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By Mr. Rice: Q. One of the points is to restrict the powers of Congress, is it not ?–A. Yes, sir.
Q. Don't you think you would have to enlarge them to do all that?-A. I would have the whole United States a Congress as far as I could.
Q. You would have ('ongress enlarged ?-A. In point of numbers.
By Mr. HEWITT:
Q. Have you studied the causes of the present business depression ?-A. I have en. deavored to do so.
Q. Have you arrived at a conclusion ?-A. Some conclusions.
Q. Please state them briefly to the committee.-A. Mr. Chairman, I shall, in as few words as possible, explain the reason why a high protective tariff lowers the wages of labor, and why free trade raises it. It is a well known fact that in all new countries, where population is small compared to the extent of fertile land, the remuneration of labor is greater than in older and more densely populated countries. The proof of that is simple. This is clearly pointed out, and the reasons why, by Adam Smith over one hundred years ago. He clearly showed, when writing about this country when British colonies, that the cheapness of land was the principal cause of the high price of la bor. Ricardo, fifty years ago, proved that when a people only required to cultivate their best lands that the profits of capital and remuneration of labor were at their maximum; and hence I claim that this country, to be prosperous, its trade must be nearly free; that is, that society must be able to sell their products. For over two hundred years the history of this country, when colonies and since its independence, has clearly proven that cheapness of fertile land was the principal cause of labor being higher here than in Europe. Now, when the profits of agriculture are high, farmers to secure the services of blacksmiths and carpenters must pay them good wages, for, with very little capital, if they are not pleased with the profit and wages of their trades, they will turn farmers. The same holds good in the large cities. If young men, in ordinary times, are not satisfied they go west, and, if wages do not please them, they also drift to farming. Does the fact that wages are generally higher in America than in Europe not demonstrate to the dullest capacity that there must be some great leading cause for it? It cannot be owing to capital, for England has more than you. If it was on account of skill, you would not need a protective tariff, and, as American goods are, in general, not so good as European, that cannot be the reason. It cannot be on account of freedom, for the last trace of serfdom has been abolished in Europe. What, then, is it? It is the immense quantity of fertile land to the population as compared with Europe. That is the only solution of the question, and the solution of it is to allow people to sell their goods freely, and allow them to buy. No man can buy unless he can sell. Other countries prove the same thing. The immense quantity of land to the population in Canada, Australia, and the Cape of Good Hope proves also the same fact. It is no use to deny it. There are 60 per cent. of the population of this country composed of farmers, planters, and their families, and also 15 per cent. more of the population employed by them directly as mechanics or forwarders of their produce to the seaboard, &c. I think I have proven my case, that even when this country was only a colony labor was high, as Adam Smith says, entirely from the cheapness and abundance of fertile land, and, as Ricardo has proven, that when only the best lands are cultivated in a country, the profits of stock and wages must be at their maximum point.
I think I may now say I have demonstrated my first position, why labor is high in the United States.
I shall now endeavor to prove our protective tariff lowers the price of labor. The general understanding of a protectionist is that the protective tariff makes wages high. Mine is directly the opposite. The cause of high wages in this country is the abundance of fertile land, and the cause of low wages is that you cannot sell these products to advantage if they refuse to buy.
I shall now endeavor to prove how a protective tariff lowers the price of labor. It is unnecessary to go into details after the able lectures by Professor Sumner on the history of the American tariff, showing the first tariff of 8 per cent., and which has been done so well that the subject is exhausted. It is evident when the first tariff was made, it only made 8 per cent. It is evident that the home manufacturers of any article that was charged with an import duty of 8 per cent. in the first tariff, if at any time they could barely compete with their foreign competitors, they would put on more duty. Now, when they got the duty doubled, what would be the conse
quence? Having got 8 per cent. more duty, they would likely get 8 per cent. more profit; they would gain additional capital and increase their production, and other people seeing them prosper would transfer their capital into the business. Then they might go on increasing production, so as even to drive the foreign article out of the market. There would still be more increase of production, until at last the production would exceed the consumption. We have protected the manufacturer to such an extent it has been like a premium to make people go into their own business. It has diverted capital and labor from other productive sources. It has failed from the beginning to the end. Then would come a glut of the home market by overproduction. Then would follow loss and ruin to the manufacturer. Now, what would be the fate of the mechanics and laborers? At first they might get a share of the extra profits by the protective tariff in the shape of high wages; but as soon as their employer could train extra hands, their wages would decline to the level of the wages of the rest of the community; and whenever the home markets were glutted with the protected commodities, and their employers were losing money, they would, if possible, make np the deficiency by reducing the wages of their employés. Then the same thing would have to be gone through again-the tariff made higher, an advance in prices and wages for a short time, a transfer of more labor and capital into the protected trade, overproduction, glut of the home market, stagnation, lower wages, ruin and discontent.
