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The Pamphlet Collection of Sir Robert Stout: Volume 41

The Arguments of Protectionists—(Concluded.)

The Arguments of Protectionists—(Concluded.)

Along the roads which used to be our great thoroughfares, are still to be found the [unclear: remains] of large inns and posting-houses which formerly let for many hundreds a year; but immediately the railways drew away the traffic these inns so entirely lost their custom that they had scarcely any value at all; many of them were pulled down, and others were converted into cottages. Any [unclear: attempt to] oppose the use of a mechanical invention, because of the loss it may cause to certain individuals, meets with almost universal disapprobation. Nothing it is maintained can be more unreasonable than allow the temporary interests of a few to stand in the way of the permanent advantage of the entire nation. If this principle holds good with regard to the benefits conferred upon a nation by the introduction of a mechanical invention, it holds equally true with regard to the still greater benefits which nation will derive from the adoption of an unrestricted commercial policy.

13. Protection can be advantageously introduced into a young country as a temporary expedient since various industries which will ultimately prosper without protection require its aid in the early stage of their existence.

This argument in favour of protection, which has been reserved to the last for consideration, [unclear: is] deserving of special attention, not only because of the great weight which is attributed to it by the advocates of protection in the Colonies and in the United States, but also because it has obtained a great amount of importance from the support it received from the late Mr. J. S. Mill. In a passage which protectionists at the present day so repeatedly quote that they seem almost to regard it as the [unclear: charted] of their policy. Mr. Mill says:—

"The only case in which, on mere principles of political economy, protecting duties can be defensible, is when they are imposed temporarily (especially in a young and rising nation) in hopes of naturalizing a foreign industry, in itself perfectly suitable to the circumstances of the country. The superiority of one country over another in a branch of production often only arises from having begun it sooner. There may be no inherent advantage on the one part or disadvantage on the other, but only a present superiority of acquired skill and experience. A country which has this skill and experience yet to acquire may in other respects be better adapted to the production than those which were [unclear: earlier] in the field: and besides it is a remark of Mr. Rae, that nothing has a greater tendency to promote improvement in any branch of production than its trial under a new set of conditions. But it cannot be expected that individuals should at their own risk, or rather to their certain loss, introduce a [unclear: new] manufacture, and bear the burden of carrying it on until the producers have been educated up to the level of those with whom the processes are traditional. A protecting duty, continued for a reasonable time, will sometimes be the least inconvenient mode in which the nation can tax itself for the support of such an experiment. But the protectionism should be confined to cases in which there is good ground of assurance that the industry which it fosters will after a time be able to dispense with it; nor should the domestic producers ever be allowed to expect that it will be continued to them beyond the time necessary for a fair trial of what they are capable of accomplishing."

There is no one more ready than I am to recognise the high authority of Mr. Mill as an Economist, and I will at once admit that the arguments which he advances in favour of the imposition [unclear: of] protection in a young country would be conclusive if there were a reasonable probability that the conditions under which he supposes that such a protective duty could be imposed would ever be realized. It will be observed in the passage above quoted that he is most careful to explain that protection can only be justified as a temporary expedient; and every word which he says in support of protection rests on the supposition, that when an industry has been fairly established the protective duty will be at [unclear: one] voluntarily surrendered by those who are interested in the particular industry. It is, however, incontestable shown by what has happened in the United States and other countries where protection [unclear: had] been long established, that it is absolutely impossible to impose a protective duty under the stipulations on which Mr. Mill so emphatically insists. Whatever professions may be made by those who first ask for protection that it is only required for a limited period, and that it is only needed to enable an industry to tide over the obstacles which may beset its first establishment, it is invariably found that where an industry has once been called into existence through protection, those who are interested in it. Whether as employers or employed, instead of showing any willingness as time goes on to surrender protection, cling to the security and aid which they suppose it gives their trade with ever-increasing tenacity. This is shown in a very striking manner by the experience of nearly a hundred years of protection in the United States. In no single instance has a protective duty when once imposed in that country been voluntarily relinquished. Far from any tendency being shown by those who are connected with the industries which enjoy protection to face free competition, they constantly display a feeling of greater dependence, and demand with reiterated urgency additional safeguards against their foreign rivals. A well-known American economist, Professor Sumner, has said: "Instead of strong independent industries, we have to-day only a hungry and clamorous crowd of "infants.'" Again, Mr. Wells, with page 7 equal force, has remarked: "Although the main argument advanced in the United States in support of protective duties is that their enactment is intended to subserve a temporary purpose, in order to allow infant industries to gain a foothold and a development against foreign competition, there has never been an instance in the history of the country where the representatives of such industries, who have enjoyed protection for a long series of years, have been willing to submit to a reduction of the tariff, or have voluntarily proposed it. But, on the contrary, their demands for higher and still higher duties are insatiable and never intermitted."

