is a clumsy and extravagant mode of giving encouragement that could be given much better and at much less cost by bounties or subsidies. If it be wise to “encourage” industries, and this we have yet to examine, the best way of doing so would be to abolish our tariff entirely and to pay bounties from funds obtained by direct taxation. In this way the cost could be distributed with some approach to fairness, and the citizen who is worth a million times more than another could have the satisfaction of contributing a million times as much to the encouragement of industry.
I do not forget that experience has shown that the bounty system inevitably leads to fraud and begets corruption, while but poorly accomplishing the ends sought by it. But these evils attach to the protective more than to the bounty system, because its operations are not so clear. Although the people have in some cases been willing to pay bounties to a small extent and for a short time, in no case have they consented to regard them as a settled thing, and to keep on paying them year after year. But protective duties once imposed, the protected industry has always been as clamorous for the continuance of protection as it was in the beginning for the grant of it. And the people, not being so conscious of the payment, have permitted it to go on.
When we encourage an industry by a bounty we do not discourage any other industry, exceot as the necessary increase in general taxation may have a discouraging effect. But when to encourage one industry we raise the price of its products by a protective duty, we at the same time produce a directly injurious effect upon other industries that use those products. So complicated has production become, so intimate are the relations between industries, and in so many forms do the products of one industry enter into the materials or processes of others, that it is hard for an expert to say what will be the effect of a single protective duty. But when it comes to encouraging not one nor a dozen, but a thousand different industries, it is impossible for human intelligence to trace the multifarious effects of raising the prices of so many products. The people cannot tell what such a system costs them, nor in most cases can even those who are supposed to be its beneficiaries really tell how their gains under it compare with their losses from it.
It is often said by protectionists that free trade is right in theory but wrong in practice. Whatever may be meant by such phrases they involve a contradiction in terms, since a theory that will not agree with facts must be false. But without inquiring into the validity of the protective theory it is clear that no such
tariff as it proposes ever has been or ever can be made.
The theory of free trade may be carried into practice to the point of ideal perfection. For to secure free trade we have only to abolish restrictions. But to carry the theory of protection into practice some articles must be taxed and others left untaxed, and, as to the articles taxed, different rates of duty must be imposed. And as the protection given to any industry may be neutralized by protection that enhances the price of its materials, careful discrimination is required, for there are very few articles that can be deemed finished products in relation to all their uses. The finished products of some industries are the materials or tools of other industries.
To make a protective tariff that would even roughly accord with the protective theory would require in the first place a minute knowledge of all trade and industry, and of the manner in which an effect produced on one industry would act and react on others. The making of a tariff, instead of being, as the protective theory requires, a careful consideration of the circumstances and needs of each industry, is in practice simply a great “grab” in which the retained advocates of selfish interests bully and beg, bribe and log-roll, in the endeavor to get the largest possible protection for themselves without regard for other interests or for the general good. The result is, and always must be, the enactment of a tariff which resembles the theoretical protectionist’s idea of what a protective tariff should be about as closely as a bucketful of paint thrown against a wall resembles the fresco of a Raphael.
WITHOUT questioning the end sought by them we have seen that protective tariffs are to be condemned as a means. Let us now consider their end — the encouragement of home industry.
There can be no difference of opinion as to what encouragement means. To encourage an industry in the protective sense is to secure to those carrying it on larger profits than they could obtain of themselves. Only so far and so long as it does this can any protection encourage an industry.
But when we ask what the industries are that protection proposes to encourage we find a wide difference. Those whom American protectionists have regarded as their ablest advocates have asked protection for the encouragement of “infant industries” — describing the protective system as a means for establishing new industries in countries to which they are adapted. They have scouted the idea of attempting to encourage all industry, and declared the encouragement of industries not adapted to a country, or already established, or for a time longer than necessary for their establishment, to be waste and robbery. As it is now popularly advocated and practically applied in the United States the aim of protection, however, is not the encouragement of “infant industries” but the encouragement of “home industry” — that is to say, of all home industries. And what has proved true in that case is generally true. Wherever protection is once begun, the imposition of duties never stops until every home industry of any political strength that can be protected by tariff gets some encouragement. It is only in new countries and in the beginnings of the system that the encouragement of infant industries can be presented as the sole end of protection. European protectionists can hardly ask protection, on the ground of their infancy, for industries that have been carried on since the time of the Romans.
We have thus two distinct propositions to examine — the proposition that new and desirable industries should be encouraged, which still figures in the apologetics of protection, and the proposition popularly urged and which protectionist legislation attempts to carry into effect — that home industry should be encouraged.
As an abstract proposition it is not, I think, to be denied that there may be industries to which temporary encouragement might profitably be extended. Industries capable, in their development, of much public benefit have often to struggle under great disadvantages in their beginnings, and their development might sometimes be beneficially hastened by judicious encouragement. But there are insuperable difficulties in discovering what industries would repay encouragement.
All experience shows that the policy of encouragement, once begun, leads to a scramble in which it is the strong, not the weak; the unscrupulous, not the deserving, that succeed. What are really infant industries have no more chance in the struggle for governmental encouragement than infant pigs have with full-grown swine about a meal-tub. Not merely is the encouragement likely to go to industries that do not need it, but it is likely to go to industries that can only be maintained in this way, and thus to cause absolute loss to the community by diverting labor and capital from remunerative industries. On the whole, the ability of any industry to establish and sustain itself in a free field is the measure of its public utility, and that “struggle for existence” which drives out unprofitable industries is the best means ol determining what industries are needed under existing conditions and what are not. Even promising industries are more apt to be demoralized and stunted than to be aided in healthy growth by encouragement that gives them what they do not earn, just as a young man is more likely to be injured than benefited by being left a fortune.
Where there is a conscious need for the making of some invention or for the establishment of some industry which, though of public utility, would not be commercially profitable, the best way to encourage it is to offer a reward or bounty conditional upon success.
Let me call attention to a confusion of thought which gives plausibility to the notion that manufactures should be “encouraged.” Manufactures grow up as population increases and capital accumulates, and, in the natural order of industry, are best developed in countries of dense population and accumulated wealth. Seeing this connection, it is easy to mistake for cause what is really effect, and to imagine that manufacturing brings population and wealth.
In new countries the industries that yield the largest comparative returns are the primary or extractive industries, which obtain food and the raw materials of manufacture from nature. The reason of this is that in these primary industries there are not required such costly tools and appliances, nor the co-operation of so many other industries, nor yet is production in large quantities so important. The people of new countries can therefore get the largest return for their labor by applying it to the primary or extractive industries, and exchanging their products for those of the more elaborate industries that can best be carried on where population is denser.
As population increases, the conditions under which the secondary or any more elaborate industries can be carried on gradually arise, and such industries will be established for which natural conditions are peculiarly favorable, beginning with those whose products are in most general demand and will least bear transportation. Thus in a country having fine forests, manufactures of wood will arise before manufactures for which there is no special advantage. The making of bricks will precede the making of china, the manufacture of plowshares that of cutlery, window glass will be made before telescope lenses, and the coarser grades of cloth before the finer.
But while we may describe in a general way the conditions which determine the natural order of industry, yet so many are these conditions and so complex are their actions and reactions upon one another that no one can predict with any exactness what in any given community the natural order of development will be, or say when it becomes more profitable to manufacture a thing than to import it. Legislative interference, therefore, is sure to prove hurtful, and such questions should be left to the unfettered play of individual enterprise, which is to the community what the unconscious vital activities are to the man. If the time has come for the establishment of an industry for which proper natural conditions exist, restrictions upon importation in order to promote its establishment are needless. If the time has not come, such restrictions can only divert labor and capital from industries in which the return is greater, to others in which it must be less, and thus reduce the aggregate production of wealth.
The popular plea for protection is not, however, the encouragement of infant industries, but the encouragement of home industry — that is, all home industry.
Now it is manifestly impossible for a protective tariff to encourage all home industry. Duties upon commodities entirely produced at home can, of course, have no effect in encouraging any home industry. It is only when imposed upon commodities partly imported and partly produced at home, or entirely imported, yet capable of being produced at home, that duties can in any way encourage an industry. Nor could any import duty encourage any of the many industries which must be carried on where needed, such as building, the printing of newspapers, and so on. Since these industries that cannot be protected constitute by far the larger part of the industries of every country, the utmost that a protective tariff can do is to encourage only a few of the total industries of a country.
Yet in spite of this obvious fact, protection is never urged for the encouragement of the industries that alone can profit by a tariff. That would be to admit that to some it gave special advantages over others and so in the popular pleas that are made for it protection is urged for the encouragement of all industry. If we ask how this can be, we are told that the tariff encourages the protected industries, and then the protected industries encourage the unprotected industries.
Imagine a village of say a hundred voters. Imagine two of these villagers to make such a proposition as this: “We are desirous, fellow-citizens, of seeing you more prosperous and to that end propose this plan: Give us the privilege of collecting a tax of five cents a day from everyone in the village. This slight tax will give our village two rich citizens who can afford to spend money. We will at once begin to live in commensurate style. We will enlarge our houses and improve our grounds, set up carriages, hire servants, give parties and buy much more freely at the stores. This will make trade brisk and cause a greater demand for labor. This, in turn, will create a greater demand for agricultural productions, which will enable the neighboring farmers to make a greater demand for store goods and the labor of mechanics. Thus shall we all become prosperous.”
There is in no country under the sun a village in which the people would listen to such a proposition. Yet it is every whit as plausible as the doctrine that encouraging some industries encourages all industries.
The only way in which we could even attempt to encourage all industry would be by the bounty or subsidy system. Were we to substitute bounties for duties as a means of encouraging industry it would not only become possible for us to encourage other industries than those now encouraged by tariff, but we should be forced to do so, for it is not in human nature that the farmers, the stock-raisers, the builders, the newspaper publishers and so on, would consent to the payment of bounties to other industries without demanding them for their own. Nor could we consistently stop until every species of industry, to that of the bootblack or ragpicker, was subsidized. Yet evidently the result of such encouragement of each would be the discouragement of all. For as there could only be distributed what was raised by taxation, less the cost of collection, no one could get back in subsidies, were there any fairness in their distribution, as much
as he would be called upon to pay in taxes.
This practical reduction
to absurdity is not possible under the protective system, because only a small
part of the industries of a country can thus be “encouraged,” while the cost of
the encouragement is concealed in prices and is not realized by the masses. The
tax-gatherer does not demand from each citizen a contribution to the
encouragement of the favored few. He sits down in a custom-house and by taxing
imports enables the favored producer to collect “encouragement” from his
fellow-citizens in higher prices. Yet it is as true of encouragement by tariff
as of encouragement by bounties that the gain to some involves loss to others,
and since encouragement by tariff involves far more cost and waste than
encouragement by bounty, the proportion which the loss bears to the gain must
be greater. However protection may affect special forms of industry, it must
necessarily diminish the total return to industry — first, by the waste
inseparable from encouragement by tariff, and, second, by the loss due to the
transfer of capital and labor, from occupations which they would choose for
themselves, to less profitable occupations which they must be bribed to engage
In. If we do not see this without reflection, it is because our attention is
engaged with but a part of the effects of protection. We see the large
smelting-works and the massive mill without realizing that the same taxes which
we are told have built them up have made more costly every nail driven and every
needleful of thread used throughout the whole
country. Our imaginations are affected as were those of the first Europeans who
But reflection will show that the claim popularly made for protection, that it encourages home industry (i.e. all home industry), can be true only in one sense — the sense in which Pharaoh encouraged Hebrew industry when he compelled the making of bricks without straw. Protective tariffs make more work, in the sense in which the spilling of grease over her kitchen floor makes more work for the housewife, or as a rain that wets his hay makes more work for the farmer.
The aim of PROTECTION is to diminish imports, never to diminish exports. On the contrary, the protectionist habit is to regard exports with favor, and to consider the country which exports most and imports least as doing the most profitable trade. When exports exceed imports there is said to be a favorable balance of trade. When imports exceed exports there is said to be an unfavorable balance of trade. In accordance with this idea all protectionist countries afford every facility for sending things away and fine men for bringing things in.
If the things which we thus try to send away and prevent coming in were pests and vermin — things of which all men want as little as possible — this policy would conform to reason. But the things of which exports and imports consist are not things that nature forces on us against our will, and that we have to struggle to rid ourselves of; but things that nature gives only in return for labor, things for which men make exertions and undergo privations. Him who has or can command much of these things we call rich; him who has little we call poor; and when we say that a country increases in wealth we mean that the amount of these things which it contains increases faster than its population. What, then, is more repugnant to reason than the notion that the way to increase the wealth of a country is to promote the sending of such things away and to prevent the bringing of them in? Could there be a queerer inversion of ideas? Should we not think even a dog had lost his senses that snapped and snarled when given a bone, and wagged his tail when a bone was taken from him?
If foreigners will bring us goods cheaper than we can make them ourselves, we shall be the gainers. The more we get in imports as compared with what we have to give in exports, the better the trade for us. And since foreigners are not liberal enough to give us their productions, but will only let us have them in return for our own productions, how can they ruin our industry? The only way they could ruin our industry would be by bringing us for nothing all we want, so as to save us the necessity for work. If this were possible, ought it seem very dreadful?
Exports and imports, so far as they are induced by trade, are correlative. Each is the cause and complement of the other, and to impose any restrictions on the one is necessarily to lessen the other. And so far from its being the mark of a profitable commerce that the value of a nation’s exports exceeds her imports, the reverse of this is true.
In a profitable
international trade the value of imports will always exceed the value of the
exports that pay for them, just as in a profitable trading voyage the return
cargo must exceed in value the cargo carried out. This
is possible to all the nations that are parties to commerce, for in a normal
trade commodities are carried from places where they are relatively cheap to
places where they are relatively dear, and their value is thus increased by the
transportation, so that a cargo arrived at its destination has a higher value
than on leaving the port of its exportation. But on the theory that a trade is
profitable only when exports exceed imports, the only way for all countries to
trade profitably with one another would be to carry commodities from places
where they are relatively dear to places where they are relatively cheap. An
international trade made up of such transactions as the importation of
manufactured ice from the
It must, however, be
borne in mind that all exporting and importing are not the exchanging of
products. This, however, is a fact which puts in still stronger light, if that
be possible, the absurdity of the notion that an excess of exports over imports
shows increasing wealth. When
In the commerce which
goes on between the
On the other hand, not only does the United States pay in exports to Europe for its imports from Brazil, India, and such countries, but interest on bonds and other obligations, profits on capital invested there, rent for American land owned abroad, remittances from immigrants to relatives at home, property passing by will or inheritance to people abroad, payments for ocean transportation formerly carried on by its own vessels but now carried on by foreign vessels, the sums spent by American tourists who every year visit Europe, and by the increasing number of rich Americans who live in Europe, all contribute to swell its exports and reduce its imports.
The annual balance
But this drain is not to
be stopped by tariffs. It proceeds from a deeper cause than any tariff can
touch, and is but part of a general drift. The internal commerce of the
The tendency of the time
is thus to the ownership of the whole country by residents of cities, and it
makes no difference to the people of the country districts whether those cities
To assume, as protectionists do, that economy must necessarily result from bringing producer and consumer together in point of space, is to assume that things can be produced as well in one place as in another, and that difficulties in exchange are to be measured solely by distance. The truth is, that commodities can often be produced in one place with so much greater facility than in another that it involves a less expenditure of labor to bring them long distances than to produce them on the spot, while two points a hundred miles apart may be commercially nearer each other than two points ten miles apart. To bring the producer to the consumer in point of distance, is, if it increases the cost of production, not economy but waste.
But this is not to deny
that trade as it is carried on today does involve much unnecessary
transportation, and that producer and consumer are in many cases needlessly
separated. American protectionists are right when they point to the wholesale
exportation of the elements of fertility of their soil, in the great stream of
breadstuffs and meats which pour across the
It IS TO CONFUSIONS OF THOUGHT growing out of the use of money that we may trace the belief that a nation profits by exporting and loses by importing — a belief to which countless lives and incalculable wealth have been sacrificed in bloody wars, and which today molds the policy of nearly all civilized nations and interposes artificial barriers to the commerce of the world.
The primary form of trade is barter — the exchange of commodities for commodities. But just as when we begin to think and speak of length, weight, or bulk, it is necessary to adopt measures or standards by which these qualities can be expressed, so when trade begins there arises a need for some common standard by which the value of different articles can be apprehended. The difficulties attending barter soon lead, also, to the adoption by common consent of some commodity as a medium of exchange, by means of which he who wishes to exchange a thing tor one or more other things is no longer obliged to find someone with exactly reciprocal desires, but is enabled to divide the complete exchange into stages or steps, which can be made with different persons, to the enormous saving of time and trouble.
As civilization advances, as society becomes more settled and orderly, and exchanges more numerous and regular, gold and silver are gradually superseded as mediums of exchange by credit in various forms. By means of accounts current, one purchase is made to balance another purchase and one debt to cancel another debt. Individuals or associations of recognized solvency issue bills of exchange, letters of credit, notes and drafts, which largely take the place of coin; banks transfer credits between individuals, and clearing-houses transfer credits between banks, so that immense transactions are carried on with a very small actual use of currency; and finally, credits of convenient denominations, printed upon paper, and adapted to transference from hand to hand without indorsement or formality, being cheaper and more convenient, take in part or in whole the place of gold or silver in the country where they are issued.
The part which money plays in social life and intercourse is so necessary, its use is so common in thought and speech and actual transaction, that certain confusions with regard to it are apt to grow up. It is not needful at present to speak of the delusion that interest grows out of the use of money, or that increase of money is increase of wealth, or that paper money cannot properly fulfill its functions unless an equivalent of coin is buried somewhere — but only of such confusions of thought as have a relation to international trade.
When the growth of commerce made it possible to raise large revenues by indirect taxation, kings and their ministers soon discovered how easily the people could thus be made to pay an amount of taxes that they would have resisted if levied directly. Import taxes were first levied to obtain revenue, but not only was it found to be exceedingly convenient to tax goods in the seaport towns from whence they were distributed through the country, but the taxation of imported goods met with the warm support of such home producers as were thus protected from competition. An interest was thus created in favor of “protection,” which availed itself of national prejudices and popular habits of thought, and a system was by degrees elaborated, which for centuries swayed the policy of European nations.
This system, which Adam Smith attacked under the name of the mercantile system of political economy, regarded nations as merchants competing with each other for the money of the world, and aimed at enriching a country by bringing into it as much gold and silver as possible, and permitting as little as possible to flow out. To do this it was sought not only to prohibit the carrying of precious metals out of the country, but to encourage the domestic production of goods that could be sold abroad, and to throw every obstacle in the way of similar foreign or colonial industries. Not only were heavy import duties or absolute prohibitions placed on such products of foreign industry as might come into competition with home industry, but the exports of such raw materials as foreign industries might require were burdened with export duties or entirely prohibited under savage penalties of death or mutilation. Skilled workmen were forbidden to leave the country lest they might teach foreigners their art; domestic industries were encouraged by bounties, by patents of monopoly and by the creation of artificial markets — sometimes by premiums paid on exports, and sometimes by laws which compelled the use of their products. One instance of this was the Act of Parliament which required every corpse to be buried in a woolen shroud.