I pity the capitalist or mechanic that is engaged in a protected industry. The history of commercial legislation proves this fact. The British farmer from 1815 to 1846 was protected with almost prohibitory laws, except when the ports were opened, when the price of foreign wheat was equal to $2.19 per bushel; yet, in spite of these laws, in 1822 there was a glutted market by the over home production of wheat, and the price fell, in spite of the law, to $1.20 per bnshel. This was caused, first, by the people being obliged to live more on potatoes than wheat, the former supporting the people at one-third the cost of wheat; second, from the wages of the manufacturing population falling in price, owing to the foreign wheat-producing countries not bnying the same amount of manufactured goods as when England was buying their wheat; and, third, from the previous high price of wheat, extending the growth of wheat at a great expense to fifth-rate land that should have been kept in pasture, thus causing the overproduction of wheat, especially when the harvests were good. What was the result of this? Continued misery. The result was, a committee of the House of Commons sat on agricultural distress in 1822. This again took place in 1834, 1835, 1843, and 1844, when at all these periods, from similar causes, there were low prices and a home glut.
By the CHAIRMAN: Q. The history of tariff legislation is a subject the committee has had to listen to many hours a day during the last session of Congress. Your idea is that one of the true causes of the present depression is the high protective tariff ?-A. Yes, sir.
Q. And your idea of the remedy is that the protective tariff should be repealed and free trade substituted ?-A. Or a tariff for revenue only, and if you cannot get enough revenue from that source, make an income-tax, or some direct tax; if you have not money enough then, put a tax on spirits or any other commodity. I would put a tax of the same amount on spirits.
Q. Your remedy is in modification of the tariff ?-A. I would eliminate the tariff system altogether.
Q. That subject is one which is under very careful consideration by one of the committees, the Committee of Ways and Means, and, while we have your suggestion, it is not worth while taking up the time of the committee in discussing that matter here. If you file that document we would be glad to have it.-A. I will file it and conclude with a few remarks: It may be said that it does not apply to exchanges effected in the liome markets, but that reasoning does not alter the case at all, as "all commodities buy commodities and services, money being only the medium of exchange.” Imports from abroad are as much the fruits of American industry as if they had been produced in this country. All goods leave the country where they are not wanted to go to the country where they are wanted. In fact, all commerce is the exchange of the surplus of one individual for the surplus of another individual, whether that exchange is effected in the country or with an individual in another country. Nations are like individuals; they naturally follow the occupation that pays best, if each individnal is left to his freedom in choosing his own pursuit in life. Some people say that labor being cheap in other countries, the mechanic and laboring man would be undersold and ruined. Such nonsense! When you can export an article, it is a proof that yon produce it cheaper than the country you export it to; and when you import an article, it is a moral certainty that the foreign country can produce it cheaper than you. Suppose, for instance, a certain amount of capital and the labor of 100 men produce a given quantity of iron, would it not be better to produce, with the labor of 80 men and 20 per cent. less money, an amount of wheat that would go abroad and be
exchanged for and import the same qnantity of iron? Whatever amount of protection an article wants in the shape of an import duty to insure its being produced at home is just so much of an indirect tax on the rest of the community, and the production of that article should at once be stopped.