No amount of theoretical reasoning as to the desirability of imposing a protective duty, as a temporary expedient in a young country, can outweigh the warnings derived from experience that no security can be provided against the permanent continuance of a protective duty when it has been once imposed. If after protection has been in operation for nearly a hundred years in the United States, the various protected interests display a growing determination to resist any change in the direction of free trade, what reason is there to suppose that what has happened in America will not in future years occur in Australia and other countries, if they should carry out the policy which now seems to find favour with them, of calling into existence various branches of industry by the imposition of protective duties?

It is sometimes said that a country may safely adopt a protective policy, because when the proper time arrived free-trade took the place of protection in England. It has however already been shown that the introduction of free trade into England was brought about by events so exceptional in their character, that a protective system when once established in other countries cannot be assailed with the same weapons by which its overthrow was effected in England. Agriculture was the industry which, more than any other was protected in England against foreign competition. In all the countries, however, such as America, Germany, France, and Australia, in which protection now finds favour, it is chiefly confined to manufacturing industry. All these countries are large exporters of food, whereas England is only able to obtain from her own soil a portion of the food which her people require, and consequently is to a great extent dependent upon foreign supplies. When protection, by interfering with the free importation of food, makes food dear, and in a period of national distress deprives the mass of the people of their supply of a first necessary of life, an amount of popular indignation can be excited against the continuance of a system of restriction, which cannot be roused against it when the results it produces that can be most tangibly brought home to the people, are that it makes various articles of wearing apparel and household furniture dearer. It has been previously shown that an addition to the price of certain articles in general use represents only a small portion of the mischief which is produced by such a protective system as that which is maintained in the United States. Amongst other evils which result from protection, it has for instance been proved that it places obstacles in the way of the general prosperity of the country; that it exerts an influence in lessening the remuneration obtained by capital and labour; that it discourages industrial enterprise by weakening the feeling of self-reliance; and that it fosters political corruption by inducing various trade interests to use their influence in securing the imposition of duties specially to benefit themselves. These and other evils, inseparably associated with protection, although they inflict an incalculable injury upon a country, are not brought home to the general body of the people with the same distinctness as when, in every humble English home, those who were pinched by hunger could be made to feel that a corn law was in operation which kept from them the food which they so urgently needed.

Nothing can be more unfortunate than if the people of a young country like Australia, who seem to be contemplating the imposition of protective duties, should be misled by the example of England, and suppose that they would be easily able to return to a policy of free trade whenever the industries, which they hope to call into existence by protection, are once fairly established. England instead of affording an example to be copied, should furnish rather a warning of that which is to be avoided. Great as was the injury which protection inflicted on England, there seems every probability that the policy of commercial restriction might have continued in operation for an indefinitely longer period, had it not been for the wide-spread misery which was caused by the Irish famine. So strong was the position of those who were interested in the various monopolies, which had been called into existence in England by protection, that only two or three years before protection was abolished some of the most prominent advocates of free trade in England almost despaired of success. When it is thus seen that it required such a national catastrophe as the sweeping away of tens of thousands by starvation, to destroy protection in England, the Australian people should feel that if they allow a system of industrial monopoly once to take root in their country, they may have, before it can be got rid of, to pay a penalty not less severe than that paid by the people of our own country before they were able to introduce free trade.

Protection wherever it is once established, never fails for reasons previously described, to obtain a firm hold. There is no reason why protection if once introduced into Australia should not in future years become as strongly established as it now is in the United States. Those who are engaged in all the various industries which are protected, are sure to feel that they are deeply interested in the continuance of the system; and Australia would experience the same difficulty that is now found in the United States in resisting so powerful a combination of interested opposition.

Enough has now been said to show the extreme peril which would be incurred by any country which should adopt a protectionist policy on the plea that it is only resorted to as a temporary expedient. With whatever plausibility such an argument may be advanced, all experience proves that when the paths of restriction have once been entered upon, it becomes increasingly difficult for a nation to retrace her steps. But even if there were any foundation for the opinion of those who apparently believe that protection would be surrendered when the proper time came for its abandonment, I think there is good ground to suppose that the industrial development of a country would be far more surely promoted by freedom than by restriction. Directly the principle is sanctioned that certain special industries are to be fostered by the State, the trade of a country at once ceases to be regulated on purely commercial considerations, and is placed under official and political guidance. The State, in fact, is made the arbiter and superintendent of the entire industrial economy of the country. The State decides what industries shall be called into existence by protection, and determines what is the exact amount of encouragement that shall be page 8 given to each particular trade. It is impossible to imagine that any government can he qualified [unclear: to,] discharge such functions; but even if it were qualified to do so, no one can doubt that in determining the exact amount of protection which should be given to particular trades, whether in one instance the duty, should be 10 per cent, and in another 20 percent., the political influence which would be brought to [unclear: bear] by special interests would exercise a far more potent effect than any conclusions which might be arrived at from carefully weighed industrial considerations.