But to attempt to increase the supply of gold and silver by such methods is both foolish and useless. Such amounts of the precious metals as are needed for use as money will come to every nation that participates in the trade of the world, by virtue of a tendency that sets at naught all endeavors artificially to enhance supply, a tendency as constant as the tendency of water to seek a level. Wherever trade exists, all commodities capable of transportation tend to flow from wherever their value is relatively low to wherever their value is relatively high. This tendency is checked by the difficulties of transportation, which vary with different things as their bulk, weight, and liability to injury compare with their value. The precious metals do not suffer from transportation, and having (especially gold) little weight and bulk as compared with their value, are so portable that a very slight change in their relative value is sufficient to cause their flow.
The effect of artificially increasing the supply of precious metals in any country must be to lower their value as compared with that of other commodities. The moment, therefore, that restrictions by which it is attempted to attract and retain the precious metals begin to increase the supply of those metals, a tendency to their outflowing is set up, increasing in force as the efforts to attract and retain them become more strenuous. Thus all efforts artificially to increase the gold and silver of a country have had no result save to hamper industry and to make the country that engaged in them poorer instead of richer. This, experience has taught civilized nations, and few of them now make any direct efforts to attract or retain the precious metals, save by uselessly hoarding them in burglar-proof vaults.
The notion that gold and silver are the only true money, and that as such they have a peculiar value, still underlies protectionist arguments, and the habit of associating incomes with sales, and expenditure with purchases, which is formed in the thought and speech of everyday life, still disposes men to accept a policy which aims at restricting imports by protective tariffs.
When we say that a merchant is doing a profitable business because his sales exceed his purchases, what we are really thinking of as sales is not the goods he sends out, but the money that we infer he takes in in exchange for them. What we are really thinking of as purchases is not the goods he takes in, but the money we infer he pays out. We mean, in short, that he is growing richer because his income exceeds his out-go. But, manifestly, when we compare the trade of a merchant carried on in the usual way with the trade of a nation, it is not the goods that a merchant sells, but the money that he pays out, that is analogous to the exports of a country; not the goods that he buys, but the money he takes in, that is analogous to imports. It is only where the trade of a merchant is carried on by the exchange of commodities for commodities, that the commodities he sells are analogous to the exports, and the commodities he buys are analogous to the imports of a nation.
The fact is, that all trade in the last analysis is simply what it is in its primitive form of barter, the exchange of commodities for commodities. The carrying on of trade by the use of money does not change its essential character, but merely permits the various exchanges of which trade is made up to be divided into parts or steps, and thus more easily effected. When commodities are exchanged for money, but half a full exchange is completed. When a man sells a thing for money it is to use the money in buying some other thing — and it is only as money has this power that anyone wants or will take it. Our common use of the word “money” is largely metaphorical. We speak of a wealthy man as a moneyed man, and in talking of his wealth say that he has so much “money,” whereas the fact probably is, that though he may be worth millions, he never has at anyone time more than a few dollars, or at most a few hundred dollars, in his possession. His possessions really consist of houses, lands, goods, stocks, or of bonds or other obligations to pay money. The shrewd business man does not stow away money. On the contrary, with the money he obtains from his sales he hastens to make other purchases. If he does not buy commodities for use in his business, or commodities or services for personal gratification, he buys lands, houses, stocks, bonds, mortgages, or other things from which he expects a profitable return.
The trade between nations, made up as it is of numerous individual transactions which separately are but parts or steps in a complete exchange, is in the aggregate, like the primitive form of trade, the exchange of commodities for commodities. Money plays no part in international trade, and the world has yet to reach that stage of civilization which will give us international money. Paper currency — which in all civilized nations now constitutes the larger part of their money — is never exported to settle balances, and when gold or silver coin is exported or imported it is as a commodity, and its value is estimated at that of the bullion contained. What each nation imports is paid for in the commodities which it exports, unless received as loans, or investments, or as interest, rent, or tribute. Before commerce had reached its present refinement of division and subdivision this was in many individual cases clear enough. A vessel sailed from New York, Philadelphia, or Boston carrying, on account of owner or shipper, a cargo of flour, lumber; and slaves to the West Indies, where it was sold, and the proceeds invested in sugar, rum, and molasses, which were brought back, or which, perhaps, were carried to Europe, there sold, and the proceeds invested in European goods, which were brought home. At present the exporter and importer are usually different persons, but the bills of exchange drawn by the one against goods exported are bought by the other, and used to pay for goods imported. So far as the country is concerned, the transaction is the same as though importers and exporters were the same persons, and that imports exceed exports in value is no more proof of a losing trade than that in the old times a trading ship brought home a cargo worth more than that she carried out was proof of an unprofitable voyage.
Chapter 11 —
Do High Wages Necessitate Protection?
Protection derives strong support from the belief that the products of the lower-paid labor of some countries could undersell the products of the higher-paid labor of other countries if free competition were permitted. This belief not only leads working men to imagine protection necessary to keep up wages, but it also induces the belief that protection is necessary to the interests of the country at large.
And further than concerns the tariff this belief has important bearings. It enables employers to persuade themselves that they are serving general interests in reducing wages, or resisting their increase — and greatly strengthens the opposition to the efforts of working men to improve their condition, by setting against them a body of opinion that otherwise would be neutral, if not strongly in their favor.
It is evident that even those who most vociferously assert that we need a protective tariff on account of our higher standard of wages do not really believe it themselves. For if protection be needed against countries ot lower wages, it must be most needed against countries of lowest wages and least needed against countries of highest wages.
“It is a poor rule that will not work both ways.” If a protective tariff is required by high wages, then countries of low wages require free trade — or, at the very least, have nothing to fear from free trade. How is it, then, that we find the protectionists of France, Germany, and other low-wage countries protesting that their industries will be ruined by the free competition of the higher-wage industries of Great Britain and the United States just as vehemently as the protectionists of the latter countries protest that their industries would be ruined if exposed to free competition with the products of the “pauper labor” of Europe?
As popularly put, the argument that the country of high wages needs a protective tariff runs in this way: “Wages are higher here than elsewhere; therefore, if the produce of cheaper foreign labor were freely admitted it would drive the produce of our dearer domestic labor out of the market.” But the conclusion does not follow from the premise. To make it valid two intermediate propositions must be assumed: first that low wages mean low cost of production; and second, that production is determined solely by cost — or, to put it in another way, that trade being free, everything will be produced where it can be produced at least cost. Let us examine these two propositions separately.
If the country of low
wages can undersell the country of high wages, how is it that though the
American farm hand receives double the wages of the English agricultural
laborer, yet American grain undersells English grain? How is it that while the
general level of wages is higher in
The protectionist answer is that American grain undersells English grain, in spite of the difference of wages, because of
American natural advantages for the production of grain; and that the bulk of American exports consists of those crude productions in which wages are not so important an element of cost, since they do not embody so much labor as the more elaborate productions called manufactures.
But the first part of this answer is an admission that the rate of wages is not the determining element in the cost of production, and that the country of low wages does not necessarily produce more cheaply than the country of high wages; while, as for the distinction drawn between the cruder and the more elaborate productions, it is evident that this is founded on the comparison of such things by bulk or weight, whereas the only measure of embodied labor is value. A pound weight of cloth embodies more labor than a pound weight of cotton, but this is not true of a dollar’s worth. That a small weight of cloth will exchange for a large weight of cotton, or a small bulk of watches for a large bulk of wheat, means simply that equal amounts of labor will produce larger weights or bulks of the one thing than of the other; and in the same way the exportation of a certain value of grain, ore, stone, or timber means the exportation of exactly as much of the produce of labor as would the exportation of the same value of lace or fancy goods.
Looking farther, we see
in every direction that it is not the fact that low-priced labor gives
advantage in production. If this is the fact, how was it that the development
of industry in the slave States of the American Union was not more rapid than
That low wages mean
inefficient labor may be seen wherever we look. Hall a dozen Bengalese
carpenters are needed to do a job that one American carpenter can do in less
time. American residents in China get servants for almost nothing, but find
that so many are required that servants cost more than in the United States;
yet the Chinese who are largely employed in domestic service in California, and
get wages that they would not have dreamed of in China, are efficient workers.
It it were true that equal amounts of labor always produced equal results, then cheap labor might mean cheap production. But this is obviously untrue. The power of human muscle is, indeed, much the same everywhere, and if his wages be sufficient to keep him in good bodily health the poorly paid laborer can, perhaps, exert as much physical force as the highly paid laborer. But the power of human muscles, though necessary to all production, is not the primary and efficient force in production. That force is human intelligence, and human muscles are merely the agency by which that intelligence makes connection with and takes hold of external things, so as to utilize natural forces and mold matter to conformity with its desires. A race of intelligent pygmies with muscles no stronger than those of the grasshopper could produce far more wealth than a race of stupid giants with muscles as strong as those of the elephant. Now, intelligence varies with the standard of comfort, and the standard of comfort varies with wages. Wherever men are condemned to a poor, hard, and precarious living their mental qualities sink toward the level of the brute. Wherever easier conditions prevail the qualities that raise man above the brute and give him power to master and compel external nature develop and expand. And so it is that the efficiency of labor is greatest where laborers get the best living and have the most leisure — that is to say, where wages are highest.
How then, in the face of
these obvious facts, can we account for the prevalence of the belief that the
low-wage country has an advantage in production over the high-wage country? It
cannot be charged to the teaching of protection. This is one of the fallacies
of which protectionism avails itself, rather than one for which it is
responsible. Men do not hold it because they are protectionists, but become
protectionists because they hold it. And it seems to be as firmly held, and on
occasion as energetically preached by so-called free traders as by
protectionists. Witness the predictions of free trade economists that trade
unions, if successful in raising wages and shortening hours, would destroy
The truth is that the notion that low wages give a country an advantage in production is a careless inference from the everyday fact that it is an advantage to an individual producer to obtain labor at low wages.
It is true that an individual producer gains an advantage when he can force down the wages of his employees below the ordinary level, or can import laborers who will work for him for less, and that he may by this means be enabled to undersell his competitors, while the employer who continues to pay higher wages than other employers around him will, before long, be driven out of business. But it by no means follows that the country where wages are low can undersell the country where wages are high. For the efficiency of labor, though it may somewhat vary with the particular wages paid, is in greater degree determined by the general standard of comfort and intelligence, and the prevailing habits and methods which grow out of them. When a single employer manages to get labor for less than the rate of wages prevailing around him, the efficiency of the labor he gets is still largely fixed by that rate. But a country where the general rate of wages is low does not have a similar advantage over other countries, because there the general efficiency of labor must also be low.
The immediate effect of a general reduction of wages in any country would be merely to alter the distribution of wealth. Of the amount produced less would go to the laborers and more to those who share in the results of production without contributing to it. Some changes in exports and imports would probably follow a general reduction of wages, owing to changes in relative demand. The working classes, getting less than before, would have to reduce their luxuries, and perhaps live on cheaper food. Other classes, finding their incomes increased, might use more costly food and demand more of the costlier luxuries, and larger numbers of them might go abroad and use up in foreign countries the produce of exports, by which, of course, imports would be diminished. But except as to such changes the foreign commerce of a country would be unaffected. The country as a whole would have no more to sell and could buy no more than before. And in a little while the inevitable effect of the degradation of labor involved in the reduction of wages would begin to tell in the reduced power of production, and both exports and imports would fall off.
So if in any country there were a general increase of wages, the immediate effect would only be so to alter the distribution of wealth that more of the aggregate product would go to the laboring classes and less to those who live on the labor of others. The result would be that more of the cheaper luxuries would be called for and less of the more costly luxuries. But productive power would in nowise be lessened; there would be no less to export than before and no less ability to pay for imports. On the contrary, some of the idle classes would find their incomes so reduced that they would have to go to work and thus increase production, while as soon as an increase in wages began to tell on the habits of the people, and on industrial methods, productive power would increase.
Chapter 12 — Of Advantages and Disadvantages as Reasons for Protection
We have seen that low wages do not mean low cost of production, and that a high standard of wages, instead of putting a country at a disadvantage in production, is really an advantage. This disposes of the claim that protection is rendered necessary by high wages, by showing the invalidity of the first assumption upon which it is based. But it is worthwhile to examine the second assumption in this claim — that production is determined by cost, so that a country of less advantages cannot produce if the free competition of a country of greater advantages is permitted. For while we are sometimes told that a country needs protection because of great natural advantages that ought to be developed, we are at other times told that protection is needed because of the sparseness of population, the want of capital or machinery or skill, or because of high taxes or a high rate of interest, or other conditions which, it may be, involve real disadvantage.
But without reference to the reality of the alleged advantage or disadvantage, all these special pleas for protection are met when it is shown, as it can be shown, that whatever be its advantages or disadvantages for production a country can always increase its wealth by foreign trade.
If we suppose two countries each of which is, for any reason, at a decided disadvantage in some branch of production in which the other has a decided advantage, it is evident that the free exchange of commodities between them will be mutually beneficial, by enabling each to make up for its own disadvantage by availing itself of the advantage of the other, just as the blind man and the lame man did in the familiar story. Trade between them will give to each country a greater amount of all things than it could otherwise obtain with the same quantity of labor. Such a case resembles that of two workmen, each having as to some things skill superior to the other, and who, by working together, each devoting himself to that part for which he is the better fitted, can accomplish more than twice as much as if each worked separately.
But let us suppose two countries, one of which has advantages superior to the other for all the productions of which both are capable. Trade between them being free, would one country do all the exporting and the other all the importing? That, of course, would be preposterous. Would trade, then, be impossible? Certainly not. Unless the people of the country of less advantages transferred themselves bodily to the country of greater advantages, trade would go on with mutual benefit. The people of the country of greater advantages would import from the country of less advantages those products as to which the difference of advantage between the two countries was least, and would export in return those products as to which the difference was greatest. By this exchange both peoples would gain. The people of the country of poorest advantages would gain by it some part of the advantages of the other country, and the people of the country of greatest advantages would also gain, since, by being saved the necessity of producing the things as to which their advantage was least, they could concentrate their energies upon the production of things in which their advantage was greatest. This case would resemble that of two workmen of different degrees of skill in all parts of their trade, or that of a skilled workman and an unskilled helper. Though the workman might be able to perform all parts of the work in less time than the helper, yet there would be some parts in which the advantage of his superior skill would be less than in others; and as by leaving these to the helper he could devote more time to those parts in which superior skill would be most effective, there would be, as in the former case, a mutual gain in their working together.
Thus it is that neither advantages nor disadvantages afford any reason for restraining trade.3 Trade is always to the benefit of both parties. If it were not there would be no disposition to carry it on.
And thus we see again the fallacy of the protectionist contention that if it takes no more labor to produce a thing in our country than elsewhere, we shall lose nothing by shutting out the foreign product, even though we have to pay a higher price for the home product. The interchange of the products of labor does not depend upon differences of absolute cost, but of comparative cost. Goods may profitably be sent from places where they cost more labor to places where they cost less labor, provided (and this is the only case in which they ever will be so sent) that a still greater difference in labor-cost exists as to other things which the first country desires to obtain. Thus tea, which Horace Greeley was fond of referring to as a production that might advantageously be naturalized in the United States by a heavy duty, could undoubtedly be produced in the United States at less cost of labor than in China, for in transportation to the seaboard, packing, etc., Americans could save upon Chinese methods. But there are other things, such as the mining of silver, the refining of oil, the weaving of cloth, the making of clocks and watches, as to which their advantage over the Chinese is enormously greater than in the growing of tea. Hence, by producing these things and exchanging them directly or indirectly for Chinese tea, they obtain, in spite of the long carriage, more tea for the same labor than they could get by growing their own tea.
Consider how this principle, that the interchange of commodities is governed by the comparative, not the absolute, cost of production, applies to the plea that protective duties are required on account of home taxation. It is of course true that a special tax placed upon any branch of production puts it at a disadvantage unless a like tax is placed upon the importation of similar productions. But this is not true of such general taxation as falls on all branches of industry alike. As such taxation does not alter the comparative profitableness ol industries it does not diminish the relative inducement to carry any of them on, and to protect any particular industry from foreign competition on account of such general taxation is simply to enable those engaged in it to throw off their share of a general burden.
It follows from the principle which, as we have seen, causes and governs international exchanges, that for any country to impose restrictions on its foreign commerce on account of its own disadvantages in production is to prevent such amelioration of those disadvantages as foreign trade would bring. Free trade is voluntary trade. It cannot go on unless to the advantage of both parties, and, as between the two, free trade is relatively more advantageous to the poor and undeveloped country than to the rich and prosperous country. The opening up of trade between a Robinson Crusoe and the rest of the world would be to the advantage of both parties. But relatively the advantage would be far greater to Robinson Crusoe than to the rest of the world.
There is a certain class
of protectionists who concede that free trade is good in itself, but who say
that we cannot safely adopt it until all other nations have adopted it, or
until an other nations have come up to our standard of civilization; or, as it
is sometimes phrased, until the millennium has come and men have ceased to
struggle for their own interests as opposed to the interests of others. They
have ceased to deny the essential goodness of free trade, but contend that so
long as other countries maintain protective tariffs,
The fallacy underlying most of these excuses for protection is that considered in the previous chapter — the fallacy that the
country of low wages can undersell the country of high wages; but there is also mixed with this the notion to which such protectionists appeal — the notion that the abolition of duties by any country is to the advantage, not of the people of that country, but of the people of the other countries that are thus given free access to its markets.
All these notions are forms of the delusion that to export is more profitable than to import, but so widespread and influential are they that it may be well to devote a few words to them. The direct effect of a tariff is to restrain the people of the country that imposes it. It curtails the freedom of foreigners to trade only through its operation in curtailing the freedom of citizens to trade. So far as foreigners are concerned it only indirectly affects their freedom to trade with that particular country, while to citizens of that country it is a direct curtailment of the freedom to trade with all the world. Since trade involves mutual benefit, it is true that any restriction that prevents one party from trading must operate in some degree to the injury of another party. But the indirect injury which a protective tariff inflicts upon other countries is diffused and slight, as compared with the injury it inflicts directly upon the nation that imposes it.
For any nation to restrict the freedom of its own citizens to trade, because other nations so restrict the freedom of their citizens, is a policy of the “biting off one’s nose to spite one’s face” order. Other nations may injure us by the imposition of taxes which tend to impoverish their own citizens, for as denizens of the world it is to our real interest that all other denizens of the world should be prosperous. But no other nation can thus injure us so much as we shall injure ourselves if we impose similar taxes upon our own citizens by way of retaliation.
