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Title: The Forgotten Man, and Other Essays

Author: William Graham Sumner

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William Graham Sumner
[1907]

THE

FORGOTTEN MAN
AND

OTHER ESSAYS

BY
WILLIAM GRAHAM SUMNER

EDITED BY
ALBERT GALLOWAY KELLER

NEW HAVEN
YALE UNIVERSITY PRESS
LONDON: HUMPHREY MILFORD
OXFORD UNIVERSITY PRESS
MDCCCCXVIII

Copyright, 1919,
By Yale University Press

PREFACE

W ITH the present collection the publication of Sumner’s Essays comes
to an end. The original project of publishers and editor
contemplated but a single volume—“War and Other Essays”—and they
accordingly equipped that volume with a bibliography which was as
complete as they then could make it. But when, later on, other materials
came to be known about, and especially after the discovery of a number of
unpublished manuscripts, the encouraging reception accorded to the first
venture led us to publish a second, and then a third collection: “Earth
Hunger and Other Essays” and “The Challenge of Facts and Other Essays.”
It was during the preparation of the latter of these, now some five years ago,
that the late Professor Callender deplored to the editor the omission of
certain of Sumner’s essays in political economy—in particular those
dealing with free trade and sound money. And the reviewers of preceding
collections had reminded us, rightly enough, that there should be a fuller
bibliography and also an index covering all the essays.

In this last volume we have striven to meet these several suggestions
and criticisms. And it is now the purpose of the publishers to form of these
singly issued volumes a set of four, numbered in the order of their issue.
Since the series could not have been planned as such at the outset, this
purpose is in the nature of an after-thought; and there is therefore no general
organization or systematic classification by volumes. In so far as
classification is possible, under the circumstances, it is made by way of the
index. This and the bibliography are the work of Dr. M. R. Davie; and are
but a part of the service he has performed in the interest of an intellectual
master whom he could know only through the printed word and the medium
of another man.
Sumner’s dominant interest in political economy, as revealed in his
teaching and writing, issued in a doughty advocacy of “free trade and hard

money,” and involved the relentless exposure of protectionism and of
schemes of currency-debasement. As conveying his estimate of
protectionism, it is only fitting that his little book on “The -Ism which
teaches that Waste makes Wealth” should be recalled from an obscurity that
it does not deserve; it is typical of the author’s most vigorous period and
witnesses to the acerbity of a former issue that may recur. In default of a
single, comprehensive companion-piece in the field of finance, and one
making as interesting reading, it has been necessary to confine selection to
several rather brief articles, most of them dating from the campaign of
1896. In the choice of all economic essays I have been guided by the advice
of my colleague, Professor F. R. Fairchild, a fellow-student under Sumner
and a fellow-admirer of his character and career. Professor S. L. Mims also
has been generous in his aid. I do not need to thank either of these men, for
what they did was a labor of gratitude and love.
The title essay will be found at the end of the volume. It is the once-
famous lecture on “The Forgotten Man,” and is here printed for the first
time. When “War and Other Essays” was being prepared, we had no
knowledge of the existence of this manuscript lecture; and, in order to bring
into what we supposed was to be a one-volume collection this character-
creation of Sumner’s, one often alluded to in modern writings, we reprinted
two chapters from “What Social Classes Owe to Each Other.” It has been
found impracticable in later reprintings of Vol. I to replace those chapters
with the more complete essay; and we have therefore decided to reproduce
the latter, despite the certain degree of repetition involved, rather than leave
it out of the series. In view of the fact that Sumner has been more widely
known, perhaps, as the creator and advocate of the “Forgotten Man,” than
as the author of any other of his works, we entitle this volume “The
Forgotten Man and Other Essays.”
Several essays not of an economic order have been included because
they have come to my knowledge within the last few years and have
seemed to me to call for preservation. It is almost impossible to fix the dates
of such manuscript essays, for I have not been able in all cases to secure
information from persons who might be able to identify times and
occasions. And there remain a good number of articles and manuscripts,
published or unpublished, which can receive no more than mention, with a
word of characterization, in the bibliography.

Some mention ought to be made here of a large body of hand-written
manuscript left by Sumner and representing the work of several years—
1899 to 1905 or thereabouts—upon a systematic treatise on “The Science of
Society.” Printed as it was left, partially and unevenly completed and with
many small and some wide hiatuses, this manuscript would make several
substantial volumes. It is a monument of industry, involving, as it did, the
collection over many years of thousands of notes and memoranda, and the
extraction from the same, by a sort of tour de force, of generalizations
intended to be set forth, with the support of copious evidence, in the form of
a survey of the evolution and life of human society. These manuscripts, as
left, represent no more than a preliminary survey of a wide field, together
with more elaborately worked out chartings of sections of that field. The
author planned to re-write the whole in the light of “Folkways.” The
continuation, modification, and completion of this enterprise, in something
approaching the form contemplated by its author, must needs be, if at all
possible, a long task.
As one surveys, through these volumes of essays, the various phases of
scholarly and literary activity of their author, and then recalls the teaching,
both extensive and intensive, done by him with such unremitting devotion
to what he regarded as his first duty—and when one thinks, yet again, of his
labors in connection with college and university administration, with the
Connecticut State Board of Education, and in other lines—it is hard to
understand where one man got the time, with all his ability and energy, to
accomplish all this. In the presence of evidence of such incessant and
unswerving industry, scarcely interrupted by the ill-health that overtook
Sumner at about the age of fifty, an ordinary person feels a sense of
oppression and of bewilderment, and is almost willing to subscribe to the
old, hopeless tradition that “there were giants in those days.”
In the preparation of this set of books the editor has been constantly
sustained and encouraged by the interest and sympathy of the woman who
stood by the author’s side through life, and to whom anything that had to do
with the preservation of his memory was thereby just, perfect, and
altogether praiseworthy. The completion of this editorial task would be the
more satisfying if she were still among us to receive the final offering.
A. G. Keller.

West Boothbay Harbor, Me.,
September 1, 1918.

CONTENTS
PAGE
Preface 3
Protectionism, the -Ism which Teaches that Waste
Makes Wealth (1885) 9
Tariff Reform (1888) 115
What is Free Trade? (1886) 123
Protectionism Twenty Years After (1906) 131
Prosperity Strangled by Gold (1896) 141
Cause and Cure of Hard Times (1896) 149
The Free-Coinage Scheme is Impracticable at every
Point (1896) 157
The Delusion of the Debtors (1896) 165
The Crime of 1873 (1896) 173
A Concurrent Circulation of Gold and Silver
(1878) 183
The Influence of Commercial Crises on Opinions
about Economic Doctrines (1879) 213
The Philosophy of Strikes (1883) 239
Strikes and the Industrial Organization (1887) 249
Trusts and Trades-unions (1888) 257
An Old “Trust” (1889) 265
Shall Americans Own Ships? (1881) 273
Politics in America, 1776–1876 (1876) 285
The Administration of Andrew Jackson (1880) 337
The Commercial Crisis of 1837 (1877 or 1878) 371
The Science of Sociology (1882) 401
Integrity in Education 409
Discipline 423

The Coöperative Commonwealth 441
The Forgotten Man (1883) 465
Bibliography 499
Index 521

PROTECTIONISM

THE -ISM WHICH TEACHES THAT
WASTE MAKES WEALTH

[1885]

PREFACE

D URING the last fifteen years we have had two great questions to
discuss: the restoration of the currency and civil-service reform.
Neither of these questions has yet reached a satisfactory solution, but both
are on the way toward such a result. The next great effort to strip off the
evils entailed on us by the Civil War will consist in the repeal of those taxes
which one man was enabled to levy on another, under cover of the taxes
which the government had to lay to carry on the war. I have taken my share
in the discussion of the first two questions, and I expect to take my share in
the discussion of the third.

I have written this book as a contribution to a popular agitation. I have
not troubled myself to keep or to throw off scientific or professional dignity.
I have tried to make my point as directly and effectively as I could for the
readers whom I address, viz., the intelligent voters of all degrees of general
culture, who need to have it explained to them what protectionism is and
how it works. I have therefore pushed the controversy just as hard as I
could, and have used plain language, just as I have always done before in
what I have written on this subject. I must therefore forego the hope that I
have given any more pleasure now than formerly to the advocates of
protectionism.

Protectionism seems to me to deserve only contempt and scorn, satire
and ridicule. It is such an arrant piece of economic quackery, and it
masquerades under such an affectation of learning and philosophy, that it
ought to be treated as other quackeries are treated. Still, out of deference to
its strength in the traditions and lack of information of many people, I have
here undertaken a patient and serious exposition of it. Satire and derision
remain reserved for the dogmatic protectionists and the sentimental
protectionists; the Philistine protectionists and those who hold the key of all
knowledge; the protectionists of stupid good faith and those who know their
dogma is a humbug and are therefore irritated at the exposure of it; the
protectionists by birth and those by adoption; the protectionists for hire and
those by election; the protectionists by party platform and those by pet
newspaper; the protectionists by “invincible ignorance” and those by vows
and ordination; the protectionists who run colleges and those who want to
burn colleges down; the protectionists by investment and those who sin
against light; the hopeless ones who really believe in British gold and dread
the Cobden Club, and the dishonest ones who storm about those things
without believing in them; those who may not be answered when they come
into debate, because they are “great” men, or because they are “old” men,
or because they have stock in certain newspapers, or are trustees of certain
colleges. All these have honored me personally, in this controversy, with
more or less of their particular attention. I confess that it has cost me
something to leave their cases out of account, but to deal with them would
have been a work of entertainment, not of utility.
Protectionism arouses my moral indignation. It is a subtle, cruel, and
unjust invasion of one man’s rights by another. It is done by force of law. It
is at the same time a social abuse, an economic blunder, and a political evil.
The moral indignation which it causes is the motive which draws me away
from the scientific pursuits which form my real occupation, and forces me
to take part in a popular agitation. The doctrine of a “call” applies in such a
case, and every man is bound to take just so great a share as falls in his way.
That is why I have given more time than I could afford to popular lectures
on this subject, and it is why I have now put the substance of those lectures
into this book.
W. G. S.

Chapter I

DEFINITIONS: STATEMENT OF THE QUESTION
TO BE INVESTIGATED

(A) The System of which Protection is a Survival.
1. The statesmen of the eighteenth century supposed that their business
was the art of national prosperity. Their procedure was to form ideals of
political greatness and civil prosperity on the one hand, and to evolve out of
their own consciousness grand dogmas of human happiness and social
welfare on the other hand. Then they tried to devise specific means for
connecting these two notions with each other. Their ideals of political
greatness contained, as predominant elements, a brilliant court, a refined
and elegant aristocracy, well-developed fine arts and belles lettres, a
powerful army and navy, and a peaceful, obedient, and hard-working
peasantry and artisan class to pay the taxes and support the other part of the
political structure. In this ideal the lower ranks paid upward, and the upper
ranks blessed downward, and all were happy together. The great political
and social dogmas of the period were exotic and incongruous. They were
borrowed or accepted from the classical authorities. Of course the dogmas
were chiefly held and taught by the philosophers, but, as the century ran its
course, they penetrated the statesman class. The statesman who had had no
purpose save to serve the “grandeur” of the king, or to perpetuate a dynasty,
gave way to statesmen who had strong national feeling and national ideals,
and who eagerly sought means to realize their ideals. Having as yet no
definite notion, based on facts of observation and experience, of what a
human society or a nation is, and no adequate knowledge of the nature and
operation of social forces, they were driven to empirical processes which
they could not test, or measure, or verify. They piled device upon device
and failure upon failure. When one device failed of its intended purpose and
produced an unforeseen evil, they invented a new device to prevent the new
evil. The new device again failed to prevent, and became a cause of a new
harm, and so on indefinitely.
2. Among their devices for industrial prosperity were (1) export taxes
on raw materials, to make raw materials abundant and cheap at home; (2)

bounties on the export of finished products, to make the exports large; (3)
taxes on imported commodities to make the imports small, and thus, with
No. 2, to make the “balance of trade” favorable, and to secure an
importation of specie; (4) taxes or prohibition on the export of machinery,
so as not to let foreigners have the advantage of domestic inventions; (5)
prohibition on the emigration of skilled laborers, lest they should carry to
foreign rivals knowledge of domestic arts; (6) monopolies to encourage
enterprise; (7) navigation laws to foster ship-building or the carrying trade,
and to provide sailors for the navy; (8) a colonial system to bring about by
political force the very trade which the other devices had destroyed by
economic interference; (9) laws for fixing wages and prices to repress the
struggle of the non-capitalist class to save themselves in the social press;
(10) poor-laws to lessen the struggle by another outlet; (11) extravagant
criminal laws to try to suppress another development of this struggle by
terror; and so on, and so on.

(B) Old and New Conceptions of the State.
3. Here we have a complete illustration of one mode of looking at
human society, or at a state. Such society is, on this view, an artificial or
mechanical product. It is an object to be molded, made, produced by
contrivance. Like every product which is brought out by working up to an
ideal instead of working out from antecedent truth and fact, the product here
is haphazard, grotesque, false. Like every other product which is brought
out by working on lines fixed by a priori assumptions, it is a satire on
human foresight and on what we call common sense. Such a state is like a
house of cards, built up anxiously one upon another, ready to fall at a
breath, to be credited at most with naïve hope and silly confidence; or, it is
like the long and tedious contrivance of a mischievous schoolboy, for an
end which has been entirely misappreciated and was thought desirable
when it should have been thought a folly; or, it is like the museum of an
alchemist, filled with specimens of his failures, monuments of mistaken
industry and testimony of an erroneous method; or, it is like the clumsy
product of an untrained inventor, who, instead of asking: “what means have
I, and to what will they serve?” asks: “what do I wish that I could
accomplish?” and seeks to win steps by putting in more levers and cogs,
increasing friction and putting the solution ever farther off.

4. Of course such a notion of a state is at war with the conception of a
state as a seat of original forces which must be reckoned with all the time;
as an organism whose life will go on anyhow, perverted, distorted, diseased,
vitiated as it may be by obstructions or coercions; as a seat of life in which
nothing is ever lost, but every antecedent combines with every other and
has its share in the immediate resultant, and again in the next resultant, and
so on indefinitely; as the domain of activities so great that they should
appall any one who dares to interfere with them; of instincts so delicate and
self-preservative that it should be only infinite delight to the wisest man to
see them come into play, and his sufficient glory to give them a little
intelligent assistance. If a state well performed its functions of providing
peace, order, and security, as conditions under which the people could live
and work, it would be the proudest proof of its triumphant success that it
had nothing to do—that all went so smoothly that it had only to look on and
was never called to interfere; just as it is the test of a good business man
that his business runs on smoothly and prosperously while he is not
harassed or hurried. The people who think that it is proof of enterprise to
meddle and “fuss” may believe that a good state will constantly interfere
and regulate, and they may regard the other type of state as “non-
government.” The state can do a great deal more than to discharge police
functions. If it will follow custom, and the growth of social structure to
provide for new social needs, it can powerfully aid the production of
structure by laying down lines of common action, where nothing is needed
but some common action on conventional lines; or, it can systematize a
number of arrangements which are not at their maximum utility for want of
concord; or, it can give sanction to new rights which are constantly created
by new relations under new social organizations, and so on.
5. The latter idea of the state has only begun to win way. All history and
sociology bear witness to its comparative truth, at least when compared
with the former. Under the new conception of the state, of course liberty
means breaking off the fetters and trammels which the “wisdom” of the past
has forged, and laissez-faire, or “let alone,” becomes a cardinal maxim of
statesmanship, because it means: “Cease the empirical process. Institute the
scientific process. Let the state come back to normal health and activity, so
that you can study it, learn something about it from an observation of its
phenomena, and then regulate your action in regard to it by intelligent
knowledge.” Statesmen suited to this latter type of state have not yet come

forward in any great number. The new radical statesmen show no
disposition to let their neighbors alone. They think that they have come into
power just because they know what their neighbors need to have done to
them. Statesmen of the old type, who told people that they knew how to
make everybody happy, and that they were going to do it, were always far
better paid than any of the new type ever will be, and their failures never
cost them public confidence either. We have got tired of kings, priests,
nobles and soldiers, not because they failed to make us all happy, but
because our a priori dogmas have changed fashion. We have put the
administration of the state in the hands of lawyers, editors, littérateurs, and
professional politicians, and they are by no means disposed to abdicate the
functions of their predecessors, or to abandon the practice of the art of
national prosperity. The chief difference is that, whereas the old statesmen
used to temper the practice of their art with care for the interests of the
kings and aristocracies which put them in power, the new statesmen feel
bound to serve those sections of the population which have put them where
they are.
6. Some of the old devices above enumerated (§ 2) are, however, out of
1
date, or are becoming obsolete. Number 3, taxes on imports for other than
fiscal purposes, is not among this number. Just now such taxes seem to be
coming back into fashion, or to be enjoying a certain revival. It is a sign of
the deficiency of our sociology as compared with our other sciences that
such a phenomenon could be presented in the last quarter of the nineteenth
century, as a certain revival of faith in the efficiency of taxes on imports as
a device for producing national prosperity. There is not a single one of the
eleven devices mentioned above, including taxes on the exportation of
machinery and prohibitions on emigration, which is not quite as rational
and sound as taxes on imports.
I now propose to analyze and criticize protectionism.

(C) Definition of Protectionism—Definition of
“Theory.”
7. By protectionism I mean the doctrine of protective taxes as a device
to be employed in the art of national prosperity. The protectionists are fond
of representing themselves as “practical” and the free traders as “theorists.”

“Theory” is indeed one of the most abused words in the language, and the
scientists are partly to blame for it. They have allowed the word to come
into use, even among themselves, for a conjectural explanation, or a
speculative conjecture, or a working hypothesis, or a project which has not
yet been tested by experiment, or a plausible and harmless theorem about
transcendental relations, or about the way in which men will act under
certain motives. The newspapers seem often to use the word “theoretical” as
if they meant by it imaginary or fictitious. I use the word “theory,” however,
not in distinction from fact, but, in what I understand to be the correct
scientific use of the word, to denote a rational description of a group of
coördinated facts in their sequence and relations. A theory may, for a
special purpose, describe only certain features of facts and disregard others.
Hence “in practice,” where facts present themselves in all their complexity,
he who has carelessly neglected the limits of his theory may be astonished
at phenomena which present themselves; but his astonishment will be due
to a blunder on his part, and will not be an imputation on the theory.
8. Now free trade is not a theory in any sense of the word. It is only a
mode of liberty; one form of the assault (and therefore negative) which the
expanding intelligence of the present is making on the trammels which it
has inherited from the past. Inside the United States, absolute free trade
exists over a continent. No one thinks of it or realizes it. No one “feels” it.
We feel only constraint and oppression. If we get liberty we reflect on it
only so long as the memory of constraint endures. I have again and again
seen the astonishment with which people realized the fact when presented
to them that they have been living under free trade all their lives and never
thought of it. When the whole world shall obtain and enjoy free trade there
will be nothing more to be said about it; it will disappear from discussion
and reflection; it will disappear from the text-books on political economy as
the chapters on slavery are disappearing; it will be as strange for men to
think that they might not have free trade as it would be now for an
American to think that he might not travel in this country without a
passport, or that there ever was a chance that the soil of our western states
might be slave soil and not free soil. It would be as reasonable to apply the
word “theory” to the protestant reformation, or to law reform, or to anti-
slavery, or to the separation of church and state, or to popular rights, or to
any other campaign in the great struggle which we call liberty and progress,
as to apply it to free trade. The pro-slavery men formerly did apply it to

abolition, and with excellent reason, if the use of it which I have criticized
ever was correct; for it required great power of realizing in imagination the
results of social change, and great power to follow and trust abstract
reasoning, for any man bred under slavery to realize, in advance of
experiment, the social and economic gain to be won—most of all for the
whites—by emancipation. It now requires great power of “theoretical
conception” for people who have no experience of the separation of church
and state to realize its benefits and justice. Similar observations would hold
true of all similar reforms. Free trade is a revolt, a conflict, a reform, a
reaction and recuperation of the body politic, just as free conscience, free
worship, free speech, free press, and free soil have been. It is in no sense a
theory.
9. Protectionism is not a theory in the correct sense of the term, but it
comes under some of the popular and incorrect uses of the word. It is purely
dogmatic and a priori. It is desired to attain a certain object—wealth and
national prosperity. Protective taxes are proposed as a means. It must be
assumed that there is some connection between protective taxes and
national prosperity, some relation of cause and effect, some sequence of
expended energy and realized product, between protective taxes and
national wealth. If then by theory we mean a speculative conjecture as to
occult relations which have not been and cannot be traced in experience,
protection would be a capital example. Another and parallel example was
furnished by astrology, which assumed a causal relation between the
movements of the planets and the fate of men, and built up quite an art of
soothsaying on this assumption. Another example, paralleling protectionism
in another feature, was alchemy, which, accepting as unquestionable the
notion that we want to transmute lead into gold if we can, assumed that
there was a philosopher’s stone, and set to work to find it through centuries
of repetition of the method of “trial and failure.”
10. Protectionism, then, is an ism; that is, it is a doctrine or system of
doctrine which offers no demonstration, and rests upon no facts, but appeals
to faith on grounds of its a priori reasonableness, or the plausibility with
which it can be set forth. Of course, if a man should say: “I am in favor of
protective taxes because they bring gain to me. That is all I care to know
about them, and I shall get them retained as long as I can”—there is no
trouble in understanding him, and there is no use in arguing with him. So

far as he is concerned, the only thing to do is to find his victims and explain
the matter to them. The only thing which can be discussed is the doctrine of
national wealth by protective taxes. This doctrine has the forms of an
economic theory. It vies with the doctrine of labor and capital as a part of
the science of production. Its avowed purpose is impersonal and
disinterested—the same, in fact, as that of political economy. It is not, like
free trade, a mere negative position against an inherited system, to which
one is led by a study of political economy. It is a species of political
economy, and aims at the throne of the science itself. If it is true, it is not a
corollary, but a postulate, on which, and by which, all political economy
must be constructed.
11. But then, lo! if the dogma which constitutes protectionism—
national wealth can be produced by protective taxes and cannot be
produced without them—is enunciated, instead of going on to a science of
political economy based upon it, the science falls dead on the spot. What
can be said about production, population, land, money, exchange, labor and
all the rest? What can the economist learn or do? What function is there for
the university or school? There is nothing to do but to go over to the art of
legislation, and get the legislator to put on the taxes. The only questions
which can arise are as to the number, variety, size, and proportion of the
taxes. As to these questions the economist can offer no light. He has no
method of investigating them. He can deduce no principles, lay down no
laws in regard to them. The legislator must go on in the dark and
experiment. If his taxes do not produce the required result, if there turn out
to be “snakes” in the tariff which he has adopted, he has to change it. If the
result still fails, change it again. Protectionism bars the science of political
economy with a dogma, and the only process of the art of statesmanship to
which it leads is eternal trial and failure—the process of the alchemist and
of the inventor of perpetual motion.

(D) Definition of Free Trade and of a Protective
Duty.
12. What then is a protective tax? In order to join issue as directly as
possible, I will quote the definitions given by a leading protectionist
2
journal, of both free trade and protection. “The term ‘free trade,’ although

much discussed, is seldom rightly defined. It does not mean the abolition of
custom houses. Nor does it mean the substitution of direct for indirect
taxation, as a few American disciples of the school have supposed. It means
such an adjustment of taxes on imports as will cause no diversion of capital,
from any channel into which it would otherwise flow, into any channel
opened or favored by the legislation which enacts the customs. A country
may collect its entire revenue by duties on imports, and yet be an entirely
free trade country, so long as it does not lay those duties in such a way as to
lead any one to undertake any employment, or make any investment he
would avoid in the absence of such duties: thus, the customs duties levied
by England—with a very few exceptions—are not inconsistent with her
profession of being a country which believes in free trade. They either are
duties on articles not produced in England, or they are exactly equivalent to
the excise duties levied on the same articles if made at home. They do not
lead any one to put his money into the home production of an article,
because they do not discriminate in favor of the home producer.”
13. “A protective duty, on the other hand, has for its object to effect the
diversion of a part of the capital and labor of the people out of the channels
in which it would run otherwise, into channels favored or created by law.”
I know of no definitions of these two things which have ever been
made by anybody which are more correct than these. I accept them and join
issue on them.

(E) Protectionism Raises a Purely Domestic
Controversy.
14. It will be noticed that this definition of a protective duty says
nothing about foreigners or about imports. According to this definition, a
protective duty is a device for effecting a transformation in our own
industry. If a tax is levied at the port of entry on a foreign commodity which
is actually imported, the tax is paid to the treasury and produces revenue. A
protective tax is one which is laid to act as a bar to importation, in order to
keep a foreign commodity out. It does not act protectively unless it does act
as a bar, and is not a tax on imports but an obstruction to imports. Hence a
protective duty is a wall to inclose the domestic producer and consumer,
and to prevent the latter from having access to any other source of supply

for his needs, in exchange for his products, than that one which the
domestic producer controls. The purpose and plan of the device is to enable
the domestic producer to levy on the domestic consumer the taxes which
the government has set up as a barrier, but has not collected at the port of
entry. Under this device the government says: “I do not want the revenue,
but I will lay the tax so that you, the selected and favored producer, may
collect it.” “I do not need to tax the consumer for myself, but I will hold
him for you while you tax him.”

