Fifthly, that if the foreign demand for cotton has been at all diminished, the diminution has been more than compensated in the additional demand created at home.
Sixthly, that the constant tendency of the system, by creating competition among ourselves, and between American and European industry, reciprocally acting upon each other, is to reduce prices of manufactured objects.
Seventhly, that, in point of fact, objects within the scope of the policy of protection have greatly fallen in price.
Eighthly, that if, in a season of peace, these benefits are experienced, in a season of war, when the foreign supply might be cut off, they would be much more extensively felt.
Ninthly, and finally, that the substitution of the British colonial system for the American system, without benefiting any section of the Union, by subjecting us to a foreign legislation, regulated by foreign interests, would lead to the prostration of our manufactories, general impoverishment, and ultimate ruin. * * * The danger of our Union does not lie on the side of persistence in the American system, but on that of its abandonment. If, as I have supposed and believe, the inhabitants of all north and east of James River, and all west of the mountains, including Louisiana, are deeply interested in the preservation of that system, would they be reconciled to its overthrow? Can it be expected that two thirds, if not three fourths, of the people of the United States would consent to the destruction of a policy, believed to be indispensably necessary to their prosperity? When, too, the sacrifice is made at the instance of a single interest, which they verily believe will not be promoted by it? In estimating the degree of peril which may be incident to two opposite courses of human policy, the statesman would be short-sighted who should content himself with viewing only the evils, real or imaginary, which belong to that course which is in practical operation. He should lift himself up to the contemplation of those greater and more certain dangers which might inevitably attend the adoption of the alternative course. What would be the condition of this Union, if Pennsylvania and New York, those mammoth members of our Confederacy, were firmly persuaded that their industry was paralyzed, and their prosperity blighted, by the enforcement of the British colonial system, under the delusive name of free trade? They are now tranquil and happy and contented, conscious of their welfare, and feeling a salutary and rapid circulation of the products of home manufactures and home industry, throughout all their great arteries. But let that be checked, let them feel that a foreign system is to predominate, and the sources of their subsistence and comfort dried up; let New England and the West, and the Middle States, all feel that they too are the victims of a mistaken policy, and let these vast portions of our country despair of any favorable change, and then indeed might we tremble for the continuance and safety of this Union!
And need I remind you, sir, that this dereliction of the duty of protecting our domestic industry, and abandonment of it to the fate of foreign legislation, would be directly at war with leading considerations which prompted the adoption of the present Constitution? The States respectively surrendered to the general government the whole power of laying imposts on foreign goods. They stripped themselves of all power to protect their own manufactures by the most efficacious means of encouragement—the imposition of duties on rival foreign fabrics. Did they create that great trust, did they voluntarily subject themselves to this self-restriction, that the power should remain in the Federal government inactive, unexecuted, and lifeless? Mr. Madison, at the commencement of the government, told you otherwise. In discussing at that early period this very subject, he declared that a failure to exercise this power would be a "fraud" upon the Northern States, to which may now be added the Middle and Western States.
[Governor Miller asked to what expression of Mr. Madison's opinion Mr. Clay referred; and Mr. Clay replied, his opinion, expressed in the House of Representatives in 1789, as reported in Lloyd's Congressional Debates.]
Gentlemen are greatly deceived as to the hold which this system has in the affections of the people of the United States. They represent that it is the policy of New England, and that she is most benefited by it. If there be any part of this Union which has been most steady, most unanimous, and most determined in its support, it is Pennsylvania. Why is not that powerful State attacked? Why pass her over, and aim the blow at New England? New England came reluctantly into the policy. In 1824, a majority of her delegation was opposed to it. From the largest State of New England there was but a solitary vote in favor of the bill. That interesting people can readily accommodate their industry to any policy, provided it be settled. They supposed this was fixed, and they submitted to the decrees of government. And the progress of public opinion has kept pace with the developments of the benefits of the system. Now, all New England, at least in this House (with the exception of one small still voice), is in favor of the system. In 1824, all Maryland was against it; now the majority is for it. Then, Louisiana, with one exception, was opposed to it; now, without any exception, she is in favor of it. The march of public sentiment is to the South. Virginia will be the next convert; and in less than seven years, if there be no obstacles from political causes, or prejudices industriously instilled, the majority of Eastern Virginia will be, as the majority of Western Virginia now is, in favor of the American system. North Carolina will follow later, but not less certainly. Eastern Tennessee is now in favor of the system. And, finally, its doctrines will pervade the whole Union, and the wonder will be, that they ever should have been opposed.
A TARIFF FOR REVENUE ONLY; HOUSE OF REPRESENTATIVES, FEBRUARY 18, 1881. MR. CHAIRMAN:
At the very threshold it is proper to define the terms I shall use and state the exact propositions I purpose to maintain. A tariff is a tax upon imported goods. Like other taxes which are levied, it should be imposed only to raise revenue for the government. It is true that incidental protection to some industries will occur when the duty is placed upon articles which may enter into competition with those of domestic manufacture. I do not propose to discuss now how this incidental protection shall be distributed. This will be a subsequent consideration when the preliminary question has been settled as to what shall be the nature of the tariff itself. The present tariff imposes duties upon nearly four thousand articles, and was levied and is defended upon the ground that American industries should be protected. Thus protection has been made the object; revenue the incident. Indeed, in many cases the duty is so high that no revenue whatever is raised for the government, and in nearly all so high that much less revenue is collected than might be realized. So true is this that, if the present tariff were changed so as to make it thereby a revenue tariff, one fifth at least could be added to the receipts of the Treasury from imports. Whenever I use the phrase free trade or free trader, I mean either a tariff for revenue only or one who advocates it.
So far as a tariff for revenue is concerned, I do not oppose it, even though it may contain some objectionable incidental protection. The necessities of the government require large revenues, and it is not proposed to interfere with a tariff so long as it is levied to produce them; but, to a tariff levied for protection in itself and for its own sake, I do object. I therefore oppose the present tariff, and the whole doctrine by which it is attempted to be justified. I make war against all its protective features, and insist that the laws which contain them shall be amended, so that out of the importations upon which the duty is levied the greatest possible revenue for the government may be obtained.