The constitution and scheme of things in this world is such that no one can do either good or evil for himself alone. No one can release himself from the influence of his surroundings, and say, “What others do is nothing to me;” nor yet can any one say, “What I do is nothing to others.” Nevertheless it is in the tendency of things that he who does good most profits by it, and he who does evil injures, most of all, himself. And those who say that a nation should adopt a policy essentially bad because other nations have embraced it are as unwise as those who say, lie, because others are false; be idle, because others are lazy; refuse knowledge, because others are ignorant.
The protective theory is that a protective duty protects the home producer4 from foreign competition, so as to encourage him, by larger profits than he could otherwise get, to engage in or increase production. All the beneficial effects claimed for protection depend upon its effect in thus encouraging the employing producer.
But when, assuming this, the opponents of protection represent the whole class of protected producers as growing rich at the expense of their fellow-citizens, they are contradicted by obvious facts. Businessmen well know that in long-protected industries the margin of profit is as small and the chances of failure as great as in any others — if, in fact, those protected industries are not harder to win success in by reason of the more trying fluctuations to which they are subject.
The reason why protection in most cases thus fails to encourage is not difficult to see.
The cost of any protective duty to the people at large is (1) the tax collected upon imported goods, plus the profits upon the tax, plus the expense and profits of smuggling in all its forms; plus the expense ol sometimes trying smugglers of the coarser sort, and occasionally sending a poor and friendless one to the penitentiary; plus bribes and moieties received by government officers; and (2) the additional prices that must be paid for the products of the protected home industry.
It is from this second part alone that the protected industry can get its encouragement. But only a part of this part of what the people at large pay is real encouragement. In the first place, it is true ol protective duties, as it is true of direct subsidies, that they cannot be had for nothing. Just as the Pacific Mail Steamship Company and the various land and bond grant railways had to expend large sums to secure representation at Washington, and had to divide handsomely with the Washington lobby, so the cost of securing Congressional “recognition” for an infant industry, or fighting off threatened reductions in its “encouragement,” and looking after every new tariff bill, is a considerable item. But still more important is the absolute loss in carrying on industries so unprofitable in themselves that they can be maintained only by subsidies. And to this loss must be added the waste that seems inseparable from governmental fosterage, for just in proportion as industries are sheltered from competition are they slow to avail themselves of improvements in machinery and methods.5 Out of the encouragement which the tariff beneficiaries receive in higher prices, much must thus be consumed, so that the net encouragement is only a small fraction of what consumers pay. Taking encouraged producers and taxed consumers together there is an enormous loss. Hence in all cases in which duties are imposed for the benefit of any particular industry the discouragement to industry in general must be greater than the encouragement of the particular industry.
Every tax that raises prices for the encouragement of one industry must operate to discourage all other industries into which the products of that industry enter. Thus a duty that raises the price of timber necessarily discourages the industries which make use of timber, from those connected with the building of houses and ships to those engaged in the making of matches and wooden toothpicks; a duty that raises the price of iron discourages the innumerable industries into which iron enters; a duty that raises the price of salt discourages the dairyman and the fisherman; a duty that raises the price of sugar discourages the fruit preserver, the maker of syrups and cordials, and so on. Thus it is evident that every additional industry protected lessens the encouragement of those already protected.
If there are producers who permanently profit by protective duties, it is only because they are in some other way protected from domestic competition, and hence the profit which comes to them by reason of the duties does not come to them as producers but as monopolists. That is to say, the only cases in which protection can more than temporarily benefit any class of producers are cases in which it cannot stimulate industry. Neither duties nor subsidies can give any permanent advantage in any business open to home competition because of the tendency of profits to a common level. The first effect of a protective duty is to increase profits in the protected industry. But unless that industry be in some way protected from the influx of competitors which such increased profits must attract, this influx must soon bring these profits to the general level. A monopoly, more or less complete, which may thus enable certain producers to retain for themselves the increased profits which a protective duty gives, may arise from the possession of advantages of different kinds.
It may arise, in the
first place, from the possession of some peculiar natural advantage. For
instance, because the only chrome mines yet discovered in the
A similar monopoly may be obtained by the possession of exclusive privileges given by the patent laws.
Or again, a similar monopoly may be secured by the concentration of a business requiring large capital and special knowledge, or by the combination of producers in a “ring” or “pool” so as to limit home production and crush home competition.
But the higher profits thus obtained in no way encourage the extension of such industries. On the contrary, they result from the very conditions, natural or artificial, which prevent the extension of these industries. They are, in fact, not the profits of capital engaged in industry, but the profits of ownership of natural opportunities, of patent rights, or of organization or combination, and they increase the value of ownership in these opportunities, rights, and monopolistic combinations, not the returns of capital engaged in production. Though they may go to individuals or companies who are producers, they do not go to them as producers; though they may increase the income of persons who are capitalists, they do not go to them by virtue of their employment of capital, but by virtue of their ownership of special privileges.
Of the monopolies which thus get the benefit of profits erroneously supposed to go to producers, the most important are those arising from the private ownership of land. That what goes to the landowner in nowise benefits the producer we may readily see.
The two primary factors of production, without which nothing whatever can be produced, are land and labor. To these essential factors is added, when production passes beyond primitive forms, a third factor, capital — which consists of the product of land and labor (wealth) used for the purpose of facilitating the production of more wealth. Thus the three factors of production in civilized societies are land, labor, and capital — and since land in modern civilization is made a subject of private ownership, the proceeds of production are divided between the landowner, the labor owner, and the capital owner.
But between these factors of production there exists an essential difference. Land is the purely passive factor; labor and capital are the active factors — the factors by whose application and according to whose application wealth is brought forth. Therefore, it is only that part of the produce which goes to labor and capital that constitutes the reward of producers and stimulates production. The landowner is in no sense a producer — he adds nothing whatever to the sum of productive forces, and that portion of the proceeds of production which he receives for the use of natural opportunities no more rewards and stimulates production than does that portion of their crops which superstitious savages might burn up before an idol in thank-offering for the sunlight that had ripened them.
There can be no labor until there is a man; there can be no capital until man has worked and saved; but land was here before man came. To the production of commodities the laborer furnishes human exertion; the capitalist furnishes the results of human exertion embodied in forms that may be used to aid further exertion; but the landowner furnishes — what? The superficies of the earth? the latent powers of the soil? the ores beneath it? the rain? the sunshine? gravitation? the chemical affinities? What does the landowner furnish that involves any contribution from him to the exertion required in production? The answer must be, nothing! And hence it is that what goes to the landowner out of the results of production is not the reward of producers and does not stimulate production, but is merely a toll which producers are compelled to pay to one whom our laws permit to treat as his own what Nature furnishes.
Now, keeping these
principles in mind, let us turn to the effects of protection. Let us suppose
Protection cannot add to the value of the land of a country as a whole, any more than it can stimulate industry as a whole; on the contrary, its tendency is to check the general increase of land values by checking the production of wealth; but by stimulating a particular form of industry it may increase the value of a particular kind of land. And it is instructive to observe this, for it largely explains the motive in urging protection, and where its benefits go.
Horace Greeley used to think that he conclusively disproved the assertion that the duties on iron were enriching a few at the expense of the many, when he declared that the laws of the United States gave to no one any special privilege of making iron, and asked why, if the tariff gave such enormous profits to iron producers as the free traders said it did, these free traders did not go to work and make iron.
The laws do not forbid me from making iron, but they do allow individuals to forbid me from making use of the natural material from which alone iron can be made. They do allow individuals to take possession of these deposits ol ore which nature has provided for the making of iron, and to treat and hold them as though they were their own private property, placed there by themselves and not by God. Consequently these deposits of iron ore are appropriated as soon as there is any prospect that anyone will want to use them, and when I find one that will suit my purpose I find that it is in the possession of some owner who will not let me use it until I pay him down in a purchase price, or agree to pay him in a royalty of so much per ton, nearly, if not quite, all I can make above the ordinary return to capital in producing iron. Thus, while the duty which raises the price of iron may not benefit producers, it does benefit the dogs-in-the-manger whom the law permits to claim as their own the stores which eons before man appeared, were accumulated by Nature for the use of the millions who would one day be called into being — enabling the monopolists of iron land to levy heavy taxes on their fellow-citizens long before they could otherwise have done so.
To repeat: It is only at first that a protective duty can stimulate an industry. When the forces of production have had time to readjust themselves, profits in the protected industry, unless kept up by obstacles which prevent further extension of the industry, must sink to the ordinary level, and the duty losing its power of further stimulation ceases to yield any advantage to producers unprotected against home competition.
tariff question seldom go further than the point we have now reached, for
though much is said, in the
Trade, as we have seen, is a mode of production, and the tendency of tariff restrictions on trade is to lessen the production of wealth. But protective tariffs also operate to alter the distribution of wealth, by imposing higher prices on some citizens and giving extra profits to others. This alteration of distribution in their favor is the impelling motive, with those most active in procuring the imposition of protective duties and in warning workmen of the dire calamities that will come on them if such duties are repealed. But in what way can protective tariffs affect the distribution of wealth in favor of labor? The direct object and effect of protective tariffs is to raise the price of commodities. But men who work for wages are not sellers of commodities; they are sellers of labor. They sell labor in order that they may buy commodities. How can increase in the price of commodities benefit them?
It is true that there is a constant tendency of all wages to a common level, and that this tendency arises from competition. But this competition is not the competition of the goods market; it is the competition of the labor market. The tendency of wages to a common level is quickest in the same occupation, because the transference of labor is easiest. If we pass to a comparison of occupation with occupation, we see that although there is a tendency to a common level, which maintains between wages in different occupations a certain relation, there are, in the same time and place, great differences of wages.
Though these differences exist, wages in different occupations are nevertheless held in a certain relation to each other by the tendency to a common level, so that a reduction of wages in one trade tends to bring about a reduction in others, not through the competition of the goods market, but through that of the labor market. As a matter of fact, trade unions, by checking the competition of labor, have considerably raised wages in many occupations, and have even brought about differences between the wages of union and nonunion workers in the same occupation. And what limits the possibility of thus raising wages is clearly not the free sale of commodities, but the difficulty of restricting the competition of labor.
Let us imagine under the general conditions of modern civilization, one country of comparatively high wages, and another country of comparatively low wages. Let us, in imagination, bring these countries side by side, separating them only by a wall which permits the free transmission of commodities, but is impassable for human beings. Can we imagine, as protectionist notions require, that the high-wage country would do all the importing and the low-wage country all the exporting, until the demand for labor so lessened in the one country that wages would fall to the level of the other? That would be to imagine that the low-wage country would go on pushing its commodities through this wall and getting back nothing in return. Clearly the one country would export no more than it got a return for, and the other could import no more than it gave a return tor. What would go on between the two countries is the exchange of their respective productions, and, as previously pointed out, what commodities passed each way in this exchange would be determined, not by the difference in wages between the two countries, nor yet by differences between them in cost of production, but by differences in each country in the comparative cost of producing different things. This exchange of commodities would go on to the mutual advantage of both countries, increasing the amount which each obtained, but no matter to what dimensions it grew, how could it lessen the demand for labor or have any effect in reducing wages?
Now let us change the supposition and imagine such a barrier between the two countries as would prevent the passage of commodities, while permitting the free passage of men. No goods produced by the lower-paid labor of the one country could now be brought into the other; but would this prevent the reduction of wages? Manifestly not. Employers in the higher-wage country, being enabled to get in laborers willing to work for less, could quickly lower wages.
What we may thus see by aid of the imagination accords with what we do see as a matter of fact. In spite of the high duties which shut out commodities on the pretense of protecting American labor, American workmen in all trades are being forced into combinations to protect themselves by checking the competition of the labor market. The American protective tariff on commodities raises the price of commodities, but what raising there is of wages has been accomplished by trades unions and the Knights of Labor. Breakup these organizations and what would the tariff do to prevent the forcing down of wages?
The whole aim and spirit of protection is not the protection of the sellers of labor but the protection of the buyers of labor; not the maintaining of wages but the maintaining of profits. The very class that profess anxiety to protect labor by raising the price of what they themselves have to sell, notoriously buy labor as cheap as they can and fiercely oppose any combination of workmen to raise wages. The whole spirit of protection is against the rights of labor.
I have already shown that protection cannot, except temporarily, increase the profits of producers as producers, but without regard to this it is clear that the contention that protection raises wages involves two assumptions: (1) that increase in the profits of employers means increase in the wages of their workmen and (2) that increase of wages in the protected occupations involves increase of wages in all occupations.
To state these assumptions is to show their absurdity. Is there anyone who really supposes that because an employer makes larger
profits he therefore pays higher wages?
Buyers of labor, like buyers of other things, pay, not according to what they can, but according to what they must.
Employers never give the increase of their profits as a reason for raising the wages of their workmen, though they frequently assign decreased profits as a reason for reducing wages. But this is an excuse, not a reason. The true reason is that the dull times which diminish their profits increase the competition of workmen for employment. Such excuses are given only when employers feel that if they reduce wages their employees will be compelled to submit to the reduction, since others will be glad to step into their places. And where trades unions succeed in checking this competition, they are enabled to raise wages.
No matter how much a protective duty may increase the profits of employers, it will have no effect in raising wages unless it so acts upon competition as to give workmen power to compel an increase of wages.
There are cases in which a protective duty may have this effect, but only to a small extent and for a short time. When a duty, by increasing the demand for a certain domestic production, suddenly increases the demand for a certain kind of skilled labor, the wages of such labor may be temporarily increased, to an extent and for a time determined by the difficulties of obtaining skilled laborers from other countries or of the acquirement by new laborers of the needed skill.
But in any industry it is only the few workmen of peculiar skill who can thus be affected, and even when by these few such an advantage is gained, it can only be maintained by trades unions that limit entrance to the craft. The cases are, I think, few indeed in which any increase of wages has thus been gained by even that small class ol workmen who in any protected industry require such exceptional skill that their ranks cannot easily be swelled; and the cases are fewer still, if they exist at all, in which the difficulties of bringing workmen from abroad, or of teaching new workmen, have long sufficed to maintain such increase.
Any temporary effect which a tariff might have to increase wages in the way pointed out would be so quickly lost that it could hardly be said to come into operation. For an increase in the wages of such occupations would at once be counteracted by the flow of labor from other occupations. And it must be remembered that the effect of “encouraging” any industry by taxation is necessarily to discourage other industries, and thus to force labor into the protected industries by driving it out of others.
Nor could wages be raised if the bounty which the tariff aims to give employing producers were given directly to their workmen. If, instead of laws intended to add to the profits of the employing producers in certain industries, we were to make laws by which so much should be added to the wages of the workmen, the increased competition which the bounty would cause would soon bring wages plus the bounty to the rate at which wages stood without the bounty; The result would be what it was in England when, during the early part of the nineteenth century, it was attempted to improve the miserable condition of agricultural laborers by “grants in aid of wages” from parish rates. Just as these grants were made, so did the wages paid by the farmers sink.
But if it is preposterous
to imagine that any effect a tariff may have to raise profits in the protected
industries can raise wages in those industries, what shall we say of the notion
that such raising of wages in the protected industries would raise wages in all
industries? This is like saying that to dam the
The general rate of wages in every country is manifestly determined by the rate in the occupations which require least special skill, and to which the man who has nothing but his labor can most easily resort. As they engage the greater body of labor these occupations constitute the base of the industrial organization, and are to other occupations what the ocean is to its bays. The rate of wages in the higher occupations can be raised above the rate prevailing in the lower, only as the higher occupations are shut off from the inflow of labor by their greater risk or uncertainty, by their requirement of superior skill, education, or natural ability, or by restrictions such as those imposed by trades unions. And to secure anything like a general rise of wages, it is necessary to raise wages in the lower and wider occupations. That is to say, to return to our former illustration, the level of the bays and harbors that open into it cannot be raised until the level of the ocean is raised.
No matter what be the
conditions of a country or what the peculiarities of its industry, that part of
its labor engaged in occupations that can be “protected” by import duties must
always be small as compared with that engaged in occupations that cannot be
protected. In the
The lowest and widest
occupations are those in which men apply their labor directly to nature, and ol
these agriculture is the most important. How quickly
the rise of wages in these occupations will increase wages in all occupations
was shown in the early days of
The difference of wages
Yet, even in countries
that are net importers of agricultural productions, a protective tariff upon
such productions could not increase agricultural wages, still less could it
increase wages in other occupations, which would then have become the widest.
This we may see by the effect of the corn laws in
We thus see from theory
that protection cannot raise wages. That it does not, facts show conclusively.
This has been seen in
Our inquiry has sufficiently shown the futility and absurdity of protection. It only remains to consider the plea that is always set up for protection — the plea that since capital has been invested and industry organized upon the basis of protection it would be unjust and injurious to abolish protective duties at once, and that their reduction must be gradual and slow. This plea for delay, though accepted and even urged by many who have been the conspicuous opponents of protection, will not bear examination. No one can acquire a vested right in a wrong; no one can claim property in a privilege. To admit that privileges which have no other basis than a legislative Act cannot at any time be taken away by legislative Act, is to commit ourselves to the absurd doctrine that has been carried to such a length in Great Britain, where it is held that a sinecure cannot be abolished without buying out the incumbent, and that because a man’s ancestors have enjoyed the privilege of living on other people, he and his descendants, to the remotest time, have acquired a sacred right to live upon other people. The true doctrine — of which we ought never, on any pretense, to yield one iota — is that enunciated in the American Declaration of Independence, the self-evident doctrine that men are endowed by their Creator with equal and inalienable rights, and that any law or institution that denies or impairs this natural equality may at any time be altered or abolished. And no more salutary lesson could today be taught to capitalists throughout the world than that justice is an element in the safety of investments, and that the man who trades upon the ignorance or the enslavement of a people does so at his own risk.
If there is to be a certain loss to any community, whether by flood, by fire, by invasion, by pestilence, or by commercial convulsion, that loss will fall more lightly on the poor and more heavily on the rich the shorter the time in which it is concentrated. If the currency of a country slowly depreciates, the depreciating currency will be forced into the hands of those least able to protect themselves, the price of commodities will advance in anticipation of the depreciation, while the price of labor will lag along after it; capitalists will have opportunity to make secure their loans and to speculate in advancing prices, and the loss will thus fall with far greater relative severity upon the poor than upon the rich.
So it is with the imposition of public burdens. It is manifestly to the advantage of the poorer class that any great public expense be met at once rather than spread over years by means of public debts. Thus, if the expenses of the American Civil War had been met by taxation levied at the time, such taxation must have fallen heavily upon the rich. But by the device of a public debt — a twin invention to that of indirect taxation — the cost of the war was not, as was pretended, shifted from present time to future time (for that would only have been possible to the extent that the means to carry on the war had been borrowed from abroad), but taxation, which otherwise must have fallen upon individuals in proportion to their wealth, was changed into taxation spread over a long series of years and falling upon individuals in proportion, not to their means, but to their consumption, thus imposing upon the poor lar greater relative burdens than upon the rich. Whether the rich would have had the patriotism to support a war which thus called upon them for sacrifices more commensurate with those of the poor, who in all wars furnish the far greater portion of “the food for powder,” is another matter; but it is certain that the spreading of the war taxation over years has not only made the cost of the war many times greater, but has been to the advantage of the rich and to the disadvantage of the working classes.