(F) “A Protective Duty is not a Tax.”
15. There are some who say that “a tariff is not a tax,” or as one of
them said before a Congressional Committee: “We do not like to call it so!”
That certainly is the most humorous of all the funny things in the tariff
controversy. If a tariff is not a tax, what is it? In what category does it
belong? No protectionist has ever yet told. They seem to think of it as a
thing by itself, a Power, a Force, a sort of Mumbo Jumbo whose special
function it is to produce national prosperity. They do not appear to have
analyzed it, or given themselves an account of it, sufficiently to know what
kind of a thing it is or how it acts. Any one who says that it is not a tax must
suppose that it costs nothing, that it produces an effect without an
expenditure of energy. They do seem to think that if Congress will say: “Let
a tax of —— per cent be laid on article A,” and if none is imported, and
therefore no tax is paid at the custom house, national industry will be
benefited and wealth secured, and that there will be no cost or outgo. If that
is so, then the tariff is magic. We have found the philosopher’s stone. Our
congressmen wave a magic wand over the country and say: “Not otherwise
provided for, one hundred and fifty per cent,” and, presto! there we have
wealth. Again they say: “Fifty cents a yard and fifty per cent ad valorem”;
and there we have prosperity! If we should build a wall along the coast to
keep foreigners and their goods out, it would cost something. If we
maintained a navy to blockade our own coast for the same purpose, it would
cost something. Yet it is imagined that if we do the same by a tax it costs
nothing.
16. This is the fundamental fallacy of protection to which the analysis
will bring us back again and again. Scientifically stated, it is that

protectionism sins against the conservation of energy. More simply stated,
it is that the protectionist either never sees or does not tell the other side of
the account, the cost, the outlay for the gains which he alleges from
protection, and that when these are examined and weighed they are sure
vastly to exceed the gains, if the gains were real, even taking no account of
the harm to national growth which is done by restriction and interference.
17. There are only three ways in which a man can part with his product,
and different kinds of taxes fall under different modes of alienating one’s
goods. First, he may exchange his product for the product of others. Then
he parts with his property voluntarily, and for an equivalent. Taxes which
are paid for peace, order, and security, fall under this head. Secondly, he
may give his product away. Then he parts with it voluntarily without an
equivalent. Taxes which are voluntarily paid for schools, libraries, parks,
etc., fall under this head. Thirdly, he may be robbed of it. Then he parts with
it involuntarily and without an equivalent. Taxes which are protective fall
under this head. The analysis is exhaustive, and there is no other place for
them. Protective taxes are those which a man pays to his neighbor to hire
him (the neighbor) to carry on his own business. The first man gets no
equivalent (§ 108). Hence any one who says that a tariff is not a tax would
have to put it in some such category as tribute, plunder, or robbery. In order,
then, that we may not give any occasion for even an unjust charge of using
hard words, let us go back and call it a tax.
18. In any case it is plain that we have before us the case of two
Americans. The protectionists who try to discuss the subject always go off
to talk English politics and history, or Ireland, or India, or Turkey. I shall
not follow them. I shall discuss the case between two Americans, which is
the only case there is. Whether Englishmen like our tariff or not is of no
consequence. As a matter of fact, Englishmen seem to have come to the
opinion that if Americans will take their own home market as their share,
and will keep out of the world’s market, they (the Englishmen) will agree to
the arrangement; but it is immaterial whether they agree, or are angry. The
only question for us is: What kind of an arrangement is it for one American
to tax another American? How does it work? Who gains by it? How does it
affect our national prosperity? These and these only are the questions which
I intend to discuss.

19. I shall adopt two different lines of investigation. First, I shall
examine protectionism on its own claims and pretensions, taking its
doctrines and claims for true, and following them out to see whether they
will produce the promised results; and secondly, I shall attack protectionism
adversely, and controversially. If any one proposes a device for the public
good, he is entitled to candid and patient attention, but he is also under
obligation to show how he expects his scheme to work, what forces it will
bring into play, how it will use them, etc. The joint stock principle, credit
institutions, coöperation, and all similar devices must be analyzed and the
explanation of their advantage, if they offer any, must be sought in the
principles which they embody, the forces they employ, the suitableness of
their apparatus. We ought not to put faith in any device (e.g., bi-metalism,
socialism) unless the proposers offer an explanation of it which will bear
rigid and pitiless examination; for, if it is a sound device, such examination
will only produce more and more thorough conviction of its merits. I shall
therefore first take up protectionism just as it is offered, and test it, as any
candid inquirer might do, to see whether, as it is presented by its advocates,
it has any claims to confidence.

Chapter II

PROTECTIONISM EXAMINED ON ITS OWN
GROUNDS

20. It is the peculiar irony in all empirical devices in social science that
they not only fail of the effect expected of them, but that they produce the
exact opposite. Paper money is expected to help the non-capitalist and the
debtor and to make business brisk. It ruins the non-capitalists and the
debtors, and reduces industry and commerce to a standstill. Socialistic
devices are expected to bring about equality and universal happiness. They
produce despotism, favoritism, inequality, and universal misery. The
devices are, in their operation, true to themselves. They act just as an
unprejudiced examination of them should have led any one to expect that
they would act, or just as a limited experience has shown that they must act.
If protectionism is only another case of the same kind, an examination of it

on its own grounds must bring out the fact that it will issue in crippling
industry, diminishing capital, and lowering the average of comfort. Let us
see.

(A) Assumptions in Protectionism.
21. Obviously the doctrine includes two assumptions. The first is, that
if we are left to ourselves, each to choose, under liberty, his line of
industrial effort, and to use his labor and capital, under the circumstances of
the country, as best he can, we shall fail of our highest prosperity. Secondly,
that, if Congress will only tax us (properly) we can be led up to higher
prosperity. Hence it is at once evident that free trade and protection here are
not on a level. No free trader will affirm that he has a device for making the
country rich, or saving it from hard times, any more than a respectable
physician will tell us that he can give us specifics and preventives to keep
us well. On the contrary, so long as men live they will do foolish things, and
they will have to bear the penalty; but if they are free, they will commit
only the follies which are their own, and they will bear the penalties only of
those. The protectionist begins with the premise that we shall make
mistakes, and that is why he, who knows how to make us go right, proposes
to take us in hand. He is like the doctor who can give us just the pill we
need to “cleanse our blood” and “ward off chills.” Hence either prosperity
in a free-trade country, or distress in a protectionist country, is fatal to
protectionism, while distress in a free-trade country, or prosperity in a
protectionist country proves nothing against free trade. Hence the fallacy of
all Mr. R. P. Porter’s letters is obvious. (§§ 52, 92, 102, 154.)
22. The device by which we are to be made better than ourselves is to
select some of ourselves, who certainly are not the best business men
among ourselves, to go to Washington, and there turn around and tax
ourselves blindly, or, if not blindly, craftily and selfishly. Surely this would
be the triumph of stupidity and ignorance over intelligent knowledge,
enterprise and energy. The motive which would control each of us, if we
were free, would be the hope of the greatest gain. We should have to put
industry, prudence, economy, and enterprise into our business. If we failed,
it would be through error. How is the congressional interference to act?
How is it to meet and correct our error? It can appeal to no other motive

than desire for profit, and can only offer us a profit where there was none
before, if we will turn out of the industry which we have selected, into one
which we do not know. It offers a greater profit there only by means of what
it takes from somebody else and somewhere else. Or, is congressional
interference to correct the errors of John, James and William, and to make
the idle, industrious, and the extravagant prudent? Any one who believes it
must believe that the welfare of mankind is not dependent on the reason and
conscience of the interested persons themselves, but on the caprices of
blundering ignorance, embodied in a selected few, or on the trickery of
lobbyists, acting impersonally and at a distance.

(B) Necessary Conditions of Successful Protective
Legislation.
23. Suppose, however, that it were true that Congress had the power
(by some exercise of the taxing function) to influence favorably the
industrial development of the country: is it not true that men of sense would
demand to be satisfied on three points, as follows?
24. (a) If Congress can do this thing, and is going to try it, ought it not,
in order to succeed, to have a distinct idea of what it is aiming at and
proposes to do? Who would have confidence in any man who should set out
on an enterprise and who did not satisfy this condition? Has Congress ever
satisfied it? Never. They have never had any plan or purpose in their tariff
legislation. Congress has simply laid itself open to be acted upon by the
interested parties, and the product of its tariff legislation has been simply
the resultant of the struggles of the interested cliques with each other, and of
the log-rolling combinations which they have been forced to make among
themselves. In 1882 Congress did pay some deference, real or pretended, to
the plain fact that it was bound, if it exercised this mighty power and
responsibility, to bring some intelligence to bear on it, and it appointed a
Tariff Commission which spent several months in collecting evidence. This
Commission was composed, with one exception, of protectionists. It
recommended a reduction of twenty-five per cent in the tariff, and said:
“Early in its deliberations the Commission became convinced that a
substantial reduction of tariff duties is demanded, not by a mere
indiscriminate popular clamor, but by the best conservative opinion of the

country.” “Excessive duties are positively injurious to the interests which
they are supposed to benefit. They encourage the investment of capital in
manufacturing enterprises by rash and unskilled speculators, to be followed
by disaster to the adventurers and their employees, and a plethora of
commodities which deranges the operations of skilled and prudent
enterprise.” (§ 111.) This report was entirely thrown aside, and Congress,
ignoring it entirely, began again in exactly the old way. The Act of 1883
was not even framed by or in Congress. It was carried out into the dark, into
3
a conference committee, where new and gross abuses were put into the bill
under cover of a pretended revision and reduction. When a tariff bill is
before Congress, the first draft starts with a certain rate on a certain article,
say twenty per cent. It is raised by amendment to fifty, the article is taken
into a combination and the rate put up to eighty per cent; the bill is sent to
the other house, and the rate on this article cut down again to forty per cent;
on conference between the two houses the rate is fixed at sixty per cent. He
who believes in the protectionist doctrine must, if he looks on at that
proceeding, believe that the prosperity of the country is being kicked
around the floor of Congress, at the mercy of the chances which are at last
to determine with what per cent of tax these articles will come out. And
what is it that determines with what tax any given article will come out?
Any intelligent knowledge of industry? Not a word of it. Nothing in the
case of a given tax on a given article, but just this: “Who is behind it?” The
history of tariff legislation by the Congress of the United States throws a
light upon the protective doctrine which is partly grotesque and partly
revolting.
25. (b) If Congress can exert the supposed beneficent influence on
industry, ought not Congress to understand the force which it proposes to
use? Ought it not to have some rules of protective legislation so as to know
in what cases, within what limits, under what conditions, the device can be
effectively used? Would that not be a reasonable demand to make of any
man who should propose a device for any purpose? Congress has never had
any knowledge of the way in which the taxes which it passed were to do
this beneficent work. It has never had, and has never seemed to think that it
needed to get, any knowledge of the mode of operation of protective taxes.
It passes taxes, as big as the conflicting interests will allow, and goes home,
satisfied that it has saved the country. What a pity that philosophers,

economists, sages, and moralists should have spent so much time in
elucidating the conditions and laws of human prosperity! Taxes can do it
all.
26. (c) If Congress can do what is affirmed and is going to try it, is it
not the part of common sense to demand that some tests be applied to the
experiment after a few years to see whether it is really doing as was
expected? In the campaign of 1880 it was said that if Hancock was elected
we should have free trade, wages would fall, factories would be closed, etc.
Hancock was not elected, we did not get any reform of the tariff, and yet in
1884 wages were falling, factories were closed, and all the other direful
consequences which were threatened had come to pass. Bradstreet’s made
investigations in the winter of 1884–1885 which showed that 316,000
workmen, thirteen per cent of the number employed in manufacturing in
1880, were out of work, 17,550 on strike, and that wages had fallen since
1882 from ten to forty per cent, especially in the leading lines of
manufacturing which are protected. What did these calamities all prove
then? If we had had any revision of the tariff, should we not have had these
things alleged again and again as results of it? Did they not, then, in the
actual case, prove the folly of protection? Oh, no! that would be attacking
the sacred dogma, and the sacred dogma is a matter of faith, so that, as it
never had any foundation in fact or evidence, it has just as much after the
experiment has failed as before the experiment was made.
27. If, now, it were possible to devise a scheme of legislation which
should, according to protectionist ideas, be just the right jacket of taxation
to fit this country to-day, how long would it fit? Not a week. Here are
certain millions of people on three and a half million square miles of land.
Every day new lines of communication are opened, new discoveries made,
new inventions produced, new processes applied, and the consequence is
that the industrial system is in constant flux and change. How, if a correct
system of protective taxes was a practicable thing at any given moment,
could Congress keep up with the changes and readaptations which would be
required? The notion is preposterous, and it is a monstrous thing, even on
the protectionist hypothesis, that we are living under a protective system
which was set up in 1864. The weekly tariff decisions by the treasury
department may be regarded as the constant attempts that are required to fit
that old system to present circumstances, and, as it is not possible that new

fabrics, new compounds, and new processes should find a place in
schedules which were made twenty years before they were invented, those
decisions carry with them the fate of scores of new industries which figure
in no census, and are taken into account by no congressman. Therefore,
even if we believed that the protective doctrine was sound and that some
protective system was beneficial, and that the one which we have was the
right one when it was made, we should be driven to the conclusion that one
which is twenty years old is sure to be injurious to-day.
28. There is nothing then in the legislative machinery by which the
tariff is to be made which is calculated to win the confidence of a man of
sense, but everything to the contrary; and the experiments of such
legislation which have been made have produced nothing but warnings
against the device. Instead of offering any reasonable ground for belief that
our errors will be corrected and our productive powers increased, an
examination of the tariff as a piece of legislation offers to us nothing but a
burden, which must cripple any economic power which we have.

(C) Examination of the Means Proposed, viz., Taxes.
29. Every tax is a burden, and in the nature of the case can be nothing
else. In mathematical language, every tax is a quantity affected by a minus
sign. If it gets peace and security, that is, if it represses crime and injustice
and prevents discord, which would be economically destructive, then it is a
smaller minus quantity than the one which would otherwise be there, and
that is the gain by good government. Hence, like every other outlay which
we make, taxes must be controlled by the law of economy—to get the best
and most possible for the least expenditure. Instead of regarding public
expenditure carelessly, we should watch it jealously. Instead of looking at
taxation as conceivably a good, and certainly not an ill, we should regard
every tax as on the defensive, and every cent of tax as needing justification.
If the statesman exacts any more than is necessary to pay for good
government economically administered, he is incompetent, and fails in his
duty. I have been studying political economy almost exclusively for the last
fifteen years, and when I look back over that period and ask myself what is
the most marked effect which I can perceive on my own opinion, or on my
standpoint, as to social questions, I find that it is this: I am convinced that

nobody yet understands the multiplied and complicated effects which are
produced by taxation. I am under the most profound impression of the
mischief which is done by taxation, reaching, as it does, to every dinner-
table and to every fireside. The effects of taxation vary with every change in
the industrial system and the industrial status, and they are so complicated
that it is impossible to follow, analyze, and systematize them; but out of the
study of the subject there arises this firm conviction: taxation is crippling,
shortening, reducing all the time, over and over again.
30. Suppose that a man has an income of one thousand dollars, of
which he has been saving one hundred dollars per annum with no tax. Now
a tax of ten dollars is demanded of him, no matter what kind of a tax or how
laid. Is he to get the tax out of the nine hundred dollars expenditure or out
of the one hundred dollars savings? If the former, then he must cut down his
diet, or his clothing, or his house accommodation, that is, lower his standard
of comfort. If the latter, then he must lessen his accumulation of capital, that
is, his provision for the future. Either way his welfare is reduced and cannot
be otherwise affected, and, through the general effect, the welfare of the
community is reduced by the tax. Of course it is immaterial that he may not
know the facts. The effects are the same. In this view of the matter it is
plain what mischief is done by taxes which are laid to buy parks, libraries,
and all sorts of grand things. The tax-layer is not providing public order. He
is spending other people’s earnings for them. He is deciding that his
neighbor shall have less clothes and more library or park. But when we
come to protective taxes the abuse is monstrous. The legislator who has in
his hands this power of taxation uses it to say that one citizen shall have less
clothes in order that he may contribute to the profits of another citizen’s
private business.
31. Hence if we look at the nature of taxation, and if we are examining
protectionism from its own standpoint, under the assumption that it is true,
instead of finding any confirmation of its assumptions, in the nature of the
means which it proposes to use, we find the contrary. Granting that people
make mistakes and fail of the highest prosperity which they might win
when they act freely, we see plainly that more taxes cannot help to lift them
up or to correct their errors; on the contrary, all taxation, beyond what is
necessary for an economical administration of good government, is either

luxurious or wasteful, and if such taxation could tend to wealth, waste
would make wealth.

(D) Examination of the Plan of Mutual Taxation.
32. Suppose then that the industries and sections all begin to tax each
other as we see that they do under protection. Is it not plain that the taxing
operation can do nothing but transfer products, never by any possibility
create them? The object of the protective taxes is to “effect the diversion of
a part of the capital and labor of the country from the channels in which it
would run otherwise.” To do this it must find a fulcrum or point of reaction,
or it can exert no force for the effect it desires. The fulcrum is furnished by
those who pay the tax. Take a case. Pennsylvania taxes New England on
every ton of iron and coal used in its industries. Ohio taxes New England on
4
all the wool obtained from that state for its industries. New England taxes
Ohio and Pennsylvania on all the cottons and woolens which it sells to
them. What is the net final result? It is mathematically certain that the only
result can be that (1) New England gets back just all she paid (in which case
the system is nil, save for the expense of the process and the limitation it
imposes on the industry of all), or, (2) that New England does not get back
as much as she paid (in which case she is tributary to the others), or, (3) that
she gets back more than she paid (in which case she levies tribute on them).
Yet, on the protectionist notion, this system extended to all sections, and
embracing all industries, is the means of producing national prosperity.
When it is all done, what does it amount to except that all Americans must
support all Americans? How can they do it better than for each to support
himself to the best of his ability? Then, however, all the assumptions of
protectionism must be abandoned as false.
33. In 1676 King Charles II granted to his natural son, the Duke of
Richmond, a tax of a shilling a chaldron on all the coal which was exported
from the Tyne. We regard such a grant as a shocking abuse of the taxing
power. It is, however, a very interesting case because the mine owner and
the tax owner were two separate persons, and the tax can be examined in all
its separate iniquity. If, as I suppose was the case, the Tyne Valley possessed
such superior facilities for producing coal that it had a qualified monopoly,
the tax fell on the coal mine owner (landlord); that is, the king transferred to

his son part of the property which belonged to the Tyne coal owners. In that
view the case may come home to some of our protectionists as it would not
if the tax had fallen on the consumers. If Congress had pensioned General
Grant by giving him seventy-five cents a ton on all the coal mined in the
Lehigh Valley, what protests we should have heard from the owners of coal
lands in that district! If the king’s son, however, had owned the coal mines,
and worked them himself, and if the king had said: “I will authorize you to
raise the price of your coal a shilling a chaldron, and, to enable you to do it,
I will myself tax all coal but yours a shilling a chaldron,” then the device
would have been modern and enlightened and American. We have done just
that on emery, copper, and nickel. Then the tax comes out of the consumer.
Then it is not, according to the protectionist, harmful, but the key to
national prosperity, the thing which corrects the errors of our incompetent
self-will, and leads us up to better organization of our industry than we, in
our unguided stupidity, could have made.

(E) Examination of the Proposal to “Create an
Industry.”
34. The protectionist says, however, that he is going to create an
industry. Let us examine this notion also from his standpoint, assuming the
truth of his doctrine, and see if we can find anything to deserve confidence.
A protective tax, according to the protectionist’s definition (§ 13), “has for
its object to effect the diversion of a part of the labor and capital of the
people ... into channels favored or created by law.” If we follow out this
proposal, we shall see what those channels are, and shall see whether they
are such as to make us believe that protective taxes can increase wealth.
35. What is an industry? Some people will answer: It is an enterprise
which gives employment. Protectionists seem to hold this view, and they
claim that they “give work” to laborers when they make an industry. On
that notion we live to work; we do not work to live. But we do not want
work. We have too much work. We want a living; and work is the inevitable
but disagreeable price we must pay. Hence we want as much living at as
little price as possible. We shall see that the protectionist does “make work”
in the sense of lessening the living and increasing the price. But if we want
a living we want capital. If an industry is to pay wages, it must be backed

up by capital. Therefore protective taxes, if they were to increase the means
of living, would need to increase capital. How can taxes increase capital?
Protective taxes only take from A to give to B. Therefore, if B by this
arrangement can extend his industry and “give more employment,” A’s
power to do the same is diminished in at least an equal degree. Therefore,
even on that erroneous definition of an industry, there is no hope for the
protectionist.
36. An industry is an organization of labor and capital for satisfying
some need of the community. It is not an end in itself. It is not a good thing
to have in itself. It is not a toy or an ornament. If we could satisfy our needs
without it we should be better off, not worse off. How, then, can we create
industries?
37. If any one will find, in the soil of a district, some new power to
supply human needs, he can endow that district with a new industry. If he
will invent a mode of treating some natural deposit, ore or clay, for
instance, so as to provide a tool or utensil which is cheaper and more
convenient than what is in use, he can create an industry. If he will find out
some new and better way to raise cattle or vegetables, which is, perhaps,
favored by the climate, he can do the same. If he invents some new
treatment of wool, or cotton, or silk, or leather, or makes a new combination
which produces a more convenient or attractive fabric, he may do the same.
The telephone is a new industry. What measures the gain of it? Is it the
“employment” of certain persons in and about telephone offices? The gain
is in the satisfaction of the need of communication between people at less
cost of time and labor. It is useless to multiply instances. It can be seen what
it is to “create an industry.” It takes brains and energy to do it. How can
taxes do it?
38. Suppose that we create an industry even in this sense—What is the
gain of it? The people of Connecticut are now earning their living by
employing their labor and capital in certain parts of the industrial
organization. They have changed their “industries” a great many times. If it
should be found that they had a new and better chance hitherto
undeveloped, they might all go into it. To do that they must abandon what
they are now doing. They would not change unless gains to be made in the
new industry were greater. Hence the gain is the difference only between the
profits of the old and the profits of the new. The protectionists, however,

when they talk about “creating an industry,” seem to suppose that the total
profit of the industry (and some of them seem to think that the total
expenditure of capital) measures their good work. In any case, then, even of
a true and legitimate increase of industrial power and opportunity, the only
gain would be a margin. But, by our definition, “a protective duty has for its
object to effect the diversion of a part of the capital and labor of the people
out of the channels in which it would otherwise run.” Plainly this device
involves coercion. People would need no coercion to go into a new industry
which had a natural origin in new industrial power or opportunity. No
coercion is necessary to make men buy dollars at ninety-eight cents apiece.
The case for coercion is when it is desired to make them buy dollars at one
hundred and one cents apiece. Here the statesman with his taxing power is
needed, and can do something. What? He can say: “If you will buy a dollar
at one hundred and one cents, I can and will tax John over there two cents
for your benefit; one to make up your loss and the other to give you a
profit.” Hence, on the protectionist’s own doctrine, his device is not needed,
and cannot come into use, when a new industry is created in the true and
only reasonable sense of the words, but only when and because he is
determined to drive the labor and capital of the country into a
disadvantageous and wasteful employment.
39. Still further, it is obvious that the protectionist, instead of “creating
a new industry,” has simply taken one industry and set it as a parasite to
live upon another. Industry is its own reward. A man is not to be paid a
premium by his neighbors for earning his own living. A factory, an insane
asylum, a school, a church, a poorhouse, and a prison cannot be put in the
same economic category. We know that the community must be taxed to
support insane asylums, poorhouses, and jails. When we come upon such
institutions we see them with regret. They are wasting capital. We know
that the industrious people all about, who are laboring and producing, must
part with a portion of their earnings to supply the waste and loss of these
institutions. Hence the bigger they are the sadder they are.
40. As for the schools and churches, we know that society must pay for
and keep up its own conservative institutions. They cost capital and do not
pay back capital directly, although they do indirectly, and in the course of
time, in ways which we could trace out and verify if that were our subject.
Here, then, we have a second class of institutions.

41. But the factories and farms and foundries are the productive
institutions which must provide the support of these consuming institutions.
If the factories, etc., put themselves on a line with the poorhouses, or even
with the schools, what is to support them and all the rest too? They have
nothing behind them. If in any measure or way they turn into burdens and
objects of care and protection, they can plainly do it only by part of them
turning upon the other part, and this latter part will have to bear the burden
of all the consuming institutions, including the consuming industries. For a
protected factory is not a producing industry. It is a consuming industry! If
a factory is (as the protectionist alleges) a triumph of the tariff, that is, if it
would not be but for the tariff (and otherwise he has nothing to do with it),
then it is not producing; it is consuming. It is a burden to be borne. The
bigger it is the sadder it is.
42. If a protectionist shows me a woolen mill and challenges me to
deny that it is a great and valuable industry, I ask him whether it is due to
the tariff. If he says “no,” then I will assume that it is an independent and
profitable establishment, but in that case it is out of this discussion as much
as a farm or a doctor’s practice. If he says “yes,” then I answer that the mill
is not an industry at all. We pay sixty per cent tax on cloth simply in order
that that mill may be. It is not an institution for getting us cloth, for if we
went into the market with the same products which we take there now and
if there were no woolen mill, we should get all the cloth we want. The mill
is simply an institution for making cloth cost per yard sixty per cent more of
our products than it otherwise would. That is the one and only function
which the mill has added, by its existence, to the situation. I have called
such a factory a “nuisance.” The word has been objected to. The word is of
no consequence. He who, when he goes into a debate, begins to whine and
cry as soon as the blows get sharp, should learn to keep out. What I meant
was this: A nuisance is something which by its existence and presence in
society works loss and damage to the society—works against the general
interest, not for it. A factory which gets in the way and hinders us from
attaining the comforts which we are all trying to get—which makes harder
the terms of acquisition when we are all the time struggling by our arts and
sciences to make those terms easier—is a harmful thing, and noxious to the
common interest.