A protective import duty should be called a double tax on unprotected consumers, one tax for the benefit of the protected interest and another for the revenue of the government. Some people say if men in eastern countries work for 6 to 12 cents per day, how could our industrious classes compete with articles imported from these countries? Do those people ever ask the question why labor is so cheap in these countries? It may be from want of a settled government, from a lawless state of society preventing the increase of capital--for without safety capital and labor must be cheap nominally in these over-peopled eastern countries; but their labor may be dearer at 12 cents per day than in this country at $2.50 per day, from deficient roads, no capital, insecurity of society, no skill or machinery, Let those people reflect for å moment on England. How is it that she is not ruined by these countries who have cheap labor? She has perfect free trade; her labor is the dearest in Europe; Europe does not ruin her by their cheaper labor, and as for the Asiatic countries, she imports largely from them, but only luxuries and raw materials that she cannot produce herself. Take this country: Where do we import largest from ? England and her colonies, where, with the exception of her East India possessions, labor is higher than in any other country in the world except this.
Now I am coming to machinery. I don't believe in restricting the hours of labor. I don't believe the world is too well fed or clothed. I believe the whole trouble is from the restriction on industry and capital.
Q. Do you believe there is overproduction ?-A. Not in the world.
Q. Do you believe an overproduction can take place as a regular thing ?-A. No, sir. Suppose that any person was inventing a machine to do away with labor in some occupation; would it not be absurd to call upon the government to prevent by law the introduction of that machine in case the people who used the old method of production would be thrown out of employment? I never heard a person in this room state the fact that a new machine makes any article cheaper. It does nothing else but throw people ont of employment at lower wages. I would like to know if it cheapens an article. Does not every man using that article get it for less money? It would create new industries. It is perfect nonsense to talk about doing away with machinery or preventing its improvement. The better way would be to let it be introduced, as it would set so much labor free for production and increase the total wealth of the community. The more machines you have, and the more you make labor-saving machines, the total wealth of the world increases. Whenever we find an article cannot stand its gronnd against a similar article imported, the sooner the home production of that ar. ticle is abandoned the better, and the labor and capital turned from it to a more profitable pursuit. Nations are like individuals; they should produce nothing themselves that they can buy cheaper from others; that is, if they can exchange what cost the labor of three hours for what cost the labor of four hours of another party.
Therefore, to force into existence, by a high protective import duty, an article that from cheaper labor, &c., can be produced abroad cheaper than in this country, is only so much waste of productive forces; for it must not be lost sight of for a moment that for the value of every article imported we must export a correspondent value, and even if, at any time, any foreign country should drive out of the home market any article that they could sell cheaper than we can produce it, it would be ultimately a saving to the whole community to the extent of the reduction of its price. In fact, it would benefit the whole community to the extent of that reduction, and would act precisely the same as the lowering of the price of any commodity by the introduction of a laborsaving machine. To be sure, some parties would suffer until their capital and labor was turned into a more profitable channel; but the country, as a whole, would be gainers. The same thing takes place with every new invention in the arts. How absurd, with our national resources, to suppose, in this thinly-settled country, with such an unlimited quantity of fertile lands, that labor cannot find, under good laws, profitable occupation! Look for a moment. Do we not send breadstuffs from California and Oregon 12,000 miles by sea round Cape Horn to England, and compete with the English farmers where labor is cheaper than in California " The reasons are simple. Our cheap lands more than offset our dear labor and length of voyage. Who can undersell ns in cotton, tobacco, wheat, Indian corn, and provisions? What a country we have! Our prairies teeming in their seasons with golden grain; our mines of coal, iron, copper, gold, and silver, and, in addition to all these minerals, the earth itself contains wells of oil. From such national resources we only want that onr government let ns alone, so that every man shall exercise his own inalienable right of selling the fruits of his industry where and to whom he likes. Unless a man has this right, you may call your government what yon like, a constitutional republic, &c., but the individual is not free. To be sure, each individual owes a debt to the government for the protection of his person and property, and for such should cheerfully pay taxes; but when the government, instead of acting as his protector, makes laws to make him subject to an indirect tax, not for its own benefit, but for the benefit of monopolists-in fact, by force of law compelling him to exchange the products of his industry for less than its equivalent-therefore I say to the extent that when a people submit to a protective tariff, they just lose so much of their rights; therefore, the sooner the protective part is taken out of their tariff laws, the more our government will be in accordance with the principles laid down by the Declaration of Independence and the Constitution of the United States.