What, then, is the theory of protection? It is based upon the idea that foreign produce imported into this country will enter into competition with domestic products and undersell them in the home market, thus crippling if not destroying domestic production. To prevent this, the price of the foreign goods in the home market is increased so as to keep them out of the country altogether, or to place the foreigner, in the cost of production, upon the same footing as the American producer. This is proposed to be done by levying a duty upon the foreign importation. If it be so high that the importer cannot pay it and sell the goods at a profit, the facilities of production between this and other countries are said to be equalized, and the American producer is said to be protected. It will be seen, therefore, that protection means the increase of price. Without it the fabric has no foundation on which to rest. If the foreign goods are still imported, the importer adds the duty paid to the selling price. If he cannot import with profit, the American producer raises his price to a point always below that at which the foreign goods could be profitably brought into the country, and controls the market. In either event, there is an increase of price of the products sought to be protected. The bald proposition therefore is that American industries can and ought to be protected by increasing the prices of the products of such industries.
There are three popular opinions, industriously cultivated and strengthened by adroit advocates, upon which the whole system rests, and to which appeals are ever confidently made. These opinions are erroneous, and lead to false conclusions, and should be first considered in every discussion of this question.
The first is, that the balance of trade is in our favor when our exportations exceed our importations. Upon this theory it is argued that it cannot be unwise to put restrictions upon importations, for they say that at one and the same time you give protection to our industries and keep the balance of trade in our favor. But the slightest investigation will show that this proposition cannot be maintained. A single illustration, often repeated, but never old in this discussion, will demonstrate it. Let a ship set sail from Portland, Maine, with a cargo of staves registered at the port of departure as worth $5,000. They are carried to the West India Islands, where staves are in demand, and exchanged for sugar or molasses. The ship returns, and after duty paid the owner sells his sugar and molasses at a profit of $5,000. Here more has been imported than exported. Upon this transaction the protectionist would say that the balance of trade was against us $5,000; the free trader says that the sum represents the profit to the shipper upon his traffic, and the true balance in our favor.
Suppose that after it has set sail the vessel with its cargo had been lost. In such case five thousand dollars' worth of goods would have been exported, with no importation against it. The exportation has exceeded the importation that sum. Is not the balance of trade, according to the protection theory, to that amount in our favor? Then let the protectionist turn pirate and scuttle and sink all the vessels laden with our exports, and soon the balance of trade in our favor will be large enough to satisfy even most advocates of the American protective system. The true theory is that in commerce the overplus of the importation above the exportation represents the profit accruing to the country. This overplus, deducting the expenses, is real wealth added to the land. Push the two theories to their last position and the true one will be clearly seen. Export every thing, import nothing, though the balance of trade may be said to be overwhelmingly in our favor, there is poverty, scarcity, death. Import every thing, export nothing, we then will have in addition to our own all the wealth of the world in our possession.
Secondly, it is said that a nation should be independent of foreign nations, lest in time of war it might find itself helpless or defenceless. Free trade, it is charged, makes a people dependent upon foreigners. But traffic is exchange. Foreign products do not come into a country unless domestic products go out. This dependence, therefore, is mutual. By trade with foreign nations they are as dependent upon us as we upon them, and in the event of a disturbance of peace the nation with which we would be at war would lose just as much as we would lose, and both as to the war would in that regard stand upon terms of equality. It must not be forgotten that the obstruction of trade between nations is one of the greatest occasions of war. It frequently gives rise to misunderstandings which result in serious conflicts. By removing these obstacles and making trade as free as possible, nations are brought closer together, the interests of their people become intermingled, business associations are formed between them, which go far to keep down national dispute, and prevent the wars in which the dependent nation is said to be so helpless. Japan and China have for centuries practised the protective theory of independence of foreigners, and yet, in a war with other nations, they would be the most helpless people in the world. That nation is the most independent which knows most of, and trades most with, the world, and by such knowledge and trade is able to avail itself of the products of the skill, intellect, and genius of all the nations of the earth.
A third erroneous impression sought to be made upon the public mind is that whatever increases the amount of labor in a country is a benefit to it. Protection, it is argued, will increase the amount of labor, and therefore will increase a country's prosperity. The error in this proposition lies in mistaking the true nature of labor. It regards it as the end, not as the means to an end. Men do not labor merely for the sake of labor, but that out of its products they may derive support and comfort for themselves and those dependent upon them. The result, therefore, does not depend upon the amount of labor done, but upon the value of the product. That country, therefore, is the most prosperous which enables the laborer to obtain the greatest possible value for the product of his toil, not that which imposes the greatest labor upon him. If this were not the case men were better off before the appliances of steam as motive power were discovered, or railroads were built, or the telegraph was invented. The man who invents a labor-saving machine is a public enemy; and he would be a public benefactor who would restore the good old times when the farmer never had a leisure day, and the sun never set on the toil of the mechanic. No, Mr. Chairman, it is the desire of every laborer to get the maximum of result from the minimum of effort. That system, therefore, can be of no advantage to him which, while it gives him employment, robs him of its fruits. This, it will be seen, protection does, while free trade, giving him unrestricted control of the product of his labor, enables him to get the fullest value for it in markets of his own selection.
The protectionist, relying upon the propositions I have thus hurriedly discussed, urges many specious reasons for his system, to a few of which only do I intend to call attention to-day.
In the first place, it is urged that protection will develop the resources of a country, which without it would remain undeveloped. Of course this, to be of advantage to a country, must be a general aggregate increase of development, for if it be an increase of some resources as a result of diminution in others, the people as a whole can be no better off after protection than before. But the general resources cannot be increased by a tariff. There can only be such an increase by an addition to the disposable capital of the country to be applied to the development of resources. But legislation cannot make this. If it could it would only be necessary to enact laws indefinitely to increase capital indefinitely. But, if any legislation could accomplish this, it would not be protective legislation. As already shown, the theory of protection is to make prices higher, in order to make business profitable. This necessarily increases the expense of production, which keeps foreign capital away, because it can be employed in the protected industries more profit-ably elsewhere. The domestic capital, therefore, must be relied upon for the proposed development. As legislation cannot increase that capital, if it be tempted by the higher prices to the business protected, it must be taken from some other business or investment. If there are more workers in factories there will be fewer artisans. If there are more workers in shops there will be fewer farmers. If there are more in the towns there will be fewer in the country. The only effect of protection, therefore, in this point of view, can be to take capital from some employment to put it into another, that the aggregate disposable capital cannot be increased, nor the aggregate development of the resources of a country be greater with a tariff than without.