If the abolition of protection is, as protectionists predict, certain to disorganize trade and industry, then it is better for all, and especially is it better for the working classes, that the change should be sharp and short. If the return to a natural condition of trade and production must temporarily throw men out of employment, then it is better that they should be thrown out at once and have done with it, than that the same loss of employment should be spread over a series of years with a constant depressing effect upon the labor market. In a sharp but short period of depression the public purse could, without serious consequences, be drawn upon to relieve distress, but any attempt to relieve in that way the less general but more protracted distress incident to a long period of depression, would tend to create an army of habitual paupers.
The notion that our manufactures would be suspended and our ironworks closed and our coal mines shut down by the abolition of protection is a notion akin to that of “the tail wagging the dog.” Where are the goods to come from which are thus to deluge our markets, and how are they to be paid for? Since other countries are not going to deluge us with the products of their labor without demanding the products of our own labor in payment, any increase in our imports from the abolition of protection would involve a corresponding increase in exports.
The increased power which the removal of restrictions upon trade would give in the production of wealth would be felt in all directions. Rings would be broken up, and where profits are now excessive they would come down; but production would go on under healthier conditions and with greater energy, while legislation and administration would be relieved of a great cause of corruption, and all governmental reforms would be made easier.
Chapter 16 —
Inadequacy of the Free Trade Argument
We have seen the absurdity of protection as a general principle and the fallacy of the special pleas that are made for it. We have seen that protective duties cannot increase the aggregate wealth of the country that enforces them, and have no tendency to give a greater proportion of that wealth to the working class. We have seen that their tendencies, on the contrary, are to lessen aggregate wealth, and to foster monopolies at the expense of the masses of the people.
But although we have directly or inferentially disproved every argument that is made for protection, although we have seen conclusively that protection is in its nature inimical to general interests, and that free trade is in its nature promotive of general interests, yet if our inquiry were to stop here we should not have accomplished the purpose with which we set out.
The very conclusiveness with which our examination has disproved the claims of protection will suggest that there must be something more to be said, and may well prompt the question, “If the protective theory is really so incongruous with the nature of things and so inconsistent with itself, how is it that after so many years of discussion it still obtains such wide and
In our examination we have gone as far, and in certain respects somewhat farther than free traders usually go. But what have we proved as to the main issue? Merely that it is the tendency of free trade to increase the production of wealth, and thus to permit of the increase of wages, and that it is the tendency of protection to decrease the production of wealth and foster certain monopolies. But from this it does not follow that the abolition of protection would be of any benefit to the working class. The tendency of a brick pushed off a chimney-top is to fall to the surface of the ground. But it will not fall to the surface of the ground if its fall is intercepted by the roof of a house. The tendency of anything that increases the productive power of labor is to augment wages. But it will not augment wages under conditions in which laborers are forced by competition to offer their services for a mere living.
The free trader can only answer: “It will increase wealth and reduce the cost of commodities.”
But in our own time the working man has seen wealth enormously increased without feeling himself a sharer in the gain. He has seen the cost of commodities greatly reduced without finding it any easier to live.
And seeing this, the working man, even though he may realize with more or less clearness the hypocrisy of the rings and combinations which demand tariff duties for “the protection of labor,” accepts the fallacies of protection, or at least makes no effort to throw them off, not because of their strength so much as of the weakness of the appeal which free trade makes to him. A considerable proportion, at least, of the most intelligent and influential of working men are fully conscious that “protection” does nothing for labor, but neither do they see what free trade could do. And so they regard the tariff question as one of no practical concern to working men — an attitude hardly less satisfactory to the protected interests than a thorough belief in protection. For when an interest is already entrenched in law and habit of thought, those who are not against it are for it.
Without question the most important social phenomena of our time arise from that partial paralysis of industry which in all highly civilized countries is in some degree chronic, and which at recurring periods becomes intensified in widespread and long-continued industrial depressions.
What is the current explanation of these phenomena? Is it not that which attributes them to over-production?
In this great fact, that increase in wealth and in the power of producing wealth does not bring any general benefit in which all classes share, does not for the great masses lessen the intensity of the struggle to live, lies the explanation of the popular weakness of free trade. It is owing to the increasing appreciation of this fact, and not to accidental causes, that all over the civilized world the free trade movement has for some time been losing energy.
It is true that the British free traders were enabled to arouse the popular enthusiasm necessary to overthrow protection. But the British tariff made food dear, which enabled free-traders to appeal to sympathy and imagination, directly and forcefully. Thus, the feeling of that time in regard to such reforms was far more hopeful. The great social problems which today loom so dark on the horizon of the civilized world were then hardly perceived.
In the destruction of political tyranny and the removal of trade restrictions ardent and generous spirits saw the emancipation of labor and the eradication of chronic poverty, and there was a confident belief that the industrial inventions and discoveries of the new era which the world had entered would elevate society from its very foundations. The natural assumption that increase in the general wealth must mean a general improvement in the condition of the people was then confidently made.
But disappointment after
disappointment has chilled these hopes, and, just as faith in mere
republicanism has weakened, so the power of the appeal that free traders make
to the masses has weakened with the decline of the belief that mere increase in
the power of production will increase the rewards of labor. Instead of the
abolition of protection in
It is useless to tell working men that increase in the general wealth means improvement in their condition. They know by experience that this is not true.
It is true that statistics may be arrayed in such way as to prove to the satisfaction of those who wish to believe it, that the condition of the working classes is steadily improving. But that this is not the fact working men well know. It is true that the average consumption has increased, and that the cheapening of commodities has brought into common use things that were once considered luxuries. It is also true that in many trades wages have been somewhat raised and hours reduced by combinations among workmen. But although the prizes that are to be gained in the lottery of life — or, if anyone prefers so to call them, the prizes that are to be gained by superior skill, energy, and foresight — are constantly becoming greater and more glittering, the blanks grow more numerous. The man of superior powers and opportunities may hope to count his millions where a generation ago he could have hoped to count his tens of thousands; but to the ordinary man the chances of failure are greater, the fear of want more pressing. It is harder for the average man to become his own employer, to provide for a family and to guard against contingencies. The anxieties attendant on the fear of losing employment are becoming greater and greater, and the fate of him who falls from his place more direful. To prove this it is not necessary to cite the statistics that show how pauperism, crime, insanity, and suicide are increasing faster than our increase in population. Who that reads our daily papers needs any proof that the increase in the aggregate of wealth does not mean increased ease of gaining a living by labor?
And when we take into account longer periods of time than are usually considered in discussions as to whether the condition of the working man has or has not improved with improvement in productive agencies and increase in wealth, here is a great broad fact:
Five centuries ago the
wealth-producing power of
Yet patient students of
those times — such men as Professor Thorold Rogers,
who devoted himself to the history of prices, and deciphered the records of
colleges, manors, and public offices, tells us that the condition of the
English laborer was not only relatively, but absolutely better in those rude
times than it is in England today, after five centuries of advance in the
productive arts. They tell us that the working man did not work so hard as he does now, and lived better; that he was exempt
from the harassing dread of being forced by loss of employment to want and
beggary, or of leaving a family that must apply to charity to avoid starvation.
Pauperism as it prevails in the rich
If this be the result of five centuries of such increase in productive power as has never before been known in the world, what ground is there for hoping that the mere abolition of protective tariffs would permanently benefit working men?
We ALL know that the reasons men give for their conduct or opinions are not always the true reasons, and that beneath the reasons we advance to others or set forth to ourselves there often lurks a feeling or perception which we may but vaguely apprehend or may even be unconscious of, but which is in reality the determining factor.
The truth is, that the fallacies of protection draw their real strength from a great fact, which is to them as the earth was to the fabled Antarns, so that they are beaten down only to spring up again. This fact is one which neither side in the controversy endeavors to explain, which free traders quietly ignore and protectionists quietly utilize, but which is of all social facts most obvious and important to the working classes — the fact that as soon, at least, as a certain stage of social development is reached, there are more laborers seeking employment than can find it — a surplus which at recurring periods of industrial depression becomes very large. Thus the opportunity of work comes to be regarded as a privilege, and work itself is deemed in common thought a good. The getting of work, not the getting of the results of work, is assumed to be the end at which a true national policy should aim — though for obvious reasons, protectionist
writers do not dwell upon this notion.
Here, and not in the labored arguments which its advocates make, or in the power of the special interests which it enlists, lies the real strength of protection. Beneath all the mental habits I have spoken of as disposing men to accept the fallacies of protection lies one still more important — the habit ingrained in thought and speech of looking upon work as a boon.
Protection, as we have seen, operates to reduce the power of a community to obtain wealth — to lessen the result which a given amount of exertion can secure. It “makes more work,” in the sense in which Pharaoh made more work for the Hebrew brick-makers when he refused them straw; in the sense in which the spilling of grease over her floor makes more work for the housewife, or the rain that wets his hay makes more work for the farmer.
Yet, when we prove this, what have we proved to men whose greatest anxiety is to get work; whose idea of good times is that of times when work is plentiful?
A rain that wets his hay is to the farmer clearly an injury; but is it an injury to the laborer who gets by reason of it a day’s work and a day’s pay that otherwise he would not have got?
The spilling of grease upon her kitchen floor may be a bad thing for the housewife; but to the scrubbing woman who is thereby enabled to earn a needed half-crown it may be a godsend.
Or if the laborers on Pharaoh’s public works had been like the laborers on modern public works, anxious only that the job might last, and if outside of them had been a mass of less fortunate laborers, pressing, struggling, begging for employment in the brickyards — would the edict that made more work, by reducing the productiveness of labor, have really been unpopular?
Those who imagine that they can overcome the popular leaning to protection by pointing out that protective tariffs make necessary more work to obtain the same result, ignore the fact that in all civilized countries that have reached a certain stage of development the majority of the people are unable to employ themselves, and, unless they find someone to give them work, are helpless, and, hence, are accustomed to regard work as a thing to be desired in itself, and anything which makes more work as a benefit, not an injury.
Here is the rock against which “free traders” whose ideas of reform go no farther than “a tariff for revenue only” waste their strength when they demonstrate that the effect of protection is to increase work without increasing wealth. And here is the reason why in the United States, in Canada, and in Australia, the disposition to resort to protective tariffs increases as that early stage in which there is no difficulty of finding employment is passed, and the social phenomena of older countries begin to appear.
There never yet lived a man who wanted work for its own sake. The natural inducement to the work by which human wants are supplied is the produce of that work. But our industrial organization is such that what large numbers of men expect to get by work is not the produce or any proportional share of the produce of their work, but a fixed sum which is paid to them by those who take for their own uses the produce of their work. This sum takes to them the place of the natural inducement to work, and to obtain it becomes the object of their work.
Now the very fact that without compulsion no one will work unless he can get something for it, causes, in common thought, the idea of wages to become involved in the idea of work, and leads men to think and speak of wanting work when what they really want are the wages that are to be got by work. But the fact that these wages are based upon the doing of work, not upon its productiveness, dissociates the idea of return to the laborer from the idea of the actual productiveness of his labor, throwing this latter idea into the background or eliminating it altogether.
In our modern civilization the masses of men possess only the power to labor. It is true that labor is the producer of all wealth, in the sense of being the active factor of production; but it is useless without the no less necessary passive factor. With nothing to exert itself upon, labor can produce nothing, and is absolutely helpless. And so, the men who have nothing but the power to labor must, to make that power ol any use to them, either hire the material necessary to the exertion of labor, or, as is the prevailing method in our industrial organization, sell their labor to those who have the material. Thus it comes that the majority of men must find someone who will set them to work and pay them wages — he keeping as his own what their expenditure of labor produces.
The man who does not sell a commodity today may sell it tomorrow. At any rate he retains the commodity. But the labor of the man who has stood idle today because no one would hire him cannot be sold tomorrow. The opportunity has gone from the man himself, and the labor that he might have exerted, had he found a buyer for it, is utterly lost. The men who have nothing but their labor are, moreover, the poorest class — the class who live from hand to mouth and who are least able to bear loss. Further than this, the sellers of labor are numerous as compared with buyers. All men in health have the power of labor, but under the conditions which prevail in modern civilization only a comparatively few have the means of employing labor, and there are always, even in the best of times, some men who find it difficult to sell their labor and who are thus exposed to privation
and anxiety, if not to physical suffering.
Hence arises the feeling that the man who employs another to work is a benefactor to him — a feeling which even the economists who have made war upon some of the popular delusions growing out of it have done their best to foster, by teaching that capital employs and maintains labor. This feeling runs through all classes, and colors all our thought and speech. One cannot read our newspapers without seeing that the notice of a new building or projected enterprise of any kind usually concludes by stating that it will give employment to so many men, as though the giving of employment, the providing of work, were the measure of its public advantage, and something for which all should be grateful.
This habit of looking on the giving of employment as a benefaction and on work as a boon, lends easy currency to teachings which assume that work is desirable in itself— something which each nation ought to try to get the most of— and makes a system which professes to prevent other countries from doing for us work we might do for ourselves seem like a system for the enrichment of our own country and the benefit of its working classes. It not only indisposes men to grasp the truth that protection can only operate to reduce the productiveness of labor, but it indisposes them to care anything about that. It is the need for labor, not the productiveness of labor, that they are accustomed to look upon as the thing to be desired.
When men are thus accustomed to think and speak of work as desirable in itself, is it any wonder that a system which proposes to “make work” should easily obtain popularity?
Protectionism viewed in itself is absurd. But it is no more absurd than many other popular beliefs. Professor W. G. Sumner of Yale College, a fair representative of the so-called free traders who have been vainly trying to weaken the hold of protectionism in the United States without disturbing its root, essayed, before the United States Tariff Commission in 1882, to bring protectionism to a reductio ad absurdum by declaring that the protectionist theory involved such propositions as these: that a big standing army would tend to raise wages by withdrawing men from competition in the labor market; that paupers in almshouses and convicts in prisons ought for the same reason to be maintained without labor; that it is better for the laboring class that rich people should live in idleness than that they should work; that trades unions should prevent their members from lessening the supply of work by doing too much; and that the destruction of property in riots must be a good thing for the laboring class, by increasing the work to be done.
But whoever will listen to the ordinary talk of men and read the daily newspapers will find that, so far from such notions seeming absurd to the common mind, they are accustomed ideas. Is it not true that the “good times during the war” are widely attributed to the “employment furnished by government” in calling so many men into the army, and to the brisk demand for commodities caused by their unproductive consumption and by actual destruction? Is it not true that the working classes protest against the employment of convicts in this, that, or the other way, and would much rather have them kept in idleness than have them “take work from honest men”? Is it not true that the rich man who “gives employment” to others by his lavish waste is universally regarded as a better friend to the workers than the rich man who “takes work from those who need it” by doing it himself?
In themselves these notions may be what the Professor declares them, “miserable fallacies which sin against common sense,” but they arise from the recognition of actual facts. Take the most preposterous of them. The burning down of a city is indeed a lessening of the aggregate wealth. But is the waste involved in the burning down of a city any more real than the waste involved in the standing idle of men who would gladly be at work in building up a city? Where everyone who needed to work could find opportunity, there it would indeed be clear that the maintenance in idleness of convicts, paupers, or rich men must lessen the rewards of workers; but where hundreds of thousands must endure privation because of their inability to find work, the doing of work by those who can support themselves, or will be supported without it, seems like taking the opportunity to work from those who most need or most deserve it. Such “miserable fallacies” must continue to sway men’s minds until some satisfactory explanation is afforded of the facts that make the “leave to toil” a boon.
A political economy that will recognize no deeper social wrong than the framing of tariffs on a protective instead of on a revenue basis, and that, with such trivial exceptions, is but a justification of “things as they are,” is repellent to the instincts of the masses. To tell working men, as Professor Sumner does, that “trade unionism and protectionism are falsehoods,” is simply to dispose them to protectionism, for whatever may be said of protection they well know that trades unions have raised wages in many vocations, and that they are the only things that have yet given the working classes any power of resisting a strain of competition that, unchecked, must force them to the maximum of toil for the minimum of pay. Such free-tradeism as Professor Sumner represents — and it is this that is taught in England, and in the United States has essayed to do battle with protectionism — must, wherever the working classes have political power, give to protection positive strength.
The opinion that finds most influential expression is that labor-saving invention, although it may sometimes cause temporary inconvenience or even hardship to a few, is ultimately beneficial to all. On the other hand, there is among working men a widespread belief that labor-saving machinery is injurious to them, although, since the belief does not enlist those powerful special interests that are concerned in the advocacy of protection, it has not been wrought into an elaborate system and does not get anything like the same representation in the organs of public opinion.
Now, should we subject this question to such an examination as we have given to the tariff question we should reach similar results. We should find the notion that invention ought to be restrained as incongruous as the notion that trade ought to be restrained — as incapable of being carried to its logical conclusions without resulting in absurdity. And while the use of machinery enormously increases the production of wealth, examination would show in it nothing to cause inequality in distribution. On the contrary, we should see that the increased power given by invention inures primarily to labor, and that this gain is so diffused by exchange that the effect of an improvement which increases the power of labor in one branch of industry must be shared by labor in all other branches. Thus the direct tendency of labor-saving improvement is to augment the earnings of labor. Even the monopoly of a labor-saving invention, while it can seldom be maintained for any length of time, cannot prevent a large (and generally much the largest) part of the benefits from being diffused.6
From this we might conclude with certainty, that the tendency of labor-saving improvements is to benefit all, and especially to benefit the working class, and hence might naturally attribute any distrust of their beneficial effects partly to the temporary displacements which, in a highly organized society, any change in the forms of industry must cause, and partly to the increased wants called forth by the increased ability to satisfy want.
It can be proved that
labor-saving invention tends to benefit labor, but that this tendency is
in some way aborted is even more clearly evident in the facts of today than it
was when John Stuart Mill questioned whether mechanical invention had lightened
the day’s toil of any human being. It is true that in some places and in some
occupations there has been improvement in the condition of labor. But not only
is such improvement nowhere commensurate with the increase of productive power;
it is clearly not due to it. It exists only where it has been won by combinations
of workmen or by legal interference. It is trade unions, not the increased
power given by machinery, that have in many occupations in
The problem we must solve, to explain why free trade or labor-saving invention or any similar cause fails to produce the general benefits we naturally expect, is a problem of the distribution of wealth. When increased production of wealth does not proportionately benefit the working classes, it must be that it is accompanied by increased inequality of distribution.
In the social phenomena we are considering, it is not merely that with increasing wealth the share that some classes obtain is not increased proportionately; it is that it is not increased absolutely, and that in some cases it is even absolutely, as well as proportionately, diminished.
To get an illustration that will cover this point let us go back to Robinson Crusoe’s island, which may well serve us as an example of society in its simplest and therefore most intelligible form.
