The Pamphlet Collection of Sir Robert Stout: Volume 39
What Becomes of the $400,000,000 Yearly Taken Out of the Pocket of the American Farmers?
The amount of Customs revenue which the United States Government derived in 1878 from duties on foreign goods imported was $130,000.000. To this amount, the agriculturist, being rather less than half of the total population of the country, contributed about $60,000,000. This was, therefore the proportion of the $400,000,000 overcharged to the American farmers on their annual expenditure that went to the legitimate purpose of national revenue; and so far, $60,000,000 of the total is satisfactorily accounted for. But what of the remaining $340,000,000? Who are the lucky men whom this mighty sum, drained year after year out of the farmer's earnings, goes to enrich? Strange and incredible as it may appear, careful examination and analysis will show that all this money has been, and is being, absolutely wasted, squandered, and spent as uselessly as it would be in hiring an army of men to dig holes and fill them up again. It has neither enriched, nor even benefited anybody. While it has to that extent impoverished the farmers, it has only served to fill up the gap and make good the losses occasioned by the misapplication of capital and labour in the Eastern States to the wrong kinds of production.
Let us trace where these $340,000,000 go. They form the extra sum paid annually to the manufacturers of the Eastern States over and above what the farmers would have had to pay for the same articles were they allowed to make their purchases from abroad. If the Eastern manufacturers were able to produce their goods as cheaply as page 18 the foreigner, all that money would be saved to the farmers; but as they cannot, the farmers are made to pay the difference. Nothing whatever is got by anybody in return for those $340,000,000; and that sum is simply thrown away and sacrificed to make up for the want of skill, or of capital, or of whatever else it may be, by reason of which the Eastern manufacturer makes no more profit by selling an article at $140 than the Britisher does by selling the same article at $100. If, indeed, the Eastern manufacturer could produce the article for $100, and if he did get $140 for it, he would be benefited and enriched; and it might be some consolation to the farmers for their loss of $340,000,000 a year that it went to form large accumulations of wealth in the pockets of their fellow-citizens in the Eastern States. But this consolation does not exist, and we shall presently show that, in spite of the enormous sum overcharged to the farmers, the profits of the Eastern manufacturer are precarious, fluctuating, and by no means above the average of other occupations. His charge of $140 for what the Britisher can afford to sell for $100, only leaves him a bare living profit, because it costs him $40 more to produce the article than it costs the Britisher. Why this should be the case we cannot here stay to inquire, but such is the fact. Indeed, how else could British goods be largely imported into the States in spite of the 42 ¾ per cent, import duties which they have to pay?
It is these $40 uselessly spent out of 140, which, added up, form the $340,000,000 which the farmers of America are called upon to throw away every year without any benefit to themselves or to anybody else. It is sheer waste; just as it is sheer waste to pay one man exorbitantly for doing the same work (no more and no better) which another man, more expert, will do cheaply;—just as it would be sheer waste to go on thrashing with a flail instead of using a machine, merely because the man with the flail was a neighbour, and the machine-maker was a stranger. We can fancy a shrewd Western farmer saying, "A man down East makes a article which he can't afford to sell me page 19 under $140, while a man over the water offers me the same article for $100. I want to deal with the latter, but to prevent that, they clap $40 duty on to the 100, and then tell me that, as now, in either case, I shall have to pay $140 for the article, I may as well buy of the man down East, because he's a kind of brother, whereas, the man over the water is only a cousin. All I see in it is, that I am done out of $40."