But, secondly, it is said that protection increases the number of industries, thereby diversifying labor and making a variety in the occupations of a people who otherwise might be confined to a single branch of employment. This argument proceeds upon the assumption that there would be no diversification of labor without protection. In other words, it is assumed that but for protection our people would devote themselves to agriculture. This, however, is not true. Even if a community were purely agricultural, the necessities of the situation would make diversification of industry. There must be blacksmiths, and shoemakers, and millers, and merchants, and carpenters, and other artisans. To each one of these employments, as population increases, more and more will devote themselves, and with each year new demands will spring up, which will create new industries to supply them. I was born in the midst of a splendid farming country. The business of nine tenths of the people of my native county was farming. My intelligent boyhood was spent there from 1850 to 1860, when there was no tariff for protection. There were thriving towns for the general trading. There were woollen mills and operatives. There were flouring mills and millers. There were iron founders and their employes. There were artisans of every description. There were grocers and merchants, with every variety of goods and wares for sale; there were banks and bankers; there was all the diversification of industry that a thriving, industrious, and intelligent community required; not established by protection nor by government aid, but growing naturally out of the wants and necessities of the people. Such a diversification is always healthful, because it is natural, and will continue so long as the people are industrious and thrifty. The diversification which protection makes is forced and artificial. Suppose protection had come to my native county to further diversify industries. It would have begun by giving higher prices to some industry already established, or profits greater than the average rate to some new industry which it would have started. This would have disturbed the natural order. It would necessarily have embarrassed some interests to help the protected ones. The loss in the most favorable view would have been equal to the gain, and besides trade would inevitably have been annoyed by the obstruction of its natural channels.
The worst feature of this kind of diversified industry is that the protected ones never willingly give up the government aid. They scare at competition as a child at a ghost. As soon as the markets seem against them, they rush to Congress for further help. They are never content with the protection they have; they are always eager for more. In this dependence upon the government bounty the persons protected learn to distrust themselves; and protection therefore inevitably destroys that manly, sturdy spirit of individuality and independence which should characterize the successful American business man.
Thirdly, it is said that protection gives increased employment to labor and enhances the wages of workingmen. For a long time no position was more strenuously insisted upon by the advocates of the protective system than that the wages of labor would be increased under it. At this point in the discussion I shall only undertake to show that it is impossible that protection should produce this result. What determines the amount of wages paid? Some maintain that it is the amount of the wage fund existing at the time that the labor is done. Under this theory it is claimed that, at any given time, there is a certain amount of capital to be applied to the payment of wages, as certain and fixed as though its amount had been determined in advance. Others maintain that the amount of wages is fixed by what the laborer makes, or, in other words, by the product of his work, and that, therefore, his wage is determined by the efficiency of his labor alone. Both these views are partly true. The wages of the laborer are undoubtedly determined by the efficiency of his work, but the aggregate amount paid for labor cannot exceed the amount properly chargeable to the wage fund without in a little time diminishing the profits of production and ultimately the quantity of labor employed.'
But, whichever theory be true, it is clear that protection can add nothing to the amount of wages. It cannot increase the amount of capital applicable to the payment of wages, unless it can be shown that the aggregate capital of a country can be increased by legislation; nor can it add to the efficiency of labor, for that depends upon individual effort exclusively. A man who makes little in a day now may in a year make much more in the same time; his labor has become more efficient. Whether this shalt be done depends on the taste, temperament, application, aptitude, and skill of the individual. No one will pretend that protection can increase the aggregate of these qualities in the labor of the country. The result is that it is impossible for protection, either by adding to the wage fund or by increasing the efficiency of labor, to enhance the wages of laboring men, a theory which I shall shortly show is incontrovertibly established by the facts.
I will now, Mr. Chairman, briefly present a few of the principal objections to a tariff for protection. As has been shown, the basis of protection is an increase in the price of the protected products. Who pays this increased price? I shall not stop now to consider the argument often urged that it is paid by the foreign producer, because it can be easily shown to the contrary by every one's experience. I shall for this argument assume it as demonstrated that the increase of price which protection makes is paid by the consumer. This suggests the first great objection to protection, that it compels the consumer to pay more for goods than they are really worth, ostensibly to help the business of a producer. Now consumers constitute the vast majority of the people. The producers of protected articles are few in comparison with them. It is true that most men are both producers and consumers. But, for the great majority, there is little or no protection for what they produce, but large protection for what they consume. The tariff is principally levied upon woollen goods, lumber, furniture, stoves and other manufactured articles of iron, and upon sugar and salt. The necessities of life are weighted with the burden. It is out of the necessities of the people, therefore, that the money is realized to support the protective system. I say, Mr. Chairman, that it is beyond the sphere of true governmental power to tax one man to help the business of another. It is, by power, taking money from one to give it to another. This is robbery, nothing more nor less. When a man earns a dollar it is his own; and no power of reasoning can justify the legislative power in taking it from him except for the uses of the government.
Yet, Mr. Chairman, the present tariff takes hundreds of millions of dollars every year from the farmer, the laborer, and other consumers, under the claim of enriching the manufacturer. It may not be much for each one to contribute, yet in the aggregate it is an enormous sum. For many, too, it is very much. The statistics will show that every head of a family who receives four hundred dollars a year in wages pays at least one hundred dollars on account of protection. Put such a tax on all incomes and the country would be in a ferment of excitement until it was removed. But it is upon the poor and lowly that the tax is placed, and their voices are not often heard in shaping the policies of tariff legislation. I repeat, the product of one's labor is his own. It is his highest right, subject only to the necessities of the government, to do with it as he pleases. Protection invades, destroys that right. It ought to be destroyed, until every American freeman can spend his money where it will be of the most service to him.