I have already stated that 75 per cent. of the population are dependent on agriculture. Of the 25 per cent. engaged in trades, mechanical arts, professions, &c., there is not, according to the census of 1870, 7 per cent. of these engaged in the production of iron and textiles, which are the only industries that require protection of any pational consequence. Is it not an act of folly, or worse, that the whole people should suffer for the benefit of a small minority ? From the above reasons, is it any wonder that the whole country is suffering under such a depression of all industries that the present generation has never witnessed the like? Now, what is the remedy? First, by careful legislation, restore specie payment as soon as practicable. Second, reduce the expenses of the government. Third, materially reduce the tariff and make it a tariff for revenue only, and increase the free list. Fourth, if you have not enough of revenue, put on an income-tax. Do this, and I am confident the country would in a very short time be restored to prosperity. I have already shown that the farmers, planters, and the laborers and mechanics they employ, also the people engaged in the forwarding of their produce to the seaboard, require no protection. Now, in our cities and towns those engaged in building do not require a protective tarift—bricklayers, inasons, bod-carriers, carpenters, house-painters, glaziers, plumbers, plasterers, brick makers, and certainly, also, our merchants, grocers, bakers, and shopkeepers of every kind, do not, or those engaged in professional pursuits, such as physicians, lawyers, or clergymen, and all mechanics engaged in making our clothing-tailors, hatters, shoeinakers, &c. (except, perhaps, some engaged in fancy work), require no protection. And in addition, all manufacturing industries, where the principal cost of the article is in the raw material and in the machinery employed, and not in human laber, require no protection. Is it not absurd that all these people should be taxed indirectly by a protective tariff for the supposed benefit of a few manufacturers of textiles and iron, not 7 per cent. of the population? Let the inhabitants of New York and Brooklyn reflect for a moment what commerce does for them. There is not a single barrel of flour that passes through these cities for shipment to Europe that does not leave 50 cents for profits and labor behind it, and every other produce of the soil does the like. Cotton, tobacco, petroleum, provisions, dairy produce, even gold and silver bullion, all must pay toll to New York and Brooklyn, and all our imports do the same. Trade to New York is the life-blood of her merchants, tradesmen, mechanics, and laborers. It is what has made her great, and will make her yet the emporium of the world. And she only wants free trade to secure soon the consummation of her great destiny.
Now, I will conclude with a summary. I have not been accustomed, like you gentlemen of Congress, to speak before a public audience.
The canses of the present depression in trade and manufacturing industry, and want of full employment to the working classes, are:
1st. The waste and expense of war.
2d. The suspension of specie payments and the over-issue of irredeemable paper money. France issued irredeemable paper inoney, but the Bank of France managed it that it never was over 2} per cent. premium. It is a shame in the nineteenth century that our legislation and money have been so horribly bungled.
3d. The borrowing of depreciated money by the government and individuals, entailing great sacrifices in repaying the debt in appreciated money.
4th. The losses of all creditors during the depreciation of the currency, and of debtors during the appreciation of the currency.
5th. The losses of workingmen by goods rising sooner than their wages during the depreciation of money, and of his wages falling before that of goods during the appreciation of money.
6th. The extravagance engendered by the short-lived period of the expansion of the currency, resulting in ruin when contraction causes shrinking in values.
7th. But the greatest source of the present depressed state of the country is the high and protective tariff in obstructing trade, as no nation can sell its surplus production well that is prevented by an oppressive tariff from buying freely.
Now, the remedies:
1st. The most rigid economy must be practiced by the government so that the taxes may be lightened; also all taxes must be levied on all property wherever found, including government bonds.
20. Specie payment must be consummated on January 1 next, or sooner, if possible, and the usury laws repealed so that capital will be imported as well as labor.