43. Hence, once more, starting from the protectionist’s hypothesis, and
assuming his own doctrine, we find that he cannot create an industry. He
only fixes one industry as a parasite upon another, and just as certainly as he
has intervened in the matter at all, just so certainly has he forced labor and
capital into less favorable employment than they would have sought if he
had let them alone. When we ask which “channels” those are which are to
be “favored or created by law,” we find that they are, by the hypothesis, and
by the whole logic of the protectionist system, the industries which do not
pay. The protectionists propose to make the country rich by laws which
shall favor or create these industries, but these industries can only waste
capital, so that if they are the source of wealth, waste is the source of
wealth. Hence the protectionist’s assumption that by his system he could
correct our errors and lead us to greater prosperity than we would have
obtained under liberty, has failed again, and we find that he wastes what
power we do possess.

(F) Examination of the Proposal to Develop our
Natural Resources.
44. “But,” says the protectionist, “do you mean to say that, if we have
an iron deposit in our soil, it is not wise for us to open and work it?” “You
mean, no doubt,” I reply, “open and work it under protective help and
stimulus; for, if there is an iron deposit, the United States does not own it.
Some man owns it. If he wants to open and work it, we have nothing to do
but wish him God-speed.” “Very well,” he says, “understand it that he needs
protection.” Let us examine this case, then, and still we will do it assuming
the truth of the protectionist doctrine. Let us see where we shall come out.
The man who has discovered iron (on the protectionist doctrine), when
there is no tax, does not collect tools and laborers and go to work. He goes
to Washington. He visits the statesman, and a dialogue takes place.
Iron man.—“Mr. Statesman, I have found an iron deposit on my farm.”
Statesman.—“Have you, indeed? That is good news. Our country is
richer by one new natural resource than we have supposed.”
Iron man.—“Yes, and I now want to begin mining iron.”

Statesman.—“Very well, go on. We shall be glad to hear that you are
prospering and getting rich.”
Iron man.—“Yes, of course. But I am now earning my living by tilling
the surface of the ground, and I am afraid that I cannot make as much at
mining as at farming.”
Statesman.—“That is indeed another matter. Look into that carefully
and do not leave a better industry for a worse.”
Iron man.—“But I want to mine that iron. It does not seem right to
leave it in the ground when we are importing iron all the time, but I cannot
see as good profits in it at the present price for imported iron as I am
making out of what I raise on the surface. I thought that perhaps you would
put a tax on all the imported iron so that I could get more for mine. Then I
could see my way to give up farming and go to mining.”
Statesman.—“You do not think what you ask. That would be
authorizing you to tax your neighbors, and would be throwing on them the
risk of working your mine, which you are afraid to take yourself.”
Iron man (aside).—“I have not talked the right dialect to this man. I
must begin all over again. (Aloud.) Mr. Statesman, the natural resources of
this continent ought to be developed. American industry must be protected.
The American laborer must not be forced to compete with the pauper labor
of Europe.”
Statesman.—“Now I understand you. Now you talk business. Why did
you not say so before? How much tax do you want?”
The next time that a buyer of pig iron goes to market to get some, he
finds that it costs thirty bushels of wheat per ton instead of twenty.
“What has happened to pig iron?” says he.
“Oh! haven’t you heard?” is the reply. “A new mine has been found
down in Pennsylvania. We have got a new ‘natural resource.’”
“I haven’t got a new ‘natural resource,’” says he. “It is as bad for me as
if the grasshoppers had eaten up one-third of my crop.”
45. That is just exactly the significance of a new resource on the
protectionist doctrine. We had the misfortune to find emery here. At once a

tax was put on it which made it cost more wheat, cotton, tobacco,
petroleum, or personal services per pound than ever before. A new calamity
befell us when we found the richest copper mines in the world in our
territory. From that time on it cost us five (now four) cents a pound more
than before. By another catastrophe we found a nickel mine—thirty cents
(now fifteen) a pound tax! Up to this time we have had all the tin that we
wanted above ground, because beneficent nature has refrained from putting
any underground in our territory. In the metal schedule, where the metals
which we unfortunately possess are taxed from forty to sixty per cent, tin
alone is free. Every little while a report is started that tin has been found.
Hitherto these reports have happily all proved false. It is now said that tin
has been found in West Virginia and Dakotah. We have reason devoutly to
hope that this may prove false, for, if it should prove true, no doubt the next
thing will be forty per cent tax on tin. The mine-owners say that they want
to exploit the mine. They do not. They want to make the mine an excuse to
exploit the taxpayers.
46. Therefore, when the protectionist asks whether we ought not by
protective taxes to force the development of our own iron mines, the answer
is that, on his own doctrine, he has developed a new philosophy, hitherto
unknown, by which “natural resources” become national calamities, and the
more a country is endowed by nature the worse off it is. Of course, if the
wise philosophy is not simply to use, with energy and prudence, all the
natural opportunities which we possess, but to seek “channels favored or
created by law,” then this view of natural resources is perfectly consistent
with that philosophy, for it is simply saying over again that waste is the key
of wealth.

(G) Examination of the Proposal to Raise Wages.
47. “But,” he says again, “we want to raise wages and favor the poor
working man.” “Do you mean to say,” I reply, “that protective taxes raise
wages—that that is their regular and constant effect?” “Yes,” he replies,
“that is just what they do, and that is why we favor them. We are the poor
man’s friends. You free-traders want to reduce him to the level of the pauper
laborers of Europe.” “But here, in the evidence offered at the last tariff
discussion in Congress, the employers all said that they wanted the taxes to

protect them because they had to pay such high wages.” “Well, so they do.”
“Well then, if they get the taxes raised to help them out when they have
high wages to pay, how are the taxes going to help them any unless the
taxes lower wages? But you just said that taxes raise wages. Therefore, if
the employer gets the taxes raised, he will no sooner get home from
Washington than he will find that the very taxes which he has just secured
have raised wages. Then he must go back to Washington to get the taxes
raised to offset that advance, and when he gets home again he will find that
he has only raised wages more, and so on forever. You are trying to teach
the man to raise himself by his boot straps. Two of your propositions
brought together eat each other.”
48. We will, however, pursue the protectionist doctrine of wages a little
further. It is totally false that protective taxes raise wages. As I will show
further on (§ 91 and following), protective taxes lower wages. Now,
however, I am assuming the protectionist’s own premises and doctrines all
the time. He says that his system raises wages. Let us go to see some of the
wages class and get some evidence on this point. We will take three wage-
workers, a boot man, a hat man, and a cloth man. First we ask the boot man,
“Do you win anything by this tariff?” “Yes,” he says, “I understand that I
do.” “How?” “Well, the way they explain it to me is that when anybody
wants boots he goes to my boss, pays him more on account of the tax, and
my boss gives me part of it.” “All right! Then your comrades here, the hat
man and the cloth man, pay this tax in which you share?” “Yes, I suppose
so. I never thought of that before. I supposed that rich people paid the taxes,
but I suppose that when they buy boots they must do it too.” “And when
you want a hat you go and pay the tax on hats, part of which (as you explain
the system) goes to your friend the hat man; and when you want cloth you
pay the tax which goes to benefit your friend the cloth man?” “I suppose
that it must be so.” We go, then, to see the hat man and have the same
conversation with him, and we go to see the cloth man and have the same
conversation with him. Each of them then gets two taxes and pays two
taxes. Three men illustrate the whole case. If we should take a thousand
men in a thousand industries we should find that each paid nine hundred
and ninety-nine taxes, and each got nine hundred and ninety-nine taxes, if
the system worked as it is said to work. What is the upshot of the whole?
Either they all come out even on their taxes paid and received, or some of
the wage receivers are winning something out of other wage receivers to the

net detriment of the whole class. If each man is creditor for nine hundred
and ninety-nine taxes, and each debtor for nine hundred and ninety-nine
taxes, and if the system is “universal and equal,” we can save trouble by
each drawing nine hundred and ninety-nine orders on the creditors to pay to
themselves their own taxes, and we can set up a clearing house to wipe off
all the accounts. Then we come down to this as the net result of the system
when it is “universal and equal,” that each man as a consumer pays taxes to
himself as a producer. That is what is to make us all rich. We can
accomplish it just as well and far more easily, when we get up in the
morning, by transferring our cash from one pocket to the other.
49. One point, however, and the most important of all, remains to be
noticed. How about the thousandth tax? How is it when the boot man wants
boots, and the hat man hats, and the cloth man cloth? He has to go to the
store on the street and buy of his own boss, at the market price (tax on), the
very things which he made himself in the shop. He then pays the tax to his
own employer, and the employer, according to the doctrine, “shares” it with
him. Where is the offset to that part which the employer keeps? There is
none. The wages class, even on the protectionist explanation, may give or
take from each other, but to their own employers they give and take not. At
election time the boss calls them in and tells them that they must vote for
protection or he must shut up the shop, and that they ought to vote for
protection, because it makes their wages high. If, then, they believe in the
system, just as it is taught to them, they must believe that it causes him to
pay them big wages, out of which they pay back to him big taxes, out of
which he pays them a fraction back again, and that, but for this
arrangement, the business could not go on at all. A little reflection shows
that this just brings up the question for a wage-earner: How much can I
afford to pay my boss for hiring me? or, again, which is just the same thing
in other words: What is the net reduction of my wages, below the market
rate under freedom, which results from this system? (See § 65.)
50. Let it not be forgotten that this result is reached by accepting
protectionism and reasoning forward from its doctrines and according to its
principles. In truth, the employees get no share in any taxes which the boss
gets out of them and others (see § 91 ff. for the truth about wages). Of
course, when this or any other subject is thoroughly analyzed, it makes no
difference where we begin or what line we follow, we shall always reach

the same result if the result is correct. If we accept the protectionist’s own
explanation of the way in which protection raises wages we find that it
proves that protection lowers wages.

(H) Examination of the Proposal to Prevent
Competition by Foreign Pauper Labor.
51. The protectionist says that he does not want the American laborer to
compete with the foreign “pauper laborer” (see § 99). He assumes, that if
the foreign laborer is a woolen operative, the only American who may have
to compete with him is a woolen operative here. His device for saving our
operatives from the assumed competition is to tax the American cotton or
wheat grower on the cloth he wears, to make up and offset to the woolen
operative the disadvantage under which he labors. If then, the case were
true as the protectionist states it, and if his remedy were correct, he would,
when he had finished his operation, simply have allowed the American
woolen operative to escape, by transferring to the American cotton or wheat
grower the evil results of competition with “foreign pauper labor.”

(I) Examination of the Proposal to raise the
Standard of Public Comfort.
52. But the protectionist reiterates that he wants to make our people
well off, and to diffuse general prosperity, and he says that his system does
this. He says that the country has prospered under protection and on account
of it. He brings from the census the figures for increased wealth of the
country, and, to speak of no minor errors, draws an inference that we have
prospered more than we should have done under free trade, which is what
he has to prove, without noticing that the second term of the comparison is
absent and unattainable. In the same manner I once heard a man argue from
statistics, who showed by the small loss of a city by fire that its fire
department cost too much. I asked him if he had any statistics of the fires
which we should have had but for the fire department (see § 102).
53. The people of the United States have inherited an untouched
continent. The now living generation is practicing bonanza farming on
prairie soil which has never borne a crop. The population is only fifteen to

the square mile. The population of England and Wales is four hundred and
forty-six to the square mile; that of the British Islands two hundred and
ninety; that of Belgium four hundred and eighty-one; of France one hundred
5
and eighty; of Germany two hundred and sixteen. Bateman estimates that
in the better part of England or Wales a peasant proprietor would need from
four and a half to six acres, and, in the worse part, from nine to forty-five
acres on which to support “a healthy family.” The soil of England and
Wales, equally divided between the families there, would give only seven
acres apiece. The land of the United States, equally divided between the
families there, would give two hundred and fifteen acres apiece. These old
nations give us the other term of the comparison by which we measure our
prosperity. They have a dense population on a soil which has been used for
thousands of years; we have an extremely sparse population on a virgin soil.
We have an excellent climate, mountains full of coal and ore, natural
highways on the rivers and lakes, and a coast indented with sounds, bays,
and some of the best harbors in the world. We have also a population of
good national character, especially as regards the economic and industrial
virtues. The sciences and arts are highly cultivated among us, and our
institutions are the best for the development of economic strength. As
compared with old nations we are prosperous. Now comes the protectionist
statesman and says: “The things which you have enumerated are not the
causes of our comparative prosperity. Those things are all vain. Our
prosperity is not due to them. I made it with my taxes.”
54. (a) In the first place the fact is that we surpass most in prosperity
those nations which are most like us in their tax systems, and those
compared with whom our prosperity is least remarkable are those which
have by free trade offset as much as possible the disadvantage of age and
dense population. Since, then, we find greatest difference in prosperity with
least difference in tax, and least difference in prosperity with greatest
difference in tax, we cannot regard tax as a cause of prosperity, but as an
obstacle to prosperity which must have been overcome by some stronger
cause. That such is the case lies plainly on the face of the facts. The
prosperity which we enjoy is the prosperity which God and nature have
given us minus what the legislator has taken from it.
55. (b) We prospered with slavery just as we have prospered with
protection. The argument that the former was a cause would be just as

strong as the argument that the lattes is a cause.
56. (c) The protectionists take to themselves as a credit all the advance
in the arts of the last twenty-five years, because they have not entirely offset
it and destroyed it.
57. (d) The protectionists claim that they have increased our wealth. All
the wealth that is produced must be produced by labor and capital applied to
land. The people have wrought and produced. The tax gatherer has only
subtracted something. Whether he used what he took well or ill, he
subtracted. He could not do anything else. Therefore, whatever wealth we
see about us, and whatever wealth appears in the census is what the people
have produced, less what the tax gatherer has taken out of it.
58. (e) If the members of Congress can establish for themselves some
ideal of the grade of comfort which the average American citizen ought to
enjoy, and then just get it for him, they have used their power hitherto in a
very beggarly manner. For, although the average status of our people is high
when compared with that of other people on the globe, nevertheless, when
compared with any standard of ideal comfort, it leaves much to be desired.
If Congress has the power supposed, they surely ought not to measure the
exercise of it by only making us better off than Europeans.
59. (f) During the late presidential campaign the protectionist orators
assured the people that they meant to make everybody well off, that they
wished our people to be prosperous, contented, etc. I wish so too. I wish
that all my readers may be millionaires. I freely and sincerely confer on
them all the bounty of my good wishes. They will not find a cent more in
their pockets on that account. The congressmen have no power to bless my
readers which I have not, save one; that is, the power to tax them.
60. (g) If the congressmen are determined to elevate the comfort of the
population by taxing the population, then every new ship load of
immigrants must be regarded as a new body of persons whom we must
“elevate” by the taxes we have to pay. It is said that an Irishman affirmed
that a dollar in America would not buy more than a shilling in Ireland. He
was asked why then he did not stay in Ireland. He replied that it was
because he could not get the shilling there. That is a good story, only it
stops just where it ought to begin. The next question is: How does he get the
dollar when he comes to America? The protectionist wants us to suppose

that he gets it by grace of the tariff. If so he gets it out of those who were
here before he came. But plainly no such thing is true. He gets it by earning
it, and he adds two dollars to the wealth of the country while earning it. The
only thing the tariff does in regard to it is to lower the purchasing power of
the dollar, if it is spent for products of manufacture, to seventy cents.
61. Here, again, then, we find that protective taxes, if they do just what
the protectionist says that they will do, produce the very opposite effects
from those which he says they will produce. They lessen wealth, reduce
prosperity, diminish average comfort, and lower the standard of living. (See
§ 30.)

Chapter III

PROTECTIONISM EXAMINED ADVERSELY

62. I have so far examined protectionism as a philosophy of national
wealth, assuming and accepting its own doctrines, and following them out,
to see if they will issue as is claimed. We have found that they do not, but
that protectionism, on its own doctrines, issues in the impoverishment of the
nation and in failure to do anything which it claims to do. On the contrary,
an examination in detail of its means, methods, purposes, and plans shows
that it must produce waste and loss, so that if it were true, we should have to
believe that waste and loss are means of wealth. Now I turn about to attack
it in face, on an open issue, for if any project which is advocated proves,
upon free and fair examination, to be based on errors of fact and doctrine, it
becomes a danger and an evil to be exposed and combated, and truth of fact
and doctrine must be set against it.

1. PROTECTIONISM INCLUDES AND
NECESSARILY CARRIES WITH IT HOSTILITY TO
TRADE OR, AT LEAST, SUSPICION AGAINST
TRADE

(A) Rules for Knowing when it is Safe to Trade.
63. Every protectionist is forced to regard trade as a mischievous or at
least doubtful thing. Protectionists have even tried to formulate rules for
determining when trade is beneficial and when harmful.
64. It has been said that we ought to trade only on meridians of
longitude, not on parallels of latitude.
65. It has been affirmed that we cannot safely trade unless we have
taxes to exactly offset the lower wages of foreign countries. But it is plain
that if the case stands so that an American employer says: “I am at a
disadvantage compared with my foreign competitor, because he pays less
wages than I”—then, by the same token, the American laborer will say: “I
am at an advantage, compared with my foreign comrade, for I get better
wages than he.” If the law interferes with the state of things so that the
employer is enabled to say: “I am now at less disadvantage in competition
with my foreign rival, because I do not now have to pay as much more
wages than he as formerly”—then, by the same token, the American laborer
must say: “I am not now as much better off than my foreign comrade as
formerly, for I do not now gain as much more than he as I did—there is not
now as much advantage in emigrating to this country as formerly.”
Therefore, whenever the taxes just offset the difference in wages, they just
take away from the American laborer all his superiority over the foreigner,
and take away all reason for caring to come to this country. So much for the
laborer. But the employer, if he has arrested immigration, has cut off one
source of the supply of labor, tending to raise wages, and is at war with
himself again (§ 47).
66. It has been said that two nations cannot trade if the rate of interest
in the two differs by two per cent. The rate of interest in the Atlantic States
and in the Mississippi Valley has always differed by two per cent, yet they
have traded together under absolute free trade, and the Mississippi Valley
has had to begin a wilderness and grow up to the highest standard of
civilization in spite of that state of things.
67. It has been said that we ought to trade only with inferior nations.
The United States does not trade with any other nation, save when it buys
territory. A in the United States trades with B in some foreign country. If I
want caoutchouc I want to trade with a savage in the forests of South

America. If I want mahogany I want to trade with a man in Honduras. If I
want sugar I want to trade with a man in Cuba. If I want tea I want to trade
with a man in China. If I want silk or champagne I want to trade with a man
in France. If I want a razor I want to trade with a man in England. I want to
trade with the man who has the thing which I want of the best quality and at
the lowest rate of exchange for my products. What is the definition or test
of an “inferior nation,” and what has that got to do with trade any more than
the race, language, color, or religion of the man who has the goods?
68. If trade was an object of suspicion and dread, then indeed we ought
to have rules for distinguishing safe and beneficial trade from mischievous
trade, but these attempts to define and discriminate only expose the folly of
the suspicion. We find that the primitive men who dwelt in caves in the
glacial epoch carried on trade. The earliest savages made footpaths through
the forests by which to traffic and trade, winning thereby mutual
advantages. They found that they could supply more wants with less effort
by trade, which gave them a share in the natural advantages and acquired
skill of others. They trained beasts of burden, improved roads, invented
wagons and boats, all in order to extend and facilitate trade. They were
foolish enough to think that they were gaining by it, and did not know that
they needed a protective tariff to keep them from ruining themselves. Or,
why does not some protectionist sociologist tell us at what stage of
civilization trade ceases to be advantageous and begins to need restraint and
regulation?

(B) Economic Units not National Units.
69. The protectionists say that their system advances civilization inside
a state and makes it great, but the facts are all against them (see § 136ff). It
was by trade that civilization was extended over the earth. It was through
the contact of trade that the more civilized nations transmitted to others the
alphabet, weights and measures, knowledge of astronomy, divisions of time,
tools and weapons, coined money, systems of numeration, treatment of
metals, skins, and wool, and all the other achievements of knowledge and
invention which constitute the bases of our civilization. On the other hand,
the nations which shut themselves up and developed an independent and
self-contained civilization (China and Japan) present us the types of

arrested civilization and stereotyped social status. It is the penalty of
isolation and of withdrawal from the giving and taking which properly bind
the whole human race together, that even such intelligent and highly
endowed people as the Chinese should find their high activity arrested at
narrow limitations on every side. They invent coin, but never get beyond a
cast copper coin. They invent gunpowder, but cannot make a gun. They
invent movable types, but only the most rudimentary book. They discover
the mariner’s compass, but never pass the infancy of ship-building.
70. The fact is, then, that trade has been the handmaid of civilization. It
has traversed national boundaries, and has gradually, with improvement in
the arts of transportation, drawn the human race into closer relations and
more harmonious interests. The contact of trade slowly saps old national
prejudice and religious or race hatreds. The jealousies which were
perpetuated by distance and ignorance cannot stand before contact and
knowledge. To stop trade is to arrest this beneficent work, to separate
mankind into sections and factions, and to favor discord, jealousy, and war.
71. Such is the action of protectionism. The protectionists make much
of their pretended “nationalism,” and they try to reason out some kind of
relationship between the scope of economic forces and the boundaries of
existing nations. The argumentation is fatally broken at its first step. They
do not show what they might show, viz., that the scope of economic forces
on any given stage of the arts does form economic units. An English county
was such a unit a century ago. I doubt if anything less than the whole earth
could be considered so to-day, when the wool of Australia, the hides of
South America, the cotton of Alabama, the wheat of Manitoba, and the meat
of Texas meet the laborers in Manchester and Sheffield, and would meet the
laborers in Lowell and Paterson, if the barriers were out of the way. But
what the national protectionist would need to show would be that the
economic unit coincides with the political unit. He would have to affirm
that Maine and Texas are in one economic unit, but that Maine and New
Brunswick are not; or that Massachusetts and Minnesota are in one
economic unit, but that Massachusetts and Manitoba are not. Every existing
state is a product of historic accidents. Mr. Jefferson set out to buy the city
of New Orleans. He awoke one morning to find that he had bought the
western half of the Mississippi Valley. Since that turned out so, the
protectionists think that Missouri and Illinois prosper by trading in perfect

6
freedom. If it had not turned out so, it would have been very mischievous
for them to trade in perfect freedom. Nova Scotia did not join the revolt of
our thirteen colonies. Hence it is thought ruinous to let coal and potatoes
come in freely from Nova Scotia. If she had revolted with us, it would have
been for the benefit of everybody in this union to trade with her as freely as
we now trade with Maine. We tried to conquer Canada in 1812–1813 and
failed. Consequently the Canadians now put taxes on our coal and
petroleum and wheat, and we put taxes on their lumber, which our coal and
petroleum industries need. We did annex Texas, at the cost of war, in 1845.
Consequently we trade with Texas now under absolute freedom, but, if we
trade with Mexico, it must be only very carefully and under stringent
limitations. Is this wisdom, or is it all pure folly and wrongheadedness, by
7
which men who boast of their intelligence throw away their own chances?
72. Trade is a beneficent thing. It does not need any regulation or
restraint. There is no point at which it begins to be dangerous. It is mutually
beneficent. If it ceases to be so, it ceases entirely, because he who no longer
gains by it will no longer carry it on. (See § 125.)

2. PROTECTIONISM IS AT WAR WITH
IMPROVEMENT.
73. The cities of Japan are built of very combustible material, and when
a fire begins it is rarely arrested until the city is destroyed. It was suggested
that a steam fire-engine would there reach its maximum of utility. One was
imported and proved very useful on several occasions. Thereupon the
carpenters got up a petition to the government to send the fire-engine away,
because it ruined their business.
74. The instance is grotesque and exaggerated, but it is strictly true to
the principle of protectionism. The southern counties of England, a century
ago, protested against the opening of the great northern turnpike, because
that would bring the products of the northern counties to the London
market, of which the southern counties had had a monopoly. After the St.
Gothard tunnel was opened the people of southern Germany petitioned the
Government to lay higher taxes on Italian products to offset the cheapness
which the tunnel had produced. In 1837 the first two steamers which ever

made commercial voyages across the Atlantic arrived at the same time. A
grand celebration was held in New York. The foolish people rejoiced as if a
new blessing had been won. Man had won a new triumph over nature. What
was the gain of it? It was that he could satisfy his needs with less labor than
before; or, in plain language, get things cheaper. But in 1842 a Home
Industry Convention was held in New York, at which it was alleged as the
prime reason why more taxes were needed, that this steam transportation
8
had made things cheap here. Taxes were needed to neutralize the
improvement.