That the Eastern manufacturers only make the average profit, and their men the average wages, of other occupations, is the necessary result of internal competition. No trade can for any length of time maintain higher rates of profit or of wages than the average, because people soon flock from other trades into that, and thus they all settle down to about the same level. There does, indeed, at intervals occur a sudden spurt of demand, causing for a brief period high prices, high profits, and high wages, but these bright, short flashes of prosperity cost the manufacturers and their men very dear. Fresh capital and fresh labour are thereby freely enticed into the trade, and when the spurt is over there is not sufficient vent for the increased supply. The result is, ruin to many, loss to all. Such a spurt occurred in 1872-1873. In 1874 the reaction came, and there followed five years of commercial depression and suffering. An immense body of American workmen were thrown out of employ, and in the course of those five years (mostly in 1877 and 1878) upwards of 600,000 persons left the East to seek a living in the West. During those five years a large number of industrial establishments closed their doors, and in the iron trade alone 250 blast furnaces were blown out, and 60 to 70 rolling mills ceased work. In the six years 1873 to 1878, the average number of commercial failures in the United States per year was 7,866 against an average of 2,889 the previous seven years. In short, those five years were the worst that American commerce had ever experienced. Yet during all that time the farmers were yearly disbursing $340,000,000 to support the manufacturers. So far, however, from enriching them, this large sum was page 20 engulfed in their losses and was squandered in vain. It is abundantly clear that, as we said at p. 19, "the profits of the Eastern manufacturers are precarious, fluctuating, and by no means above the average of other occupations."
Just now (1880), the iron manufacturers are enjoying another temporary spurt, owing to the wealth created by the farmers and the consequent necessity for more railways; and this leads to another question of vast importance to the farmers. At what cost are those new railways to be constructed? Is the farmer's produce to be conveyed to the sea-board on cheap rails at a fair rate, or on dear rails at an exorbitant rate? Are the railway-makers to pay Pennsylvanian prices or British prices for their rails? If the former, the cost of the required iron and steel will be nearly twice as much as if the latter. * Now, as the rates of freight must be in proportion, every one who may use the railways about to be constructed will have to pay high fares and freights for ever, because the legislature interdicts cheap iron and artificially makes it dear! Surely this would be an enormous evil, and all the less excusable as it could so easily be avoided!
At first glance it appears almost impossible that so vast a sum as $340,000,000 should be lost in the mere diversity of value between what two different sets of men in two different countries can produce by the application of the same amount of capital and labour. And yet the explanation, when sought for, is soon found. To take a man away from what he can do well, and set him to do what he can only do badly makes an immense difference in the result of his labour. A baker would earn poor wages indeed as a tailor; and a clever carpenter would starve on his performances as a watchmaker. A Western farmer produces excellent and cheap crops, but if he were to set up as a woollen manufacturer he would soon come to grief (unless indeed his neighbours subscribed handsomely to make good his losses and bolster him up). The difference between what men produce who are expert and what men page 21 produce who are inexpert, constitutes a very large percentage on their production, and a large percentage on the total production of the world means a sum to which $340,000,000 is a trifle. As things are, to take the world at large, the human race do not produce perhaps the hundredth part of what they might produce if their labour were properly and intelligently applied. The greatest creator of wealth at the smallest cost is division of labour, and whatever interferes with it is an obstruction to human productiveness. Everyman ought to be allowed to do the work which early education, long experience, natural aptitude, peculiarity of position, or other circumstances enable him to do best; and that legislature is sadly mischievous which shunts him off from the right on to the wrong line, and compels him to lay aside the work which he can do well and take to that which others can do better.
It may perhaps be asked, "How are the Eastern manufacturers, and the workmen they employ, to live if the farmers withdraw the yearly subsidy which is their only support?" The answer is easy. The increased imports which the abolition of customs duties would bring about would necessitate increased exports to the same amount to pay for them; for there can be no additional import without a corresponding additional export. There would arise a brisk demand for fresh capital and labour to produce those increased exports, and that demand would absorb whatever capital and labour might be set free by the diminished consumption of the Eastern States manufactures. It is quite an exploded notion that if you import what you made before, workmen are thrown out of work. It is not so; they are merely thrown on to other work to supply the articles that will be exported to pay for the new imports. The same amount of American capital and labour would be employed as before, with this difference, that then, their operations would be remunerative, whereas before they were not. No doubt this transference of capital and labour from one kind of business to another is attended with temporary inconvenience and delay to the parties interfered page 22 with, but not more than was the introduction of steamboats, railways, electric telegraphs, and other improvements, which largely benefited the many, while they were, for a time, dis-pleasing to a few. Indeed, it would not be long before the owners both of the displaced capital and of the displaced labour would feel and recognise the advantage of being engaged in industries which were self-supporting, instead of industries which were dependent for their very existence on a national subvention revocable at any moment at the will of the people.