30. Time has removed the evils of growing up to the currency, or what may be
terined slow contraction, as it is evident from the paper money being nearly at par with coin, and our foreign exchanges being favorable, that our currency is no longer redundant. In fact, specie payment will make our circulation be supplied by the natural laws that Providence has clearly pointed diffuses to each nation its share of the precious metals which the distribution of its industry requires. The quantity of gold in the hands of the government in less than two years has increased about 140 millions, so that the restoring of specie payment means : Give us more circulation, with a mixture of gold and silver among it.
Ath. All the evils connected with the depreciation of money will be at an end when specie payments are resumed. 5th. The fire of extravagance has ceased for the want of fuel.
6th. Whenever the taritt is lowered, and the protective element eliminated or greatly lessened, all industries that have been misdirected will flow back to their natural channels, and capital and labor meet with their natural and profitable reward, as was the case in general previous to the war.
No country ever had the prosperity of this country until within the last few years. Go back to your principal cause. Go back to your fertile lands again. You have only 40,000,000 of people in this country; you have land enough to support 200,000,000 of people. And nothing but the worst laws would have caused the present state of affairs-laws framed in direct opposition to our knowledge of political economy. Let no pretext for a moment delay the lowering of the tarift. If we have not enough of revenue to do so, let a graduated income-tax be at once levied. Let the import duties, now averaging 41 per cent. on dutiable goods, be reduced to 19 per cent. as before the Gentlemen, I have finished.
By the CHAIRMAN : Q. Is, or is not, the balance of trade, the excess of exports over imports, an evidence of the prosperity of a country ?-A. I 'think it is no evidence whatever.' I think the exports should be larger than imports, and I think these tables are only valuable as records of the amount of business.
Q. Do nations not export those things which they can produce cheaper than other nations to which they export them?-A. And we import what other people can produce cheaper.
Q: You are familiar with the enormous increase in the exports which has been going on for the last two years from this country I-A. I am.
Q. Is it a favorable or an unfavorable sign-this large increase in our exports ?A. No; it is a bad sign-no; it is not a bad sign, the large export; but it is a very bad sign, the small import.
Q. Supposing we are paying a debt we contracted abroad I–A. If you are paying a debt, that is all very well: and I am not sure of its being much of a debt.
Q. Does not the large export lead to a corresponding demand for labor here to produce the substance which we export?-A. No, sir; it would have been produced any way. It is the natural growth of agriculture. I think, perhaps, owing to the inflation of business, and every one frightened about going into business, not knowing what is to happen to-morrow, that there are a great many people not consuming things they are exporting.
Q. Is not this increase in exports due to the production of a surplus for which we have no adequate nse at home ?-A. Certainly; but it is of no use. Suppose you ship 50,000,000 bushels of wheat to England this year, and you ship 100,000,000 next year, and you say to the manufacturers there, “ We put 40 to 70 per cent. upon the goods you send to us,” you only reduce the duties 10 per cent. You buy more Iinen from the north of Ireland, and any man who has eaten potatoes or oaten meal would be eating good bacon. Your high tariff is the same as if you broke up the port of New York.
Q. I am only asking you as to the fact of this export, and whether that is not a good and healthy sign for this country, that it is sending abroad its products and getting back solid money for it ?-A. It is well that this country has got a surplus to ship, but it wonld be better if that surplus was well sold. I think your higher duties make you get one-third less for your goods than you would get.
Q. And you might get more for them if the tariff was lowered !-A. Yes, sir.
Q. And it may be the result of the fact that labor, which heretofore found employment in aprofitable occupation, is now turned to the soil ?-A. Yes, sir.
Q. Is it a bad thing to turn from unprofitable to profitable occupation ?-A. I think it is a good thing; but the protective tariff has been doing the reverse.
Q. Would agricultural produce increase as it has done unless it was now apparent that it is more profitable to raise agricultural produce than to produce manufactured goods ?-A. I think it is more profitable to go into agriculture, though it is not remunerative now, than to starve in the cities. I mean to say if the agricultural produce is exported, and then brings back 25 per cent. more than it is doing, the people in the country will be better off.