To illustrate the cost of protection to the consumer, consider its operation in increasing the price of two or three of the leading articles protected. Take paper for example. The duty on that commodity is twenty per cent. ad valorem. Most of the articles which enter into its manufacture or are required in the process of making it are increased in price by protection. The result is that the price of paper to the consumer is increased nearly fifteen per cent.; that is, if the tariff were taken off paper and the articles used in its manufacture, paper would be fifteen per cent. cheaper to the buyer. The paper-mills for five years have produced nearly one hundred millions of dollars' worth of paper a year. The consumers have been compelled to pay fifteen millions a year to the manufacturer more than the paper could have been bought for without the tariff. In five years this has amounted to $75,000,000, an immense sum paid to protection. It is a tax upon books and newspapers; it is a tax upon intelligence; it is a premium upon ignorance. So heavy had the burden of this tax become that every newspaper man in the district I have the honor to represent has appealed to Congress to take the duty off. The government has derived little revenue from the paper duty. It has gone almost entirely to the manufacturer, who himself has not been benefited as anticipated, as will presently be seen. These burdens have been imposed to protect the paper manufacturer against the foreigner, in face of the confident prediction made by one of the most experienced paper men in the country, that if all protection were taken off paper and the material used in its manufacture, the manufacturer would be able to successfully compete with the foreigner in nearly every desirable market in the world.
Take blankets also for example. The tariff on coarse blankets is nearly one hundred per cent. ad valorem. They can be bought in most of the markets of the world for two dollars a pair. Yet our poor, who use the most of that grade of blankets, are compelled to pay about four dollars a pair. The government derives little revenue from it, as the importation of these blankets for years has been trifling. This tax has been a heavy burden upon the poor during this severe winter, a tax running into the millions to support protection. Heaven save a country from a system which begrudges to the shivering poor the blankets to make them comfortable in the winter and the cold!
Secondly, protection has diminished the income of the laborer from his wages. The first factor in the ascertainment of the value of wages is their purchasing power, or how much can be bought with them. If in one country the wages are five dollars a day and in another only one dollar, if the laborer can in the one country with the one dollar, purchase more of the necessary articles required in daily consumption, he, in fact, is better paid than the former in the other who gets five dollars a day. Admit for a moment that protection raises the wages of the laborer, it also raises the price of nearly all the necessaries of life, and what he makes in wages he more than loses in the increase of prices of what he is obliged to buy. As already stated, a head of a family who earns $400 per year is compelled to pay $100 more for what he needs, on account of protection. What difference is it to him whether the $100 are taken out of his wages before they are paid, or taken from him afterward in the increased price of articles he cannot get along without? In both cases he really receives only $300 for his year's labor. The statistics show that the average increased cost of twelve articles most required in daily consumption in 1874 over 1860 was ninety-two per cent., while the average increase of wages of eight artisans, cabinet-makers, coopers, carpenters, painters, shoemakers, tail-ors, tanners, and tinsmiths, was only sixty per cent., demonstrating that the purchasing power of labor had under protection in thirteen years depreciated 19.5 per cent. But protection has not even raised the nominal wages in most of the unprotected industries. I find that the wages of the farm hand, the day laborer, and the ordinary artisan are in most places now no higher than they were in 1860.
But it is confidently asserted that the wages of laborers in the protected industries are higher because of protection. Admit it. I have not the figures for 1880, but in 1870 there were not 500,000 of them; but of the laborers in other industries there were 12,000,000, exclusive of those in agriculture, who were 6,000,000 more. Why should the wages of the half million be increased beyond their natural rate, while those of the others remain unchanged? More—why should the wages of the 18,000,000 be diminished that those of the half million may be increased? For an increase cannot be made in the wage rate of one class without a proportionate decrease in that of others. But the wages of labor in protected industries are not permanently increased by protection. Another very important factor in ascertaining the value of wages is the continuance or the steadiness of the employment. Two dollars a day for half the year is no more than a dollar a day for the whole year. Employment in most protected industries is spasmodic. In the leading industries for the past ten years employment has not averaged more than three fourths of the time, and not at very high wages. Within the last year manufacturers of silk, carpets, nails and many other articles of iron, of various kinds of glassware and furniture, and coal producers have shut down their works for a part of the time, or reduced the hours of labor. Production has been too great. To stop this and prevent the reduction of profits through increasing competition, the first thing done is to diminish the production, thus turning employes out of employment. Wages are diminished or stopped until times are flush again. With the time estimated in which the laborers are not at work, the average rate of wages for the ten years preceding 1880 did not equal the wages in similar industries for the ten years preceding 1860 under a revenue tariff. Indeed, in many branches the wages have not been so high as those received by the pauper labor, so-called, in Europe. But it is manifest that the wages in these industries cannot for any long period be higher than the average rate in the community, for, if the wages be higher, labor will crowd into the employments thus favored until the rate is brought down to the general level. So true is this, that it is admitted by many protectionists that wages are not higher in the protected industries than in others.
Thirdly, the effect of protection is disastrous to most of the protected industries themselves. We have seen that many of them have in recent years been compelled to diminish production. The cause of this is manifest. Production confines them to the American market. The high prices they are compelled to pay for protected materials which enter into the manufacture of their products disable them from going into the foreign market. The profits which they make under the first impulse of protection invite others into the same business. As a result, therefore, more goods are made than the American market can consume. Prices go down to some extent through the competition, but rarely under the cost of production, increased, as we have seen, by the enhanced price of material required. The losses threatened by such competition are sought to be averted by the diminution of production. Combinations of those interested are formed to stop work or reduce it until the stock on hand has been consumed. Production then begins again and continues until the same necessity calls again for the same remedy. But this remedy is arbitrary, capricious, and unsatisfactory. Some will not enter into the combination at all. Others will secretly violate the agreement from the beginning. Others still, when their surplus stock has been sold, and before the general price has risen, will begin to manufacture again. There is no power to enforce any bargain they have made, and they find the plan only imperfectly curing the difficulty. They remain uncertain what to do, embarrassed and doubtful as to the future. They have through protection violated the natural laws of supply and demand, and human regulations are powerless to relieve them from the penalty.