The discovery of the island which we have heretofore supposed, involving calls by other ships, would greatly increase the wealth which the labor of its population of two could obtain. But it would not follow that in the increased wealth both would gain. Friday was Crusoe’s slave, and no matter how much the opening of trade with the rest of the world might increase wealth, he could only demand the wages of a slave — enough to maintain him in working ability. So long as Crusoe himself lived he would doubtless take good care of the companion of his solitude, but when in the course of time the island had fully come into the circle of civilized life, and had passed into the possession of some heir of Crusoe’s, or of some purchaser, living probably in England, and was cultivated with a view to making it yield the largest income, the gulf between the proprietor who owned it and the slave who worked upon it would not merely have enormously widened as compared with the time when Crusoe and Friday shared with substantial equality the joint produce of their labor, but the share of the slave might have become absolutely less, and his condition lower and harder.
It is not necessary to suppose positive cruelty or wanton harshness. The slaves who in the new order of things took Friday’s place might have all their animal wants supplied. They might have as much to eat as Friday had, might wear better clothes, be lodged in better houses, be exempt from the fear of cannibals, and in illness have the attendance of a skilled physician. And seeing this, island “statisticians” might collate figures or devise diagrams to show how much better off these toilers were than their predecessor, who wore goatskins, slept in a cave and lived in constant dread of being eaten, and the conclusions of these gentlemen might be paraded in all the island newspapers, with a chorus of: “Behold, in figures that cannot lie and diagrams that can be measured, how industrial progress benefits everybody, even the slave!”
But in things of which the statistician takes no account they would be worse off than Friday. Compelled to a round of dreary toil, unlightened by variety, undignified by responsibility, unstimulated by seeing results and partaking of them, their life, as compared with that of Friday, would be less that of men and more that of machines.
And the effect of such changes would be the same upon laborers such as we call free — free, that is to say, to use their own power to labor, but not free to that which is necessary to its use. If Friday, instead of setting Crusoe’s foot upon his head, in token that he was thenceforward his slave, had simply acknowledged Crusoe’s ownership of the island, what would have been the difference? As he could only live upon Crusoe’s property on Crusoe’s terms, his freedom would simply have amounted to the freedom to emigrate, to drown himself in the sea, or to give himself up to the cannibals. Men enjoying only such freedom — that is to say, the freedom to starve or emigrate as the alternative of getting someone else’s permission to labor — cannot be enriched by improvements that increase the production of wealth. For they have no more power to claim any share of it than has the slave. Those who want them to work must give them what the master must give the slave if he wants him to work enough to support life and strength. When they can find no one who wants them to work, they must starve, if they cannot beg. Grant to Crusoe ownership of the island, and Friday, the free man, would be as much subject to his will as Friday, the slave; as incapable of claiming any share of an increased production of wealth, no matter how great it might be nor from what cause it might come.
And what would be true in the case of one man would be true of any number. Suppose ten thousand Fridays, all free men, all absolute owners of themselves, and but one Crusoe, the absolute owner of the island. So long as his ownership was acknowledged and could be enforced, would not the one be the master of the ten thousand as fully as though he were the legal owner of their flesh and blood? Since no one could use his island without his consent, it would follow that no one could labor, or even live, without his permission. The order, “Leave my property” would be a sentence of death. This owner of the island would be to the other ten thousand “free men” who lived upon it, their land lord or land god, of whom they would stand in more real awe than of any deity that their religion taught them reigned above. For as a Scottish landlord told his tenants: “God Almighty may have made the land, but I own it. And if you don’t do as I say, off you go!”
No increase of wealth could enable such “free” laborers to claim more than a bare living.
The opening up of foreign trade, the invention of labor-saving machines, the discovery of mineral deposits, the introduction of more prolific plants, the growth of skill, would simply increase the amount their landlord would charge for the privilege of living on his island, and could in no wise increase what those who had nothing but their labor could demand. If Heaven itself rained down wealth upon the island that wealth would be his.
And so, too, any economy that might enable these mere laborers to live more cheaply would simply increase the tribute that they could pay and that he could exact.
Of course, no man could utilize a power like this to its full extent or for himself alone. A single landlord in the midst of ten thousand poor tenants, like a single master amid ten thousand slaves, would be as lonely as was Robinson Crusoe before Friday came. The human being is by nature a social animal, and no matter how selfish such a man might be, he would desire companions nearer his own condition. Natural impulse would prompt him to reward those who pleased him, prudence would urge him to interest the more influential among his ten thousand Fridays in the maintenance of his ownership, while experience would show him, if calculation did not, that a larger income could be obtained by leaving to superior energy, skill, and thrift some part of what their efforts secured. But while the single owner of such an island would thus be induced to share his privileges with a class who would thus partake with him in the advantages of any improvement that increased the power of producing wealth, there would yet remain a class, the mere laborers of only ordinary ability, to whom such improvement could bring no benefit. And it would only be necessary to be a little chary in granting permission to work upon the island, so as to keep a small percentage of the population constantly on the verge of starvation and begging to be permitted to use their power to labor, to create a competition in which, bidding against each other, men would of themselves offer all that their labor could procure save a bare living, for the privilege of getting that.
We find in civilized countries a large class who, while they have power to labor, are denied any right to the use of the elements necessary to make that power available, and who, to obtain the use of those elements, must either give up in rent a part of the produce of their labor, or take in wages less than their labor yields. A class thus helpless can gain nothing from advance in productive power. Where such a class exists, increase in the general wealth can only mean increased inequality in distribution. And though this tendency may be a little checked as to some of them by trade unions or similar combinations which artificially lessen competition, it will operate to the full upon those outside of such combinations.
And, let me repeat it, this increased inequality in distribution does not mean merely that the mass of those who have nothing but the power to labor do not proportionately share in the increase of wealth. It means that their condition must become absolutely, as well as relatively, worse. It is in the nature of industrial advance — it is of the very essence of those prodigious forces which modern invention and discovery are unloosing — that they must injure where they do not benefit. These forces are not in themselves either good or evil. They bring good or evil according to the conditions under which they are exerted. In a state of society in which all men stood upon an equality with relation to the use of the material universe their effects could only be beneficent. But in a state of society in which some men are held to be the absolute owners of the material universe, while other men cannot use it without paying tribute, the blessing these forces might bring is changed into a curse — their tendency is to destroy independence, to dispense with skill and convert the artisan into a “hand,” to concentrate all business and make it harder for an employee to become his own employer, and to compel women and children to injurious and stunting toil.
And that this must be the tendency of labor-saving invention or reform in a society where the planet is held to be private property, and the children that come into life upon it are denied all right to its use except as they buy or inherit the title of some dead man, we may see plainly it we imagine labor-saving invention carried to its farthest imaginable extent.
Is it not true, then, it may be asked, that protection, for the reason at least that it does check that freedom and extension of trade which are essential to the full play of modern industrial tendencies, is favorable to the working classes?
My reply would be negative. Not only has protection — which is merely the protection of producing capitalists against foreign competition in the home market — tendencies in itself toward monopoly and inequality, but it is impotent to check the concentrating tendencies of modern inventions and processes. To do this by “protection” we must not only forbid foreign commerce, but restrain internal commerce. We must not only prohibit any new applications of labor-saving invention, but must prevent the use of the most important of those already adopted. We must tear up the railway and go back to the canal boat and freight wagon; cut down the telegraph wire and rely upon the post-horse; substitute the scythe for the reaper, the needle for the sewing machine, the hand loom for the factory; in short, discard all that a century of invention has given us, and return to the industrial processes of a hundred years ago. This is as impossible as for the chicken to go back to the egg. A man may become decrepit and childish, but once manhood is reached he cannot again become a child.
No; it is not in going backward, it is in going forward, that the hope of social improvements lies.
In ITSELF the abolition of protection is like the driving off of a robber. But it will not help a man to drive off one robber, if another, still stronger and more rapacious, is left to plunder him.
Labor may be likened to a man who as he carries home his earnings is waylaid by a series of robbers. One demands this much, and another that much, but last of all stands one who demands all that is left, save just enough to enable the victim to maintain life and come forth next day to work. So long as this last robber remains, what will it benefit such a man to drive off any or all of the other robbers?
Such is the situation of labor today throughout the civilized world. And the robber that takes all that is left is private property in land. Improvement, no matter how great, and reform, no matter how beneficial in itself, cannot help that class who, deprived of all right to the use of the material elements, have only the power to labor — a power as useless in itself as a sail without wind, a pump without water, or a saddle without a horse.
I have likened labor to a man beset by a series of robbers, because there are in every country other things than private property in land which tend to diminish national prosperity and divert the wealth earned by labor into the hands of non-producers. This is the tendency of monopoly of the processes and machinery of production and exchange, the tendency of protective tariffs, of bad systems of currency and finance, of corrupt government, of public debts, of standing armies, and of wars and preparations for war. But these things, some of which are conspicuous in one country and some in another, cannot account for that impoverishment of labor which is to be seen everywhere. They are the lesser robbers, and to drive them off is only to leave more for the great robber to take.
If the all-sufficient cause of the impoverishment of labor were abolished, then reform in any of these directions would improve the condition of labor; but so long as that cause exists, no reform can effect any permanent improvement. Public debts might be abolished, standing armies disbanded, war and the thought of war forgotten, protective tariffs everywhere discarded, government administered with the greatest purity and economy, and all monopolies destroyed, save the monopoly of land, without any permanent improvement in the condition of the laboring class. For the economic effect of all these reforms would simply be to diminish the waste or increase the production of wealth, and so long as competition for employment on the part of men who are powerless to employ themselves tends steadily to force wages to the minimum that gives the laborer but a bare living, this is all the ordinary laborer can get. So long as this tendency exists — and it must continue to exist so long as private property in land exists — improvement (even if possible) in the personal qualities of the laboring masses, such as improvement in skill, in intelligence, in temperance or in thrift, cannot improve their material condition. Improvement of this kind can only benefit the individual while it is confined to the individual, and thus gives him an advantage over the body of ordinary laborers whose wages form the regulative basis of all other wages. If such personal improvements become general the effect can only be to enable competition to force wages to a lower level. Where few can read and write, the ability to do so confers a special advantage and raises the individual who possesses it above the level of ordinary labor, enabling him to command the wages of special skill. But where all can read and write, the mere possession of this ability cannot save ordinary laborers from being forced to as low a position as though they could not read and write.
I do not say that reforms that increase the intelligence or improve the habits of the masses are — even in this view — useless. The diffusion of intelligence tends to make men discontented with a life of poverty in the midst of wealth, and the diminution of intemperance better fits them to revolt against such a lot. Public schools and temperance societies are thus pre-revolutionary agencies. But they can never abolish poverty so long as land continues to be treated as private property. Such reforms are in their own nature good and beneficial, but in a world like this, tenanted by beings like ourselves, and treated by them as the exclusive property of a part of their number, there must, under any conceivable conditions, be a class on the verge of starvation.
This necessity inheres in the nature of things; it arises from the relation between man and the external universe. Land is the superficies of the globe — that bottom of the ocean of air to which our physical structure confines us. It is our only possible standing place, our only possible workshop, the only reservoir from which we can draw material for the supply of our needs. Considering land in its narrow sense, as distinguished from water and air, it is still the element necessary to our use of the other elements. Without land man could not even avail himself of the light and heat of the sun or utilize the forces that pulse through matter.
Hence, let other conditions be what they may, the man who, if he lives and works at all, must live and work on land belonging to another, is necessarily a slave or a pauper.
For while population is sparse and unoccupied land is plenty, laborers are able to escape the necessity of buying the use of land, or can obtain it on nominal terms. Hence to obtain slaves — people who will work for you without your working for them in return — it is necessary to make property of their bodies or to resort to predial slavery or serfdom, which is an artificial anticipation of the power that comes to the landowner with denser population, and which consists in confining laborers to land on which it is desired to utilize their labor. But as population becomes denser and land more fully occupied, the competition of non-landowners for the use of land obviates the necessity of making property of their bodies or of confining them to an estate in order to obtain their labor without return. They themselves will beg the privilege of giving their labor in return for being permitted what must be yielded to the slave — a spot to live on and enough of the produce of their own labor to maintain life.
Land in itself has no value. Value arises only from human labor. It is not until the ownership of land becomes equivalent to the ownership of laborers that any value attaches to it. And where land has a speculative value it is because of the expectation that the growth of society will in the future make its ownership equivalent to the ownership of laborers.
It is true that all valuable things have the quality of enabling their owner to obtain labor or the produce of labor in return for them or for their use. But with things that are themselves the produce of labor, such transactions involve an exchange — the giving of an equivalent ol labor — produce in return for labor, or its produce.
Land is not the produce of labor; it existed before man was, and, therefore, when the ownership of land can command labor or the products of labor, the transaction, though in form it may be an exchange, is in reality an appropriation. The power which the ownership of valuable land gives, is that of getting human service without giving human service, a power essentially the same as that power of appropriation which resides in the ownership of slaves.
Inventions and discoveries that increase the productive power of labor lessen the value of the things that require labor for their production — but they increase the value of land, since they increase the amount that labor can be compelled to give for its use. And so, where land is fully appropriated as private property, no increase in the production of wealth, no economy in its use, can give the mere laborer more than the wages of the slave. If wealth rained down from heaven or welled up from the depths of the earth it could not enrich the laborer. It could only increase the value of land.
Thus it is that railways cheapen transportation only to increase the value of land, not the value of labor, and that when their rates are reduced it is landowners, not laborers, who get the benefit. So it is with all improvements of whatever nature.
The primary factors of production are land and labor. Capital is their product, and the capitalist is but an intermediary between the landlord and the laborer. Hence working men who imagine that capital is the oppressor of labor are “barking up the wrong tree.” In the first place, much that seems on the surface like oppression by capital is in reality the result of the helplessness to which labor is reduced by being denied all right to the use of land. “The destruction of the poor is their poverty.” It is not in the power of capital to compel men who can obtain free access to nature to sell their labor for starvation wages. In the second place, whatever of the earnings of labor capitalistic monopolies may succeed in appropriating, they are merely lesser robbers, who take what, if they were abolished, land ownership would take.
No matter whether the social organization be simple or complex, no matter whether the intermediaries between the owners of land and the owners of the mere power to labor be few or many, wherever the available land has been fully appropriated as the property of some of the people, there must exist a class, the laborers of ordinary ability and skill, who can never hope to get more than a bare living for the hardest toil, and who are constantly in danger of failure to get even that.
with me,” said
Richard Cobden, as John Bright turned heart-stricken from a new-made grave.
“There are in
In this spirit the free
trade movement waxed and grew, arousing an enthusiasm that no mere fiscal
reform could have aroused. And entrenched though it was by restricted suffrage
and rotten boroughs and aristocratic privilege, protection was overthrown in
And — there is hunger in
But this is not the
failure of free trade. When protection had been abolished and a revenue tariff
substituted for a protective tariff, free trade had only won an outpost. That
women and children still die of hunger in
Our inquiry has shown that the reason why the abolition of protection, greatly as it would increase the production of wealth, can accomplish no permanent benefit for the laboring class, is, that so long as the land on which all must live is made the property of some, increase of productive power can only increase the tribute which those who own the land can demand for its use. So long as land is held to be the individual property of but a portion of its inhabitants, no possible increase of productive power, even if it went to the length of abolishing the necessity of labor, and no imaginable increase of wealth, even though it poured down from heaven or gushed up from the bowels of the earth, could improve the condition of those who possess only the power to labor. The greatest imaginable increase of wealth could only intensify in the greatest imaginable degree the phenomena which we are familiar with as “over-production” — could only reduce the laboring class to universal pauperism.
Thus it is, that to make either the abolition of protection or any other reform beneficial to the working class we must abolish the inequality of legal rights to land, and restore to all their natural and equal rights in the common heritage.
How can this be done?
Consider for a moment precisely what it is that needs to be done, for it is here that confusion sometimes arises. To secure to each of the people of a country his equal right to the land of that country does not mean to secure to each an equal piece of land. Save in an extremely primitive society, where population was sparse, the division of labor had made little progress, and family groups lived and worked in common, a division of land into anything like equal pieces would indeed be impracticable. In a state of society such as exists in civilized countries today, it would be extremely difficult, if not altogether impossible, to make an equal division of land. Nor would one such division suffice. With the first division the difficulty would only begin. Where population is increasing and its centers are constantly changing, where different vocations make different uses of lands and require different qualities and amounts of it, where improvements and discoveries and inventions are constantly bringing out new uses and changing relative values, a division that should be equal today would soon become very unequal, and to maintain equality a re-division every year would be necessary.
But to make a re-division every year, or to treat land as a common, where no one could claim the exclusive use of any particular piece, would only be practicable where men lived in movable tents and made no permanent improvements, and would effectually prevent any advance beyond such a state. No one would sow a crop or build a house, or open a mine, or plant an orchard, or cut a drain, so long as anyone else could come in and turn him out of the land in which or on which such improvements must be fixed. Thus it is absolutely necessary to the proper use and improvement of land that society should secure to the user and improver safe possession.
This point is constantly raised by those who resent any questioning of our present treatment of land. They seek to befog the issue by persistently treating every proposition to secure equal rights to land as though it were a proposition to secure an equal division of land, and attempt to defend private property in land by setting forth the necessity of securing safe possession to the improver.
But the two things are essentially different.
In the first place, equal rights to land could not be secured by the equal division of land, and in the second place, it is not necessary to make land the private property of individuals in order to secure to improvers that safe possession of their improvements that is needed to induce men to make improvements. On the contrary, private property in land, as we may see in any country where it exists, enables mere dogs-in-the-manger to levy blackmail upon improvers. It enables the mere owner of land to compel the improver to pay him for the privilege of making improvements, and in many cases it enables him to confiscate the improvements.
Here are two simple principles, both of which are self-evident:
1. That all men have equal rights to the use and enjoyment of the elements provided by nature.
2. That each man has an exclusive right to the use and enjoyment of what is produced by his own labor.
There is no conflict between these principles. On the contrary they are correlative. To fully secure the individual right of property in the produce of labor we must treat the elements of nature as common property. If anyone could claim the sunlight as his property and could compel me to pay him for the agency of the sun in the growth of crops I had planted, it would necessarily lessen my right of property in the produce of my labor. And conversely, where everyone is secured the full right of property in the produce of his labor, no one can have any right of property in what is not the produce of labor.
No matter how complex the industrial organization, nor how highly developed the civilization, there is no real difficulty in carrying out these principles. All we have to do is to treat the land as the joint property of the whole people, just as a railway is treated as the joint property of many shareholders, or as a ship is treated as the joint property' of several owners.
In other words, we can leave land now being used in the secure possession of those using it, and leave land now unused to be taken possession of by those who wish to make use of it, on condition that those who thus hold land can pay to the community a fair rent for the exclusive privilege they enjoy — that is to say, a rent based on the value of the privilege the individual receives from the community in being accorded the exclusive use of this much of the common property, and which should have no reference to any improvement he had made in or on it, or to any profit due to the use of his labor and capital. In this way all would be placed upon an equality in regard to the use and enjoyment of those natural elements which are clearly the common heritage, and that value which attaches to land, not because of what the individual user does, but because of the growth of the community, would accrue to the community, and could be used for purposes of common benefit.
