The CHAIRMAN. But has not England grown in wealth and business and got the commerce of the world into her hands by that process?

Mr. MARSHALL. No, not by that process. That process may have opened channels to English manufacturers, but it is not my opinion that the commerce and wealth and greatness of Great Britain have been built up on that process.

The CHAIRMAN. Is there any doubt that it has contributed very much to the expansion and development of English commerce?

Mr. MARSHALL. I think that the expansion and development of English commerce have been built up to a certain extent by the system of subsidizing steamers; but you must remember that England has a peculiar commerce.

The CHAIRMAN. So peculiar that we find it very hard to compete with her.

Mr. MARSHALL. England has an outlying system of colonies all over the world, and she has fostered communication with those colonies for political causes.

The CHAIRMAN. But England has grown rich, has she not?

Mr. MARSHALL. England has grown rich, but she has not grown rich from that policy alone. That may have been one of the elements of her greatness, but I do not admit that her greatness is due to that exclusively, or even to a very great extent.

The CHAIRMAN. Can we hope to get on in competition against that very rich country which has pursued this system, and is pursuing it to-day, unless we adopt a similar system? If we cannot, what force is there in the argument that we must get a foreign market for our manufactured goods? How are we to get it unless we go a step farther, and not only take off tariff duties, but give subsidies to somebody te establish lines of communication?

Mr. MARSHALL. If the conditions of trade existed between this country and the South American states transportation would be furnished by some nation or another. It might come from an American source or might come from an English source, but that it would come is certain.

The CHAIRMAN. But it has to begin. There is not enough trade at present to freight a steamship.

Mr. MARSHALL. As soon as the point is arrived at where there is trade enough to begin a line of steamers the line will come.

The CHAIRMAN. But that point will never be reached if the English can supply the South American market as cheaply as we can and if they have a subsidized line of ships carrying goods to Brazil.

Mr. MARSHALL. We can avail ourselves, of course, of the mode of transportation which the English provide for us.

The CHAIRMAN. We would have to send our goods over there in order to get them transported to Rio.

Mr. MARSHALL. If there was an English line of steamers between here and Brazil, and if there was a volume of trade sufficient to justify that line, it would go on and exist.

The CHAIRMAN. I understand the conditions of trade with Brazil to be that return cargoes have been brought to New York and reshipped on British vessels to go to England.

Mr. MARSHALL. That is so, because duties are so high in this country on the products of their country that they do not come to us.

The CHAIRMAN. But you argue in favor of imposing a duty on coffee, the chief product of Brazil.

Mr. MARSHALL. Coffee is not its only product.

The CHAIRMAN. Coffee and hides.

Mr. MARSHALL. Hides are free to-day.

The CHAIRMAN. We get large shipments of nitrate and copper from the South American States.

Mr. MARSHALL. Not from Brazil.

The CHAIRMAN. Not from Brazil, but from Chili. My object in putting these ques tions is to have the whole field thrown open, and to show that whatever way we go we are met with difficulties of this sort, and that the nearer we get to the bottom the greater the difficulty seems to be. One conclusion to which we are all driven is, that we had better let it alone if we do not understand it.

Mr. MARSHALL. But it will not be let alone. It will never be let alone until it is placed on some permanent basis, and that basis must be a scientific one, and founded on experience.

The CHAIRMAN. You would get rid of the duties on raw material as soon as possible ?

Mr. MARSHALL. Certainly, sir. Anything that enters as a component part into manufacture I would free from duty as soon as possible.

The CHAIRMAN. There we are met again with the question, what is raw material! Is pig-iron raw material?

Mr. MARSHALL. It is and it is not. It is a finished product in a certain respect and it is a raw material in other respects. But, if we start with the idea that all tax

ation is not a benefit to a community, but is, on the contrary, an impediment to a community, we shall certainly begin in the right direction. The theory which has obtained in this country, so far as tariff taxation is concerned, is that the taxation of certain articles is a benefit to the country. That I do not think. I think that taxation is always a detriment to a community, and that, so far as you can adjust the burdens of taxation to the shoulders of the people, so far you are having a proper fiscal system. Therefore I have always argued that the limitation of duties to a few articles is infinitely better than spreading the taxation over a large number of articles. In the first place, from its simplification, it costs very much less to collect them.