Take, as an illustration of the operation of the system, the article of paper. One of the first effects of the general tariff was to increase the price of nearly every thing the manufacturer required to make the paper. Fifteen mil-lions of dollars a year through the protection are taken from the consumer. The manufacturer himself is able to retain but a small part of it, as he is obliged to pay to some other protected industry for its products, they in turn to some others who furnished them with protected articles for their use, and so on to the end. The result is that nominal prices are raised all around; the consumers pay the fifteen millions, while nobody receives any substantial benefit, because what one makes in the increased price of his product he loses in the increased price he is obliged to pay for the required products of others. The consumer is the loser, and though competition may occasionally reduce prices for him to a reasonable rate, it never to any appreciable extent compensates him for the losses he sustains through the enhanced price which the protective system inevitably causes.
It is not to be disputed that many of the protected manufacturers have grown rich. In very many cases I think it can be demonstrated that their wealth has resulted from some patent which has given them a monopoly in particular branches of manufacturing, or from some other advantage which they have employed exclusively in their business. In such cases they would have prospered without protection as with it. I think there are few, except in the very inception of a manufacturing enterprise, or in abnormal cases growing out of war or destruction of property, or the combinations of large amounts of capital, where protection alone has enriched men. The result is the robbery of the consumer with no ultimate good to most of the protective industries.
At a meeting of the textile manufacturers in Philadelphia the other day, one of the leading men in that interest said: "The fact is that the textile manufacturers of Philadelphia, the centre of the American trade, are fast approaching a crisis, and realize that something must be done, and that soon. Cotton and woollen mills are fast springing up over the South and West, and the prospects are that we will soon lose much of our trade in the coarse fabrics by reason of cheap competition. The only thing we can do, therefore, is to turn our attention to the higher plane, and endeavor to make goods equal to those imported. We cannot do this now, because we have not a sufficient supply either of the culture which begets designs, or of the skill which manipulates the fibres."
What a commentary this upon protection, which has brought to such a crisis one of the chief industries protected, and which is here confessed to have failed, after twenty years, to enable it to compete even in our own markets with foreign goods of the finer quality! What is true of textile manufacturing is also true of many other industries. What remedy, then, will afford the American manufacturer relief? Not the one here suggested of increasing the manufacture of goods of finer quality, for, aside from the impracticability of the plan, this will only aggravate the difficulty by adding to the aggregate stock in the home market. * * * The American demand cannot consume what they produce. They must therefore enlarge their market or stop production. To adopt the latter course is to invite ruin. The market cannot be increased in this country. It must be found in other countries. Foreign markets must be sought. But these cannot be opened as long as we close our markets to their products, with which alone, in most instances, they can buy; in other words, as long as we continue the protective system.
I say, therefore, to the American manufacturer, sooner or later you must choose between the alternatives of ruin or the abandonment of protection. Why hesitate in the decision? Are not Canada and South America and Mexico your natural markets? England now supplies them with almost all the foreign goods they buy. Why should not you? Your coal and iron lie together in the mountain side, and can almost be dropped without carriage into your furnaces; while in England the miners must go thousands of feet under the earth for those products. * * * The situation is yours. Break down your protective barrier. All the world will soon do the same. Their walls will disappear when ours fall. Open every market of the world to your products; give steady employment to your laborers. In a little while you will have the reward which nature always gives to those who obey her laws, and will escape the ruin which many of your most intelligent opera-tors see impending over your industries.
I have not time to-day to more than refer to the ruinous effect of protection upon our carrying trade. In 1856, seventy-five per cent. of the total value of our imports and exports was carried in American vessels; while in 1879 but seventeen per cent. was carried in such vessels, and in 1880 the proportion was still less. In 1855, 381 ships and barks were built in the United States, while in 1879 there were only 37. It is a question of very few years at this rate until American vessels and the American flag will disappear from the high seas. Protection has more than all else to do with the prostration of this trade. It accomplishes this result (1) by enhancing the price of the materials which enter into the construction of vessels, so that our ship-builders cannot compete with foreigners engaged in the same business; (2) by increasing the cost of domestic production so that American manufactured goods cannot profitably be exported; and (3) by disabling our merchants from bringing back on their return trips foreign cargoes in exchange for our products.
Nor will I say any thing as to the increase of the crime of smuggling under protection, a crime which has done incalculable harm to honest dealers, particularly on the border, and a crime out of which some of the largest fortunes in the country have been made.
There are many who will admit the abstract justice of much that I have said who profess to believe that it will not do to disturb the tariff now. But for the protectionist that time never comes. When the depression in business was universal, they said you must not disturb the tariff now, because the times are so hard and there is so much suffering. Now, when business has improved, they say you must not interfere with the tariff, because times are good and you may bring suffering again. When the present tariff was first levied it was defended as a temporary expedient only, required as a necessity by war. Now that a quarter of a century nearly has passed by and peace has been restored for fifteen years, the advocates for protection are as determined to hold on to the government bounty as ever. If they are to be consulted upon the subject as to when the people shall have relief, the system will be perpetual.
It is said we must not disturb the tariff because we must raise so much revenue. I do not propose to disturb it to diminish revenue, but to increase it. The plan I propose will add one fifth at least to the revenue of the country. It is protection I propose to get rid of, not revenue. It has been well said that revenue ceases where protection begins.
It is claimed that by taking away protection you will embarrass many industries by compelling them to close up and discharge their employees. I do not believe that the changing of the present tariff to a revenue tariff will produce this result. I believe that at once every manufacturer will make more in the diminished cost of production than he will lose in the taking away of protection. But if there should be danger to any industry I would provide against it in the law which changes the tariff so that if there should be any displacement of labor there will be no loss in consequence.
No more perfect illustration of the effect of free trade has been shown than in the history of the United States. Very much of our prosperity is due to the fact that the productions of each State can be sold in every other State without restriction. During the war the most potent argument for the cause of the Union was found in the apprehension that disunion meant restriction of commerce, and particularly the placing of the mouth of the Mississippi River under foreign control. The war was fought, therefore, to maintain free trade, and the victory was the triumph of free trade. The Union every day exhibits the advantages of the system.