No one who observes what are the most prominent characteristics in the economic condition [unclear: on] such a recently settled country as Australia, can doubt that if industry is there left to its own nature development, various trades and manufactures, which it is sought artificially to stimulate by protection are sure gradually to be established without its aid. The Australian protectionists say that they [unclear: want] protection in order to enable them to compete against cheap English labour. But the remarkable prosperity which is at the present time enjoyed by their own most important branch of industry, agriculture, conclusively proves that the higher wages paid in Australia ought to be regarded as a measure of the greater natural advantages which she possesses. If the mere fact of having to pay higher wages constituted a claim for protection, the Australian farmer who has to pay wages three or four times [unclear: a] high as are generally received by English agricultural labourers, would not be able to carry on his industry unless he were protected against foreign competition. It is scarcely necessary, however, to remark that although very high wages are paid to farm labourers in Australia, fertile land there is so cheap and abundant that many agricultural products, such as wheat and wool, are produced at a cheaper rate in Australia than they are in England. Large quantities of these articles are annually exported from the one country to the other, and thus it appears that Australia with dearer labour is able to undersell England with cheap labour, even in the English market.

Every circumstance which at the present time impedes the extension of manufactures in Australia will be certain with the progress of the country, to exert less and less influence, if no commercial restrictions are permitted to interfere with the free development of her industrial economy. The population of Australia is rapidly advancing, and with this advance in population labour will not only become cheape but as its supply increases, there will be a larger surplus available for employment in other industries besides those on which her labour and capital are now chiefly concentrated. Moreover it must be born in mind that the English people are gradually becoming more accustomed to emigration. They are now much less disinclined than they were formerly to leave their own country. Emigration to Australia was once regarded almost as banishment to a strange and unknown land. English agricultural labourers used to be in such a condition of ignorance and dependence that they went on year after year working for a miserable pittance of 8s. or 9s. a week; they were so deficient in enterprise, and were reduced to [unclear: a] state of such utter helplessness, that they would continue clinging to their own wretched poverty at home being unwilling or incapable of taking advantage of the prosperous future that was offered to them in other lands. Within the last few years, however, there has been a most remarkable change. The English agricultural labourer, stimulated by various circumstances, such as the spread of education, is rapidly rising from his former condition of torpor and helplessness; he is beginning to show as much readiness as other labourers to take advantage of any opportunity that may be offered him of improving his condition. It is also to be remembered that each one who emigrates and finds success in his new home, stimulates others to follow in his footsteps. Tidings of the prosperity which he is enjoying are brought to the village which he has left; and a great part of the disinclination which is naturally felt to settling in a new country passes away when it is felt that the new home will be amongst friends and relations, and not entirely amongst strangers.

This increasing readiness on the part of the English labouring population to avail themselves of any opportunity which may be offered to them of improving their condition by settling in a new country, must inevitably cause the remuneration of labour to approximate more nearly to an equality in England and in the countries which are mainly peopled by her emigrants. If therefore matters are allowed to take their own natural course, any difficulties which may now impede the establishment of manufacturing industries in Australia will steadily diminish and ultimately pass away. On the other hand, if the industrial economy of that country once becomes involved in the trammels of a wide-spread system of protection, every article on which a protective duty is imposed will be made artificially dear, and the cost of living will be materially increased. English labourers will fail to obtain the advantages from settling in Australia which they might otherwise enjoy. Emigration will consequently be checked, and the result of a protectionist policy must inevitably be to deprive, to a great extent such a country as Australia of those additional supplies of labour, which above all things are essential for the successful establishment of manufacturing industry. Australia should in time be warned by what is now occurring in the United States. Until quite recently America was regarded as the most favourable field for English emigration. Although wages are still in many industries nominally much higher in the United States than they are in England, yet the general cost of living has been so greatly increased in the United States by the imposition of onerous protective duties on almost every article of general consumption, that labourers find that they are scarcely so well off there as they are in England with lower wages; consequently, as already pointed out, we are at the present time witnessing the extraordinary phenomenon that nearly as many labourers are leaving the United States as are settling in that country. Whilst, however, emigration from England to the United States is thus now almost counterbalanced by a flow of population in the opposite direction, there continues to be a steady stream of emigration from England to Australia. Last year more than 30,000 persons, of whom a large proportion belonged to the agricultural labouring class emigrated from England to Australia, and less than 5,000 returned. If, however, a policy of protection should once be commenced in Australia, it will surely and rapidly spread. All experience shows that it is impossible to confine protection within narrow and well-defined limits. If one trade obtains what is considered to be the benefit of protection, a powerful inducement is immediately offered to a countless number of other trades to demand that similar privileges should be conferred upon them. With the imposition of each fresh protective duty some article would be made dearer, and thus as the system became page 9 generally extended, that would surely occur which has already happened in America; the cost of living would be so much increased that English labourers would be no better off than they are in their country; emigration would cease, and Australia would lose that supply of labour which will not only do so much to create a home demand for her produce, but which she needs for the adequate development of her great natural resources.