The CHAIRMAN. That brings up this question about trades-unions. The tradesunions believe that by restrictive regulations between themselves they can get the benefit of better wages; and certainly in good times they are able to do it, but in bad times they are not able to do it. Now it is very hard to persuade the workingmen that trades-unions are not for their benefit, and it is very hard to persuade very intelligent men outside of trades-unions, such as Frederick Harrison, Mr. Thornton, and others of his stamp. Mr. Howell's recent work, which is a very powerful defense of trades-unions, raises that whole question, whether it is possible for any one class of the community to benefit itself as against all other classes of the community, or for any community to benefit itself as against other communities. The men of the trades-unions only care for themselves-trying to see how they can get better wages. So, the nation may say we can compel England to pay more for her cotton. We can raise a smaller quantity of cotton and England will have to pay more for it.

Mr. MARSHALL. The nation at large does not say that it will get a better price for that product and other products, and that therefore it will put a protective duty on imports. It is only a small part of the nation that says so.

The CHAIRMAN. We cannot pass any law except by the voice of the majority.
Mr. MARSHALL. But the vox populi is not always the vox Dei by any means.

The CHAIRMAN. The majority in this country must believe in the doctrine of the tariff or else we would not have a tariff.

Mr. MARSHALL. For instance, the number of planters, farmers, and laborers in this country may be estimated (with their families) at twenty-four millions, and the number of trades people employed by them perhaps at six millions. There are only about two millions of adults employed in the protected manufactures in this country, and, with their families, they would amount to about ten millions. Now, there are ten millions of people dependent either directly or indirectly on protected industries in this country, while there are something like thirty millions of people in the country who are not interested in any way in protected industries. On the contrary, they are a portion of the people who pay for the benefit of these ten millions.

The CHAIRMAN. That is one statement of it, but it may be disputed.

Mr. MARSHALL. The capital employed in protected industries in this country is only about five hundred and fifty millions, whereas the property in unprotected industries amounts to about ten thousand million dollars. The people who depend upon protected industries are only about one-fourth of the population of the country. You say that the trades-unions attempt to regulate the wages of labor so far as their particular trade is concerned. They may be justified in doing that, because they are not looking at the interest of the nation at large, but only at their own interests. But any man who represents the interests of the entire community is justified only in imposing taxes that are not calculated to injure the large portion of the community.

The CHAIRMAN. Suppose that I represent a district in which there are a great many manufacturers; am I to go against the interest of my own people that send me to Congress to do a particular thing?

Mr. MARSHALL. Then you are nominally at the head of a large trades-union.

The CHAIRMAN. Take our Congressional districts. They are supposed to elect men to represent their views and interests. Suppose Mr. Rice's district sends him to Congress; is he to vote against the wishes and interests of his constituents or not?

Mr. MARSHALL. I presume that Mr. Rice would vote in the interest of his constituents; but, with all due deference to Mr. Rice's action in the matter, I should not conceive it to be in the interest of the nation at large.

The CHAIRMAN. But he is not sent to Congress to look after the interest of the nation at large, but after the interest of his own district. Senators are in Congress to look after the interest of their States. Who there is there to look after the interests of the people at large I have never been able to find out.

Mr. MARSHALL. In other words, the forty millions of people are not represented? The CHAIRMAN. There are a few gentlemen in Congress who try to be statesmen, but they get so unpopular in their own districts that they cannot be sent back to Congress. I merely state this to show you the practical difficulties in the way. Mr. RICE. It will depend upon which way most of the districts go.

Mr. MARSHALL. It seems to me that under our present system it would turn on that result.

The CHAIRMAN. Do you think that a protected industry tends to raise the wages of labor employed in it?

Mr. MARSHALL. I think it may for a time.

The CHAIRMAN. It has had that effect in this country?

Mr. MARSHALL. Yes; temporarily.

The CHAIRMAN. If that is so do you think that there can be higher rates of wages in a country, as a permanent thing, in one branch of industry than there can be in any other branch? Do not wages, like water, get to a level?

Mr. MARSHALL. I think so.

The CHAIRMAN. Then how can it be that the persons engaged in non-protected industries would get less compensation for their labor than those engaged in protected industries, if wages equalize themselves? Why do the higher rates of wages not extend to the persons employed in the non-protected industries? And if they do, how do these persons support those engaged in protected industries at a cost to themselves? Mr. MARSHALL. They support the others in paying the enhanced price of the products of protected industries.