Are these due to the accident of a State being a member of that Union or to the beneficent principle of the system itself? What would prevent similar results following if, subject only to the necessities of government, it were extended to Mexico, to Canada, to South America, to the world? In such extension the United States have everything to gain, nothing to lose. This country would soon become the supply house of the world. We will soon have cattle and harvests enough for all nations. Our cotton is everywhere in demand. It is again king. Its crown has been restored, and in all the markets of the world it waves its royal sceptre. Out of our coal and minerals can be manufactured every thing which human ingenuity can devise. Our gold and silver mines will supply the greater part of the precious metals for the use of the arts and trade.
With the opportunity of unrestricted exchange of these products, how limitless the horizon of our possibilities! Let American adventurousness and genius be free upon the high seas, to go wherever they please and bring back whatever they please, and the oceans will swarm with American sails, and the land will laugh with the plenty within its borders. The trade of Tyre and Sidon, the far extending commerce of the Venetian republic, the wealth-producing traffic of the Netherlands, will be as dreams in contrast with the stupendous reality which American enterprise will develop in our own generation. Through the humanizing influence of the trade thus encouraged, I see nations become the friends of nations, and the causes of war disappear. I see the influence of the great republic in the amelioration of the condition of the poor and the oppressed in every land, and in the moderation of the arbitrariness of power. Upon the wings of free trade will be carried the seeds of free government, to be scattered everywhere to grow and ripen into harvests of free peoples in every nation under the sun.
With the election of 1876 and the inauguration of President Hayes, March 4, 1877, the Period of Reconstruction may be said to have closed. The last formal act of that period was the withdrawal of the national troops from the South by President Hayes soon after his inauguration. During the last two decades the "Southern Question," while it has been occasionally prominent in political discussions,—especially in connection with the Lodge Federal Elections Bill, 1889-91, has, nevertheless, occupied a subordinate place in public interest and attention. As an issue in serious political discussions and party divisions the question has disappeared.
In addition to the subject of the Tariff, considered in the previous section, public attention has been directed chiefly, during the last quarter of a century, to the two great subjects, Finance and Civil Service Reform.
The Financial question has been like that of the Tariff,—it has been almost a constant factor in political controversies since the organization of the Government.
The financial measures of Hamilton were the chief subject of political controversy under our first administration, and they formed the basis of division for the first political parties under the Constitution. The funding of the Revolutionary debt, its payment dollar for dollar without discrimination between the holders of the public securities, the assumption of the State debts by the National Government, and the establishment of the First United States Bank, these measures of Hamilton were all stoutly combated by his opponents, but they were all carried to a successful conclusion. It was the discussion on the establishment of the First United States Bank that brought from Hamilton and Jefferson their differing constructions of the Constitution. In his argument to Washington in favor of the Bank, Hamilton presented his famous theory of implied powers, while Jefferson contended that the Constitution should be strictly construed, and that the "sweeping clause"—"words subsidiary to limited powers"—should not be so construed as to give unlimited powers. Madison and Giles in the House presented notable arguments in support of the Jeffersonian view. For twenty years after 1791 our financial questions were chiefly questions of administration, not of legislation. In 1811 the attempt to recharter the First United States Bank was defeated in the Senate by the casting vote of Vice-President Clinton. The financial embarrassments of the war of 1812, however, led to the establishment, in 1812, of the second United States Bank,—by a law very similar in its provisions to the act creating the First Bank in 1791. The bill chartering the Second United States Bank was signed by Madison, who had strenuously opposed the charter of the First Bank. The financial difficulties in which the war had involved his administration had convinced Madison that such an institution as the Bank was a "necessary and proper" means of carrying on the fiscal affairs of the Government. The Second Bank was, however, opposed on constitutional grounds, as the First had been; but in 1819 in the famous case of McCulloch vs. Maryland, the Supreme Court sustained its constitutionality, Chief-Justice Marshall rendering the decision. The Court held, in this notable decision, that the Federal Government was a government of limited powers, and these powers are not to be transcended; but wherein a power is specifically conferred Congress might exercise a sovereign and unlimited discretion as to the means necessary in carrying that power into operation.
The next important chapter in our financial history is the war upon the Second United States Bank begun and conducted to a finish by President Jackson. A bill rechartering the Bank was passed by Congress in 1832, four years before its charter expired. Jackson vetoed this bill, chiefly on constitutional grounds, in the face of Marshall's decision of 1819. The political literature of Jackson's two administrations is full of the Bank controversy, and this literature contains contributions from Webster, Clay, Calhoun, Benton, and other of the ablest public men of the day. No subject of public discussion in that day more completely absorbed the attention of the people.
On these important subjects, which engaged public attention during the first half-century of our national history, there may be found many valuable speeches. These, however, are largely of a Constitutional character. It has been since the opening of our civil war that our financial discussions have assumed their greatest interest and importance. We can attempt here only a meagre outline of the financial history of the last thirty years,—a history which suggests an almost continuous financial struggle and debate.
Leaving on one side the questions of taxation and banking, the financial discussion has presented itself under two aspects,—the issue and redemption of Government paper currency, and the Government policy toward silver coinage. The issue, the funding, and the payment of Government bonds have been incidentally connected with these questions.
The first "legal-tender" Act was approved February 25, 1862. Mr. Blaine says of this Act that it was "the most momentous financial step ever taken by Congress," and it was a step concerning which there has ever since been the most pronounced difference of opinion. The Act provided for the issue of $150,000,000 non-interest-bearing notes, payable to bearer, in denominations of not less than $5, and legal tender in payment of all debts, public and private, except duties on imports and interest on the public debt. These notes were made exchangeable for 6 per cent. bonds and receivable for loans that might thereafter be made by the Government. Supplementary acts of July 11, 1862, and January 17, 1863, authorized additional issues of $150,000,000 each, in denominations of not less than one dollar, and the time in which to exchange the notes for bonds was limited to July 1, 1863. It was under these Acts that the legal-tender notes known as "greenbacks," now outstanding, were issued.