It is sometimes said that while this principle is manifestly just, and while it would be easy to apply it to a new country just being settled, it would be exceedingly difficult to apply it to an already settled country where land had already been divided as private property, since, in such a country, to take possession of the land as common property and let it out to individuals would involve a sudden revolution of the greatest magnitude.
This objection, however, is founded upon the mistaken idea that it is necessary to do everything at once. But it often happens that a precipice we could not hope to climb, and that we might well despair of making a ladder long enough and strong enough to scale, may be surmounted by a gentle road. And there is in this case a gentle road open to us, which will lead us so far that the rest will be but an easy step. To make land virtually the common property of the whole people, and to appropriate ground rent for public use, there is a much simpler and easier way than that of formally assuming the ownership of land and proceeding to rent it out in lots — a way that involves no shock, that will conform to present customs, and that, instead of requiring a great increase of governmental machinery, will permit a great simplification of governmental machinery.
In every well-developed community large sums are needed for common purposes, and the sums thus needed increase with social growth, not merely in amount, but proportionately, since progress tends steadily to devolve on the community as a whole functions which in a ruder stage are discharged by individuals. Now, while people are not used to paying rent to government, they are used to paying taxes to government. Some of these taxes are levied upon personal or movable property; some upon occupations or businesses or persons (as in the case of income taxes, which are in reality taxes on persons according to income); some upon the transportation or exchange of commodities, in which last category fall the taxes imposed by tariffs; and some, in the United States at least, on real estate — that is to say, on the value of land and of the improvements upon it, taken together. The part of the tax on real estate which is assessed on the value of land, irrespective of improvements, is in its nature not a tax, but a rent — a taking for the common use of the community a part of the income that properly belongs to the community — by reason of the equal right of all to use the land.
Now it is evident that, in order to take for the use of the community the whole income arising from land, just as effectually as it could be taken by formally appropriating and letting out the land, it is only necessary to abolish, one after another, all other taxes now levied, and to increase the tax on land values till it reaches, as near as may be, the full annual value of the land.
Whenever this point of theoretical perfection is reached, the selling value of land will entirely disappear, and the charge made to the individual by the community for the use of the common property will become in form what it is in fact: a rent. But until that point is reached, this rent may be collected by the simple increase of a tax upon the selling value of land irrespective of improvements — a value that can be ascertained more easily and more accurately than any other value.
For a full exposition of the effects of this change in the method ot raising public revenues, 1 must refer the reader to the works in which I have treated this branch of the subject at greater length than is possible here. Briefly, they would be threefold:
In the first place, all taxes that now fall upon the exertion of labor or use of capital would be abolished. No one would be taxed for building a house or improving a tarm or opening a mine, lor bringing things in from foreign countries, or for adding in any way to the stock of things that satisfy human wants and constitute national wealth. Everyone would be free to make and save wealth; to buy, sell, give, or exchange, without let or hindrance, any article of human production the use of which did not involve any public injury. All those taxes which increase prices as things pass from hand to hand, falling finally upon the consumer, would disappear.7
In the second place, a large and constantly increasing fund would be provided for common uses, without any tax on the earnings of labor or on the returns of capital — a fund which in well-settled countries would not only suffice for all of what are now considered necessary expenses of government, but would leave a large surplus to be devoted to purposes of general benefit.
In the third place, and most important of all, the monopoly of land would be abolished, and land would be thrown open and kept open to the use of labor, since it would be unprofitable for anyone to hold land without putting it to its full use, and both the temptation and the power to speculate in natural opportunities would be gone. The speculative value of land would be destroyed as soon as it was known that, no matter whether land was used or not, the tax would increase as fast as the value increased; and no one would want to hold land that he did not use. With the disappearance of the capitalized or selling value of land, the premium which must now be paid as purchase money by those who wish to use land would disappear, differences in the value of land being measured by what would have to be paid for it to the community, nominally in taxes but really in rent. So long as any unused land remained, those who wished to use it could obtain it, not only without the payment of any purchase price, but without the payment of any tax or rent. Nothing would be required for the use of land until less advantageous land came into use, and possession thus gave an advantage over and above the return to the labor and capital expended upon it. And no matter how much the growth of population and the progress of society increased the value of land, this increase would go to the whole community, swelling that general fond in which the poorest would be an equal sharer with the richest.
Thus the great cause of the present unequal distribution of wealth would be destroyed, and that one-sided competition would cease which now deprives men who possess nothing but power to labor of the benefits of advancing civilization, and forces wages to a minimum no matter what the increase of wealth. Labor, free to the natural elements of production, would no longer be incapable of employing itself, and competition, acting as fully and freely between employers as between employed, would carry wages up to what is truly their natural rate — the full value of the produce of labor and keep them there.
Let us turn again to the tariff question.
The mere abolition of protection — the mere substitution of a revenue tariff for a protective tariff — is such a lame and timorous application of the free-trade principle that it is a misnomer to speak of it as free trade. A revenue tariff is only a somewhat milder restriction on trade than a protective tariff.
Free trade, in its true meaning, requires not merely the abolition of protection, but the sweeping away of all tariffs — the abolition of all restrictions (save those imposed in the interests of public health) on the bringing of things into a country or the carrying of things out of a country.
But free trade cannot logically stop with the abolition of custom-houses. It applies as well to domestic as to foreign trade, and in its true sense requires the abolition of all internal taxes that fall on buying, selling, transporting, or exchanging, on the making of any transaction or the carrying on of any business, save, of course, where the motive of the tax is public safety or health.
Thus the adoption of true free trade involves the abolition of all indirect taxation of whatever kind, and the resort to direct taxation for all public revenues.
But this is not all. Trade, as we have seen, is a mode of production, and the freeing of trade is beneficial because it is a freeing of production. For the same reason, therefore, that we ought not to tax anyone for adding to the wealth of a country by bringing valuable things into it, we ought not to tax anyone for adding to the wealth of a country by producing within that country valuable things. Thus the principle of free trade requires that we should not merely abolish all indirect taxes, but that we should abolish as well all direct taxes on things that are the produce of labor; that we should, in short, give full play to the natural stimulus to production — the possession and enjoyment of the things produced — by imposing no tax whatever upon the production, accumulation, or possession of wealth (i.e. things produced by labor), leaving everyone free to make, exchange, give, spend, or bequeath.
There are thus left, as the only taxes by which in accordance with the free-trade principle revenue can be raised, these two classes:
1. Taxes on ostentation. Since the motive of ostentation in the use of wealth is simply to show the ability to expend wealth, and since this can be shown as well in the ability to pay a tax, taxes on ostentation pure and simple, while not checking the production of wealth, do not even restrain the enjoyment of wealth. But such taxes, while they have a place in the theory of taxation, are of no practical importance.
2. Taxes on the value of land. Taxes on the value of land must not be confounded with taxes on land area, from which they differ essentially. Taxes levied on land by quantity or area apply equally to all land, and hence fall ultimately on production, since they constitute a check to the use of land, a tax that must be paid as the condition of engaging in production. Taxes on land values, however, do not fall upon all land, but only upon valuable land, in proportion to its value. Hence they do not in any degree check the ability of labor to avail itself of land, and are merely an appropriation, by the taxing power, of a portion of the premium which the owner of valuable land can charge labor for its use. In other words, a tax on land according to quantity could ultimately be transferred by owners of land to users of land and become a tax upon production. But a tax on land values, must, as is recognized by all economists, fall on the owner of land and cannot be transferred in any way to the user. The landowner can no more compel those to whom he may sell or let his land to pay a tax levied on its value, than he could compel them to pay a mortgage.
A tax on land values is of all taxes that which best fulfills every requirement of a perfect tax. As land cannot be hidden or carried off, a tax on land values can be assessed with more certainty and can be collected with greater ease and less expense than any other tax, while it does not in the slightest degree check production or lessen its incentive. It is, in fact, a tax only in form, being in nature a rent — a taking for the use of the community of a value that arises not from individual exertion but from the growth of the community. For it is not anything that the individual owner or user does that gives value to land. The value that he creates is a value that attaches to improvements. This, being the result of individual exertion, properly belongs to the individual, and cannot be taxed without lessening the incentive to production. But the value that attaches to land itself is a value arising from the growth of the community' and increasing with social growth. It, therefore, properly belongs to the community, and can be taken to the last penny without in the slightest degree lessening the incentive to production.
Taxes on land values are thus the only taxes from which, in accordance with the principle of free trade, any considerable amount of revenue can be raised. It is evident that to carry out the free trade principle to the point of abolishing all taxes that hamper or lessen production would involve very nearly the same measures which are required to assert the common right to land and place all citizens upon an equal footing.
To make these measures identically the same, it is only necessary that the taxation of land values, to which true free trade compels us to resort for public revenues, should be carried far enough to take, as near as might practically be, the whole of the income arising from the value given to land by the growth of the community.
But we have only to go one step farther to see that free trade does, indeed, require this, and that the two reforms are thus absolutely identical.
Free trade means free production. Now fully to free production it is necessary not only to remove all taxes on production, but also to remove all other restrictions on production. True free trade, in short, requires that the active factor of production, Labor, shall have free access to the passive factor of production, Land. To secure this all monopoly of land must be broken up, and the equal right ot all to the use of the natural elements must be secured by the treatment of the land as the common property in usufruct of the whole people.
Thus it is that free trade brings us to the same simple measure as that which we have seen is necessary to emancipate labor from its thralldom and to secure that justice in the distribution of wealth which will make every improvement or reform beneficial to all classes.
The partial reform miscalled free trade, which consists in the mere abolition of protection — the mere substitution ol a revenue tariff lor a protective tariff — cannot help the laboring classes, because it does not touch the lundamental cause of that unjust and unequal distribution which, as we see today, makes “labor a drug and population a nuisance” in the midst of such a plethora of wealth that we talk of over-production. True free trade, on the contrary, leads not only to the largest production of wealth, but to the fairest distribution. It is the easy and obvious way ol bringing about that change by which alone justice in distribution can be secured, and the great inventions and discoveries which the human mind is now grasping can be converted into agencies for the elevation of society from its very foundations.
civilized world, and pre-eminently in
It requires reflection to see that manifold effects result from a single cause, and that the remedy for a multitude of evils may lie in one simple reform. As in the infancy of medicine, men were disposed to think each distinct symptom called for a distinct remedy, so when thought begins to turn to social subjects there is a disposition to seek a special cure for every ill, or else to imagine the only adequate remedy to be something which presupposes the absence of those ills; as, for instance, that all men should be good, as the cure for vice and crime; or that all men should be provided for by the State, as the cure for poverty.
There is now sufficient social discontent and a sufficient desire for social reform to accomplish great things if concentrated on one line. But attention is distracted and effort divided by schemes of reform which, though they may be good in themselves, are, with reference to the great end to be attained, either inadequate or super-adequate.
Here is a traveler who, beset by robbers, has been left bound, blindfolded, and gagged. Shall we stand in a knot about him and discuss whether to put a piece of court-plaster on his cheek or a new patch on his coat, or shall we dispute with each other as to what road he ought to take and whether a bicycle, a tricycle, a horse and wagon, or a railway, would best help him on? Should we not rather postpone such discussion until we have cut the man’s bonds? Then he can see for himself, speak for himself, and help himself. Though with a scratched cheek and a torn coat, he may get on his feet, and if he cannot find a conveyance to suit him, he will at least be free to walk. This resembles good deal of the discussion that now goes on over “the social problem” — a discussion in which all sorts of inadequate and impossible schemes are advocated to the neglect of the simple plan of removing restrictions and giving labor the use of its own powers.
This is the first thing to do. And, if not of itself sufficient to cure all social ills and bring about the highest social state, it will at least remove the primary cause of widespread poverty, give to all the opportunity to use their labor and secure the earnings that are its due, stimulate all improvement, and make all other reforms easier.
It must be remembered that reforms and improvements, good themselves, may be utterly inefficient to work any general improvement until some more fundamental reform is carried out. It must be remembered that there is in every work a certain order which must be observed to accomplish anything. To a habitable house a roof is as important as walls; and we express in a word the end to which a house is built when we speak of putting a roof over our heads. But we cannot build a house from roof down; we must build from foundation up.
The first attempts of working men to improve their condition are by combining to demand higher wages of their direct employers. Something can be done in this way for those within such organizations; but it is after all very little. For a trade union can only artificially lessen competition within the trade; it cannot affect the general conditions which force men into bitter competition with each other for the opportunity to gain a living. All such efforts have the inherent disadvantage of struggling against general tendencies. They are like the attempts of a man in a crowd to gain room by forcing back those who press upon him — like attempts to stop a great engine by the sheer force of human muscle, without cutting off steam.
Those who are inclined to put faith in the power of trade unionism are beginning to see this, and the logic of events must more and more lead them to see it. But the perception that to accomplish large results general tendencies must be controlled, inclines those who do not trace these tendencies into their causes to transfer faith from some form of the voluntary organization of labor to some form of governmental organization and direction.
All varieties of what is vaguely called socialism, recognize with more or less clearness the solidarity of the interests of the masses of all countries. Whatever may be objected to socialism in its most extreme forms, it has at least the merit of lessening national prejudices and aiming at the disbandment of armies and the suppression of war. It is thus opposed to the cardinal tenet of protectionism that the interests of the people of different “nations” are diverse and antagonistic. But, on the other hand, those who call themselves socialists, so far from being disposed to look with disfavor upon governmental interference and regulation, are disposed to sympathize with protection as in this respect in harmony with socialism, and to regard free trade, at least as it has been popularly presented, as involving a reliance on that principle of free competition which, to their thinking, means the crushing of the weak.
In socialism as distinguished from individualism there is an unquestionable truth — and that a truth to which (especially by those most identified with free trade principles) too little attention has been paid. Man is primarily an individual — a separate entity, differing from his fellows in desires and powers, and requiring for the exercise of those powers and the gratification of those desires individual play and freedom. But he is also a social being, having desires that harmonize with those of his fellows, and powers that can only be brought out in concerted action. There is thus a domain of individual action and a domain of social action — some things which can best be done when each acts for himself, and some things which can best be done when society acts for all its members. And the natural tendency of advancing civilization is to make social conditions relatively more important, and more and more to enlarge the domain of social action. This has not been sufficiently regarded, and at the present time, evil unquestionably results from leaving to individual action functions that by reason of the growth of society and the development of the arts have passed into the domain of social action; just as on the other hand, evil unquestionably results from social interference with what properly belongs to the individual. Society ought not to leave the telegraph and the railway to the management and control of individuals; nor yet ought society to step in and collect individual debts or attempt to direct individual industry.
But while there is a truth in socialism which individualists forget, there is a school of socialists who in like manner ignore the truth there is in individualism, and whose propositions for the improvement of social conditions belong to the class I have called “super-adequate.” Socialism in its narrow sense — the socialism that would have the State absorb all capital and abolish all competition — is the scheme of men who, looking upon society in its most complex organization, have failed to see that principles obvious in a simpler stage still hold true in the more intimate relations that result from the division of labor and the use of complex tools and methods, and have thus fallen into fallacies elaborated by the economists of a totally different school, who have taught that capital is the employer and sustainer of labor, and have striven to confuse the distinction between property in land and property in labor-products. Their scheme is that of men who, while revolting from the heartlessness and hopelessness of the “orthodox political economy,” are yet entangled in its fallacies and blinded by its confusions. Confounding “capital” with “means of production,” and accepting the dictum that “natural wages” are the least on which competition can force the laborer to live, they essay to cut a knot they do not see how to unravel, by making the State the sole capitalist and employer, and abolishing competition.
All schemes for securing equality in the conditions of men by placing the distribution of wealth in the hands of government have the fatal defect of beginning at the wrong end. They presuppose pure government; but it is not government that makes society; it is society that makes government; and until there is something like substantial equality in the distribution of wealth, we cannot expect pure government.
But to put all men on a footing of substantial equality, so that there could be no dearth of employment, no “overproduction,” no tendency of wages to the minimum of subsistence, no monstrous fortunes on the one side and no army of proletarians on the other, it is not necessary that the state should assume the ownership of all the means of production and become the general employer and universal exchanger; it is necessary only that the equal rights of all to that primary means of production which is the source all other means of production are derived from, should be asserted. And this, so far from involving an extension of governmental functions and machinery, involves, as we have seen, their great reduction. It would thus tend to purify government in two ways — first by the betterment of the social conditions on which purity in government depends, and second, by the simplification of administration. This step taken, and we could safely begin to add to the functions of the state in its proper or co-operative sphere.
There is in reality no conflict between labor and capital;8 the true conflict is between labor and monopoly. That a rich employer “squeezes” needy workmen may be true. But does this squeezing power result from his riches — or from their need? No matter how rich an employer might be, how would it be possible for him to squeeze workmen who could make a good living for themselves without going into his employment? The competition of workmen with workmen for employment, which is the real cause that enables, and even in most cases forces, the employer to squeeze his workmen, arises from the fact that men, debarred of the natural opportunities to employ themselves, are compelled to bid against one another for the wages of an employer. Abolish the monopoly that forbids men to employ themselves, and capital could not possibly oppress labor. In no case could the capitalist obtain labor for less than the laborer could get by employing himself. Once remove the cause of that injustice which deprives the laborer of the capital his toil creates, and the sharp distinction between capitalist and laborer would, in fact, cease to exist.
Where there exists a class denied all right to the element necessary to life and labor, competition is one-sided, and as population increases must press the lowest class into virtual slavery, and even starvation. But where the natural rights of all are secured, then competition — acting on every hand between employers as between employed; between buyers as between sellers — can injure no one.
The line at which the state should come in is that where free competition becomes impossible — a line analogous to that which in the individual organism separates the conscious from the unconscious functions. There is such a line, though extreme socialists and extreme individualists both ignore it. The extreme individualist is like the man who would have his hunger provide him food; the extreme socialist is like the man who would have his conscious will direct his stomach how to digest it.
Individualism and socialism are in truth not antagonistic but correlative. Where the domain of the one principle ends, that of the other begins. And although the motto Laissez faire has been taken as the watchword of an individualism that tends to anarchism, and so-called free traders have made “the law of supply and demand” a stench in the nostrils of men alive to social injustice, there is in free trade nothing that conflicts with a rational socialism. On the contrary, we have but to carry out the free-trade principle to its logical conclusions to see that it brings us to such socialism.
The free-trade principle is, as we have seen, the principle of free production — it requires not merely the abolition of protective tariffs, but the removal of all restrictions upon production.
Within recent years a class of restrictions on production, imposed by concentrations and combinations which have for their purpose the limiting of production and the increase of prices, have begun to make themselves felt and to assume greater and greater importance.
This power of combinations to restrict production arises in some cases from temporary monopolies granted by our patent laws, which (being the premium that society holds out to invention) have a compensatory principle, however faulty they may be in method.