(A) Taxes to Offset Cheapened Transportation.
75. For the last twenty-five years, to go no farther back, we have
multiplied inventions to facilitate transportation. Ocean cables, improved
marine engines, and screw steamers, have been only improved means of
supplying the wants of people on two continents more abundantly with the
products each of the other. The scientific journals and the daily papers boast
of every step in this development as a thing to be proud of and rejoice in,
but in the meantime the legislators on both sides of the water are hard at
work to neutralize it by taxation. We, in the United States, have multiplied
monstrous taxes on all the things which others make and which we want, to
prevent them from being brought to us. The statesmen of the European
continent are laying taxes on our meat and wheat, lest they be brought to
their people. The arts are bringing us together; the taxes are needed to keep
us apart. In France, for instance, the agriculturist complains of American
competition—not “pauper labor,” but gratuitous soil and sunlight. He does
not want the French artisan to have the benefit of our prairie soil. The
government yields to him and lays a tax on our meat and wheat. This raises
the price of bread in Paris, where the reconstruction of the city has collected
a large artisan population. The government then finds itself driven to fix the
price of bread in Paris, to keep it down. But the reconstruction of the city
was accomplished by contracting a great debt, which means heavy taxes.
These taxes drive the population out into the suburbs. At least one voice has
been raised by an owner of city property that a tax ought to be laid on
9
suburban residents to drive them back to the city, and not let them escape
the efforts of the city landlord to throw his taxes on them. Then, again,

France has been subsidizing ships, and when the question of renewing the
subsidy came up, it was argued that the ships subsidized at the expense of
the French taxpayer had lowered freight on wheat and made wheat cheap;
that is, as somebody justly replied, had wrought the very mischief against
which the increased tax had just been demanded on wheat. Therefore the
taxpayer had been taxed first to make wheat cheap, and then again to make
it dear.
76. Tax A to favor B. If A complains, tax C to make it up to A. If C
complains, tax B to favor C. If any of them still complain, begin all over
again. Tax them as long as anybody complains, or anybody wants anything.
This is the statesmanship of the last quarter of the nineteenth century.
77. Bismarck, too, is going into the business. He has to rule a people
who live on a poor soil and have to bear a crushing military system. The
consequence is that the population is declining. Emigration exceeds the
natural increase. Bismarck’s cure for it is to lay protective taxes against
American pork and wheat and rye. This will protect the German
agriculturist. If it lowers still more the comfort of the buyers of food, and
drives more of them out of the country, then he will go and buy or fight for
colonies at the expense of the German agriculturists whom he has just
“protected,” although the surplus population of Germany has been taking
itself away for thirty years without asking help or giving trouble. What can
Germany gain by diverting her emigrants to her own colony unless she
means to bring the able-bodied men back to fight her battles? If she means
that, the emigrants will not go to her colony.
78. France is also reviving the old colonial policy with discriminating
favors and compensatory restraints. She already owns a possession in
Algeria, which is the best example of a colony for the sake of a colony. It
has been asserted in the French Chambers that each French family now in
10
Algeria has cost the Government (i.e., the French taxpayer) 25,000 francs.
The longing of these countries for “colonies” is like the longing of a negro
dandy for a cane or a tall hat so as to be like the white gentlemen.

(B) Sugar Bounties.

79. The worst case of all, however, is sugar. The protectionists long
boasted of beet-root sugar as a triumph of their system. It is now an industry
in which an immense amount of capital is invested on the Continent, but
cheap transportation for cane sugar, and improvements in the treatment of
the latter, are constantly threatening it. Mention is made in Bradstreet’s for
June 28, 1885, of a very important improvement in the treatment of cane
which has just been invented at Berlin. Germany has an excise tax on beet-
root sugar, but allows a drawback on it when exported which is greater than
the tax. This acts as a bounty paid by the German taxpayer on the
exportation. Consequently, beet-root sugar has appeared even in our market.
The chief market for it, however, is England. The consequence is that the
sugar, which is nine cents a pound in Germany, and seven cents a pound
here, is five cents a pound in England, and that the annual consumption of
11
sugar per head in the three countries is as follows: England, sixty-seven
and a half pounds; United States, fifty-one pounds; Germany, twelve
pounds. I sometimes find it difficult to make people understand the
difference between wanting an “industry” and wanting goods, but this case
ought to make that distinction clear. Obviously the Germans have the
industry and the Englishmen have the sugar.
80. No sooner, however, does Germany get her export bounty in good
working order than the Austrian sugar refiners besiege their government to
know whether Germany is to have the monopoly of giving sugar to the
12
Englishmen. They get a bounty and compete for that privilege. Then the
French refiners say that they cannot compete, and must be enabled to
compete in giving sugar to the Englishmen. I believe that their case is under
favorable consideration.
80a. I have found it harder (as is usually the case) to get recorded
information about the trade and industry of our own country than about
those of foreign nations. However, we too, although we do not raise beet-
sugar, have our share in this bounty folly, as may be seen by the following
13
statement, which comes to hand just in time to serve my purpose. “The
export of refined sugar [from the United States] is entirely confined to hard
sugars, or, to be more explicit, loaf, crushed, and granulated. This is
because the drawback upon this class of sugar is so large that refiners are
enabled to sell them at less than cost. The highest collectable duty upon

sugar testing as high as 99° is but 2.36, but the drawback upon granulated
testing the same, and in the case of crushed and loaf less, is 2.82 less 1 per
cent. This is exactly 43 cents per one hundred pounds more than the
government receives in duty. But it rarely happens that raw sugar is
imported testing 99°, and never for refining purposes. The following table
gives the rates of duty upon the average grades used in refining:

Degrees Duty
Fair refining testing 89 1.96
Fair refining testing 90 2.00
Centrifugal testing 96 2.28
Beet-sugar testing 88 1.92

It will be clearly seen from the above figures that with a net drawback upon
hard sugar of 2.79 our refiners are able to sell to foreigners, through the
assistance of our Treasury, sugar at less than cost. Taking, for instance, the
net price of centrifugal testing only 97° and the net price less drawback of
granulated:

Centrifugal raw sugar testing 97° 6.00
Less duty 2.28
Net 3.72
Granulated refined testing 99° 6.37½
Less drawback 2.71
Net 3.66½
6½

Nothing could demonstrate the absurdity of the present rate of drawback
more clearly than the above. A refiner pays 6½ cents per hundred more for
raw sugar testing 2° less saccharine than he sells refined for. Not, however,
to the American consumers, but to foreigners. After paying the expenses
necessary to refining by the assistance of a drawback, which clearly
amounts to a subsidy of about 50 cents a hundred pounds, our large sugar
monopolists are assisted by the government to increase the cost of sugar to
American consumers. One firm controls almost the entire trade of the east;
at all events it is safe to say that the trade of the entire country is controlled

by three firms, and the Treasury assists this monopoly in sustaining prices
against the interest of the country at large. Up to date the exports of refined
sugar have amounted to 83,340 tons, which, taken at 50 cents a hundred,
has cost the treasury over $830,000. All this may not have gone into the
pockets of the refiners, as the ship owners have obtained a share, but the
fact remains that the Treasury is the loser by this amount. Besides this
bounty presses hard upon the consumers. They not only have to pay the tax,
but during the late rise they were compelled to pay more for their sugar than
they otherwise would have done had not the export demand caused by
selling sugar to foreigners at less than cost, the Treasury paying the
difference, increased prices. While an American consumer is charged 6½
cents for granulated, foreign buyers, through the liberality of our
government, can buy it under 3¾ cents. Certainly it is time that the
Secretary of the Treasury asked the sugar commission to commence a
comprehensive and impartial inquiry.”
81. Of course the story would not be complete if the English refiners
did not besiege their government for a tax to keep out this maleficent gift of
foreign taxpayers. This, say they, is not free trade. This is protection turned
the other way around. We might hold our own on an equal footing, but we
cannot contend against a subsidized industry. A superficial thinker might
say that this protest was conclusive. The English government set on foot an
investigation, not of the sugar refining, but of those other interests which
were in danger of being forgotten. There was a tariff investigation which
was worth something and was worthy of an enlightened government. It was
found that the consumers of sugar had gained more than all the wages paid
in sugar refining. But, on the side of the producers, it was found that 6,000
persons are employed and 45,000 tons of sugar are used annually in the
neighborhood of London in manufacturing jam and confectionery. In
Scotland there are eighty establishments, employing over 4,000 people and
using 35,000 tons of sugar per annum in similar industries. In the whole
United Kingdom, in those industries, 100,000 tons of sugar are used and
12,000 people are employed, three times as many as in sugar refining.
Within twenty years the confectionery trade of Scotland has quadrupled and
the preserving trade—jam and marmalade—has practically been originated.
In addition, refined sugar is a raw material in biscuit making and the
manufacture of mineral waters, and 50,000 tons are used in brewing and
distilling. Hence the Economist argues (and this view seems to have

controlled the decision): “It may be that the gain which we at present realize
from the bounties may not be enduring, as it is impossible to believe that
foreign nations will go on taxing themselves to the extent of several
millions a year in order to supply us and others with sugar at less than its
fair price, but that is no reason for refusing to avail ourselves of their
14
liberality so long as it does last.” (See § 83, note.)
82. One point in this case ought not to be lost sight of. If the English
government had yielded to the sugar refiners without looking further, all
these little industries which are mentioned, and which in their aggregate are
so important, would have been crushed out. Ten years later they would have
been forgotten. It is from such an example that one must learn to form a
judgment as to the effect of our tariff in crushing out industries which are
now lost and gone, and cannot even be recalled for purposes of controversy,
but which would spring into existence again if the repeal of the taxes should
give them a chance.
83. On our side the water efforts have been made to get us into the
sugar struggle by the proposed commercial treaties with Spain and England,
which would in effect have extended our protective tariff around Cuban and
15
English West Indian sugar. The sugar consumers of the United States were
to pay to the Cuban planters the twenty-five million dollars revenue which
they now pay to the treasury on Cuban sugar, on condition that the Cubans
should bring back part of it and spend it among our manufacturers. It was a
new extension of the plan of taxing some of us for the benefit of others of
us. Let it be noticed, too, that when it suited their purpose, the protectionists
were ready to sacrifice the sugar industry of Louisiana without the least
concern. We have been trying for twenty-five years to secure the home
market and keep everybody else out of it. As soon as we get it firmly shut,
so that nobody else can get in, we find that it is a question of life and death
with us to get out ourselves. The next device is to tax Americans in order to
go and buy a piece of the foreign market. At the last session of Congress
Senator Cameron proposed to allow a drawback on raw materials used in
exported products. On that plan the American manufacturer would have two
costs of production, one when he was working for the home market, and
another much lower one when working for the foreign market. As it is now,
the exports of manufactured products, of which so much boasting is heard,
are for the most part articles sold abroad lower than here so as not to break

down the home monopoly market. The proposed plan would raise that to a
system, and we should be giving more presents to foreigners.
84. To return to sugar, our treaty with the Sandwich Islands has
produced anomalous and mischievous results on the Pacific coast. In the
southern Pacific New Zealand is just going into the plan of bounties and
16
protection on sugar. It would not, therefore, be very bold to predict a
worldwide catastrophe in the sugar industry within five years.
85. Now what is it all for? What is it all about? Napoleon Bonaparte
began it in a despotic whim, when he determined to force the production of
beet-root sugar to show that he did not care for the supremacy of England at
sea which cut him off from the sugar islands. In order not to lose the capital
engaged in the industry, protection was continued. But this led to putting
more capital into it and further need of protection. The problem has
tormented financiers for seventy-five years. There are two natural products,
of which the cane is far richer in sugar. But the processes of the beet-sugar
industry have been improved, until recently, far more rapidly than those of
the cane industry. Then the refining is a separate interest. If, then, a country
has cane-sugar colonies which it wants to protect against other colonies,
and a beet-sugar industry which it wants to protect against neighbors who
produce beet-sugar, and refiners to be protected against foreign refiners, and
if the relations of its own colonial cane-sugar producers to its own domestic
beet-sugar producers must be kept satisfactorily adjusted, in spite of
changes in processes, transportation, and taxation, and if it wants to get a
revenue from sugar, and to use the colonial trade to develop its shipping,
and if it has two or three commercial treaties in which sugar is an important
item, the statesman of that country has a task like that of a juggler riding
several horses and keeping several balls in motion. Sugar is the commodity
on which the effects of a world-embracing commerce, produced by modern
inventions, are most apparent, and it is the commodity through which all the
old protectionist anti-commercial doctrines will be brought to the most
decisive test.

(C) Forced Foreign Relations to Regulate
Improvement which can no Longer be Defeated.

86. If we turn back once more to our own case, we note the rise in
1883–1884 of the policy of commercial treaties and of a “vigorous foreign
policy.” For years a “national policy” for us has meant “securing the home
market.” The perfection of this policy has led to isolation and ostentatious
withdrawal from cosmopolitan interests. I may say that I do not write out of
any sympathy with vague humanitarianism or cosmopolitan sentiments. It
seems to me that local groupings have great natural strength and obvious
utility so long as they are subdivisions of a higher organization of the
human race, or so long as they are formed freely and their relations to each
other are developed naturally. But now suddenly rises a clap-trap demand
for a “national policy,” which means that we shall force our way out of our
tax-created isolation by diplomacy or war. The effort, however, is to be
restrained carefully and arbitrarily to the western hemisphere, and we have
anxiously disavowed any part or lot in the regulation of the Congo,
although we shall certainly some day desire to take our share in the trade of
that district. Our statesmen, however, if they are going to let us have any
foreign trade, cannot bear to let us go and take it where we shall make most
by it. They must draw a priori lines for it. They have taxed us in order to
shut us up at home. This has killed the carrying trade, for, if we decided not
to trade, what could the shippers find to do? Next ship-building perished,
for if there was no carrying trade why build ships, especially when the taxes
to protect manufactures were crushing ships and commerce? (§ 101.) Next
the navy declined, for with no commerce to protect at sea, we need no navy.
Next we lost the interest which we took thirty years ago in a canal across
the isthmus, because we have now, under the no-trade policy, no use for it.
Next diplomacy became a sinecure, for we have no foreign relations.
87. Now comes the “national policy,” not because it is needed, but as
an artificial and inflated piece of political bombast. We are to galvanize our
diplomacy by contracting commercial treaties and meddling in foreign
quarrels. No doubt this will speedily make a navy necessary. In fact our
proposed “American policy” is only an old, cast-off, eighteenth-century,
John Bull policy, which has forced England to keep up a big army, a big
navy, heavy debt, heavy taxes, and a constant succession of little wars.
Hence we shall be taxed some more to pay for a navy. Then it is proposed
to tax us some more to pay for canals through which the navy can go. Then
we are to be taxed some more to subsidize merchant ships to go through the
canal. Then we are to be taxed some more to subsidize voyages, i.e., the

carrying trade. Then we are to be taxed some more to provide the ships with
cargoes (§ 83).
88. All this time, the whole West Indian, Mexican, and Central and
South American trade is ours if we will only stand out of the way and let it
come. It is ours by all geographical and commercial advantage, and would
have been ours since 1825 if we had but taken down the barriers. Instead of
that we propose to tax ourselves some more to lift it over the barriers. Take
the taxes off goods, let exchange go on, and the carrying trade comes as a
consequence. If we have goods to carry, we shall build or buy ships in
which to carry them. If we have merchant ships, we shall need and shall
keep up a suitable navy. If we need canals, we shall build them, as, in fact,
private capital is now building one and taking the risk of it. If we need
diplomacy we shall learn and practice diplomacy of the democratic,
peaceful, and commercial type.
89. Thus, under the philosophy of protectionism, the very same thing, if
it comes to us freely by the extension of commerce and the march of
improvement, is regarded with terror, while, if we can first bar it out, and
then only let a little of it in at great cost and pains, it is a thing worth
fighting for. Such is the fallacy of all commercial treaties. The crucial
criticism on all the debates at Washington in 1884–1885 was: Have these
debaters made up their minds to any standard by which to measure what
you get and what you give under a commercial treaty? It was plain that they
had not. A generation of protectionism has taken away the knowledge of
what trade is (§§ 125, 139), and whence its benefits arise, and has created a
suspicion of trade (§§ 63 ff.). Hence when our public men came to compare
what we should get and what we should give, they set about measuring this
by things which were entirely foreign to it. Scarcely two of them agreed as
to the standards by which to measure it. Some thought that it was the
number of people in one country compared with the number in the other.
Others thought that it was the amount sold to as compared with the amount
bought from the country in question. Others thought that it was the amount
of revenue to be sacrificed by us as compared with the amount which would
be sacrificed by the other party. If any one will try to establish a standard by
which to measure the gain by such a treaty to one party or the other, he will
be led to see the fallacy of the whole procedure. The greatest gain to both
would be if the trade were perfectly free. If it is obstructed more or less, that

is a harm to be corrected as far and as soon as possible. If then either party
lowers its own taxes, that is a gain and a movement toward the desirable
state of things. No state needs anybody’s permission to lower its own taxes,
and entanglements which would impair its fiscal independence would be a
17
new harm.
90. Protectionism, therefore, is at war with improvement. It is only
useful to annul and offset the effects of those very improvements of which
we boast. In time, the improvements win power so great that protectionism
cannot withstand them. Then it turns about and tries to control and regulate
them at great expense by diplomacy or war. The greater and more
worldwide these improvements are, the more numerous are the efforts in
different parts of the world to revive or extend protection. No doubt there is
loss and inconvenience in the changes which improvement brings about. A
notable case is the loss and inconvenience of a laborer where a machine is
first introduced to supplant him. Patient endurance and hope, in the
confidence that he will in the end be better off, has long been preached to
him. It is true that he will be better off; but why not apply the same doctrine
in connection with the other inconveniences of improvement, where it is
equally true?

3. PROTECTION LOWERS WAGES.
91. On a pure wages system, that is, where there is a class who have no
capital and no land, wages are determined by supply and demand of labor.
The demand for labor is measured by the capital in hand to pay for it just as
the demand for anything else is measured by the supply of goods offered in
exchange for it. In Cobden’s language: “When two men are after one boss,
wages are low; when two bosses are after one man, wages are high.”

(A) No True Wages Class in the United States.
92. The United States, however, have never yet been on a pure wages
system because there is no class which has no land or cannot get any. In
fact, the cheapening of transportation which is going on is making the land
of this continent, Australia, and Africa available for the laborers of Europe,
and is breaking down the wages system there. This is the real reason for the

rise of the proletariat and the expansion of democracy which are generally
attributed to metaphysical, sentimental, or political causes. A man who has
no capital and no land cannot live from day to day except by getting a share
in the capital of others in return for services rendered. In an old society or
dense population, such a class comes into existence. It has no reserves; no
other chances; no other resource. In a new country no such class exists. The
land is to be had for going to it. On the stage of agriculture which is there
existing very little capital and very little division of labor are necessary.
Hence he who has only unskilled manual strength can get at and use the
land, and he can get out of it an abundant supply of the rude primary
comforts of existence for himself and his family. If it is made so cheap and
easy to get from the old centers of population to the new land that the
lowest class of laborers can save enough to pay the passage, then the effect
will reach the labor market of the old countries also. Such is now the fact.
93. The weakness of a true wages class is in the fact that they have no
other chance. Obviously, however, a man is well off in this world in
proportion to the chances which he can command. The advantage of
education is that it multiplies a man’s chances. Our noncapitalists have
another chance on the land, and the chance is near and easy to grasp and
use. It is not necessary that all or any number should use it. Every one who
uses it leaves more room behind, lessens the supply and competition of
labor, and helps his class as a class. The other chance which the laborer
possesses is also a good one, and consequently sets the minimum of
unskilled wages high. Here we have the reason for high wages in a new
country.
94. The relation of things was distinctly visible in the early colonial
days. Winthrop tells how the General Court in Massachusetts Bay tried to
fix the wages of artisans by law. It is obvious that artisans were in great
demand to build houses, and that they would not work at their trades unless
the wages would buy as good or better living than the farmers could get out
of the ground, for these artisans could go and take up land and be farmers
too. The only effect of the law was that the artisans “went West” to the
valley of the Connecticut, and the law became a dead letter. The same
equilibration between the gains from the new land and the wages of artisans
and laborers has been kept up ever since.

95. In 1884 an attempt was made to unite the Eastern and Western Iron
Associations for common effort in behalf of higher wages. The union could
not be formed because the Eastern and Western Associations never had had
the same rate of wages. The latter, being farther west, where the supply of
labor is smaller and the land nearer, have obtained higher wages. It may be
well to anticipate a little right here in order to point out that this difference
in wages has not prevented the growth of the industry in the West, and has
18
not made competition in a common market impossible. The fact is of the
first importance to controvert the current assumption of the protectionists.
They say that an industry cannot be carried on in one place if the wages
there are higher than must be paid by somebody in the same industry in
another place. This proposition has no foundation in fact at all. Farm
laborers in Iowa get three times the wages of farm laborers in England. The
products of the former pay 5,000 miles transportation, and then drive out
the products of the latter. Wages are only one element, and often they are far
from being the most important element, in the economy of production. The
wages which are paid to the men who make an article have nothing to do
with the price or value of that article. This proposition, I know, has a
startling effect on the people who hold to the monkish notions of political
economy, but it is only a special case of the theorem that “Labor which is
past has no effect on value,” which is the true cornerstone of any sound
political economy. Wages are determined by the supply and demand of
labor. Value is determined by the supply and demand of the commodity.
These two things have no connection. Wages are one element in the
capitalist’s outlay for production. If the total outlay in one line of
production, when compared with the return obtained in that line, is not as
advantageous as the total outlay in another line when compared with the
return available in the second line, then the capital is withdrawn from the
first line and put into the second; but the rate of wages in either case or any
case is the market rate, determined by the supply and demand of labor, for
that is what the employers must pay if they want the men, whether they are
making any profits or not.
96. The facts and economic principles just stated above show plainly
why wages are high, and put in strong light the assertion of the
protectionists that their device makes wages high (§ 47), that is, higher than
they would be otherwise, or higher here than they are in Europe. Wages are

not arbitrary. They cannot be shifted up and down at anybody’s whim. They
are controlled by ultimate causes. If not, then what has made them fall
during the last eighteen months, ten to forty per cent, most in the most
protected industries (§ 26)? Why are they highest in the least protected and
the unprotected industries, e.g., the building trades? Hod-carriers recently
struck in New York for three dollars for nine hours’ work. Where did the
tariff touch their case? Why does not the tariff prevent the fall in wages? It
is all there, and now is the time for it to come into operation, if it can keep
wages up. Now it is needed. When wages were high in the market, and it
was not needed, it claimed the credit. Now when they fall and it is needed,
it is powerless.
97. Wages are capital. If I promise to pay wages I must find capital
somewhere with which to fulfill my contract. If the tariff makes me pay
more than I otherwise would, where does the surplus come from?
Disregarding money as only an intermediate term, a man’s wages are his
means of subsistence—food, clothing, house rent, fuel, lights, furniture, etc.
If the tariff system makes him get more of these for ten hours’ work in a
shop than he would get without tariff, where does the “more” come from?
Nothing but labor and capital can produce food, clothing, etc. Either the tax
must make these out of nothing, or it can only get them by taking them
from those who have made them, that is by subtracting them from the
wages of somebody else. Taking all the wages class into account, then the
tax cannot possibly increase, but is sure by waste and loss to decrease
wages.

(B) How Taxes Do Act on Wages.
98. If taxes are to raise wages they must be laid not on goods but on
men. Let the goods be abundant and the men scarce. Then the average
wages will be high, for the supply of labor will be small and the demand
great. If we tax goods and not men, the supply of labor will be great, the
demand will be limited, and the wages will be low. Here we see why
employers of labor want a tariff. For it is an obvious inconsistency and a
most grotesque satire that the same men should tell the workmen at home
that the tariff makes wages high, and should go to Washington and tell
Congress that they want a tariff because the wages are too high. We have

found that the high wages of American laborers have independent causes
and guarantees, outside of legislation. They are provided and maintained by
the economic circumstances of the country. This is against the interest of
those who want to hire the laborers. No device can serve their interest
unless it lowers wages. From the standpoint of an employer the fortunate
circumstances of the laborer become an obstacle to be overcome (§ 65). The
laborer is too well off. Nothing can do any good which does not make him
less well off. The competition which troubles the employer is not the
“pauper labor” of Europe.
99. “Pauper labor” had a meaning in the first half of this century, in
England, when the overseers of the poor turned over the younger portion of
the occupants of the poorhouses to the owners of the new cotton factories,
under contracts to teach them the trade and pay them a pittance. Of course
the arrangement had shocking evils connected with it, but it was a transition
arrangement. The “pauper laborers’” children, after a generation, became
independent laborers; the system expired of itself, and “pauper laborer” is
now a senseless jingle.
100. The competition which the employers fear is the competition of
those industries in America which can pay the high wages and which keep
the wages high because they do pay them. These draw the laborer away.
These offer him another chance. If he had no other way of earning more
than he is earning, it would be idle for him to demand more. The reason
why he demands more and gets it is because he knows where he can get it,
if he cannot get it where he is. If, then, he is to be brought down, the only
way to do it is to destroy, or lessen the value of, his other chance. This is
just what the tariff does.
101. The taxes which are laid for protection must come out of
somebody. As I have shown (§§ 32 ff.) the protected interests give and take
from each other, but, if they as a group win anything, they must win from
another group, and that other group must be the industries which are not
and cannot be protected. In England these were formerly manufactures and
they were taxed, under the corn laws, for the benefit of agriculture. In the
United States, of course, the case must be complementary and opposite. We
tax agriculture and commerce to benefit manufactures. Commerce, i.e., the
ship-building and carrying trade, has been crushed out of existence by the
burden (§ 86). But the burden thus thrown on agriculture and commerce

lowers the gains of those industries, lessens the attractiveness of them to the
laborer, lessens the value of the laborer’s other chance, lessens the
competition of other American industries with manufacturing, and so, by
taking away from the blessing which God and nature have given to the
American laborer, enable the man who wants to hire his services to get
them at a lower rate. The effect of taxes is just the same as such a
percentage taken from the fertility of the soil, the excellence of the climate,
the power of tools, or the industrious habits of the people. Hence it reduces
the average comfort and welfare of the population, and with that average
comfort it carries down the wages of such persons as work for wages.

(C) Perils of Statistics, Especially of Wages.
102. Any student of statistics will be sure to have far less trust in
statistics than the uninitiated entertain. The bookkeepers have taught us that
figures will not lie, but that they will tell very queer stories. Statistics will
not lie, but they will play wonderful tricks with a man who does not
understand their dialect. The unsophisticated reader finds it difficult, when a
column of statistics is offered to him, to resist the impression that they must
prove something. The fact is that a column of statistics hardly ever proves
anything. It is a popular opinion that anybody can use or understand
statistics. The fact is that a special and high grade of skill is required to
appreciate the effect of the collateral circumstances under which the
statistics were obtained, to appreciate the limits of their application, and to
interpret their significance. The statistics which are used to prove national
prosperity are an illustration of this, for they are used as absolute measures
when it is plain that they have no use except for a comparison. Sometimes
the other term of the comparison is not to be found and it is always ignored
(§ 52).
103. A congressional committee in the winter of 1883–1884, dealing
with the tariff, took up the census and proceeded to reckon up the wages in
steel production by adding all the wages from the iron mine up. Then they
took bar iron and added all the wages from the bottom up again, in order to
find the importance of the wages element in that, and so on with every stage
of iron industry. They were going to add in the same wages six or eight
times over.