The retirement of the greenbacks was begun soon after the war. On April 12, 1866, an Act authorized the Secretary of the Treasury to retire and cancel not more than $10,000,000 of these notes within six months of the passage of the Act, and $4,000,000 per month thereafter. This policy of contraction was carried out by Secretary McCulloch, who urged still more rapid contraction; but the policy was resisted by a large influence in the country, and on February 4, 1868, an Act of Congress suspending the authority of the Secretary of the Treasury to retire and cancel United States notes, became a law without the signature of the President.
On March 18, 1869, an "Act to strengthen the public credit" was passed, which declared that the "greenbacks" were redeemable in coin. This Act concluded as follows: "And the United States also solemnly pledges its faith to make provision at the earliest practicable period for the redemption of the United States notes in coin."
On January 14, 1875, the "Resumption Act" was passed. It declared that "on and after January 1, 1879, the Secretary of the Treasury shall redeem in coin the United States legal-tender notes then outstanding, on their presentation for redemption at the office of the Assistant Treasurer of the United States in the city of New York, in sums of not less than fifty dollars." The same Act provided that while the legal-tender notes outstanding remained in excess of $300,000,000, the Secretary of the Treasury should redeem such notes to the amount of 80 per cent. of the increase in National Bank notes issued.
On May 31, 1878, an Act was passed forbidding the further retirement of United States legal-tender notes, and providing that "when any of said notes may be redeemed or be received into the Treasury under any law from any source whatever and shall belong to the United States, they shall not be retired, cancelled, or destroyed, but they shall be re-issued and paid out again and kept in circulation." When this Act was passed there were $346,681,016 of United States notes outstanding, and there has been no change in the amount since.
As to the silver policy of the Government since the war it is expected that the purport of certain important acts of legislation should be understood by all who would have an intelligent conception of our financial controversies.
The Act of February 12, 1873, suspended the coinage of the standard silver dollar of 412 and 1/2 grains. This Act authorized the coinage of the trade dollar of 420 grains, making it a legal tender for $5. This is the Act which has been called the "crime of 1873," on which tomes of controversy have been called forth. It is discussed at some length in the speech of Mr. Morrill, found in our text.
On February 28, 1878, the Bland-Allison Act was passed over the veto of President Hayes. A bill providing for the free and unlimited coinage of silver, of 412 and 1/2 grains to the dollar, had passed the House in November, 1877, under a suspension of the rules. At this time the bullion in the silver dollar was worth about 92 cents. When the Bland free-coinage Act came to the Senate, it was amended there on report of Senator Allison, of Iowa, Chairman of the Finance Committee of the Senate, by a provision that the Government should purchase from $2,000,000 to $4,000,000 worth of silver bullion for coinage into dollars. Holders of the coin were authorized to deposit the same with the United States Treasurer and to receive therefor certificates of deposit, known as silver certificates. These certificates are not legal tender, although receivable for customs, taxes, and all public dues, and are redeemable only in silver. This Act called forth an exhaustive and able debate. Senator Morrill, of Vermont, opened the debate in opposition to silver coinage. Senator Beck, of Kentucky, was one of the ablest advocates of silver coinage, while Mr. Blaine made a notable contribution to the debate, in which he favored the unlimited coinage of a silver dollar of 425 grains. Preceding the Congressional action there had been much public discussion on the subject throughout the country. A Monetary Commission had been organized, by joint resolution of August 15, 1875, for the purpose of making an examination into the silver question. This Commission made an exhaustive report to Congress on March 2, 1877, the majority of the Commission recommending the resumption of silver coinage. Also, previous to the discussion of the Bland-Allison Act in the Senate, the celebrated Matthews Resolution was passed by that body. This asserted that "all bonds of the United States are payable in silver dollars of 412 and 1/2 grains, and that to restore such dollars as a full legal tender for that purpose, is not in violation of public faith or the rights of the creditors." The de-bate on this resolution was a notable one. It was chiefly under these aspects that the financial question was discussed in the years 1877-1878.
The Bland-Allison Act was in operation from 1878 to 1890, during which time $2,000,000 in silver were coined per month, the minimum amount authorized by law. On July 14, 1890, the so-called Sherman Act stopped the coinage of silver dollars and provided for the purchase of silver bullion to the amount of 4,500,000 ounces per month. Against this bullion Treasury notes were to be issued, redeemable in gold or silver coin at the option of the Secretary of the Treasury. These notes were made a legal tender in payment of all debts, public and private, and receivable for all customs, taxes, and all public dues. It was also declared in this Act to be the established policy of the United States to maintain the two metals on a parity with each other upon the present legal ratio, or such ratio as may be provided by law. On account of this language in the law the Secretary of the Treasury under Mr. Cleveland has not deemed it advisable to exercise the discretion which the law gives him to redeem these notes in silver, and these new Treasury notes have been treated as gold obligations. By November 1, 1893, when the silver purchase clause of the Act of July 14, 1890, was repealed, Treasury notes to the amount of $155,000,000 had been issued, though some of these have since been exchanged for silver dollars at the option of the holders. It has been by these Treasury notes and the outstanding greenbacks that gold has been withdrawn from the Treasury, thus depleting the gold reserve and making bond issues necessary. It has been deemed advisable by successive administrations of the Treasury Department to maintain a gold reserve of $100,000,000 against the $346,681,000 outstanding greenbacks, though no law requires that such a reserve should be maintained further than that the Act of March 18, 1869, pledges the faith of the United States that its outstanding notes should be redeemed in coin.
The repeal of the silver purchase clause of the Sherman Act was accomplished in a special session of Congress, November 1, 1893. Since this repeal, the silver policy of the Government has been as it was before the Bland-Allison Act of 1878, which involves a complete suspension of silver coinage. The Acts of 1878 and of 1890 were compromise measures, agreed to by the opponents of silver coinage in order to prevent the passage of a bill providing for full unlimited coinage of silver at the ratio of 16 to 1. Speaking in his Recollections of the situation in 1890, Senator Sherman says: "The situation at that time was critical. A large majority of the Senate favored free silver, and it was feared that the small majority against it in the other House might yield and agree to it. The silence of the President on the matter gave rise to an apprehension that if a free coinage bill should pass both Houses he would not feel at liberty to veto it. Some action had to be taken to prevent a return to free silver coinage, and the measure evolved was the best obtainable. I voted for it, but the day it became a law I was ready to repeal it, if repeal could be had without substituting in its place absolute free coinage."
