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country since 1860, so far as the manner of conducting it is concerned. Business today is infinitely more speculative than it used to be.

The CHAIRMAN. As I understand, one of the immediate effects of paper money is to produce a speculative feeling; and that speculative feeling brings about a speculative era; and that speculative era brings about a collapse ; and the collapse brings about an era of depression.

Mr. MARSHALL. That is my view. Depression may be brought about by any such course being previously pursued; and we are now suffering from that course.

The CHAIRMAN. What would you have Congress do in the matter?

Mr. MARSHALL. I believe that the most important question before the government at present is the question of currency. To my mind it is more important than the question of tariff, and more important than any question that now looms up before the public. Although I have been a laborer in the free trade cause for ten years, and have spent a good deal of time and money in trying to ameliorate the condition of the workingman, so far as removing from him the restrictions of the tariff, still I put that question aside as a secondary consideration compared with the question of the currency, which I regard as the most important to be considered by any public man. My firmest views and opinions are that, until we get back to specie payment, or to a currency based on gold, we shall be subject to those alternate periods of undue speculation and undue depression; and that the laboring men, as constituting the largest element of the population of this country, must suffer comparatively.

The CHAIRMAN. The countries where specie payments prevail, and where they have not been suspended for a great many years, have had the same commercial revulsion that we have had here, and the same depression in business.

Mr. MARSHALL. That is very true; humanity is not exempt from evils in any part of the world. But I think that it is undoubted that countries possessing a stable currency are better suited to bear those revulsions than countries that possess a fluctuating currency

The CHAIRMAN. In other words, you think that depression there is not accompanied with such general distress as it is where there is an irredeemable paper money?

Mr. MARSHALL. No, sir; and it is infinitely easier to recover from it in countries where there is a stable currency than it is in a country that has to deal with irredeemable money.

The CHAIRMAN. What is there to prevent us doubling all the gold in the Treasury by simply stamping every dollar as two dollars, and every five dollars as ten dollars ; would you then have twice as much gold, or would you have only the same quantity?

Mr. MARSHALL. You would only bave the same quantity. The CHAIRMAN. Can the stamp of the government make any difference in the value of that commodity !

Mr. MARSHALL. None whatever. The value of the commodity is regulated by the number of grains of pure metal which it contains.

The CHAIRMAN. If the stamp of the government is powerless to do that, has it any more power to stamp a piece of paper and to give it value

Mr. MARSHALL. None whatever. And I think that the great error of the government has been in issuing the greenbacks. I sincerely hope that they will be redeemed and that we will have no more of them.

The CHAIRMAN. Suppose this large amount of irredeemable paper money was issued, you say that it would result in increasing the price of everything, and that a man would want a great deal of paper money for his property. Would the workman's wagns purchase for him, under that system, any more or less than they would under the gold basis?

Mr. MARSHALL. Certainly they would not purchase any more.
The CHAIRMAN. The workingman would not be any better off?

Mr. MARSHALL. He would not be any better off, but probably worse off. His wages might be nominally increased, but their purchasing power would be comparatively diminished.

The CHAIRMAN. And the workingman could not gain by that process ?
Mr. MARSHALL. Impossible.
The CHAIRMAN. What class of people in the community could gain by it!
Mr. MARSHALL. Only speculators and the middle-men who deal in currency:
The CHAIRMAN. How about the class that is in debt; would they not gain by it!

Mr. MARSHALL. They would gain by it so far as paying off their debts in depreciated currency goes.

The CHAIRMAN. But that happened before, and did the debtor class avail itself of that opportunity to get out of debt, or did they immediately get more into debt?

Mr. MARSHALL. They proceeded to get more into debt.
The CHAIRMAN. Then they did not gain by it?
Mr. MARSHALL. No, not in the end.

The CHAIRMAN. And in fact it is the collapse of that state of things which has produced the present depression in business ?

pose ?