104. The statistics of comparative wages which are published are of no
19
value at all. It is not known how, or by whom, or from what selected
cases, they were collected. It is not known how wide, or how long, or how
thorough was the record from which they were taken. The facts about
various classifications of labor in the division of labor, and about the rate at
which machinery is run, or about the allowances of one kind and another
which vary from mill to mill and town to town are rarely specified at all.
Protected employers are eager to tell the wages they pay per day or week,
which are of no importance. The only statistics which would be of any use
for the comparison which is attempted would be such as show the
proportion of wages to total cost per unit. Even this comparison would not
have the force which is attributed to the other. Hence the statistics offered
are worthless or positively misleading. In the nature of the case such
statistics are extremely hard to get. If application is made to the employers,
the inquiry concerns their private business. They have no interest in
answering. They cannot answer without either spending great labor on their
books (if the inquiry covers a period), or surrendering their books to some
one else, if they allow him to do the labor. If inquiry is made of the men, it
becomes long and tedious and full of uncertainties. Do United States
Consuls take the trouble involved in such an inquiry? Have they the training
necessary to conduct it successfully?
105. The fact is generally established and is not disputed that wages are
higher here than in Europe. The difference is greatest on the lowest grade of
labor—manual labor, unskilled labor. The difference is less on higher
grades of labor. For what the English call “engineers,” men who possess
personal dexterity and creative power, the difference is the other way, if we
compare the United States and England. The returns of immigration reflect
these differences exactly (§ 122, note). The great body of the immigrants
consists of farmers and laborers. The “skilled laborers” are comparatively a
small class, and, if the claims of the individuals to be what they call
themselves were tested by English or German trade standards, the number
would be very small indeed. Engineers emigrate from Germany to England.
Men of that class rarely come to this country, or, if they come, they come
under special contracts, or soon return. Each country, spite of all taxes and
other devices, gets the class of men for which its industrial condition offers

the best chances. The only thing the tariff does in the matter is to take from
those who have an advantage here a part of that advantage.

4. PROTECTIONISM IS SOCIALISM
106. Simply to give protectionism a bad name would be to accomplish
very little. When I say that protectionism is socialism I mean to classify it
and bring it not only under the proper heading but into relation with its true
affinities. Socialism is any device or doctrine whose aim is to save
individuals from any of the difficulties or hardships of the struggle for
existence and the competition of life by the intervention of “the State.”
Inasmuch as “the State” never is or can be anything but some other people,
socialism is a device for making some people fight the struggle for
existence for others. The devices always have a doctrine behind them which
aims to show why this ought to be done.
107. The protected interests demand that they be saved from the trouble
and annoyance of business competition, and that they be assured profits in
their undertakings, by “the State,” that is, at the expense of their fellow-
citizens. If this is not socialism, then there is no such thing. If employers
may demand that “the State” shall guarantee them profits, why may not the
employees demand that “the State” shall guarantee them wages? If we are
taxed to provide profits, why should we not be taxed for public workshops,
for insurance to laborers, or for any other devices which will give wages
and save the laborer from the annoyances of life and the risks and hardships
of the struggle for existence? The “we” who are to pay changes all the time,
and the turn of the protected employer to pay will surely come before long.
The plan of all living on each other is capable of great expansion. It is, as
yet, far from being perfected or carried out completely. The protectionists
are only educating those who are as yet on the “paying” side of it, but who
will certainly use political power to put themselves also on the “receiving”
side of it. The argument that “the State” must do something for me because
my business does not pay, is a very far-reaching argument. If it is good for
pig iron and woolens, it is good for all the things to which the socialists
apply it.

Chapter IV

SUNDRY FALLACIES OF PROTECTIONISM

108. I can now dispose rapidly of a series of current fallacies put
forward by the protectionists. They generally are fanciful or far-fetched
attempts to show some equivalent which the taxpayer gets for his taxes.

(A) That Infant Industries can be Nourished up to
Independence and that they then Become
Productive.
109. I know of no case where this hope has been realized, although we
have been trying the experiment for nearly a century. The weakest infants
to-day are those whom Alexander Hamilton set out to protect in 1791. As
soon as the infants begin to get any strength (if they ever do get any) the
protective system forces them to bear the burden of other infants, and so on
forever. The system superinduces hydrocephalus on the infants, and instead
of ever growing to maturity, the longer they live, the bigger babies they are.
It is the system which makes them so, and on its own plan it can never
rationally be expected to have any other effect. (See further, under the next
fallacy, §§ 111 ff.)
20
110. Mill makes a statement of a case, as within the bounds of
conceivability, where there might be an advantage for a young country to
protect an infant industry. He is often quoted without regard to the
limitation of his statement, as if he had affirmed the general expediency of
protection in new countries and for infant industries. It amounts to a
misquotation to quote him without regard to the limitations which he
specified. The statement which he did make is mathematically
21
demonstrable. The doctrine so developed is very familiar in private
enterprise. A business enterprise may be started which for some years will
return no profits or will occasion losses, but which is expected later to
recoup all these. What are the limits within which such an enterprise can
succeed? It must either call for sinking capital only for a short period (like
building a railroad or planting an orange grove), or it must promise

enormous gains after it is started (like a patented novelty). The higher the
rate of interest, as in any new country, the more stringent and narrow these
conditions are. Mill said that it was conceivable that a case of an industry
might occur in which this same calculation might be applied to a protective
tax. If, then, anybody says that he can offer an industry which meets the
conditions, let it be examined to see if it does so. If protection is never
applied until such a case is offered, it will never be applied at all. A thing
which is mathematically conceivable is one which is not absurd; but a thing
which is practically possible is quite another thing. For myself, I
strenuously dissent from Mill’s doctrine even as he limits it. In the first
place the state cannot by taxes work out an industrial enterprise of a
character such that it, as any one can see, demands the most intense and
careful oversight by persons whose capital is at stake in it, and, in the
second place, the state would bear the loss, while it lasted, but private
interests would take the gain after it began.

(B) That Protective Taxes do not Raise Prices but
Lower Prices.
111. To this it is obvious to reply: what good can they then do toward
the end proposed? Still it is true that, under circumstances, protective taxes
do lower prices. The protectionist takes an infant industry in hand and
proposes to rear it by putting on taxes to ward off competition, and by
giving it more profits than the world’s market price would give. This raises
the price. But the consumer then raises a complaint. The protectionist turns
to him and promises that by and by there will be “overproduction,” and
prices will fall. This arrives in due time, for every protected industry is
organized as a more or less limited monopoly, and a monopoly which has
overproduced its market, at the price which it wants, is the weakest industry
possible (§ 24). The consumer now wins, but a wail from the cradle calls
the protectionist back to the infant industry, which is in convulsions from
“overproduction.” Some of the infants die. This gives a new chance to the
others. They combine for more effective monopoly, put the prices up again
by limiting production, and go on until “overproduction” produces a new
collapse. This is another reason why infants never win vitality. The net
result is that the market is in constant alternations of stringency and laxity,
and nothing at all is gained.

112. Whenever we talk of prices it should be noticed that our
statements involve money—the rate at which goods exchange for money. If
then we want to raise prices, we must restrict the supply of goods, so that
on the doctrine of money also we shall come to the same result as before,
that protective taxes lessen production and diminish wealth.
113. The problem of managing any monopoly is to dose the market
with just the quantity which it will take at the price which the monopolist
wants to get. In a qualified monopoly, that is, one which is shared by a
number of persons, the difficulty is to get agreement about the management.
They may not have any communication with each other and may compete.
If so they will overdose the market and the price will fall. Then they meet,
to establish communication; form an “association,” to get harmonious
action, and agree to divide the production among them and limit and
regulate it, to prevent the former mistake and restore prices (§ 24).

(C) That we should be a Purely Agricultural
Nation under Free Trade.
114. A purely agricultural nation covering a territory as large as that of
the United States is inconceivable. The distribution of industries now inside
the United States is a complete proof that no such thing would come to
pass, for we have absolute free trade inside, and manufactures are growing
up in the agricultural states just as fast as circumstances favor, and just as
fast as they can be profitably carried on. Under free trade there would be a
subdivision of cotton, woolen, iron and other industries, and we should both
export and import different varieties and qualities of these goods. The
southern states are now manufacturing coarse cottons in competition with
New England. The western states manufacture coarse woolens, certain
grades of leather and iron goods, etc., in competition with the East. Here we
see the exact kind of differentiation which would take place under free
trade, and we can see the mischief of the tariff, whether on the one hand it
strikes a whole category with the same brutal ignorance, or tries, by
cunning sub-classification, to head off every effort to save itself which the
22
trade makes. If, however, it was conceivable that we should become a
purely agricultural nation, the only legitimate inference would be that our

whole population could be better supported in that way than in any other. If
there was a greater profit in something else some of them would go into it.

(D) That Communities which Manufacture are More
Prosperous than those which are Agricultural.
115. This is as true as if it should be said that all tall men are healthy. It
would be answered that some are and some are not; that tallness and health
have no connection. Some manufacturing communities are prosperous and
some not. The self-contradiction of protectionism appears in one of its
boldest forms in this fallacy. We are told that manufactures are a special
blessing. The protectionist says that he is going to give us some. Instead of
that he makes new demands on us, lays a new burden on us, gives us
nothing but more taxes. He promises us an income and increases our
expenditure; promises an asset and gives a liability; promises a gift and
creates a debt; promises a blessing and gives a burden. The very thing
which he boasts of as a great and beneficial advantage gives us nothing, but
takes from us more. Prosperity is no more connected with one form of
industry than another. If it were so, some of mankind would have, by
nature, a permanently better chance than others, and no one could emigrate
to a new, that is agricultural country, without injuring his interests. The
world is not made so.

(E) That it is an Object to Diversify Industry, and
that Nations which have Various Industries are
Stronger than Others which have not Various
Industries.
116. It is not an object to diversify industry, but to multiply and
diversify our satisfactions, comforts, and enjoyments. If we can do this by
unifying our industry, in greater measure than by diversifying it, then we
should do, and we will do, the former. It is not a question to be decided a
priori, but depends upon economic circumstances. If a country has a
supremacy in some one industry it will have only one. California and
Australia had only one industry until the gold mines declined in
productiveness, that is, until their supreme advantage over other countries

was diminished: they began to diversify when they began to be less well
off. The oil region of Pennsylvania has a chance of three industries, the old
farming industry, coal, and oil. It will have only one industry so long as oil
gives chances superior to those enjoyed by any other similar district. When
it loses its unique advantage by nature it will diversify. The “strongest”
nation is the one which brings products into the world’s market which are of
high demand, but which cost it little toil and sacrifice to get; for it will then
have command of all the good things which men can get on earth at little
effort to itself. Whether the products which it offers are one or numerous is
immaterial. All the tariff has to do with it is that when the American comes
into the world’s market with wheat, cotton, tobacco, and petroleum, all
objects of high demand by mankind and little cost to him, it forces him to
forego a part of his due advantage (§§ 125, 134).

(F) That Manufactures Give Value to Land.
117. This doctrine issued from the Agricultural Bureau. It has been
thought a grand development of the protectionist argument. It is a simple
logical fallacy based on some misconstrued statistics. The value of land
depends on supply and demand. The demand for land is population. Hence
where the population is dense the value of land is great. Manufactures can
be carried on only where there is a supply of labor, that is, where the
population is dense. Hence high value of land and manufacturing industry
are common results of dense population. The statistician of the Agricultural
Bureau connected them with each other as cause and effect, and the New
York Tribune said that it was the grandest contribution to political economy
since “the fingers of Horace Greeley stiffened in death”; which was true.
118. If manufactures spring up spontaneously out of original strength,
and by independent development, of course they “add value to land,” that is
to say, the district has new industrial power and every interest in it is
benefited; but if the manufactures have to be protected, paid for, and
supported, they do not do any good as manufactures but only as a device for
drawing capital from elsewhere, as tribute. In this way, protective taxes do
alter the comparative value of land in different districts. This effect can be
seen under some astonishing phases in Connecticut and other
manufacturing states. The farmers are taxed to hire some people to go and

live in manufacturing villages and carry on manufacturing there. This
displacement of population, brought about at the expense of the rural
population, diminishes the value of agricultural land and raises that of city
land right here within the same state. The hillside population is being
impoverished, and the hillside farms are being abandoned on account of the
tribute levied on them to swell the value of mill sites and adjoining land in
the manufacturing towns (§§ 120, 137).

(G) That the Farmer, if he Pays Taxes to Bring
into Existence a Factory, which would not
otherwise Exist, will Win more than the Taxes by
Selling Farm Produce to the Artisans.
119. This is an arithmetical fallacy. It proposes to get three pints out of
a quart. The farmer is out for the tax and the farm produce and he can not
get back more than the tax because, if the factory owes its existence to the
protective taxes, it cannot make any profit outside of the taxes. The
proposition to the farmer is that he shall pay taxes to another man who will
bring part of the tax back to buy produce with it. This is to make the farmer
rich. The man who owned stock in a railroad and who rode on it, paying his
fare, in the hope of swelling his own dividends, was wise compared with a
farmer who believes that protection can be a source of gain to him.
120. Since, as I have shown (§ 101), protective taxes act like a
reduction in the fertility of the soil, they lower the “margin of cultivation,”
and raise rent. They do not, however, raise it in favor of the agricultural
land owner, for, by the displacement just described, they take away from
him to give to the town land owner. Of course, I do not believe that the
protective taxes have really lowered the margin of cultivation in this
country, for they have not been able to offset the greater richness of the
newest land, and the advance in the arts. What protection costs us comes
out of the exuberant bounty of nature to us. Still I know of very few who
could not stand it to be a great deal better off than they are, and the New
England farmer is the one who has the least chance, and the fewest
advantages, with which to endure protection.

(H) That Farmers Gain by Protection, because it
Draws so many Laborers out of Competition with
them.

121. Since the farmers pay the taxes by which this operation is
supposed to be produced, a simple question is raised, viz., how much can
one afford to pay to buy off competition in his business? He cannot afford
to pay anything unless he has a monopoly which he wants to consolidate.
Our farmers are completely open to competition on every side. The
immigration of farmers every three or four years exceeds all the workers in
all the protected trades. Hence the farmers, if they take the view which is
recommended to them, instead of gaining any ground, are face to face with
a task which gets bigger and bigger the longer they work at it. If one man
should support another in order to get rid of the latter’s competition as a
producer, that would be the case where the taxpayer supports soldiers, idle
pensioners, paupers, etc. A protected manufacturer, however, by the
hypothesis, is not simply supported in idleness, but he is carrying on a
business the losses of which must be paid by those who buy off his
competition in their own production. On the other hand, when farmers come
to market, they are in free competition with several other sources of supply.
Hence, if they did any good to agricultural industry by hiring the artisans to
go out of competition with them, they would have to share the gain with all
their competitors the world over while paying all the expense of it
themselves.
122. The movement of men over the earth and the movement of goods
over the earth are complementary operations. Passports to stop the men and
taxes to stop the goods would be equally legitimate. Since it is, once for all,
a fact that some parts of the earth have advantages for one thing and other
parts for other things, men avail themselves of the local advantages either
by moving themselves to the places, or by trading what they produce where
they are for what others produce in the other places. The passenger trains
and the freight trains are set in motion by the same ultimate economic fact.
Our exports are all bulky and require more tonnage than our imports. On
the westward trip, consequently, bunks are erected and men are brought in
space where cotton, wheat, etc., were taken out. The tariff, by so much as it
lessens the import of goods, leaves room which the ship owners are eager to
fill with immigrants. To do this they lower the rates. Hence the tariff is a

premium on immigration. The protectionists have claimed that the tariff
does favor immigration. But nine-tenths of the immigrants are laborers,
23
domestic servants, and farmers. Probably more than one-third of the total
number, including women, find their way to the land. As we have seen, the
tariff also lowers the profits of agriculture, which discourages immigration
and the movement to the land. Therefore, if the farmer believes what the
protectionist tells him, he must understand that the taxes he pays bring in
more people, and raise the value of land by settling it, and that they also
bring more competition, which the farmer must buy off by lowering the
profits of his own (the farming) industry. Then, too, so far as the immigrants
are artisans, the premium on immigration is a tax paid to increase the
supply of labor, that is, to lower wages, although the protectionists say that
the tariff raises wages. Hence we see that when a tax is laid, in our modern
complicated society, instead of being a simple and easy means or method to
be employed for a specific purpose, its action and reaction on
transportation, land, wages, etc., will produce erratic, contradictory, and
confused effects, which cannot be predicted or analyzed thoroughly, and the
protectionist, when he pleads three or four arguments for his system, is
alleging three or four features of it which, if properly analyzed and brought
together, are found to be mutually destructive, and cumulative only as to the
mischief they do (see §§ 29, 101).

(I) That our Industries would Perish without
Protection.
123. Those who say this think only of manufacturing establishments as
“industries.” They also talk of “our” industries. They mean those we
support by the taxes we pay; not those from which we get dividends. No
industry will ever be given up except in order to take up a better one, and if,
under free trade, any of our industries should perish, it would only be
because the removal of restrictions enabled some other industry to offer so
much better rewards that labor and capital would seek the latter. It is plain
that, if a man does not know of any better way to earn his living than the
one in which he is, he must remain in that, or move to some other place. If
any one can suppose that the population of the United States could be
forced, by free trade, to move away, he must suppose that this country

cannot support its population, and that we made a mistake in coming here.
This argument is especially full of force if the articles to be produced are
coal, iron, wool, copper, timber, or any other primary products of the soil.
For, if it is said that we cannot raise these products of the soil in
competition with some other part of the earth’s surface, all it proves is that
we have come to the wrong spot to seek them. If, however, the soil can
support the population under an arrangement by which certain industries
support themselves, and those which do not pay besides, then it is plain that
the former are really supporting the whole population—part directly and
part indirectly, through a circuitous and wasteful organization. Hence the
same strong and independent industries could certainly still better support
the whole population, if they supported it directly.
124. I have been asked whether we should have had any steel works in
this country, if we had had no protection. I reply that I do not know; neither
does anybody else, but it is certain that we should have had a great deal
more steel, if we had had no protection.
125. “But,” it is said, “we should import everything.” Should we import
everything and give nothing? If so, foreigners would make us presents and
support us. Should we give equal value in exchange? If so, there would be
just as much “industry” and a great deal less “work” in that way of getting
things than in making them ourselves. The moment that ceased to be true
we should make and not buy. Suppose that a district, A, has two million
inhabitants, one million of whom produce a million bushels of wheat, and
one million produce a million hundredweight of iron; and suppose that a
bushel of wheat exchanges for a hundredweight of iron. Now, by improved
transportation and emigration, suppose that a new wheat country, B, is
opened, and that its people bring wheat to the first district, offering two
bushels for a hundredweight of iron. Plainly they must offer more than one
bushel for one hundredweight, or it is useless for them to come. Now the
people of A, by putting all their labor and capital in iron production,
produce two million hundredweight. They keep one million hundredweight,
and exchange one million hundredweight of iron for two million bushels of
wheat. The destruction of their wheat industry is a sign of a change in
industry (unifying and not diversifying) by which they have gained a
million bushels of wheat. Such is the gain of all trade. If the gain did not
exist, trade would not be a feature of civilization.

(J) That it would be Wise to Call into Existence
Various Industries, even at an Expense, if we could
thus Offer Employment to all Kinds of Artisans,
etc., who might Come to us.

126. This would be only maintaining public workshops at the expense
of the taxpayers, and would be open to all the objections which are
conclusive against public workshops. The expense would be prodigious,
and the return little or nothing. This argument shows less sense of
comparative cost and gain than any other which is ever proposed.

(K) That we Want to be Complete in ourselves and
Sufficient to ourselves, and Independent, as a
Nation, which State of Things will be Produced by
Protection.
127. I will only refer to what I have already said about China and Japan
(§ 69) as types of what this plan produces. If a number of families from
among us should be shipwrecked on an island, their greatest woe would be
that they could not trade with the rest of the world. They might live there
“self-contained” and “independent,” fulfilling the ideal of happiness which
this proposition offers, but they would look about them to see a surfeit of
things which, as they know, their friends at home would like to have, and
they would think of all the old comforts which they used to have, and which
they could not produce on their island. They might be contented to live on
there and make it their home, if they could exchange the former things for
the latter. If now a ship should chance that way and discover them and
should open communication and trade between them and their old home, a
protectionist philosopher would say to them: “You are making a great
mistake. You ought to make everything for yourselves. The wise thing to do
would be to isolate yourselves again by taxes as soon as possible.” We sent
some sages to the Japanese to induct them into the ways of civilization,
who, as a matter of fact, did tell them that the first step in civilization was to
adopt a protective tariff and shut up again by taxes the very ports which
they had just opened.

(L) That Protective Taxes are Necessary to
Prevent a Foreign Monopoly from Getting Control
of our Market.

128. It is said that English manufacturers once combined to lower
prices in order to kill out American manufactures, and that they then put up
their prices to monopoly rates. If they did this, why did not their other
customers send to the United States and buy the goods here in the first
instance, and why did not the Americans go and buy the goods of the
Englishmen’s other customers in the second instance? If the Englishmen put
down their prices for their whole market in the first instance, why did they
not incur a great loss? and, if they raised it for their whole market in the
second instance, why did they not yield the entire market to their
competitors? The Englishmen are said to be wonderfully shrewd, and are
here credited with the most stupid and incredible folly.
129. The protective system puts us certainly in the hands of a home
monopoly for fear of the impossible chance that we may fall into the hands
of a foreign monopoly. Before the war we made no first quality thread. We
got it at four cents a spool (retail) of an English monopoly. Under the tariff
we were saved from this by being put into the hands of a home monopoly
which charged five cents a spool. In the meantime the foreign monopoly
lowered thread to three cents a spool (retail) for the Canadians, who were at
its mercy. Lest we should have to buy nickel of a foreign monopolist,
Congress forced us to buy it of the owner of the only mine in the United
States, and added thirty cents a pound to any price the foreigner might ask.

(M) That Free Trade is Good in Theory but
Impossible in Practice; that it would be a Good
Thing if All Nations would have it.
130. That a thing can be true in theory and false in practice is the most
utter absurdity that human language can express. For, if a thing is true in
practice (protectionism, for instance) the theory of its truth can be found,
and that theory will be true. But it was admitted that free trade is true in
theory. Hence two things which are contradictory would both be true at the
same time about the same thing. The fact is, that protectionism is totally

impracticable. It does not work as it is expected to work; it does not
produce any of the results which were promised from it; it is never properly
and finally established to the satisfaction of its own votaries. They cannot
let it alone. They always want to “correct inequalities,” or revise it one way
or another. It was they who got up the Tariff Commission of 1882. Their
system is not capable of construction so as to furnish a normal and regular
status for industry. One of them said that the tariff would be all right if it
could only be made stable; another said that it ought to be revised every two
years. One said that it ought to include everything; another said that it
would be good “if it was only laid on the right things.”
131. If all nations had free trade, no one of them would have any
special gain from it, just as, if all men were honest, honesty would have no
commercial value. Some say that a man cannot afford to be honest unless
everybody is honest. The truth is that, if there was one honest man among a
lot of cheats, his character and reputation would reach their maximum
value. So the nation which has free trade when the others do not have it
gains the most by comparison with them. It gains while they impoverish
themselves. If all had free trade all would be better off, but then no one
would profit from it more than others. If this were not true, if the man who
first sees the truth and first acts wisely did not get a special premium for it,
the whole moral order of the universe would have to be altered, for no
reform or improvement could be tried until unanimous consent was
obtained. If a man or a nation does right, the rewards of doing right are
obtained. They are not as great as could be obtained if all did right, but they
are greater than those enjoy who still do wrong.

(N) That Trade is WAR, so that Free Trade
Methods are Unfit for it, and that Protective
Taxes are Suited to it.
132. It is evidently meant by this that trade involves a struggle or
contest of competition. It might, however, as well be said that practicing
law is war, because it is contentious; or that practicing medicine is war,
because doctors are jealous rivals of each other. The protectionists do,
however, always seem to think of trade as commercial war. One of them
was reported to have said in a speech, in the late campaign, that nations

would not fight any more with guns but with taxes. The nations are to
boycott each other. One would think that the experience our Southerners
made of that notion in the Civil War, upon which they entered in the faith
that “cotton is king,” would have sufficed to banish forever that antique
piece of imbecility, a commercial war. If trade is war, all the tariff can do
about it is to make A fight B’s battles, although A has his own battles to
fight besides.

(O) That Protection Brings into Employment Labor
and Capital which would otherwise be Idle.

133. If there is any labor or capital which is idle, that fact is a symptom
of industrial disease; especially is this true in the United States. If a laborer
is idle he is in danger of starving to death. If capital is idle it is producing
nothing to its owner, who depends on it, and is suffering loss. Therefore, if
labor or capital is idle, some antecedent error or folly must have produced a
stoppage in the industrial organization. The cure is, not to lay some more
taxes, but to find the error and correct it. If then things are in their normal
and healthy condition, the labor and capital of the country are employed as
far as possible under the existing organization. We are constantly trying to
improve our exchange and credit systems so as to keep all our capital all the
time employed. Such improvements are important and valuable, but to
make them cost more thought and skillful labor than to invent machines.
Hence Congress cannot do that work by discharging a volley of taxes at
selected articles, and leaving those taxes to find out the proper points to
affect, and to exert the proper influence. It takes intelligent and hard-
working men to do it. The faith that anything else can do it is superstition.