Such cases aside, this power of restricting production is derived, in part, from tariff restrictions. Thus the American steel makers when they limited their production, and put up the price of rails 40 percent at one stroke, were enabled to do this only by the heavy duty on imported rails. They were able, by combination, to put up the price of steel rails to the point at which they could be imported plus the duty, but no farther. Hence, with the abolition of the duty this power would be gone. To prevent the play of competition, a combination of the steel workers of the whole world
would then be necessary, and this is practically impossible.
In other part, this restrictive power arises from ability to monopolize natural advantages. This would be destroyed if the taxation of land values made it unprofitable to hold land without using it. In still other part, it arises from the control of businesses which in their nature do not admit of competition, such as those of railway, telegraph, gas, and other similar companies.
But here we reach a point where positive action on the part of government is needed. Except as between terminal or “competitive” points where two or more roads meet (and as to these the tendency is, by combination or “pooling,” to do away with competition), the carrying of goods and passengers by rail, like the business of telegraph, telephone, gas, water, or similar companies, is in its nature a monopoly. To prevent restrictions and discriminations, governmental control is therefore required. Such control is not only not inconsistent with the free-trade principle; it follows from it, just as the interference of government to prevent and punish assaults upon persons and property follows from the principle of individual liberty. Thus, if we carry free trade to its logical conclusions we are inevitably led to what monopolists, who wish to be “let alone” to plunder the public, denounce as “socialism,” and which is, indeed, socialism, in the sense that it recognizes the true domain of social functions.
Whether businesses in their nature monopolies should be regulated by law or should be carried on by the community, is a question of method. It seems to me, however, that experience goes to show that better results can be secured, with less risk of governmental corruption, by state management than by state regulation. But the great simplification of government which would result from the abolition of the present complex and demoralizing modes of taxation would vastly increase the ease and safety with which either of these methods could be applied. The assumption by the state of all those social functions in which competition will not operate would involve nothing like the strain upon governmental powers, and would be nothing like as provocative of corruption and dishonesty as our present method of collecting taxes. The more equal distribution of wealth that would ensue from the reform which thus simplified government, would, moreover, increase public intelligence and purify public morals, and enable us to bring a higher standard of honesty and ability to the management of public affairs.
There is another way, moreover, in which true free trade tends strongly to socialism, in the highest and best sense of the term. The taking for the use of the community of that value of privilege which attaches to the possession of land, would, wherever social development has advanced beyond a certain stage, yield revenues even larger than those now raised by taxation, while there would be an enormous reduction in public expenses consequent, directly and indirectly, upon the abolition of present modes of taxation. Thus would be provided a fund, increasing steadily with social growth, that could be applied to social purposes now neglected. And among the purposes which will suggest themselves to the reader by which the surplus income of the community could be used to increase the sum of human knowledge, the diffusion of elevating tastes, and the gratification of healthy desires, there is none more worthy than that of making honorable provision for those deprived of their natural protectors, or through no fault of their own incapacitated for the struggle of life.
Chapter 22 — Practical Politics
Free trade, narrowed to a mere fiscal reform, can only appeal to the lower and weaker motives — to motives that are inadequate to move men in masses. Take the current free-trade literature. Its aim is to show the impolicy of protection rather than its injustice; its appeal is to the pocket, not to the sympathies. Yet to begin and maintain great popular movements it is the moral sense rather than the intellect that must be appealed to, sympathy rather than self-interest. For however it may be with any individual, the sense of justice among the masses is keener and truer than intellectual perception, and unless a question can assume the form of right and wrong, it cannot provoke general discussion and excite the many to action. And while material gain or loss impresses us less vividly the greater the number of those we share it with, the power of sympathy increases as it spreads from man to man — becomes cumulative and contagious.
But he who follows the principle of free trade to its logical conclusion can strike at the very root of protection; can answer every question and meet every objection, and appeal to the surest of instincts and strongest of motives. He will see in free trade not a mere fiscal reform, but a movement which has for its aim nothing less than the abolition of poverty, and of the vice and crime and degradation that flow from it, by the restoration to the disinherited of their natural rights and the establishment of society upon the basis of justice. He will catch the inspiration of a cause great enough to live for and to die for, and be moved by an enthusiasm that he can evoke in others.
It is true that to advocate free trade in its fullness would excite the opposition of interests far stronger than those concerned in maintaining protective tariffs. But on the other hand it would bring to the standard of free trade forces without which it cannot succeed. And what those who would arouse thought have to fear is not so much opposition as indifference. Without opposition that attention cannot be excited, that energy evoked, that are necessary to overcome the inertia that is the strongest bulwark of existing abuses. A party can no more be rallied on a question that no one disputes than steam can be raised to working pressure in an open vessel.
The working class have been awakening to the fact that there is some deep wrong in the constitution of society, although they may not see clearly what that wrong is; they have been gradually coming to feel that to emancipate labor radical measures are needed, although they may not know what those measures are.
And scattered through the great body thus beginning to stir and grope are a rapidly increasing number of men who do know what this primary wrong is — men who see that in the recognition of the equal right of all to the element necessary to life and labor is the hope, and the only hope, of curing social injustice.
It is to men of this kind that I would particularly speak. They are the leaven which has in it power to leaven the whole lump.
To abolish private property in land is an undertaking so great
that it may at first seem impracticable.
But this seeming impracticability consists merely in the fact that the public mind is not yet sufficiently awakened to the justice and necessity of this great change. To bring it about is simply a work of arousing thought. How men vote is something we need not much concern ourselves with. The important thing is how they think.
Now the chief agency in promoting thought is discussion. And to secure the most general and most effective discussion of a principle it must be embodied in concrete form and presented in practical politics, so that men, being called to vote on it, shall be forced to think and talk about it.
The advocates of a great principle should know no thought of compromise. They should proclaim it in its fullness, and point to its complete attainment as their goal. But the zeal of the propagandist needs to be supplemented by the skill of the politician. While the one need not fear to arouse opposition, the other should seek to minimize resistance. The political art, like the military art, consists in massing the greatest force against the point ot least resistance; and to bring a principle most quickly and effectively into practical politics, the measure which presents it should be so moderate as (while involving the principle) to secure the largest support and excite the least resistance. For whether the first step be long or short is of little consequence. When a start is once made in a right direction, progress is a mere matter of keeping on.
It is in this way that
great questions always enter the phase of political action. Important political
battles begin with affairs of outposts, in themselves of little moment, and are
generally decided upon issue joined not on the main question, but on some minor
or collateral question. Thus the slavery question in the
To secure equal rights to land there is in this stage of civilization but one way. Such measures as peasant proprietary, or “land limitation,” or the reservation to actual settlers of what is left of the public domain, do not tend toward it; they lead away from it. They can affect only a comparatively unimportant class, and that temporarily, while their outcome is not to weaken landowner-ship but rather to strengthen it, by interesting a larger number in its maintenance. The only way to abolish private property in land is by the way of taxation. That way is clear and straightforward. It consists simply in abolishing, one after another, all imposts that are in their nature really taxes, and resorting for public revenues to economic rent, or ground value. To the full freeing of land, and the complete emancipation of labor, it is, of course, necessary that the whole of this value should be taken for the common benefit; but that will inevitably follow the decision to collect from this source the revenues now needed, or even any considerable part of them, just as the entrance of a victorious army into a city follows the route of the army that defended it.
Thus it is that when men take up the principle of freedom they are led on and on, and that the hearty advocacy of freedom to trade becomes at length the advocacy of freedom to labor. Once the tariff question becomes a national issue, and in the struggle against protection, free traders will be forced to attack indirect taxation; while before the abolition of indirect taxation is reached, the incidence of taxation and the nature and effect of private property in land will have been so well discussed that the rest will be but a matter of time.
Property in land is as indefensible as property in man. It is so absurdly impolitic, so outrageously unjust, so flagrantly subversive of the true right of property, that it can only be instituted by force and maintained by confounding in the popular mind the distinction between property in land and property in things that are the result of labor. Once that distinction is made clear — and a thorough discussion of the tariff question must now make it clear — private property in land is doomed.
For it is true, as was declared by the first National Assembly of France, that "ignorance, neglect, or contempt of human rights are the sole causes ofpublic misfortunes and corruptions of government."
Here is the conclusion of the whole matter: That we should do unto others as we would have them do to us — that we should respect the rights of others as scrupulously as we would have our own rights respected, is not a mere counsel of perfection to individuals, but it is the law to which we must conform social institutions and national policy if we would secure the blessings of abundance and peace.
It IS SOMETIMES ASSERTED, as one of the advantages of tariff duties, that they fall on the producers of imported goods, and are thus paid by foreigners. This assertion contains a scintilla of truth. An import duty on a commodity of which the production is a closely controlled foreign monopoly may in some cases fall in part or in whole upon the foreign producer. For instance, let us say that a foreign corporation has a monopoly in the production of a certain article. Within the limits of cost on the one hand and the highest rate at which any can be sold on the other, the price of such article can be fixed by the producers, who will naturally fix it at the point they conclude will give the largest aggregate profits. If we impose an import duty on such an article they may prefer to reduce to some extent their profit on what they sell to this country rather than have the sale diminished by the addition of the duty to the price. In such case the duty will to that extent fall upon them.
Or, again, let us suppose a Canadian farmer so situated that the only market in which he can conveniently sell his wheat is on the American side. Wheat being a commodity of which our home production not merely supplies home demands, but leaves a surplus for export, the duty on wheat does not add to price, and the Canadian farmer so exceptionally situated that he must send wheat to this side although there is no general demand lor Canadian wheat, cannot get back in enhanced price the duty he must pay.
Such cases, too unimportant to be considered in any estimates of national revenue, are only the rare exceptions to the general rule that the ability to tax ends with the territorial limits of the taxing power. And it is well for mankind that this is so. If it were possible for the government of one country, by any system of taxation, to compel the people of other countries to pay its expenses, the world would soon be taxed into barbarism.
But the possibility of exceptional cases in which import duties may in part or in whole fall on foreign producers, instead of domestic consumers, has in it, even for those who would gladly tax “foreigners,” no shadow of a recommendation for protection. For it will be noticed that the few and exceptional cases in which an import duty falls on foreign producers, are cases in which it can afford no encouragement to home producers. An import duty can only fall on foreign producers when its payment does not add to price; while the only possible way in which an import duty can encourage home producers is by adding to price.
Thf. proposition that restrictions on foreign trade are beneficial because home trade is more profitable than foreign trade is fortified by the authority of Adam Smith. In Book II, chapter v of The Wealth of Nations, occurs this passage:
The capital which is
employed in purchasing in one part of the country in order to sell in another
the produce ofthe industry of that country, generally replaces by every
such operation two distinct capitals that had both been employed in the
agriculture or manufactures of that country, and thereby enables them to
continue that employment .... The capital which sends
Scotch manufactures to
The capital employed
in purchasing foreign goodsfor home consumption, when
this purchase is made with the produce of domestic industry, replaces, too, by
every such operation, two distinct capitals: but one of them only is employed
in supporting domestic industry. The capital which sends British goods to
This astonishing proposition, of which Adam Smith never seemed to see the significance, is one of the inconsistencies into which he was led by his abandonment of the solid ground from which labor is regarded as the prime factor in production, for that from which capital is so regarded — a confusion of thought which has ever since befogged political economy. This passage is quoted approvingly by protectionist writers, and made by them the basis of assertions even more absurd, if that be possible.9 Yet the fallacy ought to be seen at a glance. It is of the same nature as the Irishman’s division, “Two for you two, and two for me, too,” and depends upon the introduction ol a term “British,” which includes in its meaning two of the terms previously used, “English” and “Scotch.” If we substitute for the terms used by Adam Smith other terms of the same relation we may obtain, with equal validity, such propositions as this: If Episcopalians trade with Presbyterians, two profits are made by Protestants; whereas when Presbyterians trade with Catholics only one profit goes to Protestants. Therefore, trade between Protestants is twice as profitable as trade between Protestants and Catholics.
In Adam Smith’s
illustration there are two quantities of British goods, one in
This is just such a proposition as that an innkeeper who only permits his guests to stay with him one day can, with equal facilities, furnish twelve times as much entertainment to man and beast as can the innkeeper who permits each guest to stay with him twelve days.
The arguments by which it is attempted to prove that it is no hardship to a people to be forced to pay higher prices to home producers for goods they can more cheaply obtain by importation are of no better consistency. The real cost of commodities, it is declared, is not to be measured by their price but by the labor needed to produce them, and hence as it is put, though higher wages, interest, taxes, etc., may make it impossible to produce certain things for as low a price in one country as in another, their real cost is no greater, if no greater amount of labor is needed for their production, and thus a nation loses nothing by shutting out the cheaper foreign products.
The fallacy is in the assumption that equal amounts of labor always produce equal results. A first-class portrait painter may be able to do whitewashing with no more labor than a professional whitewashes but it would nevertheless be a loss to him to take time in which he might earn the wages of a portrait painter in order to do whitewashing that he might get done for the wages of a whitewasher. Nor would his loss be the less real if he chose to average his income so as to credit himself with as much for whitewashing as for portrait painting. In the same way, it is not the amount of labor required to produce a thing here or there which determines whether it can be more profitably obtained by home production or by importation, but the relation between what the same labor could produce in that and in other employments. This is shown by price. Though as between different times and places the prices of things do not accurately indicate the relative quantity and quality of labor necessary to obtain them, they do in the same time and place. If at any given time and place, a certain commodity cannot be produced for as low a price as it can be imported for, this is not necessarily proof that it would take more labor to produce it in the given place, but it is proof that labor there and then can be more profitably employed. And when industry is diverted from more profitable to less profitable occupations, though the capital and labor so transferred may be compensated by duties or bounties, there must be a loss to the people as a whole.
Protection or Free Trade was first published in 1886, with an abridged version following in 1932. The book has never gone out of print, and quite properly so. Henry George’s topics are timeless, his logic impeccable, his style pellucid, powerful, and even lyrical. Thank goodness for great books. As John Milton said,
As good almost kill a man as kill a good book: who kills a man kills a reasonable creature, God's image; but he who destroys a good book kills reason itself... A good book is the precious lifeblood ofthe master spirit, embalmed and treasured up on purpose to a life beyond life.
Henry George is quite the “master spirit,” and he states his purpose in writing Protection or Free Trade at the very outset. It is “to determine whether protection or free trade better accords with the interests of labor, and to bring to a common conclusion on this subject those who really desire to raise wages.” And the determination? Free trade unequivocally creates a “tendency” towards improving the lot of labor, but we must examine afresh the cultural narrative and address the laws of land in order to turn this tendency into incontrovertible fact.
The purpose of my prose is threefold: to summarize George’s position on protected versus free trade, to provide slight updates almost a century and a quarter later, and to conclude with his radical proposals for tax reforms, all predicated on his radical approach to human rights. In doing so, I labor under no illusion that my words, like his, will bear the test of time. Mine, on the contrary, are written to be rewritten, over and over again as the decades and centuries advance.
Most of the first half of Protection and Free Trade reads like a primer for a University of Chicago economics graduate student, particularly during the Milton Friedman regnum (another confession: I was there then, I know whereof I speak). Trade helps both sides to a transaction, at least according to the information they have then at hand. Imports come in to a country because its denizens want to, can, and do buy them. Comparative advantage, not absolute advantage, creates the opportunity for trade.
On the other hand, government interference with this freedom is replete with unintended consequences. As Nobel laureate economist George Stigler once said, “You don’t read the statute or legislation to see how it actually works.” What are the indirect, as well as the direct consequences? How are the laws enforced? “Infant industries” tend never to mature past protection — why would they, where’s their incentive? Indirect taxes (such as tariffs) are clumsy and costly. Tariffs are taxes, and, like regulatory policy, tax policy tends to be captured by powerful, and vested, interests. Politicians, after all, must be elected, and elections are expensive. Lack of transparency contributes to the success and longevity of political transfers away from the disorganized poor and toward the concentrated rich, regardless of the rhetoric.
To these generalities, I
shall add only a few specifics from the world of 2008, 122 years after Protection
or Free Trade first appeared in print. A Clevelander by birth, I sat down
to write this afterword less than a week after
Hillary Clinton and Barack Obama
both disavowed (or did they?) NAFTA in order to win
votes in 2008’s Ohio Democrat Party primary. Pandering to those suffering in
The better policy is to work to make the factors more mobile. In particular, workers who lose their jobs in a dynamic economy should be helped acquire the skills to get hired in other sectors. The best sort of help, of course, is a good liberal arts education, which exercises and trains the brain to adapt and take advantage of new opportunities even as old ones vanish. Also important is the sort of assistance that helps with transitions rather than making costly and ultimately bootless efforts to freeze the allocations of the past. Labor markets change, and not just because of immigration and trade among nations. They also change with per capita growth in GNP, because the income elasticities of demand vary among goods and services. And per capita growth itself happens in good measure because of technological change. The “creative destruction” of Schumpeter’s “entrepreneur” is key to this process. New ideas or inventions, in the hands of entrepreneurs, become innovations that create promising opportunities for some even as they destroy the status quo that has been so very pleasant and rewarding for others. Their skills may have been rendered obsolete; their human capital no longer valuable. Growth and improvements don’t happen in equilibrium. Disequilibrium is the order of their day. Mobility and flexibility will always be important in a growing economy.
A situation like what the
Tariffs can also be used
as political tools to prevent other countries from developing. The
Free trade, on the other
hand, can be used to restrain or prevent market power in industries where
economies of scale reduce the number of economically viable firms enough to make
monopoly or oligopoly a problem. What broke the hold of the Big Three auto
manufacturers? Not the
Another benefit from free trade is its power to improve the standard of living in other countries. Not only is it good, in and of itself, for foreign countries to prosper, but their prosperity can not only raise home incomes by increasing the demand for our goods and services, but also contribute to world peace (more on this point in a moment).
Free trade also lessens immigration pressure. If labor can’t move here, capital and jobs can move there. Importing goods and services can substitute for importing people. While we ponder whether we should actually mean what Statue of Liberty says — “Give me your tired, your poor, your huddled masses yearning to breathe free, the wretched refuse of your teeming shore,” this substitution effect provides some relief both ethically and economically from an issue so very complicated and so very, very fraught.
Many are Henry George’s
anecdotes to reveal the absurdity of restricting international trade by
uncovering the absurdity of restricting domestic trade. There is, however, one
key difference between the two, and that difference involves national security.
National defense takes many forms. After embargoes and the
threat ol mass starvation in
A standard strategy of skilled communicators is to start their pieces by establishing their bona fides as sane and learned people. Henry George is good at this game. After methodically and somewhat conventionally building the case for free trade, George transitions with the gentle word “tendency” into his more radical, and also more important, message. Truly free trade, the free trade that not only has a tendency to improve the lot of workers but actually will improve their well-being, requires basic reform from within. Workers, he suggests, resist “free” trade because they do not see their standard of living improving in its midst. And they are, in the main, correct. Although free trade could improve the overall condition of the poor, it will not, it cannot, until a more basic problem is addressed and solved. Until then, whether it occurs more quickly in the context of free trade or more slowly under conditions of protectionism, growth and general prosperity will aggravate, not ameliorate, the condition of the most vulnerable section of the population: the poor.