[Without introductory comment or remarks we have placed before our readers the arguments of Protectionists and replies thereto, by one of the most advanced political economists of the present day. As the questions of Free Trade and Protection are to some extent engaging the attention of New Zealanders, and especially the commercial people of the large centres of population, no apology is needed for the action we have taken. We may add that the Protection cry has a bewitching sound for the industrial classes, and, like the the will-o'-the-wisp, leads them on sooner or later to dire poverty and wretchedness. To those who are honestly seeking to benefit the masses of this colony we commend the study of the question. Such eminent men as John Stuart Mill, the Hon. John Bright, British statesmen of acknowledged ability, and M. About, the eminent French journalist and political economist, with a host of others, have written against the protective policies of nations, and may be commended to persons wishing to lead up the question. The attention of those of the working people of New Zealand who have not the time or inclination for the study of political economy, may be advantageously directed to the "Protected" industries of the United States of America and its thousands of unemployed artizans; and to Victoria, where the poor "Protected" population is crying for a return to Free Trade and its attendant prosperity.]

The: Colony of New Zealand has now a public debt of something like £26,000,000 sterling, and the gratifying news reached the colony that the last £5,000,000 loan had been subscribed for twice over, thus showing the credit of the country to be held in high repute by English capitalists. In addition to this large indebtedness, city corporations and public bodies generally throughout the length and breadth of the land, and even religious bodies, are flocking into the British money market with their loans for larger or smaller amounts. The State can scarcely with consistency legislate to prevent public bodies borrowing money from whoever will lend it to them, since it sets so fine an example itself, nevertheless the question of curtailing these borrowing powers of the State and private bodies is one that will force itself sooner or later upon statesmen. Already political economists are looking with apprehension upon the oft-recurring loans sought and obtained by the dependencies of the Empire, and politicians are realising the truth that States and colonies and corporations can become hopelessly insolvent as well as private people. Added to all this it is notorious that private companies and individuals borrow largely in the Home market for speculative purposes. The question arises, Is it not high time to put the brake hard down, and for the future live more within our means? Is it not better to face the inevitable at once, ere we drift into the deplorable condition as exemplified by Egypt and Turkey? Already the burdens of taxation are pressing heavily on the people, and every loan, whether Government, corporation, or public body, means more taxes, and these have to be paid either directly or indirectly by the property-owners, or taken from the hard earnings of the people—perhaps under the fascinating cry of protecting native industry. Thoughtless, unscrupulous, or unprincipled people will no doubt reply, "Borrow and trust to chance or the Bankruptcy Court to pay;" but honest folk should ponder these things, and soberly consider whether it be not advisable to use all the powers they possess to check this growing craving for borrowing, which produces, when it becomes an evil, a fictitious appearance of prosperity, blinding those who partake of its favours, but burdensome to the great majority of the population. In short, we submit that the "Foreign Policy" of New Zealand requires checking in this direction, and should be as narrowly watched as is that of the Mother-country by her British sons.

A month or two ago we wrote upon the necessity for providing a law for the proper controlling of performances in public places of amusement. At the time, the writer was, twitted by one of our morning contemporaries with not being acquainted with the subject he had written upon. Subsequent events have proved the contrary, as a Bill was, immediately after the necessity for such an Act was recognised, introduced into Parliament. The criticisms of journalists should be truthful, and courteous to members of their own cloth. One of the gravest charges that may be brought against a writer is ignorance of the subjects he assumes to speak of—therefore we are due this little correction.