(P) That a Young Nation Needs Protection and will
Suffer some Disadvantage in Free Exchange with an
Old One.
134. The younger a nation is the more important trade is to it (cf.
§§ 127 ff.). The younger a nation is the more it wins by trade, for it offers
food and raw materials which are objects of greatest necessity to old
nations. The things England buys of us are far more essential to her than

what she buys of France or Germany. The strong party in an exchange is not
the rich party, or the old party, but the one who is favored by supply and
demand—the one who brings to the exchange the thing which is more rare
24
and more eagerly wanted. If a poor woman went into Stewart’s store to
buy a yard of calico, she did not have to pay more because Stewart was
rich. She paid less because he used his capital to serve her better and at less
price than anybody else could. England takes 60 per cent of all our exports.
We sell, first, wheat and provisions, prime articles of food; second, cotton,
the most important raw material now used by mankind; third, tobacco, the
most universal luxury and the one for which there is the intensest demand;
fourth, petroleum, the lighting material in most universal use. These are
things which are rare and of high demand. We are, therefore, strong in the
market. Protection only robs us of part of our advantage (§ 116).

(Q) That we Need Protection to Get Ready for
War.
135. We have no army, or navy, or fortifications worth mentioning. We
are wasting more by protective taxes in a year than would be necessary to
build a first-class navy and fortify our whole seacoast. It is said that, in
some way, the taxes get us ready for war, and yet in fact we are not ready
for war. It is plain that this argument is only a pretense put forward to try to
cover the real motives of protection. If we prefer to go without army, navy,
and fortifications, as we now do, then the best way to get ready for war,
consistently with that policy, is to get as rich as we can. Then we can count
on buying anything in the world which anybody else has got and which we
need. Protection, then, which lessens our wealth, is only diminishing our
power for war.

(R) That Protectionism Produces some Great Moral
Advantages.
136. It is a very suspicious thing when a man who sets out to discuss an
economic question shifts over on the “moral” ground. Not because
economics and morals have nothing to do with each other. On the contrary,
they meet at a common boundary line, and, when both are sound, straight

and consistent lines run from one into the other. Capital is the first requisite
of all human effort for goods of any kind, and the increase of capital is
therefore the expansion of chances that intellectual, moral, and spiritual
good may be won. The moral question is: How will the chances be used? If,
then, the economic analysis shows that protective taxes lessen capital, it
follows that those taxes lessen the regular chances for all higher good.
137. It is argued that hardship disciplines a man and is good for him;
hence, that the free traders, who want people to do what is easiest, would
corrupt them, and that protectionists, by “making work,” bring in salutary
discipline for the people. This is the effect upon those who pay the taxes.
The counter-operation on the beneficiaries of the system I have never seen
developed. Bastiat said that the model at which the protectionist was aiming
was Sisyphus, who was condemned in Hades to roll a stone to the top of a
hill, from which, as soon as he got it there, it rolled down again to the
bottom. Then he rolled it up again, and so on to all eternity. Here then was
infinity of effort, zero of result; the ultimate type to which the protectionist
system would come. Somebody pitied Sisyphus, to whom he replied: “Thou
fool! I enjoy everlasting hope!” If Sisyphus could extract moral consolation
from his case, I am not prepared to deny but that a New England farmer,
ground between the upper millstone of free competition, in his production,
with the Mississippi Valley, and the nether millstone of protective taxes on
all his consumption, may derive some moral consolation from his case.
There are a great many people who are apparently ready to inflict salutary
chastisement on the American citizen for his welfare—and their own
advantage.
138. The protectionist doctrine is that if my earnings are taken from me
and given to my neighbor, and he spends them on himself, there will be
important moral gains to the community which will be lost if I keep my own
earnings, and spend them on myself. The facts of experience are all to the
contrary. When a man keeps his own earnings he is frugal, temperate,
prudent, and honest. When he gets and lives on another man’s earnings, he
is extravagant, wasteful, luxurious, idle, and covetous. The effects on the
community in either case correspond.
139. The truth is that protectionism demoralizes and miseducates a
people (§§ 89, 153, 155). It deprives them of individual self-reliance and
energy, and teaches them to seek crafty and unjust advantages. It breaks

down the skill of great merchants and captains of industry, and develops the
skill of lobbyists. It gives faith in monopoly, combinations, jobbery, and
restriction, instead of giving faith in energy, free enterprise, public purity,
and freedom. Illustrations of this occur all the time. Objection has been
made to the introduction of machines to stop the smoke nuisance because
they would interfere in the competition of anthracite and bituminous coal.
People have resisted the execution of ordinances against gambling houses
because said houses “make trade” for their neighbors. The theater men
recently made an attempt to get regulations adopted against skating rinks—
purely on moral grounds. The industries of the country all run to the form of
25
combinations. Our wisdom is developed, not in the great art of
production, but in the tactics of managing a combination, and while we
sustain all the causes and all the great principles of this system of business
we denounce “monopoly” and “corporations.”

(S) That a “Worker may Gain More by Having his
Industry Protected than he will Lose by Having to
Pay Dearly for what he Consumes. A System which
Raises Prices all round—like that in the United
States at present—is Oppressive to Consumers, but
is Most Disadvantageous to those who Consume
without Producing anything, and Does Little, if
Any, Injury to those who Produce More than they
Consume.”
140. This is an English contribution to the subject dropped in passing
26
by a writer on economic history. It is a noteworthy fact that the “historical
economists” and others who deride political economy as a science do not
desist from it, but at once set to work to make very bad political economy
of the “abstract” or “deductive” sort. The passage quoted involves three or
four fallacies already noticed, and an assumption of the truth of
protectionism as a philosophy. As we have abundantly established,
“workers” gain nothing by protection in their production (§ 48). Also, “a
system which raises prices all around” must either lessen the demand and
requirement for money, i.e., restrict business and the supply of goods

(§ 112), or it must increase the amount of money. In the former case it could
not but injure “workers”; in the latter case we should find ourselves dealing
with a greenback fallacy. But passing by that, who are they who consume
more than they produce? I can think only of (1) princes, pensioners,
sinecurists, protected persons, and paupers, who draw support from taxes,
and (2) swindlers, confidence men, and others who live by their wits on the
produce of others. Those under (1), if they receive fixed money grants or
subsidies, find an advance in price most disadvantageous. So the protected,
of course, as consumers of others’ products, when they spend what they
have received by protection, suffer. Who are they who produce more than
they consume? I can think only of (1) taxpayers, and (2) victims of fraud
and of those economic errors which give one man’s earnings to another’s
use. Rise in price is just as advantageous to this class as it was
disadvantageous to the other, on the same hypothesis, viz., if they pay fixed
money taxes to the parasites, and can sell their products for more money.
Evidently the writer did not understand correctly what his two classes
consisted of, and he put the protected “workers” in the wrong one. If in
industry a person should produce more than he consumes, he could give it
away, or it would decay on his hands. If he should consume more than he
27
produced, he would run in debt and become bankrupt. Protection has
nothing to do with that.

(T) That “A Duty may at once Protect the Native
Manufacturer Adequately, and Recoup the Country
for the Expense of Protecting him.”
28
141. This is Professor Sidgwick’s doctrine. It has given great comfort
to our protectionists because it is put forward by an Englishman and a
Cambridge professor. It is offered under the “art” of political economy. It is
a new thing; an a priori art. The “may” in it deprives it of the character of a
doctrine or dogma such as our less cultivated protectionists give us
—“Protective taxes come out of the foreigner”—but it is not a maxim of
art. It has the air of a very astute contrivance (see § 3), and is therefore very
captivating to many people, and it is very difficult to dissect and to expose
in a simple and popular way. It has therefore given great trouble and done

great mischief. It is, however, a complete error. It is not possible in any way
or in any degree to use duties so as to make the foreigner pay for protection.
142. Professor Sidgwick states the hypothetical instance which he sets
up to prove by illustration that there “may” be such a case, as follows:
“Suppose that a five per cent duty is imposed on foreign silks, and that, in
consequence, after a certain interval, half the silks consumed are the
product of native industry, and that the price of the whole has risen 2½ per
cent. It is obvious that, under these circumstances, the other half, which
comes from abroad, yields the state five per cent, while the tax levied from
the consumers on the whole is only 2½ per cent; so that the nation, in the
aggregate, is at this time losing nothing by protection, except the cost of
collecting the tax, while a loss equivalent to the whole tax falls on the
foreign producer.”
143. It is necessary, in the first place, to complete the hypothesis which
is included in this case. Let us assume that the consumption of silk, when
all was imported, was 100 yards and that the price was $1 per yard. Then
the following points are taken for granted, although not stated in the case as
it is put: (1) That the state needs $5 revenue; (2) that it has determined to
get this out of the consumers of silk; (3) that the advance in price does not
diminish the consumption; (4) that the tax forces a reduction of price for the
silk in the whole outside market; (5) that the “silk” in question is the same
thing after the tax is laid as before. Of these assumptions, 3, 4, and 5 are
totally inadmissible, but, if they be admitted in the first instance, and if the
doctrine of the case which is put be deduced, it is this: If the part imported
multiplied by the tax is equal to the total consumption multiplied by the
advance in price, the consumers can pay the latter in protection, for it is
equal to the former, and the former, which is paid to the government by the
foreigner, is what the consumers of silk must otherwise have paid.
144. Obviously this deduction is arithmetically incorrect, even on the
hypothesis. In the first place, the government has not obtained $5 revenue
which it needed, but $2.50 (5 cents on 50 yards). In the second place, the
foreigner sells at $1.02½ (net 97½) the silk which he used to sell for $1. He
therefore gets back from the consumers 2½ cents per yard on 50 yards, or
$1.25 out of the $2.50 which he has paid to the government. Also, the
domestic silk to compete must be equal to the dollar imported silk which
now sells for $1.02½. Hence, the consumers really pay in protection only

2½ cents on 50 yards, i.e. $1.25. This case, then, is, that the foreigner pays
$1.25 revenue, and the consumers pay $1.25 revenue and $1.25 protection.
Hence the result is not at all what is asserted, and there is no such operation
of the contrivance as was expected. But the government needs $2.50 more
revenue, the operation of its tax having been interfered with by protection.
As there is no equivalence or compensation in the case as it already stands,
it is evident that the effect of any further tax, instead of bringing about
equivalence or compensation, will be to depart from such a result still
further.
145. It is, however, impossible to admit assumptions 3, 4, and 5 above,
or to deal with any economic problem by any arithmetical process. The
result above reached is totally incorrect and only serves to clear the ground
for a correct analysis. The producer may have to bear part of a tax, if he is
under the tax jurisdiction, or if he has a monopoly. If he has no monopoly,
and is not under the tax jurisdiction, and works for the world’s market, he
cannot lower his price in order to assume part of the tax. What he does is
that he differentiates his commodity. This is the fact in the art of production
which is established by abundant experience. It is the explanation of the
constant complaint, under the protective system, of “fraud” and of the
constant demand for subclassification in the tariff schedules. The protected
product never is, at least at first, as good in quality as the imported article
which it aims to supersede. Hence the foreigner, if he desires to retain the
protected market, can prepare a special quality for that market. The “silk”
after the tax is laid is not the same silk as before. It nets to the foreign
producer 97½ cents, and pays him business profits at that price. Therefore
when he sells it at $1.02½ he gets back the whole tax from the consumers.
The domestic silk sold at $1.02½ is no better than might have been obtained
for 97½ cents. Hence the consumers are paying a tax for protection which is
full and equal to the revenue rate. The fact that the price has fallen to
$1.02½, and is not $1.05, evidently proves that instead of disproving it, as
many believe.
146. Thus this case falls to pieces. It gains a momentary plausibility
from the erroneous assumptions which are implicit in it. The foreign
producer may suffer a narrowing of his market and a reduction of his
aggregate profits, but there is no way to make him tributary (unless he has a
monopoly) either to the treasury or the protected interests of the taxing

29
country. If it was true in general, or in any limited number of cases, that a
country which lays protective taxes can make foreigners pay those taxes,
then England, which has had no protective taxes since (say) 1850, and has
been surrounded by countries which have had more or less protective taxes,
must have been paying tribute to them all this time and must have been
steadily impoverished accordingly.

Chapter V

SUMMARY AND CONCLUSION

147. I have now examined protectionism impartially on its own
grounds, assuming them to be true, and adversely from ground taken
against it, and have reviewed a series of the commonest arguments put
forward in its favor. If now we return, with all the light we have obtained, to
test the assumptions which we found in protectionism, that the people
would not organize their industry wisely under liberty, and that protective
taxes are the correct device for bringing about a better organization, we find
that those two assumptions are totally false and have no semblance of claim
upon our confidence. At every step the dogmas of protectionism, its claims,
its apparatus, have proved fallacious, absurd, and impracticable. We can
now group together some general criticisms of protectionism which our
investigation suggests.
148. We have taken the protectionist’s own definition of a protective
duty, and have found that such a duty, instead of increasing national wealth,
must, at every step, and by every incident of its operation, waste labor and
capital, lower the efficiency of the national industry, weaken the country in
trade, and consequently lower the standard of comfort of the whole
population. We have found that protected industries, according to the
statement of the protectionists, do not produce, but consume. If then these
industries are the ones which make us rich, consumption is production and
destruction produces. The object of a protective duty is “to effect the
diversion of a part of the capital and labor of the people out of the channels
in which it would run otherwise, into channels favored or created by law”
(§ 13). We have seen that the channels into which the labor and capital of

the people are to be diverted are offered by the industries which do not pay.
Hence protectionism is found to mean that national prosperity is to be
produced by forcing labor and capital into employments where the capital
cannot be reproduced with the same increase which could be won by it
elsewhere. If that is so, then capital in those employments will be wasted,
and the final outcome of our investigation, which must be made the primary
maxim of the art of national prosperity under protectionism, is that Waste
makes Wealth. Such is its outcome when regarded as an economic
philosophy.
149. As regards the social and jural relations which are established
between citizen and citizen, protectionism is proved by a half-dozen
independent analyses of it to be simply a device for forcing us to levy
tribute on each other. If the law brings a cent to A it must have taken it from
B, or else it must have produced it out of nothing, that is, it must be magic.
Every soul pays protective taxes. If, then, anybody gets anything from
them, he needs to remember what they cost him, and he should insist on
casting up both sides of the account. If anybody gets nothing from them,
then he pays the taxes and gets no equivalent.
150. During the anti-corn-law campaign in England, a writer in the
Westminster Review illustrated protectionism by the story of the monkeys in
a cage, each of whom received for his dinner a piece of bread. Each
monkey dropped his own piece of bread and grabbed his neighbor’s. The
consequence was that soon the floor of the cage was strewn with fragments,
and each monkey had to make the best dinner he could from these. It is a
good and fair illustration. I saw a story recently in a protectionist newspaper
about the peasants in the Soudan. Each owns pigeons, and at evening, when
the pigeons come home, each tries to entice as many of his neighbors’
pigeons as he can into his own pigeon house. “All of them do the same
thing, and therefore each gets caught in his turn. They know this perfectly
well, but no Egyptian fellah could resist the temptation of cheating his
neighbor.” They ought to tax each other’s pigeons all around. Then they
would put themselves at once on the level of free and enlightened
Americans. The protectionist assures me that it is for the good of the
community and for my good that he should tax me. I reply that, in his
language, “these are fine theories,” but that whether it is good for the
community or not, and whether it is good for me or not, that he should tax

me, I can see that it is for his good that he should tax me. Then he says:
“Now you are abusive.”
151. If protectionism is anything else than mutual tribute, then it is
magic. The whole philosophy of it comes down to questions like this: How
much can I afford to pay a man for hiring me? How much can I afford to
pay a man for trading with me? How much can I afford to pay a man to
cease to compete with me in my production? How much can I afford to pay
a man to go and compete with those who supply me my consumption? It is
only an expensive way to get what we could get for nothing if it was worth
having (§ 89). It is admitted that one man cannot lift himself by his boot
straps. Suppose that a thousand men stand in a ring and each takes hold of
the other’s boot straps reciprocally and they all lift, can the whole group lift
itself as a group? That is what protection comes to just as soon as we have
drawn out into light the other side, the cost side of it. Whatever we win on
one side, we must pay for by at least equal cost on another. The losses will
all be distributed as net pure injury to the community. The harm of
protection lies here. It is not measured by the tax. It is measured by the total
crippling of the national industry. We might as well say that it would be a
good thing to put snags in the rivers, to fell trees across the roads, to dull all
our tools, as to say that unnecessary taxation could work a blessing. Men
have argued that to destroy machines was to do a beneficial thing, and I
have recently read an article in a Boston paper, quoting a Massachusetts
man who thinks that what we need is another war in the United States. Such
men may believe that protective taxes work a blessing, but to those who
will see the truth, it is plain that, when the whole effect of the protective
system is distributed, it benefits nobody. It is a dead weight and loss upon
everybody, and those who think that they win by it would be far better off in
a community where no such system existed, but where each man earned
what he could and kept what he earned.
152. There is a school of political science in this country in whose deed
of foundation it is provided that the professors shall teach how “by suitable
tariff legislation, a nation may keep its productive industry alive, cheapen
the cost of commodities, and oblige foreigners to sell to it at low prices,
while contributing largely toward defraying the expenses of the
30
government.” Is not that a fine thing? Those professors ought to likewise
provide us a panacea, the philosopher’s stone, a formula for squaring the

circle, and all the other desiderata of universal happiness. It would be only a
trifle for them. The only fear is that they may write the secret which they
are to teach in books, and that other nations to whom we are “foreigners,”
may learn it. Then while Englishmen, Frenchmen, and Germans work for us
at low prices and pay our taxes, we shall be forced to work for them at low
prices and pay their taxes, and the old somber misery will settle down upon
the world again the same as ever.
153. Some years ago we were told that protection was necessary
because we had a big debt to pay. Well, we have paid the debt until we have
reduced it from $78.25 per head to $28.41 per head. We, the people, have
also raised our credit until the annual debt charge has been reduced from
$4.29 per head to 95 cents per head. Now it is necessary to keep up the debt
in order to keep up the taxes, and protectionism is now most efficient in
forcing wasteful and corrupting expenditures to get rid of revenue, lest a
surplus should furnish an argument for reducing taxation. This is right on
the doctrine that waste makes wealth.
154. They tell us that protection has produced prosperity, and when we
ask them to account for hard times in spite of the tariff, they say that hard
times are caused by the free traders who will not keep still. Therefore the
prosperity produced by protection is so precarious that it can be overthrown
by only talking about free trade. They denounce laissez-faire, or “let alone,”
but the only question is when to let alone, when to keep still. They do not let
the tariff alone if they want to revise it to suit them, or want to make it
“equitable.” When they get it “equitable” they will let it alone, but that
insures agitation, and makes sure that they will cause it, for an indefinite
time to come. On the other hand the victims of the tariff will not keep still.
Their time to “let alone” is when it is repealed. If the tariff did not hurt
somebody somewhere it would not do any good to anybody anywhere, and
31
the victims will resist. Mr. Lincoln used to tell a story about hearing a
noise in the next room. He looked in and found Bob and Tad scuffling.
“What is the matter, boys?” said he. “It is Tad,” replied Bob, “who is trying
to get my knife.” “Oh, let him have it, Bob,” said Mr. Lincoln, “just to keep
him quiet.” “No!” said Bob, “it is my knife and I need it to keep me quiet.”
Mr. Lincoln used the story to prove that there is no foundation for peace
save truth and justice. Now, in this case, the man whose earnings are being
taken from him needs them to keep him quiet. Our fathers fought for free

soil, and if we are worthy to be their sons we shall fight for free trade,
which is the necessary complement of free soil. If a man goes to Kansas to-
day and raises corn on “free soil,” how does he get the good of it, unless he
can exchange that corn for any product of the earth that he chooses on the
best terms that the arts and commerce of to-day can give him?
155. The history of civil liberty is made up of campaigns against abuses
of taxation. Protectionism is the great modern abuse of taxation; the abuse
of taxation which is adapted to a republican form of government.
Protectionism is now corrupting our political institutions just as slavery
used to do, viz., it allies itself with every other abuse which comes up. Most
recently it has allied itself with the silver coinage, and it is now responsible,
in a great measure, for that calamity. The silver coinage law would have
been repealed three years ago if the silver mining interest had not served
notice on the protectionists that that was their share of protection, and the
price of their coöperation. The silver coinage is the chief cause of the “hard
times” of the last two or three years. In a well-ordered state it is the function
of government to repress every selfish interest which arises and endeavors
to encroach upon the rights of others. The state thus maintains justice.
Under protectionism the government gives a license to certain interests to
go out and encroach on others. It is an iniquity as to the victims of it, a
delusion as to its supposed beneficiaries, and a waste of the public wealth.
There is only one reasonable question now to be raised about it, and that is:
How can we most easily get rid of it?

TARIFF REFORM32

A YEAR and a half ago a gentleman who had just been reëlected, by
Republicans, to the Senate of the United States, made a five-minute
speech acknowledging the honor. In respect to public affairs he uttered but
one opinion: that the people of the United States were confronted by a most
serious problem, viz., how to reduce taxation. On the face of it, this was a
most extraordinary statement, and the chronicler or historian might well
take note of it as a new event in the life of the human race. Statesmen and
historians are familiar enough with the difficulty of raising more revenue,
and laying more taxes, but the solemn and calamitous position of a nation
which is forced to reduce its taxes, and finds itself confronted by industrial
disaster if it does it, is something new. Students of political economy are
familiar with the question: What harm to industry may be done by levying
taxes on it? But the problem of how to avert the economic disaster which
may follow taking them off is new. Of course the state of mind revealed by
the formulation of the above problem is the result of a long habit of
regarding taxation as an industrial force, or, at least, as an effective
condition of industrial success.

There is, however, a problem; in regard to that fact all concur. It is also
a rare problem, one for which the only precedent is to be found in our own
history, and when the case occurred before, it proved to be fraught with
calamity. We are confronted by the dangers of a surplus revenue, and no
proposal to do away with the surplus in extravagant expenditures can stand
before the common sense of the people.
If the taxes are collecting more than the public necessities require, then
the simple and obvious, and, in fact, the only solution, is not to collect the
taxes; let the people keep their own products and do what they please with
them. If we do not make a problem there will not be any; if we simply do in
the most straightforward manner what the common sense of the situation
demands, there will be no difficulty; the consequences will all take care of

themselves, and all the imaginary calamities will fail to appear. If, however,
we must have a grand scheme of national prosperity established in advance,
then the case is different.
During the war a notion grew up here that, through some new
dispensation of fate, it was possible for the American people to make war
and prosper by it. After the war the notion grew up that the paper money
was a condition of success and that we should be ruined if we resumed
specie payments. Now we are met by the doctrine that we cannot repeal the
taxes which were laid during the war, partly in order to carry it on, because
our national prosperity is bound up in them. These notions, in fact, are all
consistent, and all hang together; they all belong to a philosophy that men
prosper by discord and war, not by peace and harmony. According to that
philosophy we touched unawares the springs of prosperity when we
engaged in a civil war, incurred an immense debt, and laid crushing taxes.
Now, therefore, when we ask that the taxes which are no longer necessary
may be taken off, the men who have fallen under the dominion of these
fallacies tell us that it cannot be done; that our prosperity would be
undermined by it. They have been assuring us for years past that the
protective system was sure to produce a solid and stable prosperity; now, by
their own statement, it has produced a state of things so weak and unstable
that it must be maintained by heavy taxes. The industrial prosperity of the
United States proves to be as burdensome to it as the armaments of the
European nations are to them.
The notion seems to be that protective taxes, laid on imports, are the
particular kind of taxes which make national prosperity, and which
therefore ought not to be touched. It is proposed that internal taxes shall be
reduced. If local taxes on real estate, etc., are reduced, every one rejoices;
that is supposed to be a clear and simple gain. I have known the same man
to exert himself very actively to scrutinize local expenditures, and reduce
local taxes, and to boil with rage against free traders who want to reduce
protective taxes. However, there is probably no tax of any kind whatsoever
which does not interfere with the conditions of supply and demand, or
industrial competition, in such a way as to give “protection” to somebody at
the expense of somebody else. There are persons who are now enjoying
great advantages in their business from the whisky and tobacco taxes which
they would lose if those taxes were repealed. This is one of the incidental

mischiefs of all taxation and one of the reasons for insisting that taxation
shall be as slight as possible, and, to that end, that government functions
shall be limited as much as possible.
We are, therefore, face to face with the question whether we are able to
reduce our own taxes, and whether we are free to do so. We may fairly ask:
if not, why not? It is plain that this is a question of domestic policy and of
our own interest altogether. All the attempts to prejudice it by talking about
“England” are impertinent, and all allegations that those of us who want to
reduce our own taxes are trying “to give away our market,” etc., belong to
the worst abuses of political discussion. What is true is that we have built
up a vast combination of vested interests, which in a few cases have, and in
nearly all cases think they have, an interest in maintaining the taxes. These
are among ourselves; what they gain, they gain from us; it is with them that
we have to contend. They have thus far carried on the fight by all the
methods dear to vested interests; they have put forth plausible fallacies,
sought alliances, procured delays, appealed to prejudices.
Behind these selfish and sordid interests, however, there is the strong
and sincere prejudice which still prevails among the civilized nations of to-
day, and which is dividing them into hostile parties, carrying on tariff wars
with each other. I call it “protectionism,” because it is not a policy, but a
philosophy of national welfare. In the United States it takes the form of
various fallacies about the home markets, diversification of industry, wages,
etc. As these are all questions of political economy, and as all who talk on
the subject at all are talking political economy of some sort or other, it
seems that a great work of education is to be done here on the field of
economic doctrine. Hitherto the attempt of the politicians has been not to
perform this work of education but to thrust it aside.
As soon as the issue is formed, however, and the protectionists are
forced to formulate their doctrine, as a doctrine, its absurdity becomes
apparent. It is not capable of statement. If we are to have temporary
protection, in order to start infant industries, then it will become
imperatively necessary, so soon as public attention is occupied by the
subject, to say how, and how far, and how long, the system is to be kept up,
and the public will demand to know how it is getting on, and at what rate it
is approaching its goal. For this reason those who have any logical
directness of thinking, have already advanced to a more intense position;

they advocate protectionism as a permanent and universal economic
philosophy. In that form it flies in the face of common sense and
civilization; in some of the latest forms which it has taken on in the hands
of some professors of political economy, it is a kind of economic
mysticism.
If, however, the United States could be cut off from all the rest of the
world as regards trade and industry, then at least it should be plain that
whatever material prosperity they could gain would be just what they, with
their energy, enterprise, and capital, are able to extract from such soil and
climate as nature has given to us here. What would be the difference if,
then, there were no tax barriers? Certainly none whatever. The wealth
which the American people get they must produce by applying their labor
and capital to the natural advantages which they possess. With foreign trade
open to them, they will not make use of it unless they find an advantage in
it; that is, unless American labor and capital can attain more wealth through
exchange than without it. The task of American producers will still be to
attain the greatest possible wealth by expending their labor and capital on
American soil, either directly, or with an intermediate step of exchange.
Wages are only a part of the product of the country; if then, trade increased
the amount of commodities at the disposition of the people, it would
increase the amount of each share in the distribution. This is the simplest
common sense of the matter, stripped of all technicalities, and to this the
whole discussion must again and again return.
If now we begin to reduce and abolish the taxes which were laid during
the war, we shall simply begin to free the American people from a clog on
their energies and a waste of their industrial strength. Every step in this
direction is an emancipation under which we may be sure that the national
energy which is set free will spring up with the quickest response. The
guarantee of this is in the character of the people, and in the natural
advantages which they possess. Whatever chances we have, we have in the
nature of the case; the tariff could not give us any; it could only divert in
one way or another those which nature has given us. This diversion or
perversion has now entered into the experience and education of our
generation. We have no idea of the welfare we should enjoy if we were only
free to use the chances which are within our reach, and a great many of us

have spun out a kind of political economy to prove that the cords which
bind us are the tools by which we work.

WHAT IS FREE TRADE?33

T HERE never would have been any such thing to fight for as free
speech, free press, free worship, or free soil, if nobody had ever put
restraints on men in those matters. We never should have heard of free
trade, if no restrictions had ever been put on trade. If there had been any
restrictions on the intercourse between the states of this Union, we should
have heard of ceaseless agitation to get those restrictions removed. Since
there are no restrictions allowed under the Constitution, we do not realize
the fact that we are enjoying the blessings of complete liberty, where, if
wise counsels had not prevailed at a critical moment, we should now have
had a great mass of traditional and deep-rooted interferences to encounter.

Our intercourse with foreign nations, however, has been interfered
with, because it is a fact that, by such interference, some of us can win
advantages over others. The power of Congress to levy taxes is employed to
lay duties on imports, not in order to secure a revenue from imports, but to
prevent imports—in which case, of course, no revenue will be obtained.
The effect which is aimed at, and which is attained by this device, is that the
American consumer, when he wants to satisfy his needs, has to go to an
American producer of the thing he wants, and has to give to him a price for
the product which is greater than that which some foreigner would have
charged. The object of this device, as stated on the best protectionist
authority, is: “To effect the diversion of a part of the labor and capital of the
people out of the channels in which it would run otherwise, into channels
favored or created by law.” This description is strictly correct, and from it
the reader will see that protection has nothing to do with any foreigner
whatever. It is purely a question of domestic policy. It is only a question
whether we shall, by taxing each other, drive the industry of this country
into an arbitrary and artificial development, or whether we shall allow one
another to employ each his capital and labor in his own way. Note that there
is for us all the same labor, capital, soil, national character, climate, etc.,—
that is, that all the conditions of production remain unaltered. The only

change which is operated is a wrenching of labor and capital out of the lines
on which they would act under the impulse of individual enterprise, energy,
and interest, and their impulsion in another direction selected by the
legislator. Plainly, all the import duty can do is to close the door, shutting
the foreigner out and the Americans in. Then, when an American needs
iron, coal, copper, woolens, cottons, or anything else in the shape of
manufactured commodities, the operation begins. He has to buy in a market
which is either wholly or partially monopolized. The whole object of
shutting him in is to take advantage of this situation to make him give more
of his products for a given amount of the protected articles, than he need
have given for the same things in the world’s market. Under this system a
part of our product is diverted from the satisfaction of our needs, and is
spent to hire some of our fellow-citizens to go out of an employment which
would pay under the world’s competition, into one which will not pay under
the world’s competition. We, therefore, do with less clothes, furniture, tools,
crockery, glassware, bed and table linen, books, etc., and the satisfaction we
have for this sacrifice is knowing that some of our neighbors are carrying
on business which according to their statement does not pay, and that we
are paying their losses and hiring them to keep on.
Free trade is a revolt against this device. It is not a revolt against import
duties or indirect taxes as a means of raising revenue. It has nothing to say
about that, one way or the other. It begins to protest and agitate just as soon
as any tax begins to act protectively, and it denounces any tax which one
citizen levies on another. The protectionists have a long string of notions
and doctrines which they put forward to try to prove that their device is not
a contrivance by which they can make their fellow-citizens contribute to
their support, but is a device for increasing the national wealth and power.
These allegations must be examined by economists, or other persons who
are properly trained to test their correctness, in fact and logic. It is enough
here to say, over a responsible signature, that no such allegation has ever
been made which would bear examination. On the contrary, all such
assertions have the character of apologies or special pleas to divert attention
from the one plain fact that the advocates of a protective tariff have a direct
pecuniary interest in it, and that they have secured it, and now maintain it,
for that reason and no other. The rest is all afterthought and excuse. If any
gain could possibly come to the country through the gains of the
beneficiaries of the tariff, obviously the country must incur at least an equal

loss through the losses of that part of the people who pay what the protected
win. If a country could win anything that way, it would be like a man lifting
himself by his boot straps.
The protectionists, in advocating their system, always spend a great
deal of effort and eloquence on appeals to patriotism, and to international
jealousies. These are all entirely aside from the point. The protective system
is a domestic system, for domestic purposes, and it is sought by domestic
means. The one who pays, and the one who gets, are both Americans. The
victim and the beneficiary are amongst ourselves. It is just as unpatriotic to
oppress one American as it is patriotic to favor another. If we make one
American pay taxes to another American, it will neither vex nor please any
foreign nation.
The protectionists speak of trade with the contempt of feudal nobles,
but on examination it appears that they have something to sell, and that they
mean to denounce trade with their rivals. They denounce cheapness, and it
appears that they do so because they want to sell dear. When they buy, they
buy as cheaply as they can. They say that they want to raise wages, but they
never pay anything but the lowest market rate. They denounce selfishness,
while pursuing a scheme for their own selfish aggrandizement, and they
bewail the dominion of self-interest over men who want to enjoy their own
earnings, and object to surrendering the same to them. They attribute to
government, or to “the state,” the power and right to decide what industrial
enterprises each of us shall subscribe to support.
Free trade means antagonism to this whole policy and theory at every
point. The free trader regards it as all false, meretricious, and delusive. He
considers it an invasion of private rights. In the best case, if all that the
protectionist claims were true, he would be taking it upon himself to decide
how his neighbor should spend his earnings, and—more than that—that his
neighbor shall spend his earnings for the advantage of the men who make
the decision. This is plainly immoral and corrupting; nothing could be more
so. The free trader also denies that the government either can, or ought to
regulate the way in which a man shall employ his earnings. He sees that the
government is nothing but a clique of the parties in interest. It is a few men
who have control of the civic organization. If they were called upon to
regulate business, they would need a wisdom which they have not. They do
not do this. They only turn the “channels” to the advantage of themselves

and their friends. This corrupts the institutions of government and continues
under our system all the old abuses by which the men who could get control
of the governmental machinery have used it to aggrandize themselves at the
expense of others. The free trader holds that the people will employ their
labor and capital to the best advantage when each man employs his own in
his own way, according to the maxim that “A fool is wiser in his own house
than a sage in another man’s house”;—how much more, then, shall he be
wiser than a politician? And he holds, further, that by the nature of the case,
if any governmental coercion is necessary to drive industry in a direction in
which it would not otherwise go, such coercion must be mischievous.
The free trader further holds that protection is all a mistake and
delusion to those who think that they win by it, in that it lessens their self-
reliance and energy and exposes their business to vicissitudes which, not
being incident to a natural order of things, cannot be foreseen and guarded
against by business skill; also that it throws the business into a condition in
which it is exposed to a series of heats and chills, and finally, unless a new
stimulus is applied, reduced to a state of dull decay. They therefore hold
that even the protected would be far better off without it.

PROTECTIONISM TWENTY YEARS
AFTER34

I THINK it must be now nearly twenty years since I have made a free-
trade speech or been able to take share in a free-trade dinner.

When I was invited here this evening I thought I would try to come for
the pleasure of hearing the gentlemen, especially the members of Congress,
who were announced to speak here. I have been so out of health that it has
been impossible for me to sit up evenings or to attempt public speaking in
the evenings, but things are going a little better and I will make an attempt
to say a little—not very much, as the hour is now late.
Thirty-five or forty years ago I became a free trader for two great
reasons, as far as I can now remember.
One was because, as a student of political economy, my whole mind
revolted against the notion of magic that is involved in the notion of a
protective tariff. That is, there are facts that are accounted for by
protectionism through assertions that are either plainly untrue or are entirely
irrational. The other reason was because it seemed to me that the protective
tariff system nourished erroneous ideas of success in business and produced
immoral results in the minds and hopes of the people.
I cannot say that I have got any more light on the matter within the last
twenty years; it looks to me still as if the great objections to protectionism
were these two. No man who enjoys the benefit of a protective tariff, as he
believes, can ever tell whether he gets back anything for the taxes which he
pays or not. He never has any analysis of the operation and never knows
whether or not he really recovers from the action of the tariff what he pays
in.
I say now the taxes which he pays, because—let us not make any
mistake about this—the matter we are talking about is one entirely of

Americans and between Americans. If the protective tariff operates so as to
perform what is attributed to it, it prevents things from being imported into
this country. That may be a disadvantage to the foreigner, it may disappoint
him in his hopes, but we may leave him out of account. Then the increase of
the cost of these commodities for the American consumer at home is the
source from which the American protected manufacturer must obtain his
benefit, if he ever obtains any. Therefore he has to pay also taxes to the
other protected industries on account of the operation of the system.
Therefore he is both paying and receiving, but whether or not he gets back
the part that he hoped to receive is a question which he never can sift and
never can know.
I should myself suppose that possibly the Pennsylvanian on his coal
and iron might stand a good chance of winning something. The operation is
direct and simple in that case, and coal and iron are to-day the very first
conditions of industry. They must be obtained as raw material, because they
enter into everything, and it is possible that under those circumstances the
game might be sufficiently direct so that its effect could be felt and
perceived. But the Connecticut manufacturer has to pay taxes on coal and
iron and copper and the other metals, and he has to pay also the taxes on
wool and the other raw materials, and then comes the question whether he
ever gets it back again or not. He never knows; he cannot know; he cannot
feel it and he cannot possibly know whether the operation of the system is
to bring him back a return for his outlay or not.
We hear a great deal about a rightly adjusted tariff. It is a constant ideal
that is presented, whenever the tariff subject comes up again for discussion
in Congress, that it ought to be rightly adjusted, and when it is, it is going to
perform its beneficial operation.
How can a tariff ever be rightly adjusted unless the industry will stand
still? The taxes stand still for years without change. The industries never
stand still. There are new inventions in machinery, there are new raw
materials brought into use, there are new processes developed, and all that
changes the character of the industry. These inventions and improvements
and processes are all ignored by the protective system. It contains no
allowance for them at all. But our people are full of enterprise, they are
fond of improvements, they like novelties, and they adopt changes. The
consequence is that the industry changes, and then again the decisions that

are made by somebody or other as to the doubtful questions in the
interpretation of the law are also constantly changing, and then by and by
we find a lot of people who want the tariff changed. They say it needs to be
adapted to the time, it is out of date, it has fallen behind, it does not fit the
requirements of the moment, and they would like to have a tariff revision;
but they are told then that they ought to keep still and not make a
disturbance which will bring up a discussion of the entire tariff system, and
that they ought to allow it to go on for the sake of the “system.”
What is the system then? The system means that the import duties that
we have in this country have raised the prices of all commodities in our
market, I may say thirty or forty per cent on a very low calculation. Is not
that a very extraordinary thing when you stand off and try to realize it for a
minute—that we have raised the prices in the United States thirty or forty
per cent—perhaps more nearly fifty per cent—above the level of the prices
for the same commodities in the other civilized countries of our grade; and
that we believe that we have done a grand and noble thing by raising these
prices, putting the whole level of life in this country on an artificial plane
that much above the level of the world’s market? In fact, if you should
listen to a protectionist he would make you believe that this continent
would not be habitable if it was not for the protective tariff that is here
working this operation all the time on the American market.
I am of the opinion—I am not very confident about it—but it looks to
me as if it were true that a protective tariff wears out in a little while—I
mean, so far as its expected beneficial effect is concerned. Its effects are
distributed, they are taken up and they are allowed for all around the market
until the expected benefit to the protected people is lost and there remains
nothing but the dead weight of the system itself as an interference with the
industries. There is then a call for a new tariff in order to get another
impulse or another fillip, as I have heard it called, to give things a new
impulse, to start them on again.
That has been the history of our tariff now for one hundred years, that it
has been restarted, reinvigorated from time to time in order to give a new
impulse. Then in the very nature of the case, therefore, it seems to me that a
new impulse is constantly required.

As I said at the outset, the tariff system seems to me to teach us to
believe that a man needs a “pull” of some kind or other to make any
industry a success. It is an idea that there must always be a provision of
easy profit in connection with the industry that shall demand no labor or no
expenditure of capital to get it. That is the pure doctrine of graft. The tariff
teaches us to look for a fee or a gratuity or a rake-off which will be a pure
and net profit. People are told that tariff taxes are a rightful gift to the
beneficiary. Those who do not get that gain seek another one of the same
kind somewhere, and when they do that they have recourse to graft.
It is a shameful fact that this notion of graft, and this word, should have
come to us, as it has within the last four or five years, and should have
extended so far and become so familiar to us in connection with a great
many of the operations of business. It is customary, as we have known for a
long time, in some nations, for instance in Russia, China, and Turkey; and
with us it has seemed to spread and win acceptance and currency in a most
astonishing manner. I cannot believe but what the tariff system has educated
us in this direction and prepared us to tolerate and accept the development
of this idea. It also seems to me that now, after one hundred years of this
system, the tariff is no longer properly an economic question. It is a
practical political question. The politics and the business are interwoven in
it inextricably. There is no economic discussion possible of the propositions
that are made, economic in form, in connection with the tariff system. There
is only a war of partial views and of superficial inferences.
Our American protectionism has grown out of the peculiar
circumstances of this country. It is an old idea that has come down to us
from Europe, and, indeed, from the Middle Ages in Europe, and here it
found a chance for a new and very remarkable development. There were
new conditions here, and the chances were so big and grand that, as a
matter of fact, the protective system has never done more than exact a
certain tribute from us on these chances. It has never really touched us in an
acute and sensible way, and in spite of it we have enjoyed marvelous
prosperity which is due really to the circumstances of advantage and favor
which we have enjoyed here.
In the year 1892 we got an issue on this matter and went to the
electorate with it, with the result that we all know. But the mandate of the

people was neglected and disobeyed by the government and the purpose
that the people showed at that time was defied.
We have also had opportunity to notice the great power of the protected
interests in Congress. The fact is that we are being governed at the present
time by a combination of these protected interests which have got control of
the machinery of government, and have control of the personnel of the
government to such an extent that it is almost impossible, practically, to
make any breach in this system at all. That is because the political
combinations have been so thoroughly wrought out and so ingeniously
developed that they look at present as if they were impregnable.
I look around to see if I can find some encouragement. I thought that it
was something of an encouragement when Mr. Dalzell made this speech in
Congress that Mr. Williams has referred to, in which he poured such scorn
on the idea of “incidental protection.” I have never said anything so severe
about any protectionist idea as that which he said about incidental
protection. But suppose that the people of 1850, the middle of the
nineteenth century, could come to life again, the old protectionists of that
time. What would they think to hear a man speak with scorn of incidental
protection? It was what they believed in; it was the whole business to them.
When an old protectionist like Mr. Dalzell can turn around and pour scorn
upon incidental protection I feel as if we never could tell what they might
throw overboard next time, in some paroxysm of some kind or other, of fear
or hope or something else, and we might get a chance that we have not been
able to get in the past.
Then, as has been well said by other gentlemen to-night, there has been
within the last year or two a very great revolt in the public mind against
graft and political and business corruption. How far will this go? We do not
know, but it is, at any rate, an opening in the public mind that is full of
chances. It may go very far; it may have very great effects; it is certainly
something to be noticed and taken advantage of.
Then, again, there are new conflicts of interests arising. We have
become very great people in the world’s commerce, with a billion dollars’
worth of exports and imports in a year, and we are so interwoven with the
whole world that it will not be possible for us to go on with our old policy
of discouraging commerce and rejecting it, and trying to stop it, and paying

no attention at all to the remonstrances of our neighbors. In future we shall
be obliged to pay some attention to these remonstrances. They are just, they
are reasonable, and they will command our attention; and then we shall
have to make concessions to them. In other words, we cannot any longer
afford to reject and neglect these remonstrances.
It may be, therefore, that in the time that is now before us we shall have
better chances for a practical war upon this system than we have had
hitherto. As long, however, as I can remember, and as long as I have had
any share in it, we have got along without any encouragement in it at all.
We have done what we could without that. We got so we did not expect it.
We knew that we should be neglected and treated as persons whose
opinions in these matters were not of any importance or worthy of any
attention, and so we went on and kept up our arguments, as we considered
them, to the best of our ability and without very much result.
Now, it may be that we are on the eve of a different time, when the
circumstances will be more favorable, more hopeful, more full of
opportunities, and I certainly, for my part, most profoundly hope that that is
so.
I have noticed with some discouragement the efforts that Mr. Williams
has made on the floor of Congress to get some modifications of the tariff
made, or some argument even opened up there that might give the matter
activity and life in the legislative domain. They did not seem any more
encouraging than what we used to see in the old times. But it is certainly in
the nature of things that the difficulties and absurdities of this system must
come out in practice more and more distinctly as we go on, and the need for
reform will therefore force itself in the shape of a play of interests that will
bring new and counteracting forces into operation to which we may look for
help in the overthrow of the system.

PROSPERITY STRANGLED BY GOLD35

S OME of the silver fallacies were stated by Mr. St. John, in his address
before the silver convention, with such precision that his speech
offers a favorable opportunity for dealing with them.

He says that “it is amongst the first principles in finance that the value
of each dollar, expressed in prices, depends upon the total number of dollars
in circulation.” There is no such principle of finance as the one here
formulated. The “quantity doctrine” of currency is gravely abused by all
bimetallists, from the least to the greatest, and it is at best open to great
doubt. When the dollars in question are dollars of some money of account
which can circulate beyond the territory of the State in which it is issued,
the quantity doctrine cannot be true within that territory. It may be noted, in
passing, that this is the reason why no scheme of the silver people for
manipulating prices in the United States can possibly succeed. Silver and
gold will be exported and imported until their values conform throughout
the world, and prices fixed in one or the other of them will conform to the
world’s prices, after all the trouble and waste and loss of translating them
two or three times over have been endured.
The quantity doctrine, however, means that the value of the currency is
a question of supply and demand, and everybody knows that to double or
halve the supply does not halve or double the value, or have any other effect
which is simple and direct. If it did have such effect speculation would not
be what it is.
Mr. St. John goes on to argue that our population increases two millions
every year, on account of which we need more dollars; that the production
of gold does not furnish enough to meet this need, and that, therefore, prices
fall. This argumentation is very simple and very glib. Prosperity and
adversity are put into a syllogism of three lines. But, if we can avert the fall
in prices and adversity by coining silver, it must be by adding the silver to
the gold which we now have. “High” and “low” prices are only relative

terms. They mean higher and lower than at another time or place; higher
and lower than we have been used to. If misery depends on ten-cent corn
we are advised to cut the cents in two and we shall get twenty-cent corn and
prosperity. Corn will not be altered in value in gold, or outside of the United
States, and, as all other things will be marked up at the same time and in the
same way, its value in other things will not be altered by this operation.
When we get used to twenty-cent corn it will seem just as low and just as
“hard for the debtor” as ten-cent corn is now. Then we can divide by ten and
get two-dollar corn, by adding free coinage of copper. When we get used to
that we shall be no better satisfied with it. We can then make paper dollars
and coin them without limit. Million-dollar corn will then become as bitter
a subject for complaint as ten-cent corn is now. The fact that people are
discontented is no argument for anything.
The fact that prices are low is made the subject of social complaint and
of political agitation in the United States. Prices have undergone a wave
since 1850. They arose until about 1872. They have fallen again. They are
lower than they were at the top of the wave all the world over. This fact, the
explanation of which would furnish a very complicated task for trained
statisticians and economists, is made a topic of easy interpretation and
solution in political conventions and popular harangues, and it is proposed
to adopt violent and portentous measures upon the basis of the flippant
notions which are current about it. But what difference does it make
whether the “plane” of prices is high or low? If corn is at forty cents a
bushel and calico at twenty cents a yard, a bushel buys two yards. If corn is
at ten cents a bushel and calico at five cents a yard, a bushel will buy two
yards. So of everything else. If, then, there has been a general fall, and that
is the alleged grievance, neither farmers nor any other one class has
suffered by it.
It is undoubtedly true that a period of advancing prices stimulates
energy and enterprise. It does so even when, if all the facts were well
known, it might be found that capital was really being consumed in
successive periods of production. Falling prices discourage enterprise,
although, if all facts were known to the bottom, it might be found that
capital was being accumulated in successive periods of production.
It is also true that a depreciation of the money of account, while it is
going on, stimulates exports and restrains imports.

But who can tell how we are to make prices always go up, unless by
constant and unlimited inflation? Who can tell how we are to avoid
fluctuations in prices or eliminate the element of contingency, risk,
foresight, and speculation?
It is also true that, although high prices and low prices are immaterial at
any one time, the change from one to the other, from one period of time to
another, affects the burden of outstanding time contracts. Men make
contracts for dollars, not for dollar’s-worths. Selling long or short is one
thing; lending is another. Borrowers and lenders never guarantee each other
the purchasing power of dollars at a future time. If the contracts were thus
complicated they would become impossible. Between 1850 and 1872 the
debtors made no complaint and the creditors never thought of getting up an
agitation to have debts scaled up. The debtors now are demanding that they
be allowed to play heads I win, tails you lose, and Mr. St. John and others
tell us that they have the votes to carry it; as if that made any difference in
the forum of discussion.
Increase in population does not prove an increased need of money. It
may prove the contrary. If the population becomes more dense over a given
area, a higher organization may make less money necessary. If railroads and
other means of communication are extended, money is economized. If
banks and other credit institutions are multiplied, and if credit operations
are facilitated by public security, good administration of law, etc., less
money is needed. If these changes are going on at the same time that
population is increasing (and such is undoubtedly the case in the United
States), who can tell whether the net result is to make more or less currency
necessary? Nobody; and all assertions about the matter are wild and
irresponsible.
If it was true that an increase of two millions in the population called
for more dollars, how does anybody know whether the current gold
production is adequate to meet the new requirement or not? The assertion is
arithmetical. It says that two quantities are not equal to each other. The first
quantity is the increase in the currency called for by two million more
people. How much more is needed? Nobody knows, and there is no way to
find out. The silver men have put figures for it from time to time, but the
figures rested on nothing and were mere bald assertions. The second
quantity is the amount of new gold annually available for coinage in the

United States. How much is this? Nobody knows, because if an attempt is
made to define what is meant it is found that there is no idea in the words.
The people of the United States buy and coin just as much gold as they
want at any time. Hence two things are said to be unequal to each other,
when nobody knows how big either one of them is. It may be added that it
makes no difference how big either one of them is. How much additional tin
is needed annually for the increase of our population? Do the mines
produce it? Nobody knows or asks. The mines produce, and the people buy,
what they want. The case is the same as to gold.
We find, then, that Mr. St. John begins with a doctrine which is
untenable; then he asserts a relation between population and the need of
money which does not exist; then he assumes that this need is greater than
the amount of new gold produced, although neither he nor anybody else
knows how big either one of these quantities is. This is the argumentation
by which he aims to show that prices are reduced and misery produced by
the single gold standard. It is the argumentation which is current among the
silver people. Not a step of it will bear examination. The inference that we
must restore the free coinage of silver, to escape this strangulation of
prosperity, falls to the ground.

CAUSE AND CURE OF HARD TIMES36

I T is an essential part of the case of the silver men that the country is
having “hard times.” The bolters from the Republican convention say,
in their manifesto: “Discontent and distress prevail to an extent never before
known in the history of the country.” This is an historical assertion. It is
distinctly untrue. There is no such discontent and distress as there was in
1819, or in 1840, or in 1875, to say nothing of other periods. The writers
did not know the facts of the history, and they made use of what is
nowadays a mere figure of speech. People who want to say that a social
phenomenon is big, and who do not know what has been before, say that it
is unparalleled in history.