As readers of Henry George’s other books already know, the reform that transforms tendency into solid prediction also unites ethics and economics. His radical diagnosis and cure — going to the root of our economy and civilization — find their basis in the following bold declaration:
Here are two simple principles, both of which are self-evident:
II.— That each man has an exclusive right to the use and enjoyment of what is produced by his own labor.
Henry George is wise to
echo Thomas Jefferson here, for he is really adding a fourth inalienable right
But George’s solution or cure is most civilized, and it can be implemented by tools already well established within the system. From the first simple and self-evident principle, it follows that the government should tax rent. And from the second, it is clear that the government should, to the fullest degree possible, untax wages, returns to capital, and improvements to/on land.
You see, Georgism, in today’s parlance, is really “three-factor economics.” Neoclassical economics conflated “land” with “capital” in its two-factor world of labor and capital. Land, however, is distinct, both ethically and economically. “Land” is the one-word summary of all the elements provided by nature — location or site value, minerals, sunshine, (clean) air, the spectrum, and so on. Their supply is completely inelastic. Taxing their use, while supporting J. S. Mill’s labor theory of ownership by untaxing labor and capital, is therefore not only ethical but efficient as well. In sharp contradistinction, current fiscal policies distort the decisions between labor and leisure, between saving/investing and consuming. Taxing buildings as well as, even more than, site value penalizes improvements and use while subsidizing vacancy. Both Henry George’s proposed fiscal reform and his advocacy of free trade, in brief, enhance growth by promoting efficiency. And, taken together, they pretty much guarantee the long-term distribution of some of these gains to the poor.
Ownership involves three distinct and separable parts: right to use (within legally-determined limits of how to use), right to purchase and sell, and right to residual income streams. The Georgist solution preserves the first, and only the first, as it exists today. Georgists are, in the main, strong supporters of private use; we just believe that individuals should pay the community for the privilege of being able to use communal assets privately, and to the exclusion of other users. Taxing the benefits of this annual use of nature reserves the other two rights of ownership for the community, distinguishing the approach sharply from Socialism.
Ideas matter. Embodied as
innovations in new capital through investment, inventions are the greatest
source of economic growth. Inventions often require the stimulation and
exchange provided by population density. Indeed, the greatest benefit cities
may provide civilization may well be this massing of population and the
concomitant advance in thinking — hence, high land (site) value in
I observed earlier that domestic trade differs significantly from international trade because (absent civil war) the latter involves security issues while the former does not. But now I urge you to think across national boundaries. Planet Earth didn’t come with political boundaries. I dare you to look afresh at George’s first principle:
That all men have equal rights to the use and enjoyment of the elements provided by nature.
What does this mean to you?
We already know that,
barring marvelous technological inventions harvesting renewable resources like
the sun and wind, the rest of the world cannot attain the material prosperity
What do these observations mean for immigration? To me, they mean open borders, even though I hesitate because of problems with community assets built up over centuries of human investment. Finding the balance between these two considerations is so difficult that, at least for me, it strengthens anew the arguments for free trade. We all need breathing time.
And, so, while you digest this most radical of ideas, I urge you, while also working to make trade “truly free,” to support free trade over protection now not only for all of the reasons earlier adumbrated by Henry George but also because it both encourages innovation and addresses, at least partially, through the principle of substitution, the complicated issue of free movement not just of goods and services, but of people. Solving the chronic disease of poverty should be a powerful motivator for all of us. Both prosperity and peace are at stake. In sum, survival is at stake — not of the planet, but ol human civilization thereon.
I dare you, in brief and in sum, truly to transform the cultural narrative that at present has all of us captive. Many of us grew up being told that women and blacks were in many ways inferior to white men. The Declaration of Independence’s ringing assertion that “all men are created equal” was once read, and probably written, to mean that any white man with property is equal, in rights, to all other white men with property and superior to all women, blacks and white men without property. Please try your best to examine afresh the American Dream of owning your own home. Separate the concept of the house you buy or build and the land on which it sits. Separate the three concepts of ownership one from another. It’s time to critique and rewrite this part of our cultural narrative. Let’s do it together.
— Adele Wick, President Robert Scha/kenbach Foundation July, 2008
ad valorem taxes 24
barter, primary form of trade 48 blockading squadrons, and protective tariffs 16 bounties. See subsidies Bright,John 117 bull, as emblem of working masses 1 Bush, George W., protectionist policies of 152
gold mines in 84 wages in 84 capital
and labor, not really in conflict 135 confused with “means of production” 134 does not oppress labor 116
Chicago, University of
151 child labor 103-104 chrome mines, in the United States 72 Civil War, public
debts from 86
tend to flow to where their value is relatively high 51 when exchanged for money, trade not complete 52 common property in land,
necessary to securing equal rights 120 comparative advantage 63, 65 competition
causes no injury when natural rights are secured 136 erases gains from protection 71-72
in the labor market 78, 113 consumer, often needlessly
separated from producer 46
Corn Laws 4, 84, 91 currency and finance, bad systems of 112
and surplus labor 95 direct tax, easier to oppose 25 distribution of wealth 104 dogs-in-the-nranger 76 duties. Sec tariffs
employer, seen as benefactor 99 English workers, better off before industrial revolution 94 equal rights
to products of labor 120 to use of natural opportunities 120
can be secured via taxation 122
export duties 50 exports
correlative with imports 42 not beneficial to poor nations IX other than goods 44 which would still go on even with no imports 45
factors of production 73 free trade
disappointing results of 92 in its entirety 117 increases production 90 partial, cannot help workers 129 seen as antithetical to fair trade IX true meaning of 125 weakness of general argument for 90
free trade agreements, do not
represent true free trade X free trade movement, in
globalization 79 gold, and silver. See precious metals Greeley, Horace 75
home industry, protection of 33
Hussein, Saddam 155
correlative with exports 42 other than goods 44 improvements, in transportation, bad if protection is good 12 increased production, has not helped workers 90 indirect taxation 22,151
advantageous to big business 26
cost ol includes costs of bribery and evasion 23-24 tails more heavily on cheaper, more common goods 24 favored by special interests 26 hidden in prices of goods 25 not easy or cheap to collect 22 often evaded 23 regressive 23-24 restricts trade 125 individualism, distinguished from socialism 133 industrial policy 69 inequality, leads to corrupt governments 134 infant industries 33
not powerful enough to secure protection 34-35 intelligence, most important element in production 59 international trade
always increases a nation's wealth 62
made up of very many individual transactions 53 profitable when exports exceed imports 42
Jefferson, Thomas 156 justice, most important aspect of social questions 140
Kissinger, Henry 155 Knights of Labor 80
active factor of production 98 not really in conflict with capital 135 cannot produce without land 98 low-priced, gives no advantage in production 57-58 quickly flows in to fill shortages 82 surplus of 98
waylaid bv a series of robbers 111
labor market 78 labor unions 78, 103-104 as monopsonies 152 cannot help all workers 132 restrict competition in labor market 78 labor-saving inventions
bad, if protection is good 12 believed injurious to workers 102
have the same effect as free trade 102 laborers, surplus of 95-96 Laissezfaire VIII, 136 land
equal rights to, cannot be secured by redistribution 118
freely available at margin 124 has no inherent value 114 not produced by labor 115 passive factor in production 73-74 secure tenure of 119 selling price disappears when full rental value taken in taxation 123 speculative price of 124 land value
arises from growth of community 127 belongs to community 127 increased by improvements in transportation 115 increased by labor-saving inventions 115 not created by owners of land 121
land value tax 126
accords with principles of free
trade 128 cannot be transferred to user of land 127 full rent should be taken by community 143 not really a tax 122,127 not the same as tax on land area 126 should ultimately take full rent 128 would simplify' government 135
benefits to, do not benefit producers 73 makes no contribution to production 74
Macaulay, Thomas, on pecuniary interests and gravitation 3 Malthus, Thomas R. 4 Manchester school 4 manufactures
growth of, should arise organically 36 their growth a result, not a cause, of population 35 market access 67 merchant, trade of compared to that of a nation 52 Mexico, primitive silver mining in 58
contribute to production 20-21
save trouble and expense 20 Mill, John Stuart 103, 145 labor theory of ownership 157
confusions about 49 evolution of 49 for a merchant 52 in common speech, really means “wealth” 53 when exchanged for commodities, trade not complete 52 monopolies, industrial 112 monopolists, benefit from protection 71
National Assembly of France 144 nationalism 8 nations
erroneously likened to merchants 50 trade of, compared with that of a merchant 52 natural monopolies 138 government control of, less costly than current methods of regulation 139
should be operated by government 133
Obama, Barack 150 octroi 13 oligopoly 72
over-production, purported cause of depressions 91 ownership, three component rights of 157
Pacific Mail Steamship Company 70 patent laws 72, 137 Physiocrats vii
politician, strategy of, compared with propagandist 142 post hoc, ergo propter hoc fallacy 6 precious metals as commodities 51 easily transported 51 thought to be the only true money 51-52 private property in land: robber that takes all that is left 111
producer, often needlessly
separated from consumer 46 production
includes services 21 includes transport and trade 19
productivity, advances in, tend to decrease inderdependence 18
propagandist, strategy of,
compared with politician 142
property in land, indefensible 144 protection
aim of to diminish imports 41 and nationalism 8 and profits 80 compared to ligatures 18 defined 10 futile and absurd 85 gains of, erased by competition 71 implies antagonism between nations 11 implies inferiority of labor 9 makes work 96 not needed bv high-wage nations 56 not needed by low-wage nations 56 of one undustry discourages all others involved with it 71 political costs of 70 protects buyers of labor, not sellers of labor 80 real strength of argument for 96
retards overall tendency toward greater inequality' 109
should be abolished quickly, not gradually 87 Protection or Free Trade, publication history 150 protective theory. See also protection cannot be fully employed 32 reductio ad absurdum 13 public schools, as pre-revolutionary agents 113
argument against, speciously used against the single tax 119
of land, impracticable 118 of land, not necessary 121 rent fund
increases with society's growth 139
surplus above necessary expenses of government 124
robber that takes all that is left 111 Robinson Crusoe 104
Schumpeter, Joseph, "creative destruction” 153 Seigniorage 153 selling price of land, disappears when full rent taken by community 123
services, part of production 21 silver and gold. See precious metals
silver mining, in
single tax. See land value tax skilled workmen, forbidden to leave nation under mercantilism 50 slavery 156
type of resulting from private land ownership 106 chattel method used where land is readily available 114 Smith, Adam
on mercantilism 50 on natural wage 4 on tariffs 3
two capitals fallacy 146 smuggling, not felt to be wrong 11
social functions, true domain of 138 social reform
efforts, distracted and diffused 130
must be fundamental 131 socialism
decreases nationalistic prejudices 132 distinguished from individualism 133 presupposes uncorrupt government 134
various forms of 132 solar energy 64 standing armies 112 statistics
manipulation of 92, 105 pitfalls in their use in political economy 7 Stigler, George 151 subsidies 30, 82
more efficient means of encouraging industry 30 only possible way to encourage home industry 38 Sumner, W. G. 99, 101 supply and demand 137
tariff, revenue 22 unnecessary 27 tariffs, protective 28
against desire of domestic consumers 15 an indirect tax 22 and blockading squadrons 16 and national security 155 as defense against tariffs in other nations 66 benefit landowners 74 benefit monopolists 71 cannot encourage all home industry 37 cumulative costs of 69-70 diminish overall production 39 tariffs, protective (cont.)
effects of, on many different products at once 31 foster monopolies 89 incidence of 145 increase prices of goods 78 lead to more fraud and corruption than subsidies 30 may raise wages temporarily, for a few workers 81 raise prices generally 29 taxes
on land area are taxes on production 127 on land value. See land value tax
on ostentation 126 on production, restrict trade 125
temperance societies, as prerevolutionary agents 113 three-factor economics 157 trade
allows economies of scale 17 allows optimal use of human abilities 17 always reduces to barter 52,
as currently practiced, involves much unnecessary transportation of goods 46 between high-wage and low-wage nations 79 exchange of commodities for
commodities 52 is voluntary 14-15 maximizes use of natural opportunities 17 part of production 77 trade deficits, in the United States today 153 trade surplus, has often led to impoverishment 43-44 trade unions. See labor unions trusts 137
unemployment 100-101 unions. See labor unions urbanization, unnatural tendency toward 47
depend on competition in labor market 78 general rate of 83 level of, compared to water level 83 low rate of, does not mean low cost of production 57 of common labor, relates to general prosperity 2-3 rate of, legitimate public concern 2-3 when low, production eventually falls 61
where high, productivity increases quickly 58 where higher, intelligence is free to develop 59 where low, production inefficient 58 war, seen as providing employment 100 wealth, flows from producers to monopolists 45-46
not desirable for its own sake 97
opportunity of, regarded as privilege 95 workers
Books by Henry George
Published by the Robert Schalkenbach Foundation
Progress and Poverty: An Inquiry into the Cause of Industrial
Depressions and the Increase of Want with Increase of Wealth...
The Remedy (orig. 1879)
Unabridged Hardcover, ishn 978-0-911312-79-9
Unabridged Paperback, ishn 978-0-911312-58-4
Abridged bv Arthur Madsen, Paperback, ISBN 978-0-911312-10-2
Modernized &. Abridged bv Bob Drake, Pb., ISBN 978-0-911312-98-0
Social Problems (orig. 1883)
Unabridged Hardcover, isbn 978-0-911312-10-2
The Land Question: Viewpoint and Counterviewpoint on the Need for Land Reform (orig. 1884)
Unabridged Paperback, ISBN 978-0-911312-40-9
Protection or Free Trade: An Examination of the Tariff Question, with Special Regard to the Interests of Labor (orig. 1886)
Unabridged Hardcover, ISBN 978-0-911312-83-6 Unabridged Paperback, ISBN 978-0-911312-84-3 Abridged by F. C. R. Douglas, Paperback, isbn 978-0-911312-49-2
A Perplexed Philosopher: An Examination of Herbert Spencer’s Utterances on the Land Question (orig. 1892)
Unabridged Hardcover, isbn 978-0-911312-80-5
The Science of Political Economy: A Reconstruction of its Principles in Clear and Systematic Form(orig. 1898)
Unabridged Hardcover, isbn 978-0-911312-51-5
Abridged by Lindv Davies, Paperback, isbn 978-0-911312-48-5
Other works by Henry George and related authors are also available
in print, on disc, and online. Latest catalogue available free upon
request and online: www.schalkenbach.org
Robert Schalkenbach Foundation
Tel: 212-683-6425 Toll-free: 800-269-9555 Fax: 212-683-6454
For Further Exploration
Tuition-free courses on the economics and social philosophy of Henry George are offered by:
Correspondence courses (Internet or regular mail) based on the works of Henry George are offered by the Henry George Institute, 121 East 30th Street, New York, NY 10016 www.henrygeorge.org
A world-wide list of all Georgist
organizations, with contact information, is available from the Council of Georgist Organizations,
Robert Schalkenbach Foundation (RSF) was founded in 1925 to promote and develop the ideas ol Henry George and keep them in the public dialogue. The foundation carries out its mission in several ways: (1) by publishing the works of Henry George and distributing the works of related authors; (2) by engaging in scholarly research projects that assess George’s world-wide legacy, extend his analysis, and apply it to new circumstances; and (3) by using modern media, including fdm, to engage a wider public audience.
End of Poverty? is a film produced by RSF
and Cinema Libre Studio, and well received at its
debut at the 2008 Cannes Film Festival. It’s theatrical
release in 2009 will be followed by a DVD release. For this invitation to
“Think Again” about causes of poverty and how to end it, award-winning director
Philippe Diaz brings together narration by celebrated actor Martin Sheen and
commentary by Nobel laureate economists Amartya Sen and Joseph Stiglitz, along
with experts Susan George, John Perkins, Eric Toussaint, Chalmers Johnson, and RSF’s Clifford Cobb. The camera crew takes the audience to
Please visit www.schalkenbach.org to purchase published materials on paper, CD and DVD; to read and download new research and writing online, news about The End ofPoverty? and links to Georgist websites, projects, and organizations.
Robert Schalkenbach Foundation
Tel: 212-683-6424. Toll-free 800-269-9555. Fax: 212-683-6454
The Corn Laws, in force between 1815 and 1846, were import tariffs designed to support and protect domestic British corn prices against competition from less expensive foreign-grain imports. These laws are often viewed as examples of British mercantilism. — EC.R.D.
or municipal tariff on produce brought into a town, is still levied in
In point of fact there is no country which as to all branches of production can be said to have superior advantages. The conditions which make one part of the habitable globe better fitted for some productions, unfit it for others, and what is disadvantage for some kinds of production is generally advantage for other kinds. Even the lack of rain, which makes some parts of the globe useless to man, may, if invention ever succeeds in directly utilizing the power of the sun’s rays, be found to be especially advantageous for certain parts of production. The advantages and disadvantages that come from the varying density of population, the special development of certain forms of industry, etc., are also largely relative. The most positive of all advantages in production — that which most certainly gives superiority in all branches, is that which arises from that general intelligence which increases with the increase of the comfort and leisure of the masses of the people, that is to say, with the increase of wages. — H.G. (,4
For want of a better term I have here used the word “producers” in that limited sense in which it is applied to those who control capital and employ labor engaged in production. — H. G.
This disposition is, of course, largely augmented by the greater cost of machinery under a protective tariff, which not only increases the capital required to begin, but makes the constant discarding of old machinery and purchase of new, required to keep up with the march of invention, a much more serious matter. — H.G.
For a fuller examination of the effects of machinery see my Social Problems.
Buildings or other fixed improvements would be as secure as now, and could be bought and sold, as now, subject to the tax or ground rent due to the community for the ground on which they stood. Houses and the ground they stand on, or other improvements and the land they are made on, would also be rented as now. But the tenant would have to pay less than now, since the taxes now levied on buildings or improvements fall ultimately on the user, and the tenant would therefore get the benefit of their abolition. — H. G.
The great source of confusion in regard to such matters arises from the failure to attach any definite meaning to terms. It must always be remembered that nothing that can be classed either as labor or as land can be accounted capital in any definite use of the term, and that much that we commonly speak of as capital — such as solvent debts, government bonds, etc. — is in reality not even wealth — which all true capital must be. — H. G. [For a fuller elucidation of this, as of similar points, the reader should refer to George’s The Science of Political Economy.
In the next paragraph Adam Smith goes on to carry the proposition to an unconscious reductio ad absurdum. He says: “A capital therefore employed in the home trade will sometimes make twelve operations, or be sent out and returned twelve times, before a capital employed in the foreign trade of consumption has made one. If the capitals are equal, therefore, the one will give four-and-twenty times more encouragement and support to the industry of the country than the other.” — H.G.