Since 1893 the contention has been carried on by the silver men in a public agitation in favor of free silver coinage, without compromise or international agreement, and this year (1896), by our form of political referendum, the question has been referred to the people for decision.
We have attempted to include four representative orations on this complex subject, from four of our most prominent public men. The literature of the subject is unlimited. Mr. Morrill is a representative advocate of the gold standard. In the same discussion Mr. Blaine offers a compromise position. Senator Sherman is an international bimetallist and a pronounced opponent of independent silver coinage. He has given much attention—probably no one has given more—to financial questions during a long public life. Senator Jones is recognized as one of the ablest advocates and one of the deepest students of monetary problems on the free silver side of the controversy. The extracts from these speeches will indicate the merits of the long debate on silver coinage,—the greatest question in our financial history in a quarter of a century.
The reform of the Civil Service has been a subject of public attention especially since 1867. The public service of the United States is divided into three branches, the civil, military, and naval. By the civil service we mean that which is neither military nor naval, and it comprises all the offices by which the civil administration is carried on. The struggle for Civil Service Reform has been an effort to substitute what is known as the "Merit System" for what is known as the "Spoils System"; to require that appointment to public office should depend, not upon the applicant's having rendered a party service, but upon his fitness to render a public service. It would seem that the establishment in public practice of so obvious a principle should require no contest or agitation; and that the civil service should ever have been perverted and that a long struggle should be necessary to reform it, are to be explained only in connection with a modern party organization and a party machinery and usage which were entirely unforeseen by the framers of the Constitution. The practice of the early administrations was reasonable and natural. Washington required of applicants for places in the civil service proofs of ability, integrity, and fitness. "Beyond this," he said, "nothing with me is necessary or will be of any avail." Washington did not dream that party service should be considered as a reason for a public appointment. John Adams followed the example of Washington. Jefferson came into power at the head of a victorious party which had displaced its opponent after a bitter struggle. The pressure for places was strong, but Jefferson resisted it, and he declared in a famous utterance that "the only questions concerning a candidate shall be, Is he honest? is he capable? is he faithful to the Constitution?" Madison, Monroe, and John Quincy Adams followed in the same practice so faithfully that a joint Congressional Committee was led to say in 1868 that, having consulted all accessible means of information, they had not learned of a single removal of a subordinate officer except for cause, from the beginning of Washington's administration to the close of that of John Quincy Adams.
The change came in 1829 with the accession of Jackson. The Spoils System was formally proclaimed in 1832. In that year Martin Van Buren was nominated Minister to England, and, in advocating his confirmation, Senator Marcy, of New York, first used the famous phrase in reference to the public officers, "To the victors belong the spoils of the enemy."
Since then every administration has succumbed, in whole or in part, to the Spoils System. The movement for the reform of the civil service began in 1867-68, in the 39th and 40th Congresses in investigations and reports of a Joint Committee on Retrenchment. The reports were made and the movement led by Hon. Thomas A. Jenckes, a member of the House from Rhode Island. These reports contained a mass of valuable information upon the evils of the spoils service. In 1871 an Act, a section of an appropriation bill, was passed authorizing the President to prescribe rules for admission to the civil service, to appoint suitable persons to make inquiries and to establish regulations for the conduct of appointees. Mr. George William Curtis was at the head of the Civil Service Commission appointed by General Grant under this Act, and on December 18, 1871, the Commission made a notable report, written by Mr. Curtis, on the evils of the present system and the need of reform. In April, 1872, a set of rules was promulgated by the Commission regulating appointments. These rules were suspended in March, 1875, by President Grant although personally friendly to the reform, because Congress had refused appropriations for the expenses of the Commission. Appeal was made to the people through the usual agencies of education and agitation. President Hayes revised the Civil Service Rules, and Mr. Schurz, Secretary of the Interior, made notable application of the principle of the reform in his department. President Garfield recognized the need of reform, though he asserted that it could be brought about only through Congressional action. Garfield's assassination by a disappointed placeman added to the public demand for reform, and on January, 18, 1883, the Pendleton Civil Service Law was passed. This Act, which had been pending in the Senate since 1880, provided for open competitive examinations for admission to the public service in Washington and in all custom-houses and post-offices where the official force numbered as many as fifty; for the appointment of a Civil Service Commission of three members, not more than two of whom shall be of the same political party; and for the apportionment of appointments according to the population of the States. Provision was made for a period of probation before permanent appointment should be made, and no recommendations from a Senator or member of Congress, except as to the character or residence of the applicant, should be received or considered by any person making an appointment or examination. The Act prohibited political assessments in a provision that "no person shall, in any room occupied in the discharge of official duties by an officer or employee of the United States, solicit in any manner whatever any contribution of money or anything of value, for any political purpose whatever."
The Pendleton Act was a landmark in the history of the reform and indicated its certain triumph. The Act was faithfully executed by President Arthur in the appointment of a Commission friendly to the cause, and under the Act the Civil Service Rules have since been extended by Presidents Harrison and Cleveland until the operations of the reform embrace the greater part of the service, including fully 85,000 appointments. It is not probable that the nation will ever again return to the feudalism of the Spoils System.
No two men have done more for the cause of Civil Service Reform than George William Curtis and Carl Schurz. When Mr. Curtis died, in 1892, the presidency of the Civil Service Reform League, so long held by him, worthily devolved upon Mr. Schurz. It may be said that in the last twenty-five years of Mr. Curtis' life is written the history of this reform. His orations on the subject have enriched our political literature and they hold up before the young men of America the noblest ideals of American citizenship. He gave unselfishly of his time and of his exalted talents to this cause, and his services deserve from his countrymen the reward due to high and devoted patriotism. Refusing high and honorable appointments which were held out to him, he preferred to serve his country by doing what he could to put her public service upon a worthy plane. The oration from Mr. Curtis included in our text is one among many of his worthy productions.