The CHAIRMAN. But they get more wages themselves, and the purchasing power of their wages is not changed.

Mr. MARSHALL. The non-protected elements of the community pay a correspondingly higher price for the products of protected industries in consequence of that protection.

The CHAIRMAN. But they get a correspondingly higher rate of wages themselves. Mr. MARSHALL. Who do?

The CHAIRMAN. Those in the non-protected industries. Do they not get the same rates of wages as those in the protected industries?

Mr. MARSHALL. They do not.

The CHAIRMAN. Then you have a state of things by which some people in the community get permanently better wages than others?

Mr. MARSHALL. I do not say permanently, because the tendency of wages is to equalize themselves unless that tendency is obstructed by artificial means.

The CHAIRMAN. Suppose the wages paid to workers in iron and cotton factories are greater than the wages paid on farms; do not the men on farms rush to the towns and seek employment at the factories; and, in that way, do not wages come on a uniform level?

Mr. MARSHALL. They will ultimately; but, if you put a protective duty on articles and thereby increase their price, that tends to the production of those articles in large quantities, because capital will always flow into the most remunerative channel; and that will employ labor; and that state of things will continue so long as the protective influence goes on.

The CHAIRMAN. It must raise the rate of wages uniformly if it raises them at all, because the men who go into the protected industries come out of the ranks of those engaged in the non-protected industries; and therefore, there being this diminution of the supply of labor in the non-protected industries, the laborers who are left in them get a higher rate of wages. You cannot have two rates of wages prevailing for the same class of labor for any length of time.

Mr. MARSHALL. But this is a different kind of labor. There is protected and nonprotected labor.

The CHAIRMAN. Laboring men on farms and laboring men in factories interchange all the time.

Mr. MARSHALL. I think you are mistaken in that. I think that the tendency of protected industries is to increase the cost of the article, and to induce more capital to go into the production of that article, and thereby to increase for the time the wages of labor.

The CHAIRMAN. But, after a time, they will become equalized.

Mr. MARSHALL. Undoubtedly; and ultimately wages will go down to the general level. But the difficulty in this country is that the protected industries, having received an undue amount of support, and the home market at one time being a very large one, they were enabled to obtain profitable employment for labor and capital in those particular industries. But now the home market is poor, and there is no foreign market to look to; and, therefore, the wages of labor have gone down and capital has suffered disaster.

The CHAIRMAN. The same thing has happened in England, which is under a freetrade system.

Mr. MARSHALL. Undoubtedly. There are commercial disasters all over the world. I do not mean to say that the tariff is the only cause of commercial depression; but I do mean to say that the country which has the least restrictive legislation is the country which has the most recuperative power.

Mr. RICE. If we can protect some industries in this country, the product of which is furnished to us now by foreign manufacturers, and if we can thereby set at work those who are now unemployed in the country, would not that raise the wages of all laborers!

Mr. MARSHALL. If it did, it would be by an indirect taxation on the people.

Mr. RICE. Would it not produce employment for all kinds of labor and raise the wages of those working along on low pay now?

Mr. MARSHALL. That would depend entirely on the demand for those products that exist here.

Mr. RICE. Take the products which we need here and which we now import from abroad. If they could be manufactured here (although the laborers who are now employed had to pay a larger amount for those products than they have to pay now when they are brought from England), would it not be better for them and better for all! Mr. MARSHALL. No, sir; I think that, while it might nominally increase the scale of wages, it would proportionately increase the scale of prices, and that the laborer would find that the purchasing power of wages was diminished. He would get more in money but he would get less in commodities. After all it is not of very much difference whether the rate of wages is high or low; but the real question is how much the wages will buy. I would also remark that it is the tendency of all capital to seek the most remunerative outlet, to seek the greatest return; and that, if there are no restrictions as to the employment of capital, capital will naturally seek the most remunerative channel in which to employ itself. Now if you institute a protective system you divert capital from channels that are normally profitable into those which become abnormally profitable in consequence of the protective system. That is, you take capital and labor from industries in which they are at present employed, and you transfer them to other industries at which they may be employed at a larger remuneration.