The manufacturers of the Eastern States "object to their trades being called losing trades, because they and their workmen live out of them." But they do not live out of them! They mostly live out of the $340,000,000 which the farmers yearly pay to those trades over and above what they need pay if they dealt with others. They live out of that, and of as much more paid to them in the same way by the rest of the American people. We believe that many trades would thrive better unassisted, but by clinging to Protection they proclaim their dependence on it. Were it otherwise, why keep up such heavy import duties, and how is it that, in spite of those heavy duties, foreign goods can still afford to come in? Surely those must be "losing trades" in which $140 worth of capital and labour are spent to produce $100 worth of goods. Such trades depend for their maintenance, not on their own merit, but on other people's help. They are private establishments supported by public involuntary contributions.
We feel sure, however, that the manufacturers of the Eastern States underrate their own strength, and that they would soon walk alone, if they were deprived of the go-cart of Protection. Under the wholesome stimulus of open competition, the energy, activity, and shrewdness of their race would rapidly enable them to recover the ground they had lost under the enervating influence of the coddling system. We would venture to say to them, "Why, gentlemen, should you not, with raw cotton at your doors, compete with the Britisher, to whom it goes across the ocean? Yet whereas page 23 in 1860 your export of cotton manufactures was $11,000,000, it was only $11,500,000 in 1878, a paltry increase of $500,000 in eighteen years! In England the increase within the same period was $60,000,000. There is no doubt that had you been left unencumbered by the fatal boon of Protection you would have made infinitely greater process, and you might by this time have proved formidable rivals to the Britisher in neutral markets. Again, in three years 1866 to 1868, agricultural exports formed 74 per cent, and manufacturing and other exports 26 per cent, of the total exports. In three years 1876 to 1878 the agricultural exports formed 80 per cent., and the manufacturing and other exports only 20 per cent, of the totality. No doubt that, but for the fatal boon of Protection, you would not have lagged behind in the race, and that your relative proportion of exports would have shown an increase instead of a diminution. Again, in spite of the vast expansion of the world's commerce, the tonnage of the United States mercantile navy is actually less now than it was twenty years ago. From 1855 to 1863 it was upwards of 5,000,000 tons; from 1874 to 1878 it was little more than 4,000,000. English tonnage in 1861 was 4,350,000 tons; in 1877 it was 6,115,000. Within the last twenty years English tonnage has increased by 2,000,000 tons while yours has diminished by 1,000,000. Formerly your mercantile navy shared the carrying trade of the world with England; now, not only that is lost, but your own produce is carried away from your own ports in foreign bottoms. Is it that the American of to-day has degenerated in energy, skill, or enterprise? Not a bit of it. But here also Protection has shed its baneful influence. Iron has superseded wood in the construction of large ships, and your tariff makes iron nearly twice as costly to the American shipbuilder as it is to his British rival. Abolish your import duties, and you will speedily see your mercantile marine restored to its former splendour."
To sum up, the vast amount yearly wrested out of the earnings of the American farmers is simply a useless and wanton waste. It makes them by so much the poorer, page 24 without making others one whit the richer. Moreover, it must be borne in mind that we have in these pages only calculated that share of the general loss which accrues to the agriculturists. These barely form half of the total population of the United States, and the other half suffers a fully proportionate loss on their yearly expenditure, from the same causes and with the same results. What steps should be taken to put a stop to these extravagant and unjustifiable losses shall be examined in the next chapter.
* The import duty on steel at this time amounts to 120 per cent.