Mr. MARSHALL. Undoubtedly. The CHAIRMAN. I understood you to say that you are an enthusiastic free-trader! Mr. MARSHALL. Yes, I am. The CHAIRMAN. And that you have spent time and money to that end ! Mr. MARSHALL. Yes. By free trade I mean a tariff for revenue; I do not mean absolute free trade.

The CHAIRMAN. But you would like very well to have absolute free trade if we could get rid of all taxes ?

Mr. MARSHALL. Yes, if that were possible I should be delighted.

The CHAIRMAN. In the course of your efforts I have heard it charged that you gentlemen who belong to the free-trade organization have been using British gold in this country to carry out your doctrines and opinions, and that you have been engaged in using money received from the other side to break down American manufactures. Have you ever received (you need not answer the question unless you want to) any contribution of money from the other side to propagate free-trade doctrines !

Mr. MARSHALL. Yes; I received on one occasion from a gentleman in England £5.
That is the only contribution of British gold that I ever received.

The CHAIRMAN. Did you ever hear of any other contribution for the purpose ?
Mr. MARSHALL. Never.

The CHAIRMAN. Did you ever hear of any organized fund on the other side deroted
to that purpose ?
Mr. MARSIIALL. I never did.
The CHAIRMAN. Do you know the Cobden Club?
Mr. MARSHALL. I am a member of it.
The CHAIRMAN. Has the Cobden Club sent any money to this country for that pur-
Mr. MARSHALL. I never have received any.
The CHAIRMAN. Would you be likely to know it if it had !

Mr. MARSHALL. I would be likely to know it, as I have been the treasurer of the American Free-Trade League in this country ever since its inception.

Mr. RICE. Have you any doubt that free trade in this country would be an advan. tage to British manufacturers ?

Mr. MaRSHALL. I am of the opinion it would be perhaps a temporary advantage to British manufacturers, and perhaps a permanent one; but I think that the ultimate advantage would largely accrue to us. When I announced myself as a free-trader, or as an advocate of a revenue tariff (that is, a tariff composed of the fewest articles possible, and on which a rate should be collected to meet the necessities of the government), I do not mean to say that, as a free-trader, I would advocate any sweeping changes in the present fiscal system of this country, so far as the tariff is concerned. I think that an immense number of industries have grown up in the country that have been created by the protective influences, and that it would be wrong and unjust to sweep away, for the present at least, all the advantages which those industries receive from protection. I would be glad to see any correction of the tariff made gradually until our house is set in order.

The CHAIRMAN. You would deal with them as with the coasting trade--not all at once ?

Mr. MARSHALL. Yes, I would deal with them gradually, and that is the only statesmanlike method of doing it.

The CHAIRMAN. Be good enough to indicate the direction in which it ought to be gin.

Mr. MARSHALL. I think we ought to begin with eliminating from the tariff all arti. cles which do not pay the cost of collection-in other words, to make a large increase to the free list. We have now eighteen hundred or two thousand articles paying duties which might certainly be reduced to the number of five or six hundred without detriment to the revenue or to the manufacturing interests of the country. Then I think we should certainly impose a tax on tea and coffee. The duties on tea and coffee which formerly produced about $20,000,000 a year were abolished through the protective influences in Congress in order to maintain protective duties on other articles. But the duty on tea and coffee is an eminently just one, because it is purely a revenue one. Every dollar collected from it goes into the Treasury, and every man who drinks tea or coffee pays in proportion to the amount he consumes. Therefore it is eminently a just tax.

The Chairman. Would it not bear rather harder on the poor man than on the rich man?

Mr. RICE. That is, if he drinks as much tea and coffee.

The CHAIRMAN. You know that coffee forms a very large article of consumption among the workingmen; and that workingwomen very largely indulge in tea. You and I like coffee and tea also ; but can we contrive to get rid of any more of it in the course of a day than a workingman can!

Mr. MARSHALL. No, sir.

The CHAIRMAN. Then would it not be rather an unequal tax in its operations ?

Mr. MARSHALL. It would be an equal tax so far as the amount of consumption is concerned. Every man would pay in proportion to his consumption.

The CHAIRMAN. But not in proportion to his means. Mr. MARSHALL. Not in proportion to his means; but that would give an opportunity to lighten the burden of taxation on these very individuals in regard to other articles.

The CHAIRMAN. Would you not put taxation on accumulated wealth rather than on consumption? Do you not think that people ought to pay taxes in proportion to their means rather than on any other standard 1

Mr. MARSHALL. I think that taxes on accumulated wealth are legitimate; but this is a question of tariff taxation.

The CHAIRMAN. But suppose we can take the duty off tea and coffee, which poor men and women use, and transfer it to the incomes of gentlemen like yourself and Mr. Rice?

Mr. MARSHALL. I am not entirely opposed to an income tax under certain conditions.

The CHAIRMAN. Would it not be a sound statesmanlike view of taxation rather to impose taxation on wealth than on poverty!

Mr. MARSHALL. I do not think it possible to impose any tax in which the poor man will not have a share. You may impose taxation on accumulated wealth, if you like, or you may impose taxation on all production or consumption, but in the end the poor man has got to bear bis proportion of it.

TheCHAIRMAN. Suppose we raised the entire revenue of the United States-$150,000,000 a year-by an income tax imposed on incomes over $1,000, and that absolute free trade is established; by what process could the burden of that tax be transferred from the men who pay it to the men who work for them?

Mr. MARSHALL. It could be transferred by reduced wages or by adding the tax to the cost of the products. It would increase the cost of the product to the extent of the tax levied. Suppose a man is engaged in the manufacture of iron and that he has to pay an income tax, would not that tax enter into the iron product as an element of its cost?

The CHAIRMAN. How would that affect the wages of the laborer? They are determined by the law of demand and supply, and the demand and supply would remain unaltered. He cannot put any portion of the tax on labor. If there are more laborers seeking employment than there is a demand for, wages will go down. Otherwise they will go up. The fact that I pay an income tax on my profits does not affect that question at all.

That is the whole point in the case—whether it is not possible to transfer the whole burden of taxation to profits and net income, and thus to relieve the labor of the country from the part of the taxation which it now pays.

Mr. MARSHALL. I still think that the income tax (although it might be levied di rectly on the net profits) would enter as an element into the cost of production and be ultimately borne by the consumer.

The CHAIRMAN. If it made capital less productive in this country than in other countries by reason of that tax, then it would tend to drive capital out of this country, and that would restrict the area of employment and the demand for labor, and wages would consequently fall.

Mr. MARSHALL. There would undoubtedly be less capital to give employment to labor, and there would be less remuneration for capital and labor in the country.

The CHAIRMAN. And if it would tend to drive capital out of the country, of course it would tend to reduce wages. I have asked these questions in order to bring out the inseparable connection between the existence of capital and the wages paid to labor, and to show that if you increase capital you increase the demand for labor, and that if you reduce capital you reduce the demand for labor, and wages must go down.

Mr. MARSHALL. I agree with you entirely on that point.

The CHAIRMAN. Do you think that the income tax might be made so onerous that it would tend to drive capital out of the country?

Mr. MARSHALL. I do, nndoubtedly. An income tax has to be imposed with caution. But the income tax is, in principle, a just tax. In this country it was extremely odious on account of the system which prevailed in its collection ; and it certainly bore hard on individuals. But I think that the principle of an income tax is just.

The CHAIRMAN. Would you recommend us to report to Congress that it is espedient to impose an income tax ?

Mr. MARSHALL. I would not. You would have to put in operation a new set of machinery for the purpose of collecting a tax which never yielded more than from seventeen to twenty million dollars a year in the best times, and which would yield very much less at the present time (besides affording so many opportunities for fraud and evasion). It would be extremely unpopular, I think, to recommend the imposition of such a tax.

The CHAIRMAN. If we want to raise $20,000,000 additional revenue, and if we have the choice between a tax on tea and coffee and an income tax, ought we rather to put the tax on tea and coffee !

Mr. MARSHALL. I think it would be better to tax tea and coffee rather than impose an income tax. The collection of an income tax is extremely difficult. It tends to put capital at a disadvantage, and, therefore, to lower the remuneration of labor; and it is, besides, odious to the American people.

The CHAIRMAN. On the other hand, if you put a tax on tea and coffee, you add so much to the price of those articles; and that is very odious to the poor men and women.

Mr. MARSHALL. I think that, so far as the increase of price is concerned, it is almost imperceptible. It would be borne with great facility by the country.

The CHAIRMAN. Can you give us any facts to show the effect on prices of the removal of the tax on tea and coffee

Mr. MARSHALL. I think that the removal of the tax on tea made no particular change in the prices.

The CHAIRMAN. It is in evidence that, as to coffee, the only effect of the removal of the tax was to put up the price in Brazil in proportion to the amount of duty. In other words, that it is the producer of coffee that pays the tax, and not the consumer.

Mr. MARSHALL. Yes; and I believe it was the same in regard to tea in China. That is because the production of tea and coffee is a monopoly so far as those countries are concerned, and the market price is to be settled to a certain extent by the producers of tea and coffee. If they cannot market their products at a certain price they will mar. ket them at another price. If there is a demand for tea and coffee at one price, and if the tax be removed, they only put it on at the other end.

The CHAIRMAN. Then, in the imposition of tariff duties, it may be that this country does not pay the tax, and that some other country does ?

Mr. MARSHALL. I took care to make the exception in the case of tea and coffee, because they are comparatively monopolies, so far as production is concerned; whereas the commodities in which the world deals generally are not monopolies, and there is an immense general competition for the trade. There the producers of those articles have not the facilities for transferring the tax to the articles at the other end that the producers of tea and coffee have. I know that that is a favorite argument of the protectionistthat the manufacturers on the other side pay the taxes.

The CHAIRMAN. It is a favorite argument of those who have studied political economy that sometimes the consumer pays the tax, and sometimes the producer-depending on the condition of international trade at a particular time. That is the favorite statement of those who are after truth. Those who are really scientific put it so; that sometimes the producer pays the tax, and sometimes the consumer; that it depends upon the local conditions of consumption and production at the time; and that if there is an over-stock of iron in England the English will send out and sell it in foreign countries for less than they sell it in England in order to get rid of it. And so I am told that in New England now they are sending out cotton goods and selling them in foreign markets at less than they sell them for at home.

Mr. MARSHALL. I believe so; for they have sent cotton goods to Manchester and sold them there at a loss.

The CHAIRMAN. That may happen in regard to almost any article.

Mr. MARSHALL. Only in exceptional cases. It will not happen where trade is steady and when the purchaser can get a proper market for bis product. I think that the tariff has another blighting influence on the manufacturing industries of the country in the way of precluding them from obtaining the foreign outlet. What we need most particularly now is a market for our manufactures. That market, it appears to me, the tariff has prevented us from obtaining, as we would have obtained it if the restrictive influences of the tariff had not been operative. Take South America, for instance. South America is, so to speak, at our doors. It is within comparatively easy access of us, and the amount of products that that country consumes is very con. siderable, and more particularly of cotton goods. Now, it is well known tbat the cot. ton goods manufactured in this country have attained a high degree of popularity. To-day we make goods in this country better than England nakes. Our cotton goods have a preference over English goods in all the markets of the world. When I was in England the last time there was a large house with connections in Chili, a member of which approached me on that subject. He said that they were in the babit of shipping very large quantities of Manchester goods to Chili, and that they had made some experiments with American goods, and found that the favor with which American goods were received in South America was so great that they wanted to ascertain if they could not make connections in this country by which Ainerican goods could be sent to Chili and pay a profit. That is one symptom of a tendency to get a foreign market for our manufactured products.

The CHAIRMAN. If they took our poducts how could we get them to the South American market as economically as the English can in the absence of any shipping!

Mr. MARSHALL. Undoubtedly that practical difficulty would exist if we had no steam

communication with South America; but if you establish the conditions of profitable trade between countries, transportation will spring up and accommodate the trade.

The CHAIRMAN. But, in advance of that, would you have the government do anything to stimulate it ?

Mr. MARSHALL. No, sir; I am entirely opposed to subsidies to lines of steamers; I think that the effect of them is to build up a commercial marine at the expense of the country at large; and not only that, but to stifle all competition.

The CHAIRMAN. Take the case between here and Rio. * Was there any foreign line of steamers running from New York to Rio prior to the establishment of the American line :

Mr. MARSHALL. I think there was; but I am not certain.

The CHAIRMAN. If we were to give a subsidy to the American line now running, of course it would carry goods cheaper than the foreign line, from the fact that it has a subsidy and the foreign line has not.

Mr. MARSHALL. Yes.

The CHAIRMAN. Would not that drive the foreign line off and prevent competition in that trade?

Mr. MARSHALL. Yes; it might.
The CHAIRMAN And would it not enable the American line to put up its prices ?
Mr. MARSHALL. Yes, it would give the American line a practical monopoly.

The CHAIRMAN. And that would be against the interest of the consumer here and of the producer there!

Mr. MARSHALL. Yes. The only safety is in an unlimited competition in the trade. Then the transportation is conducted on the best possible terms.

The CHAIRMAN. You would object to a subsidy being given to yourself to establish a steamship line from here to England ?

Mr. MARSHALL. Certainly; I should think it most unfair and most unjust. If you give me a subsidy for a particular line of steamers it does away with any chance for private competition outside; private competition is handicapped to the extent of the subsidy. If I am receiving a subsidy and you are receiving none, you certainly are put to a disadvantage.

The CHAIRMAN. But it is necessary to bave the mail service performed promptly. Now, suppose that we have not got a line of steamers to Rio, but have to send our mail to England, and from England to Rio. Has not the English merchant, in that case, the advantage over the American merchant?

Mr. MARSHALL. Undoubtedly.

The CHAIRMAN. Would you do anything to facilitate postal communication between this country and South America ?

Mr. MARSHALL. I think it is proper for the government to pay anything reasonable that is necessary for the transportation of the mails.

The CHAIRMAN. Suppose it is necessary to give $20,000 a trip in order to have direct mail transportation from here to Rio, where there is a business of $40,000,000 a year, would you do it ?

Mr. MARSHALL. I think that, if there was a line of steamers in existence, and if it were necessary to transport the mails to a given point, and if the government can only obtain that transportation on certain terms that are not unreasonable, the government would be justified in paying those terms-not in the nature of a subsidy, but for service performed. The government might be obliged to pay exorbitantly in the absence of competition.

The CHAIRMAN. Say that it had to pay a dollar a letter? Mr. MARSHALL. There is a limit beyond which the government would not be justified in paying for the transmission of postal matter for the benefit of the comparatively few who participate in the trade.

The CHAIRMAN. As a matter of fact have not the English, the French, and the Germans enormously increased their foreign commerce, and given great facilities to their manufacturers by that very process of paying large subsidies for the transportation of the mails? Has it not built up their great commercial marine ?

Mr. MARSHALL. It bas built up portions of it. Undoubtedly England does pay large amounts for subsidizing her lines of steamers.

The CHAIRMAN. Take the line between England and Brazil and other South American lines where subsidies are paid. How can our American manufacturers expect to compete with English manufacturers when the English Government pays subsidies to steamships, which are thus enabled to carry British products at low rates and with great rapidity from England to those markets? How are we to get on under that state of things ?

Mr. MARSHALL. We cannot compete with them so long as England pays the subsidies.

The CHAIRMAN. Is it a wrong system on her part ?
Mr. MARSHALL. I think it is.

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