The CHAIRMAN. Take a country like Australia (and every young country), whose natural products are those from agriculture, sheep-raising, gold and silver mining, &c. It has no manufactures. Being a British colony, its people have all been brought up under the free-trade system, and they believed in free trade when they went there; but they have established a protective system. How could they have got any start at all in business, with Great Britain as a competitor, unless they had some means of acquiring the necessary skill (which takes time) to carry on works! Take iron-works, for example, and it will require a new beginner from five to ten years to acquire the necessary amount of skill.

Mr. MARSHALL. Why should they do it?

The CHAIRMAN. Because they find that they cannot employ all their labor in other ways. They produced so much wool that the price of wool fell. They had no adequate market for their agricultural products. There was a limit, of course, to the production of gold and silver. And the colonies got down to the point that they had to diversify their industry.

Mr. MARSHALL. Then they paid the cost of it. It is a diversion of labor from one channel to another, for which the country at large pays.

The CHAIRMAN. But is not a diversification of industry valuable to a country? Mr. MARSHALL. I think it is; but I do not think that a diversification of industry should be brought about except by natural laws.

The CHAIRMAN. But suppose that, five years hence, they can compete with other countries under a free-trade system, are they to pay nothing for that advantage even by way of a bonus ?

Mr. MARSHALL. I should not do it. I should be entirely opposed to paying a bonus, either directly or indirectly, because the people at large have to pay it and have to pay it for the benefit of a few.

The CHAIRMAN. You may be right. Nevertheless the greatest statesmen in all times have pursued the opposite course.

Mr. MARSHALL. Not of late years.

The CHAIRMAN. The tendency now is in your direction. But Napoleon Banaparte was one of the greatest men who ever lived; and Bismarck is a great man; and they looked at this question with a statesman-like eye, and took measures to establish diversified industries.

Mr. MARSHALL. Napoleon Bonaparte was a great conqueror. He wished to build up his own personal ambition. I do not think he has been cited as a great political economist.

The CHAIRMAN. But he is cited as one of the greatest administrators of public affairs.

Mr. MARSHALL. So he was. But his views of trade and commerce might be entirely wrong. Now, the third Napoleon

The CHAIRMAN. Yes. He arrived at a day when he took another course.
Mr. MARSHALL. He instituted free trade between France and England.
The CHAIRMAN. Do you call it free trade?

Mr. MARSHALL. I do not call it absolute free trade. But he formed a treaty between France and England which greatly reduced the duties on articles entering into France from England, and made a corresponding reduction on articles entering into England from France. In 1860 the imports into England (I am sorry that I cannot give you the figures for France)———

The CHAIRMAN. They are very advantageous to your position. The English imports increased enormously; but the French imports have not increased to a corresponding degree; and the English people think that France got the best of the bargain. Mr. MARSHALL. You mean that England did.

The CHAIRMAN. No, that France did. The imports into England increased enormously. That is, England bought immensely more from France under the Cobden treaty than France bought from England.

Mr. MARSHALL. That was a good thing for France.

The CHAIRMAN. Yes. But the way she arranged it was that she (France) kept her duties up on many articles and did not buy English products.

Mr. MARSHALL. The English showed their capacity to take advantage of that treaty by their increased importations.

The CHAIRMAN. And the French were very glad to sell. Of course it was a mutual benefit.

Mr. MARSHALL. It is so with every commercial transaction. But, in order to show the progress of trade as brought about by that treaty, so far as England is concerned, I will state the figures. The imports for the fifteen years before the treaty were £210,530,873, and for the fifteen years ending in 1875 were £373,935,737, showing an increase of over £136,000,000. [See foot-note 1.]

The CHAIRMAN. Do you mean the foreign trade of England?
Mr. MARSHALL. No; I mean trade with France alone.
The CHAIRMAN. Not in a year?

Mr. MARSHALL. No; from 1860 to 1875-fifteen years. Now, the volume of exports for the fifteen years before the treaty was £164,521,000, and for the fifteen years end

Here I wish to amend my testimony. The figures I have given apply to the general increase of trade of England with foreign countries before and after the French commercial treaty, and are not those which refer to the Anglo-French trade alone. I subjoin the tables showing how the trade of England, both in imports and exports, increased after Peel's tariff reforms, and after the establishment of the French treaty; and I add, in order to illustrate my argument in its application to the trade with France alone, the imports and exports in 1855, 1860, 1865, 1870, 1873, 1874, 1875: