Protection and progress; a study of the economic bases of the American protective system, by John P. Young ...

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About Google Book Search Google's mission is to organize the world's information and to make it universally accessible and useful. Google Book Search helps readers discover the world's books while helping authors and publishers reach new audiences. You can search through the full text of this book on the web at|http : //books . google . com/| \ y GENERAL LIBRARY I " OF I University of Michigan ^ Presented by I OsfVVV. r. (^TVtfeffi^ J 1 "%st<t^M i<i.r,9k 1-1 1900 ^ ^ HF tisc y7s / '».» r I 4 s t Protection and Progress. Protection and Progress A STUDY OF THE ECONOMIC BASES OF THE AMERICAN PROTECTIVE SYSTEM BY JOHN P. YOUNG, Nbw Yoik; THE AMERICAN PROTECTIVE TARIFF LEAGUE, , Copyright, 1900. CONTENTS. CHAPTBB PAGE Introduction ^ 9 I. Growth of English Industry 25 II. Balance OF Trade Theory 39 III. Free Trade in England 59 I V. Foundation of English Supremacy 78 V. England THE World's Workshop 91 VI. International Friction 114 VII. Waste of Energy 128 VIII. Protection Promotes Economy 148 IX. Internal Trade 173 X. Agriculture and Economics 196 XI. Industrial Development 218 XIL Labor Efficiency 238 XIII. Labor-Saving Devices 266 XIV. Production and Consumption 292 XV. External Trade 320 XVI. Industrialism in Asia 349 XVII. Formation of Trusts 375 XVIII. ' Two Kinds of Consumers 406 XIX. WORKINGMEN AND WagES 444 XX. Equalization of Condition 485 XXI. CbBDENiSM A Failure , 525 XXII. Triumph of Protection 560 INTRODUCTION. The purpose of the writer in presenting what he con- ceives to be the true object of the protective policy is to combat the erroneous idea that the only useful function of the system of protection is to assist in the establishment of a domestic manufacturing industry. This opinion is now freely expressed by authors who concede that protec- tion performs a valuable service to a nation by artificially calling into existence industries whose growth tmder so- called natural conditions would have been slow, perhaps impossible ; but who contend that when this result has been accomplished the industries created shpuld be left to work out their destinies under a system of unrestrained com- petition. Those who hold to this view have been led astray by the false teachings of professional economists who have failed to perceive that no system of political economy which merely considers the present can be sound. That this is a fundamental defect of the doctrines of the Manchester school will be demonstrated in the following pages. It will be conclusively shown that the teachings and practices of the British followers of Cobden, although hav- ing for their professed object the cheapening of production and the consequent increase of consumption, had they been accepted and imitated by the world, would have resulted in an arrest of industrial progress and the ultimate defeat of the purpose which free traders assert is the sole aim of the policy advocated by them. It will be made clear that the most distinguished ex- lo INTRODUCTION ponents of the doctrines of the Manchester school con- stantly disregard the fact that present cheapness may result in ultimate deamess, and that they completely ignore the necessity of considering the future. If there is a free trader who has pointed out that the welfare of the consumer in time to come is as much to be regarded by the economist as that of the consumer of the present day, his writings have not received much considera- tion. Those who have borne the Cobden banner in the front of the fray have certainly not done so, for their writings present an uninterrupted advocacy of a system which has for its object immediate gain at the expense of posterity. That this accusation is well founded will be admitted by every one capable of recognizing that the inevitable result of acting up to the theory of "buying in the cheapest and selling in the dearest market" is to promote the wasteful system of unnecessary transportation, which is carried on by a useless expenditure of human energy and the uncalled for destruction of an immense proportion of the world's store of fuel. The cheapest market for the time being must necessarily be that in which an industry is already established. No matter how great the resources of raw materials, or how abundant the facilities for converting them into finished products may be in an undeveloped country, in practice it is impossible to utilize them profitably unless artificial aid is extended to overcome the advantages enjoyed by those carrying on industries in older lands. Had the free trade theory that it is the part of wisdom to buy in the cheapest market been generally accepted it would have resulted in the arrest of that almost simul- taneous universal progress which is one of the most con- spicuous features of the closing years of the nineteenth century. Had the advice of Cobden and his adherents been followed by Americans and other peoples the world would INTRODUCTION ii have witnessed the singular spectacle of one nation becom- ing its workshop. Had considerations of the immediate benefit of the consumer prevailed England must inevitably have maintained her industrial supremacy, for there is no doubt that it would have been impossible for rivals, if the disposition to engage in rivalry could exist under such circumstances, to produce as cheaply as that country. That the advantages enjoyed by the country with a well developed manufacturing industry would have been indefinitely retained under a system of exchange which discouraged efforts at competition cannot be doubted. To illustrate: it would have been impossible, if the theory that it is wise to buy in the cheapest market had prevailed in the United States, for that country to have created a gresit iron and steel industry ; for at no time until within the past three years have Americans been able to manufacture those products as cheaply as Great Britain. It ought not to be difficult to perceive that the present abundance and cheapness of iron and steel is wholly due to the refusal of the people of protected countries to consider immediate cheapness as of paramount importance. Deliber- ate defiance of the Cobdenite tenet that it is wise to buy in the cheapest market has called into existence rival iron and steel industries which cause those of the country once supreme in this department of manufacture to shrink in importance. At the beginning of the free trade era Great Britain produced more than half of the pig iron consumed by the world ; fifty years later she produced less than one- fourth. In 1840 Great Britain mined 3,500,000 tons of iron ore and the rest of the world only 2,900,000 tons ; in 1894 the iron ore production of the United Kingdom was 12400,- 000 tons, and that of the other manufacturing countries reached the colossal aggregate of 40,800,000 tons. The out- put of iron ore in the United States was 500,000 tons in 1840 ; in 1894 it had increased to 17,000,000 tons. 12 INTRODUCTION It is impossible to escape the conclusion these figures suggest. They clearly indicate the cause of the present cheapness and extended consumption of iron and steel. Production on an enormous scale has compelled the result, and this production is obviously due to the disregard of the advice to buy in the cheapest market. Had Americans and Germans been frightened by the Cobdenite bogie of dear- ness they would still be dependent upon the British for their supplies of iron and steel. The restricted resources of the English and the practical monopoly which they en- joyed would, under such circumstances, have kept up prices, and the result would have been permanent deamess, although Great Britain might have remained the cheapest producer for an indefinite period. The strength of the policy of protection is due to the perception that it promotes true, not merely nominal, cheap- ness. Protection could never have made headway if it had operated to make things actually and permanently dearer. Its economic basis is the elimination of wastefulness. By decentralizing industry it has vastly promoted its growth. The bringing of the consumer and producer together, which is the object of all consistent protectionists, promotes con- sumption and prevents waste of energy and the source of energy, fuel. Because it accomplishes this latter result it must always hold first place in any system of economy which does not disregard the future. Cobdenism was foredoomed because its successful work- ing depended upon the violation of true economic laws. It set up the theory that the world would be benefited by concentrating manufacturing operations in one quarter of the globe. A temporary advantage due to adventitious circumstances was mistaken for evidence that the British people were more capable than others. Acting on this erroneous idea a system of economics was elaborated by the Manchester school which, had it been accepted, must INTRODUCTION 13 inevitably have prevented numerous peoples passing the stage of homogenity. Heterogenity would have been im- possible under a system of industry which proposed to rele- gate some nations to the position of producers of rude products for others to convert into finished articles. Had the doctrine advanced by the followers of Cobden prevailed there must have been a perpetual waste of energy. Could mankind generally have been induced to believe that it is unwise to make temporary sacrifices to diversify in- dustry England would have indefinitely continued the waste- ful process of transporting raw materials from all parts of the world to be worked up into manufactured articles by the people of two islands, whose capabilities experience has demonstrated are in nowise greater than those of the peo- ples of numerous other nations. It ought to require no argument to establish that it is wasteful to transport raw cotton to England to be manu- factured for American consumption in the face of the con- cession made by free traders that the labor efficiency of operatives in this particular industry is greater in the United States than in the United Kingdom. If it is true that there is no natural obstacle in the way of manufacturers of cotton textiles in the United States producing goods vieing in quality with those turned out by English mills, sound economy demands that they should be produced in this country, not only for consumption by Americans but as well for Englishmen. From the standpoint of the economist who regards the elimination of wastefulness as the most important thing to be considered the attempt to perpetuate cotton manufac- turing in England will always be viewed as an effort to maintain an exotic industry. No country incapable of pro- ducing the raw material required in the prosecution of an industry can be regarded as naturally adapted to its man- ufacture, and unless the inhabitants of a country in which a 14 INTRODUCTION raw material is not indigenous are superior in skill to those who have the raw material in abundance they cannot hope to successfully compete when the latter have overcome the disadvantages inherent to the establishment of a new in- dustry in a new country. It is the ftmction of protection to destroy the artificial advantages resulting from accumulations of capital and those which result from prior occupation of fields of in- dustry. In performing this work protection is gradually reducing the wastefulness involved in useless carriage. In this respect it presents a complete antithesis to free trade, which promotes this sort of wastefulness by encouraging the unnecessary hauling to and fro of raw and finished articles. The inevitable outcome of the general adoption of protection must be the creation of many centers of in- dustry instead of one or two. The result of this practical conversion of the whole world into a workshop will be an enormous gain to mankind. The far-reaching consequences of the elimination of the waste which the general adoption of the Cobden system would have entailed are easily apprehended when we reflect that the world's supply of that great source of energy, coal, is not inexhaustible. We need not accept the pessimistic opinions which in some cases are gloomy enough to make the subject one of present concern in countries like Eng- land, but we are forced to admit that within a very brief period, as periods are measured in history, the available supply of coal will be exhausted. In an article on "European and American Bridge Con- m struction," which recently appeared in the Engineering Magazine (September, 1898), the writer, Gustav Linden- thai, stated that "authorities estimate that the coal fields of Europe and America will last from four hundred to fifteen hundred years longer. Those of Asia and Africa are not yet well known. Measured by the Eg3rptian INTRODUCTION 15 pyramids," he says, "the steel age will therefore be of short duration, but the most glorious in the history of mankind." If the assumption is sound that "mineral fuel is the only great source of power which can be used for the reduction of iron ores," it is extremely doubtful whether the future historian will extol the achievements of those who are so Javishly wasting it. He will more probably condemn them as exhibitions of selfish disregard of the rights of posterity and of incapacity to make the best use of the gifts of nature. If it is a blunder bordering on the criminal to heedlessly strip the earth of its forests, which human care and energy may restore, what may we call the unnecessary destruction of the store of mineral fuel, which can never be replaced? This is a question which will come home to posterity, and when the answer is framed it will embrace an awful indict- ment against a false economic system which taught men to deliberately waste an indispensable economic assistant pro- vided by nature which can never be replaced. That Cobdenism is responsible for waste of this char- acter is easily demonstrable, and that the waste is on a colossal scale and is constantly accelerated by the system which has. for its shibboleth "buy in the cheapest market" will be shown in the following chapters. It will be made clear that an enormous proportion of the coal annually mined in Europe and other parts of the world is consumed in the unnecessary moving to and fro of raw materials and finished articles and in supplying the motive power of the vast navies of modem times, which are admittedly main- tained for the purpose of protecting a forced and uimatural external trade. According to recent estimates the coal output of the year 1897 was 574,532,600 tons. It would be impossible to even approximately state how much of this enormous total is absolutely wasted, but some conception of the magni- ^ i6 INTRODUCTION tude of the unnecessary consumption may be obtained from a consideration of the following facts : Nearly two-thirds of the raw cotton, about one-third of the wheat, a large quantity of the com, and similar pro- portions of the ruder productions of the United States are unnecessarily moved to England and other countries in vessels propelled by steam generated by coal. Obviously the fuel thus consumed must be regarded as an economic waste, as it has been demonstrated that cotton textiles and other finished articles can be equally well produced in prox- imity to the source of raw materials. This being true, there can be no economic justification for moving the raw mate- rials of manufacture or the food products required to feed operatives in countries remote from the places where the raw materials and food are produced. If, instead of ship- ping abroad the raw materials and food products of the United States, they were worked up into finished articles in this country, and if the food now exported was consumed by American workingmen, perhaps two-thirds of the coal now required to propel the ships plying between American ports and other parts of the world would be saved. The tonnage required to move finished articles from countries where raw materials are found in abundance to lands where they cannot be produced would be insignificant by compar- ison with that now employed in useless transportation. This illustration applies with varying force to the move- ment of products between other countries. The unnecessary shipment to and fro of competing articles, which is chiefly due to the failure of exporters of rude products to diversify their industries, is as much a feature of the intercourse between other nations as it is of the trade of this with other countries. In 1897 the United Kingdom mined 202,129,931 tons of coal. Of this quantity 154,572,035 tons were retained for domestic consumption, 37,102,138 tons were exported INTRODUCTION 17 to foreign countries and 10,455,758 tons were shipped for the use of steamers engaged in the foreign trade. To segre- gate the quantities used for developing energy from those consumed for warmth and kindred purposes would be im- possible, but it may be assumed that so much of the 154,- 572,035 tons as is employed in manufacturing textiles and other articles for export, which could be equally well made in the countries where the raw materials of manufac- ture are or could be produced, is sheer waste. All that pro- portion consumed in providing for the domestic comfort of workingmen who would be more profitably employed if their services were made use of in factories situated near the base of supplies of raw and food products may also be set down as economic waste. In the same category must be placed all that part of the 37,102,138 tons shipped abroad, which goes to countries having coal measures whose inhab- itants neglect or are unable to develop them because the superior equipment and great capital of the British coal miners make competition impossible. The 10,455,758 tons shipped for the use of steamers engaged in the foreign trade and for navies can be said to have been profitably employed only when it supplied the motive power for mov- ing non-competing products. Great Britain occupies a pre- eminent position as a coal producer and exporter, but the illustration employed applies equally to other countries which in the same manner wastefully consume their stores of fuel. This present wastefulness, attributable to the pursuit of a false economy which elevates immediate above per- manent cheapness, necessarily entails future waste of human energy and fuel. The consequences of the blunder are only in part visited upon its perpetrators. In time to come, if a manufacturing industry is to be carried on in the United Kingdom the current of coal carriage must be reversed, and instead of mineral fuel being carried out of Great i8 INTRODUCTION Britain it will have to be brought into it. That country now ships coal to many parts of the world where it exists in greater quantity than in the comparatively limited measures of the British Isles. When these latter have been exploited to such an extent that they can no longer be profitably worked in competition with those of countries now occupy- ing to England the relation of importers of coal, the move- ment of mineral fuel will be in the opposite direction. When we consider that the British have for a long period been shipping coal to countries which have extensive coal measures of their own, and that the quantity exported at present nearly reaches fifty million tons annually, and that that rate of export promises to increase before the power of capital to artifically force out of the country its limited supplies of fuel is destroyed, we are enabled to form an impression, but a very inadequate one, of the extent of the waste involved in living up to the Cobdenite maxim of buying in the cheapest market. If, at some future day, an economist with the statistical bias undertakes to show the wastefulness of the system which unduly stimulated external trade in competing prod- ucts he will have no difficulty ip doing so. He will be able to cite that during the period while the people of Great Britain were exporting coal the aggregate of their ship- ments amounted to billions of tons, and that when their mines were practically exhausted they were compelled to reverse the process and import mineral fuel. The figures thus presented will interpret themselves. They will admit of but one conclusion, and that is that the cheapness result- ing from the system of unnecessary transportation was merely fancied, and that it involved irreparable waste and therefore a future dearness which the wit of man cannot mitigate. Although the unnecessary and premature consumption of mineral fuel by a people like the British, caused by manu- INTRODUCTION 19 factttring articles for peoples capable of producing for them- selves, affords the most striking illustration of the fatuity of the free trade system, it will not weaken the argument directed against economic waste to point out that the forced development of the iron and steel industry of Great Britain has brought about a similar result, the effects of which are already seen. While the United Kingdom remained supreme in this branch of manufacture her annual shipments of its products reached millions of tons. The advantages of superior equipment and greater capital which for a time enabled British manufacturers to export to countries whose resources in the shape of ores and fuel were immeasurably greater are rapidly disappearing. The iron and steel man- ufacturers of England are becoming more and more depend- ent upon the foreigner for supplies of ores, and the tide of products of iron and steel is beginning to set in toward the shores of Britain rather than away from them. The consequences to the British, as a people, of this reflex action is iuUy considered in its appropriate place. Here, it is only referred to ki order to impress on the economic student that it has resulted in the unnecessary dissipation of an enormous quantity of human energy and an irreparable waste of the world's stock of mineral fuel. Viewed in its broader aspect, trading which results in denud- ing a country of its supplies of fuel and raw material will always be regarded as improvident. Its outcome must necessarily be disastrous. It is impossible to keep the lamp burning without oil. The history of industrialism shows that in the countries which cannot produce their own oil the flame of industry soon dies out. Where the consumption is unavoidable no blame can attach, but when it is prompted by greed for present gain it may be set down as a crime against posterity. When the industrial lamp of England goes out and the British people are left in darkness the historian will arraign 20 INTRODUCTION as fools "the blind leaders" of a blind people who deliber- ately shipped to lands far better supplied with mineral fuel and iron ores than were those of the exporters billions of tons of coal and hundreds of millions of tons of iron and the products of iron and steel. Philosophers have amused themselves constructing theories to explain the origin of the family. The merely animal instinct of self-defense is generally conceded by them to have been the primary cause which brought about an or- ganization which served as a foundation for rearing the structure of a highly complex civilization. When primeval man, impelled by instinct, formed the family group he could not have divined its far-reaching influence. It seems that modem protectionists, driven by the instinct of self-defense into formulating a system that permits them to maintain themselves in the struggle for existence which modem com- petition has engendered, are equally blind to the far-reaching consequences to mankind of their action. They do not see — ^at least many do not — that the instinct of banding against aggression has called into existence economic methods which tend to promote universal progress. Had not this instinct been planted in the human breast the process of evolution would be infinitely slower than it is. Had Great Britain, to confine our observations to comparatively recent times, accepted the theory which the Dutch might have advanced when England was little better than a pastoral country, that the true interests of Englishmen would be promoted by confining themselves to the produc- tion of raw wool and exchanging it for the cheaply made cloths of the Flemings, the weaver might still be plodding at his hand loom and the names of Watt, Hargreaves and Arkwright might have been unknown to the world. Had Smericans accepted the dictum of the Cobdenites, that it is wisdom to buy in the cheapest market, no McCormick or Edison would have been heard of in the United States. INTRODUCTION 21 It has been the aim of the writer to develop the idea that the desire for industrial independence which has called into operation the system of protection is almost wholly responsible for the marvelous strides toward universal in-, tegration which have been witnessed in modem times, and to show that the acceptance of the theory of buying in the cheapest market would have resulted in paralyzing endeavor throughout the greater part of the habitable world. To accomplish this purpose it has been necessary to briefly sketch the industrial history of England and show that the progress of that country and the commercial supremacy attained by it were wholly due to a well conceived and strictly maintained policy of protection, and that the con- cept of buying in the cheapest market never received its modern interpretation until Englishmen felt confident that they would be able to prevent rivals manufacturing for themselves. The fact is also brought forward with as much force as the writer can command that the school of economists who have given form to the so-called free trade system were misled regarding the causes of the industrial supremacy which the British enjoyed for a considerable period. The blunders and inconsistencies of the advocates of the idea that some time about the middle of the nineteenth century the world had assumed fixed conditions which made it pos- sible to assert that the people of one country were best fitted by nature to produce rude products, while other peoples were providentially endowed with the gift to fashion them into finished articles, have been exposed; and the logic of experience has been set against conclusions reached by a priori methods and the latter have invariably been proved unsound. The parallel attempt to sketch the advances toward in- tegration under protection and to point out and analyze the errors of writers who have been unable to see that the 22 INTRODUCTION system of present cheapness advocated by them must ulti- mately lead to dearness has prevented that orderly marshal- ing of facts and arguments which is always desirable. But while the narrative may occasionally lack continuity, it is hoped that the digressions are not serious enough to divert attention from the main purpose of establishing the fact that protection has an economic basis, and that it is unques- tionably broadening the field of industrial development and concurrently bringing into the pale of heterogenity nations which, had the free trade idea prevailed, must always have remained in that homogenous state which the historian and philosopher have alike agreed to think and speak of as a condition resembling barbarism. If the demonstration that protection by encouraging the spirit of self dependence is turning the whole world into a workshop, thus eliminating the fabtor of unnecessary waste of human energy and fuel, is not complete, the purpose of writing the following chapters has not been accomplished. If the writer has not been able to show conclusively that the adoption of Cobdenism must have resulted in ultimate dearness he has missed his aim. But nevertheless, as the years march on, it will be seen that a system which elevated the consumer to the first place and which has made the mid- dleman of more consequence than the producer has vital defects. Unless it can be shown that the value of com- modities is enhanced by unnecessarily transporting them to and fro the Cobdenite policy of moving raw materials to one country to be manufactured, and thence distributing them over the world, can never be justified. The porter fills a useful function, but no one will say that he makes the article he carries more valuable. The dis- honest hackman who drives an ignorant passenger two or three miles out of his way to increase his fare may profit by the transaction, but the object of the extortion is not a gainer. The swelling army of middlemen composed of INTRODUCTION 23 transporters, factors, jobbers, etc., who are engaged in the unnecessary handling and hauling of products, perform no greater service to society than the "cabby" who charges his fare an extra rate for consuming his time in a purposely rotmdabout journey. The promotion of free trade must inevitably result in wastefulness, because in the main its workings are anal- ogous to the tricky operation of the cabman. It makes the consumer pay for unnecessary expenditures of energy. Whatever its professed purpose may be, Cobdenism's real object is to increase the wealth of the nation practicing it at the expense of society generally, and to further that aim methods have been advocated by professional economists that are no more defensible than the trick of the hackman. The extolled roundabout foreign trades and the lauded bene- fits of international exchanges have obscured the fact that true economy demands that producer and consumer be brought as close together as possible. This is the purpose of protection, and the swelling figures of production, and its lessening of prices, show that it is being achieved. The g^eat factor in the marvelous expan- sion of modern industry is national self dependence and its resultant economies. It is inconceivable that the world would be able to consume the tremendous quantity of prod- ucts of iron and steel it does at present if it were dependent upon one or two nations for its supplies. It is by bringing the rolling mill close to the doors of the farmers of this and other countries and eliminating the waste of unnecessary transportation that they are enabled to use those articles freely. Had England remained the chief producer the British would have grown more wealthy, but American farmers and those of other countries would have used less iron and steel. The conditions which have admittedly been brought about by protective tariffs can only be maintained by retain- ^4 INTRODUCTION ing them. Nothing will have been gained by a nation if after laboriously building up a great industry it deliberately sacrifices it by entering upon a competition the terms of which can never be fairly adjusted. There can be no real economy in a country such as the United States, with its overwhelming superiority of resources of raw materials and its skillful artisans, importing iron products or textile fabrics. If any nation produces them more cheaply it is because its workingmen are willing to adopt a lower standard of living than Americans. That the desperate straits in which the peoples of some overcrowded countries, find them- , selves will induce them to lower their standard of living and thus make future reductions in labor cost is more than probable. The chief function of a protective tariff is to guard against such a result and preserve the standard of living attained by workers within the boundaries of a nation, thus preventing them being reduced to a common level of degradation. The result, no matter how nominal prices may be affected, must be real cheapness, that cheap- ness which manifests itself in increased consumption and the enlarged enjoyment of the conveniences of an advanced civilization. That protection is conducive to this end the writer hopes to prove in the following pages, which have been written to show that the system has not fulfilled its mission by merely calling manufacturing industries into existence, but that it must be maintained to guard against the destructive effects of the growing tendency of nations producing in excess of their needs to dump their surpluses upon foreign- ers. Justice to the producing population requires the inter- vention of an equalizing tariff, and in according this justice the prime object of a true economic policy will be subserved, namely, the elimination of wastefulness. That is the eco- nomic basis of protection, and it accounts for the virility of the system now generally adopted by the civilized world. San Francisco, January 5, 1899. CHAPTER I. GROWTH OF ENGLISH INDUSTRY. SKBTCH OF THE EARLY INDUSTRIAL ATTEMPTS OF THE BRITISH PEOPLE. Simon de Montfort's essay at protection in 1264 — ^Aspirations for in- dustrial independence and liberty go together — Edward III and his protective efforts — Immigration of skilled Flemings into the realm during his reign — The rise of the English doth trade causes the industrial prostration of Flanders — British agriculture did not prosper until manufactures were introduced in the island's — An agricultural country will remain perma- nently destitute of manufactures unless it resorts to artificial methods to stimulate them — Slow growth of English manu- factures— ^The commercial element in the Puritan character — Effects of the Navigation Act — Control of the trade of the colonies through its adoption — ^Use of coal in smelting iron a great stimulus to industry — Growth of English industry more rapid before than after the repeal of the corn laws--Great Britain's industrial primacy during the Napoleonic wars — Free trade fallacy exposed by comparison of England's position before and after 1846— The prostration of British industries in the '40s due to overproduction — Origin of the theory of the cheap loaf and the world's workshop. In the second volume of Nicholson's "Principles of Political Economy," which may be said to present the revised opinion of the professional economists of England on the subject of free trade, we find the admission that the adoption of the system by the United Kingdom "in the sense of extreme laissez faire was due to the force of events rather than to the force of reasoning/'* The author also tells us that "free trade finds its strongest support in the direct ^Nicholson, Principles of Political Economy, Vol. II, p. 249. 26 PROTECTION AND PROGRESS appeal to complex experience rather than in the statements of first principles."* Those familiar with the literature of the subject will recognize that this attitude of the Edinburgh professor differs strikingly from that of the teachers of the Manchester school who have formulated theories which have for a long time been accepted by millions of people in and out of England as perfectly sound, despite the fact that most of them have refused to work well in practice. In this and the succeeding chapters an effort will be made to trace the growth of these theories and to examine the causes which led to their acceptance. To do this it will be necessary to briefly outline the economic history of Eng- land during preceding centuries in order to show the in- dustrial status of that country at the time of the abrogation of the corn laws and to determine what causes contributed to make the people of an island, not over-endowed with natural resources, the wealthiest on the globe. The material for such an investigation as that proposed exists in overwhelming abundance, and much of it is of such a character that when presented it will be accepted without challenge, consisting, as it does, almost wholly of state- ments and admissions made by English historians and those of economic writers who have advocated "Cobdenism," a term which will frequently be employed alternatively with that of free trade in the following discussion. The first attempt at protection in England was made as early as 1264 by Simon de Mont fort during the Barons' war. He forbade any cloth to be worn that was not of English make. It is significant that this statesman was regarded by the people of his time as the champion of liberty, and historians are agreed that he brought about "a constitutional change of mighty issue" in English history. It was through his instrumentality that the merchant and '''Nicholson, Principles of Political Economy, Vol. II, p. 2fo, ENGLISH INDUSTRY vj the trader were first summoned to sit beside the knight of the shire, the Baron and the Bishop in the Parliament of the realm of England."*" It is not surprising that this English patriot, who so greatly enlarged the bounds of liberty, should have advocated protection, and on the distinct ground that the British peo- ple should develop their own resources, and so far as possible render themselves independent of foreigners. The troubled conditions of the times may have helped impel his mind to such a policy, but it is more than probable that it was obser- vation of the fact that the foreigner was powerful because he utilized his resources which prompted Sir Simon to the course he pursued. , The times following the death of Simon de Montfort and the accession of Edward III were troublous, but much was accomplished for freedom. "Under the first Edward the Parliament had vindicated its right to the control of taxation ; under the second it had advanced from the removal of Ministers to the deposition of a King; under the third it gave its voice on questions of peace and war, controlled expenditure and regulated the course of civil administra- tion."t Concurrently with the growth of these civil and political rights the idea began to prevail that it was a sense- less proceeding for Englishmen to grow wool, ship it to other countries and have it returned to them in the shape of manu- factured cloth. The seed sown by Simon de Montfort v^as beginning to bear fruit. The national feeling was growing stronger and stronger and many efforts were made to promote the development of the resources of England. The exportation of sheep was forbidden and Englishmen were not permitted to wear foreign cloth without special license from the King. This was in 1338, under Edward III. About this time that monarch invited a number of Flemings *Green, History of the English People, VoL I, p. 301. fibid, VoL I, p. 416. 28 PROTECTION AND PROGRESS skilled in the art of making cloth to make their homes In England, and to encourage the industry which he sought to establish heavy export duties were imposed on wool, the object being to make it cheaper at home and dearer abroad. This method of bringing about the desired result does not commend itself to modem protectionists, but it must be recalled that at this time England was one of the chief sources of the raw material required by the manufacturers of Flanders and that the idea was prevalent in that country and in England that English-grown wool was incomparably superior to any other. Time has shown that the assumption was fallacious, but the evidence is incontestable that' the purpose of Edward was achieved. A carefully prepared sketch of the early history of the English woolen industry, by W. J. Ashley, a fellow of Lincoln College, opens with the statement that "the history of English wool and cloth explains the origin of the wealth of England and illustrates with peculiar clearness the devel- opment of industry,"* an assertion which he follows with conclusive proof that the policy inaugurated by Edward III was one of the chief causes "of the destruction of the Flemish industry and the rise of the English cloth trade in the sixteenth and seventeenth centuries." It would be impossible to even glance at all the results which followed the conscious efforts of English statesmen to diversify the industries of the realm. To do so would involve rewriting the history of England for the past five centuries; but in order to make it clear that the present wealth of Great Britain is unquestionably due to the policy of protection it will be well to point out that prior to the introduction of the Flemish weavers by Edward there was absolutely no progress and that the condition of the British people was in many respects deplorable. Although the pop- ulation of the island at the time of Edward's accession was ^American Economic Association Publication. ENGLISH INDUSTRY 29 not less than two and a quarter millions'*' the inhabitants were steeped in poverty. A distinguished English writer, the gifts of whose intel- lect were devoted to the discovery of theories to support the contention that the prosperity which followed the abroga- tion of the com laws was due to this change in the incidence of British taxation, has made an exhaustive study of the stationary condition of the English people during the middle ages and Jias furnished much evidence to support his opinion that it was due to failure to improve the arts of agriculture. It is not difficult, however, to detect that this failure was a secondary cause and that the primary one was the neglect of other and more important resources of the island. Had the English, between 1377 and the close of the sixteenth century, been energetic in all fields of industry the writer we quote would not have been called upon to record "that for upward of two centuries, just as there had been no improvement in the art of agriculture, so there was no increase in population."f The same writer and other English economists have made it tolerably clear that the improvement of agriculture is in a large degree dependent upon the growth of manu- factures and that it is always in a more forward state in those countries in which the mechanic arts flourish. Arthur Hassall, writing of the beginning of the eighteenth century, tells us that "wherever trade developed in Europe the con- dition of the agricultural classes improved and an independ- ent, wealthy and intelligent middle class grew up which supplied to the various countries many admirable financiers, administrators and soldiers."J Adam Smith, whose views regarding the state of agriculture in England differ from those expressed by Rogers, asserted that the cultivation of the land in England in his time was in a more forward state ^Rogers, Economic Interpretation of History, p. 48. flbid, p. 49. IHassall, European History 1715-1789, p. 5. 30 PROTECTION AND PROGRESS than that of France,* and he pointed out that it was im- portant that the capital of manufacture should reside within a country, because "it necessarily puts in motion a greater quantity of productive labor and adds a greater value to the produce of the land and labor of society."f Mill lays it down as a general proposition that "a country will seldom have a productive agriculture unless it has a large town popula- tion,"t and he attributes the relatively inferior agricultural productiveness of India to its comparative lack of large towns and cities."§ On the whole,'therefore, we must conclude that while the later improvement of ag^riculture in England, which Pro- fessor Rogers notes, undoubtedly permitted the expansion of population, that improvement was due chiefly if not wholly to the extension of manufactures, which, in turn, called into existence a growing commercial class. As commerce and manufactures expanded the condition of the agricultural classes improved, and it continued to do so until the British adopted the policy of stimulating manufacturing at the ex- pense of the tiller of the soil. The slow growth of manufactures and trade in England after the policy of protection had been resolved upon exhibits the great difficulty experienced by a people in changing the course of industry and disputes the assumption that a popula- tion wholly devoted to agriculture will, in the face of an active competition and without artificial aid, ultimately develop a system of manufactures for itself. As already noted, the practical beginning of manufacturing in Eng- land may be dated from the beginning of the fourteenth century. One hundred and fifty years later, or about the time of the discovery of America, the product of British manufactures was only valued at ii,ooo,ooo, or a trifle over ^Smith, Wealth of Nations, Book III, Chap. IV. flbid, Book II, Chap. V. J Mill, Principles of Political Economy, Vol. T, p. i6s. Ibid, p. 163. ENGLISH INDUSTRY 5 shillings per capita. But great oaks grow from small acorns, and while that planted by Simon de Montfort and watered by Edward III and other sagacious sovereigns, who, like Elizabeth, were guided by the advice of shrewd statesmen, increased in girth and height, but slowly it eventually be- came a mighty monarch in the forest of industry and for a long time threatened to overshadow and exterminate, root and branch, the trade trees planted by rival nations. That the growth of English trade and manufactures was in no sense a natural one every reader of history must be aware. Few writers make the fact perfectly clear, but those who care to read between the lines can see that the animating spring of all British political movement after the fifteenth century was trade. The Reformation was in a certain sense as much a struggle for commercial supremacy as for religious freedom. One cannot help noting the admixture of political economy and religion in such writings as the ''Constitutional Documents of the Puritan Revolution" and Fuller's "Church History," and he who only sees the sentimental side of Oliver Cromwell's character fails to recognize the qualities that entitled him to a niche in the temple of fame as a great statesman ; one who was considerately desirous of advancing the material interests of the people whose destinies he con- trolled. A letter written in 1659 by Samuel Lamb, a prominent London merchant, to Cromwell, and afterward published as a pamphlet, shows the trend of Puritan thought in Eng- land at this time, and how largely it was filled with the idea that in order for a people to truly appreciate the beauties of religious freedom they must be afforded the opportunity to increase their stores of wealth.* Sir Joshua Child, in a treatise published in 1690, found as much to admire in the mercantile system of the Netherlands as he did in the religious teachings of the Dutch scholars. His book is *Lord Somer'8 Tracts, Ed. by Sir W. Scott, Vol. VI, p. 446, etc. 32 PROTECTION AND PROGRESS filled with advice to his countrymen, upon whom he urges the necessity of imitating the Holland virtue of honesty in commercial dealings as well as their theology if they desire to become great.* The policy of stimulating shipping, so highly extolled by Smith, who says : "As defense is of much more importance than opulence, the act of navigation is perhaps the wisest of all the commercial regulations of England," f was bor« rowed from the Dutch during the sitting of the Long Parliament, but it is doubtful whether there is any ground for the assumption that its adoption was inspired by the animosity existing between the Hollanders and English. There is too much evidence of the kind referred to above to forbid any other explanation of the English resort to the system than a desire to secure for England the commercial advantages which the Dutch had derived from a similar law and which Englishmen were observing with growing jealousy. But the motive need not be inquired into so narrowly, as we are merely concerned with the results. That they were excellent Smith testifies, for he says "the reg