There has been an advancing paralysis of enterprise and arrest of credit
ever since the Sherman act of 1890 was passed. The bolters say that “No
reason can be found for such an unhappy condition of things save in a
vicious monetary system.” The reason for it has been that the cumulative
effect of the silver legislation was steadily advancing to a crisis. The efforts
by which the effects of that legislation had been put off were no longer
effective, and it was evident that the country was on the verge of a
cataclysm in which the standard of value would be changed. What man can
fail to see the effect of such a fear on credit and enterprise? And with such a
fear in the market, how idle it is to try to represent the trouble as caused by
the fact that the existing standard was of gold, or of silver, or of anything
else! Men will make contracts and go on with business by the use of any
medium, the terms of which can be defined, understood, and maintained
until the contract is solved, but uncertainty as to the terms, or danger of
change in them, makes credit and enterprise impossible. In the whole
history of finance no crisis can be found which was so utterly unnecessary,
and so distinctly caused by the measures of policy which had gone before it,
as that of 1893.

So much being admitted as to “hard times,” it remains true, however,
that by far the greatest part of the current declamation about hard times is
false. Prosperity and adversity of society are not capable of exact
verification. At all times some people, classes, industries, are less
prosperous than others. The fashion has grown up among politicians and
stump orators of using assertions about prosperity and distress as arguments
for their purpose, and parties come before the public with prosperity
policies. They have programs for “making the country prosperous.” If this
country, with its population, its resources, and its chances, is not prosperous
by the intelligence, industry, and thrift of its population, does any sane man
suppose that politicians and stump orators have any devices at their control
for making it so? The orators of the present day see prosperity where they
need to see it for the purposes of their argument. They say that all gold-
standard countries in Europe are in distress. Mr. St. John says that Mexico
is prosperous. As to Canada, we have seen no statement. According to some
discussions which are current, the bicycle rivals the gold standard as a
calamity-producer. As the bicycle has certainly gravely affected the
distribution of expenditure and the accumulation of capital, its efficiency as
a crisis-maker, in its degree, whatever that may be, can be rationally
discerned, but nobody has ever been able to show any rational grounds of
belief that the gold standard is a crisis-maker.
A crisis will also be produced whenever capital has been invested on a
large scale in any unproductive investment, whereby it is not reproduced,
but is lost. The enterprises are always made the basis of engagements and
contracts. When the enterprises fail, the engagements cannot be met; other
engagements based on these also fail, and so on through the whole
industrial organization. Such crises are inevitable in a new country.
Enterprises run in fashions. At any one time great groups of producers tend
to one line of industry. That industry is sure to be overdone and to come to a
crisis. In a free country, where every man is at liberty to direct his enterprise
as he sees fit, what is the sense, when it turns out that he has made a
mistake, of trying to throw the losses on other people? No one would
propose it as to an individual or a number, but when there is a great interest
it makes itself a political power and produces a platform for the same
purpose, generally with inflated principles of humanity, justice, democracy,
and Americanism as wind-attachments to make it float.

Mr. St. John says that the farmers are spending ten dollars an acre to get
eight or nine dollars an acre. What farmer in the United States can tell how
many dollars he spends on an acre? What is the sense of these pretendedly
accurate figures? But, if they had sense, what would be the gain of cutting
the dollars in two? If the farmer spent twenty silver dollars on an acre and
got back sixteen or eighteen, how would he be benefited? The dollars of
outlay are of the same kind as the dollars of return in any case. If it is true
that the return does not equal the outlay, it must be on account of some facts
of production, and it requires but a moment’s reflection to see that changing
the currency in which outlay and income are reckoned cannot change the
relation between the two.
A dispassionate view of facts will go to prove that the world is
reasonably and ordinarily prosperous at the present time, except where
particular classes and industries are affected by special circumstances, as
some classes and industries are being affected at all times. The land-owners
of western Europe are in distress on account of the competition of new land,
with cheapened means of transportation, but now we are told that the
holders of the other side of the competition, the land-owners of the new
soil, are victims of distress. It must be, then, that too much labor and capital
are being expended on the soil the world over, and that, too, in spite of all
the protective tariffs drawing people to the textile and metal industries. Our
silver men say that this is not the correct inference. They say that the people
on the new land suffer because the prices are set in coins of gold and the
debits and credits are kept in terms of those coins. The prices are fixed in
the world’s market in gold. They will be so fixed, whatever we may do with
our coinage laws. If the proceeds, in being brought home, are converted into
silver value, a new opportunity for brokerage and exchange gambling will
be given to the hated bankers and brokers of Wall Street. That is the only
difference which will be produced. It would be far more sensible to say that
distress is produced by doing the business on the English system of weights
and measures, in bushels and pecks, and that prosperity would be produced
by doing it on the metric system, in litres and hectolitres, for that charge
would at least be harmless. Our distress could all be dispelled in a week by
an act of Congress making all contracts, beyond political peradventure, that
which they are in law and fact, gold contracts.

There is, however, another cause of hard times for some people which
is far more important in our present case than any other. That is the case of
the boom which has collapsed. We hear a great deal about “Wall Street
gambling.” The gambling in Wall Street is insignificant compared with the
gambling in land, buildings, town sites, and crops which goes on all over
the country, and which is participated in chiefly by the men who declaim
about Wall Street. For three hundred years our history has been marked by
the alternations of “prosperity” and “distress” which are produced by the
booms and their collapses. When the collapse comes the people who are left
long of goods and land always make a great outcry and start a political
agitation. Their favorite device always is to try to inflate the currency and
raise prices again until they can unload.
It is a very popular thing to tell men that they have a grievance. That
most of them find it hard to earn as much money as they need to spend goes
without saying. Now comes the wily orator and tells them that this is
somebody’s fault. In old times, if a man was sick, it was always assumed
that somebody had bewitched him. The witch was to be sought. The
medicine-man had to name somebody, and then woe to the one who was
named. Our medicine-men say that it is the gold-bugs, Wall Street, England,
who are to blame for hard times. Whether there is any rational proof of
connection is as immaterial as it always was in witchcraft. It is a case of
pain and passion. The “gold standard” has done it! There is something to
hate and denounce. All would be well if silver could be coined at four
hundred and twelve and a half grains to the dollar. But the assumption is
that while the farmers would sell their products for twice as many “dollars”
as now, in silver, all the prices of things which they want to buy would
remain at the same number of dollars and cents as now, in gold; that is, it is
believed that wheat would be at, say, one dollar and fifty cents per bushel in
silver, instead of seventy-five cents in gold, but that cloth would remain at
fifty cents a yard in silver, if it is now fifty cents a yard in gold. When this
assumption is brought out into clear words, every one knows that such can
never be the result. The proposed cure is like a witch cure. It lacks rational
basis, and cannot command the confidence of men of sense. If the times
were ever so bad, such a cure could only make them worse.

THE FREE-COINAGE SCHEME IS
IMPRACTICABLE AT EVERY POINT37

The Program.

I N two former articles I have discussed some points which are presented
by the advocates of the free coinage of silver, on the assumption that
their project was feasible and their conception of its operation correct. They
have laid out a program; free coinage, silver standard, great demand for
silver, rise of prices, rise in the value of silver, cancellation of debts,
prosperity. They now admit that this program would involve a panic, but it
would come out, they say, at the desired result in two or three years. They
denounce the gold standard as having caused hard times, but they plan a
program with a panic as an incident on the way to a silver standard as if it
was a trifle.

There is not a step in this program which could or would be carried out
as planned.

Free Silver Means Fiat Paper Money.

The amount of circulating cash of all kinds in the hands of the people at
the present time is about nine hundred millions. If the dollar was reduced to
half its present value, and if allowance was made for reserves, two thousand
million silver dollars would be the specie requirement of the country. We
already have nearly five hundred millions of such dollars. Hence the
country could not use at the utmost, if the new silver dollar was worth not
more than half the present gold dollar, and if the total circulation consisted

of silver without any paper, but three times as many more silver dollars as
we have now. But every one knows that such a state of the currency never
would exist. We should have paper “based on silver”; that is to say, the
silver inflation never will be carried out. It will turn to paper inflation at the
first step. Who can believe that, if the silver standard was adopted, silver
would be bought and piled up dollar for dollar against the paper, and that
the paper would be issued only as fast as the silver could be coined? In fact,
silver would no doubt be dropped and forgotten, and we should have plain
and straightforward fiat money of paper. Such ought to be faced as the only
real sense and probable outcome of the present agitation for the free
coinage of silver.

Limit of the Amount of Silver which could be
Absorbed.

Let us, however, proceed upon the assumption that the plan proposed is
sincere, and that the attempt would be made to carry it out in good faith.
The circulation in the hands of the people would be paper, for they would
become sick of silver and revolt against it. There would then be two
thousand million dollars in paper afloat, each “dollar” being of silver and
worth half a present gold one. We have now five hundred million silver
dollars. At the utmost not more than another five hundred millions of silver
could be absorbed into the system. That would give reserves of fifty per
cent of the total currency, and that is the maximum of the demand for silver
which could be created if the United States went over to the silver standard.
The supply would come from all over the earth. Mr. St. John is sure that
none would come from Europe, because legal tender silver there is at a
higher ratio than sixteen to one. Not a nation in Europe which is now under
the yoke of silver would hesitate a moment to demonetize it and send it here
if we opened our mints to it at sixteen to one. He also assures us that none
would come here from the East because the course of silver has always
been from West to East. The course of silver has turned from East to West
more than once when there was a profit on bringing it back, and that is the
only condition necessary to bring it back again. Japan would adopt a gold
currency the moment that the United States adopted a silver one.

It is Impossible Indefinitely to Increase the
Circulation.

The power of our currency to absorb silver is not unlimited. People
seem to believe that they can go on and increase the monetary circulation
indefinitely. This is possible with paper, which has no commodity value and
cannot be exported, always understanding that the paper will depreciate as
issued, but it is not possible with any money which has commodity value.
When silver has been put into circulation here to such an amount that all the
fictitious value given to it by the coinage law has been eliminated—that is
to say, when so many silver dollars, or paper bearing the obligation of silver
dollars, have been issued as will equal in value the present circulation—
then there will be no profit in sending silver here from elsewhere, and no
more profit in minting silver here than in sending it elsewhere. As we have
seen, there is no reason to estimate the amount of silver which would be
absorbed in this operation at more than five hundred millions. The miners
are making all this agitation for the sake of that share which they could get
in furnishing this sum. That share would really not exceed the silver they
had on hand when the law was put in force.

Antagonistic Interests of Miners and Populists.

What share, then, would the silver-miners get in the results of the
enterprise? They could get none unless the new silver was bought only of
them, and only bought gradually as they produced it, and bought at a rising
price as the demand of debtors acted upon it. Not one of these conditions
would be fulfilled. The debtors and the silver-miners really have
antagonistic interests at every point. It has been proposed that only
American silver should be accepted at the mint. That plan is impracticable
in any case, but, when the Populists had their victory in hand, does anybody
suppose that they would wait eight or ten years for the realization of their
hopes while the mines were producing new silver, being certain that that
delay would cause all they hoped for to slip through their fingers? I repeat:
The interests of the two factions are all antagonistic to each other, and one

of them is destined inevitably to be the dupe of the other. That destiny is
reserved for the miners who, besides, are paying all the expenses.
Already, so far as the campaign has proceeded, this antagonism has
begun to manifest itself. Mr. Bryan says that his plan will make silver worth
one dollar and twenty-nine cents per ounce fine. He thus takes his position
with the miners’ faction. Thereupon the organs of the repudiators’ faction
have begun to remonstrate. That is not at all what they are fighting for. They
do not want their scheme to raise silver at all. But if it does not, the miners
gain nothing. If it does, then again the repudiators take to paper money and
the miners win nothing.
The mechanical difficulty of recoining the silver with the necessary
rapidity could probably be overcome. There are machine-shops enough to
do it if there was a party in power which had that reckless determination to
execute its will which these people show. We may, therefore, go on to
consider the rise of prices.

The Rise of Prices.

The rise in prices would regularly occur only as the new silver or paper
was put out, but as the consequences would all be discounted it would be
sudden and rapid. It would not, however, affect all things at the same time
or to an equal degree. It is here that one of the first disappointments would
occur. It is not possible to put up prices when and as one would like to do it,
even when the rise is due to inflation. The effect cannot all be distributed at
once. An advance in price reacts on business relations, that is, on the
industrial organization. Many people and many interests find that they
cannot push against others until long after they have been pushed against
themselves. The wages class and the farmers are the ones who are most
clearly in this position, at least as far as the latter do not produce articles for
export. It must be plain that in such a convulsion of the market everybody
will try to save himself at the expense of others. Who will succeed? Those
certainly who spend their lives in the market and already possess the control
of its machinery; not those whose time is occupied in the details of
production.

Where the Expected Gains would Go.

It is said that the farmer would sell his grain and cotton, as now, for
gold; that he would exchange the gold for silver; would get the silver coined
and would pay his debts with it. Would any individual farmer do this?
Would any one man go through the steps of this operation?—see the buyer
of his products, handle the gold and silver, go to the mint? Certainly not. All
these operations would go on through the commercial and financial
machinery. They would be executed by different individuals, in the way of
business, through the organization, and every one of them would be lost to
view. Every operation would have to be paid for. Every operation would
give a new chance for more middlemen and more charges. Would, then, the
gains of this grand scheme go to the farmer? Not at all. They would go to
the “brokers and speculators of Wall Street.” They would be lost in
commissions and charges. The type of operator whom the Populist seems to
think of when he talks about “Wall Street sharks,” exists, although his
importance in Wall Street is not as great as that of the political farmer in
agriculture; but this type of man does not care what the currency legislation
is, except that he would like to have a great deal of it, and to have it very
mixed. Whatever it is, when it is made and he sees what it is, he will
proceed to operate upon it.

Playing into the Hands of the Money Sharks.

We hear fierce denunciations of what is called the “money power.” It is
spoken of as mighty, demoniacal, dangerous, and schemes are proposed for
mastering it which are futile and ridiculous, if it is what it is said to be.
Every one of these schemes only opens chances for money-jobbers and
financial wreckers to operate upon brokerages and differences while
making legitimate finance hazardous and expensive, thereby adding to the
cost of commercial operations. The parasites on the industrial system
flourish whenever the system is complicated. Confusion, disorder,
irregularity, uncertainty are the conditions of their growth. The surest means
to kill them is to make the currency absolutely simple and absolutely sound.
Is it not childish for simple, honest people to set up a currency system

which is full of subtleties and mysteries, and then to suppose that they, and
not the men of craft and guile, will get the profits of it?

THE DELUSION OF THE DEBTORS38

F IFTY years ago a political agitation was started for the annexation of
Texas. As the enterprise appeared like a barefaced piece of land-
grabbing, it was necessary to invent some historical, political, and moral
theories which would give it another color. One such theory was that Texas
had properly belonged to us, but that it was given away by Monroe and
Adams in 1819. Therefore the project was presented as one for the re-
annexation of Texas.

The Re-monetization of Silver.

An attempt is now made to impugn the coinage act of 1873 under
various points of view, in order to lay a foundation for the claim that it is
only sought now to re-monetize silver. Not a single imputation on the act of
1873 has ever been presented which will stand examination, but, if that
were not so, that act was like any other act of Congress which has become
the law of the land, and under which we have all been obliged to live for
twenty-five years. We cannot go back and undo the law and live the twenty-
five years over again. All the mistakes and follies of the past are gone into
the past for all classes and all persons amongst us. The men of the past must
be assumed to have acted according to their light, and we who inherit the
consequences of what they did must make the best of both the good and ill
of it, as the case may be, or as we think it is. If now we make a new coinage
law it must stand on its own merits, and on the responsibility of the men
who make it, now and for the future. All references back to 1873 are idle
and irrelevant.
The plain fact, therefore, to be faced without any disguise, is that we
are invited to debase the coinage and lower the standard of value, now and
for the future, as a free act of political choice, to be deliberately adopted in
a time of profound peace, and that this is to be done with the intention and

hope that it will perpetrate a bankruptcy at fifty cents on the dollar for all
existing debtors. Can this project be executed? It cannot. The scheme and
plan of it for a nation of seventy million people is silly and wicked at the
same time, and is both, beyond the power of words to express. The
projectors of it deal with the economic phenomena of a great nation as if
they were talking about a game at cards, and they plan to do this with prices
and that with debts, this with exports and that with banks, as if they were
planning a program for building a barn. If we try to realize the operation
proposed we shall see how childish and absurd it is.
We must distinguish between three classes of debtors: great financial
institutions, small mortgagors, and partners in collapsed booms.

Financial Institutions as Debtors.

The great financial institutions are intermediaries between debtors and
creditors. They have received capital from some people and lent it to others.
They have to recover it and pay it back. If they only recover it at fifty cents
on the dollar, they can only repay it in the same way. What this would mean
is that the creditors of those institutions would be paid “dollars,” but that
when they tried to re-invest them they would find that prices had risen to a
greater or less degree in those dollars for the things which they wanted to
buy. To this the Populists answer, triumphantly, that now the debtors find
that the prices of their products have fallen, so that when they try to sell
them they cannot get enough to pay their debts; but the debtors are those
who made contracts and undertook enterprises five, ten, fifteen, or twenty
years ago, expecting to make gains which they certainly would have kept.
As things have turned out they have not made the gains, and their plan is to
escape the loss by throwing it on some one else. The institutions in
question, however, are bound to protect the interests of either body of their
clients, borrowers or depositors, when either is unjustly threatened, and they
are by no means destitute of means to do it. A law to forbid specific coin
contracts is but one step in the desperate policy of prostituting law and
corrupting the administration of justice, which would be necessary in the
attempt to force through the plan under discussion. It would fail at last,
because the advocates of it would find that, as the popular saying is, it

would “fly up and hit them in the face.” It is not possible to throw society
and all its most important institutions into confusion without ruining all the
interests of everybody, and at last everybody but the tramp or pauper has to
ask himself whether it will pay. As for the institutions, many of them would
be ruined in the operation. It is not possible for them simply to collect and
repay in the debased dollars. The operation would produce snarls and knots
at every turn. Lawsuits would multiply on all sides, and would so entangle
the affairs of the institution as to ruin it. The proof of this is presented by
the difficulties of liquidation in any case, even when there is no question of
currency revolution, and when general affairs are in a normal condition,
unless there is time and security for all the operations. In this case the
demands on the institution would be precipitated at once, so far as the form
of contract would allow.

Small Mortgagors.

The small mortgagors are either wages-men or farmers. As to the
wages-men, their wages would undoubtedly go up in time as prices went
up, but in the paralysis of industry which would be the first distinct effect of
the plan, as soon as it was known that the experiment was to be made,
immense numbers of wages-men would be thrown out of employment, and
all wages would fall on account of this condition of the labor market. Later,
when things began to adjust themselves to the new basis, wages would be
low with prices high, both in silver. Advance of wages would come, but it
would have to be won through strikes and a prolonged industrial war. In the
state of things supposed it would be every man for himself. The wages class
would be weakest of all under the circumstances, as they are in every case
of “hard times.” How would mortgagors of this class traverse such a time
and keep up their interest? As to the principal, which is to be halved, it
cannot be halved unless it is paid, and the mortgagor has nothing to pay it
with except the surplus which he can save from his wages over the cost of
living. The project promises woe and ruin to the wages class, with industrial
war and class hatred as moral consequences of the most far-reaching
importance.

Farmer-Mortgagors.

The farmers expect to double the price of their products, and so get
39
silver to pay off their mortgages. It has been shown elsewhere how
illusory this expectation is as regards prices. Prices would rise, indeed, in
silver, but irregularly and unequally. They would rise for all things which a
farmer buys as well as for all that he sells. If, as the silver theorists
generally say, all prices were to rise uniformly, the farmer would gain but
little. For the only means he would win toward paying off his mortgage
would be the surplus of his income over his outgo, and this he could only
apply year by year as he won it. If, then, the whole scheme could be made
to work smoothly provided the victims of it would submit to it without
resistance, does this afford any probability of realizing the great hopes
which are built upon the scheme?

Social War the Consequence.

But victims would not submit without resistance, and once more we
come to the result that no effect can be expected from this undertaking but
social war, and a convulsion of the entire social system, whose
consequences defy analysis or prediction. If a man says that he “does not
see” what great difference going over to the silver standard will make, it
must be that he is little trained to understand the workings of the industrial
system in which he lives and on which he depends. It is a monstrous thing
that a free, self-governing people should join a political battle, in this year
of grace 1896, over the question whether to debase their coinage or not.

The Exploded Booms.

The third class of debtors is by far the most important in this matter—
those who are caught in exploded booms. The peaceful and honest
mortgagors of farms and homesteads are not the ones who have gotten up
this political agitation. The jobbers, speculators, and boom-promoters have

been one of the curses of this country from the earliest colonial days. They
are men of the “hustling” type, jobbing in politics with one hand and in land
or town lots with the other. It is they who, at the worst periods of financial
trouble in our history, have always appeared in the lobby, eager for “relief,”
declaiming about the “people,” the “money power,” the “banks,”
“England,” etc. They have always favored schemes for fraudulent banks, or
paper money, or state subsidies, or other plans by which they could unload
on the state or on their creditors. Just now it is silver, because silver has
fallen within twenty-five years so much that it is what is called “cheap
money.” This type of men have always used a dialect, part of which is
quoted above, which is so well marked that it suffices to identify them. The
history of financial distress in this country is full of it. No scheme which
has ever been devised by them has ever made a collapsed boom go up
again. With very few exceptions, they have, on account of such expedients,
only floundered deeper in the mire. The exceptions have been those who
have succeeded in making the state provide them with capital, although by
no means all of these have been hard-headed enough to use it to “get out.”
Generally they believe in themselves and their schemes, and use new
capital only to plunge in again still deeper.
It is men of this class and the silver-miners who have brought the
present trouble upon us, who have invented and preached the notions about
the crime of ’73, the hard times, the magical influence of silver, and all the
rest. It is they who have filled and engineered conventions. They will gain
no more now than in any former crisis, but they insist on involving us all in
turmoil, risk, and ruin by their schemes to save themselves.

THE CRIME OF 187340

Legislative History of the Act of 1873.

I T is alleged that the law of 1873 was enacted surreptitiously. Mr. Bryan
is quoted as having said that the free-coinage men only ask for a
restoration of “that system that we had until it was stricken down in the
dark without discussion.” Within the last ten years the facts of the
legislative history of that law have been published over and over again.
They are to be found in the report of the Comptroller of the Currency for
1876, page 170; in “Macpherson’s Political Manual” for 1890, page 157,
and in “Sound Currency,” Vol. III, No. 13. The bill was before Congress
three years, was explained and debated again and again. The fact that the
silver dollar was dropped was expressly pointed out. It is not now justifiable
for any man who claims to be honest and responsible to assert that it was
passed “in the dark and without discussion.” The fact is that nobody cared
about it. It is noteworthy that the act is not in “Macpherson’s Manual” for
1874. It was not thought to be of any importance. It was not until after the
panic of 1873 that attention began to be given to the currency. To that, I
who write can testify, since I tried in vain, before that time, to excite any
interest in the subject. I was once in the gallery of the House of
Representatives when a question of coinage was before the House. I
counted those members who, as far as I could judge, were paying any
attention. There were six. What is it necessary to do in such a case in order
to prevent the claim, twenty-five years later, when countless interests have
vested under the law, that the law is open to “reversal” because it was
passed “in the dark”?

Was it Passed Surreptitiously?

How can a law be passed through Congress surreptitiously? We have
indeed heard of bills being “smuggled through” in the confusion attending
the last hours of the session, or as an amendment, or under a misleading
title. There are the rules of order, however, by which all legislation is
enacted. All laws which get through the mill are equally valid. There never
has been and never can be any distinction drawn between them according to
their legislative history. In the present case there was not the slightest
manœuvre or trick, nor is there even room to trump up an allegation of the
kind.

That the People Did Not Know of It.

It is said that “the people” did not know what was being done. How do
they ever know what is being done? There is all the machinery of publicity,
and it is all at work. If people do not heed (and of course in nearly all cases
they do not), whose fault is it? Who is responsible to go to the ten million
voters individually and make sure that they heed, lest twenty-five years
later somebody may say that the fact that they did not heed lays down a
justification for a new project which certainly is “a crime” in the new sense
which is given to that word here?

Motive of the Law.

The act of 1873 did not affect any rights or interests. It took away an
option which had existed since 1834, but had never been used, and, for ten
years before this act was passed, had sunk entirely out of sight under paper-
money inflation. Secretary Boutwell, when he first brought the matter to the
attention of Congress in 1870, explained the proposed legislation as a
codification of existing coinage laws. Later it took the shape of a complete
simplification of existing law, history, and fact, in order to put the coinage
on the simplest and best system as a basis for resumption. As we had then
no coin, we had a free hand to put the system on the best basis, there being
no vested rights or interests to be disturbed. That this was a wise and sound
course to pursue under the circumstances is unquestionable. Three years

later, by the rise in greenbacks and the fall in silver, it came about that four
hundred twelve and one-half grains of silver, nine-tenths fine, was worth a
little less than a greenback dollar. The old option would, therefore, if still
existent, have been an advantage to debtors. Complaint and clamor for the
restoration of the option then began, but to give such an option, after the
market had changed, would be playing with loaded dice. The European
countries which still retained the option abolished it as soon as silver began
to fall, and we, if we had retained it open until that time, ought to have done
the same.

Alternate Ruin to Debtors and Creditors.

The inflation of the Civil War had a direful effect upon all creditors on
contracts outstanding in 1862. The resumption of specie payments had a
similar effect on debtors under contracts made between 1868 and 1878.
Greenbackism and silver debasement were produced by resistance to this
operation. The debtors of to-day are not those of that period. The debts of
that period are paid off. The pain and strain have been borne. The credit of
the United States has been established, the currency restored, and the whole
business of the country for seventeen years has been completely established
on the gold dollar as the dollar of account for all transactions whatsoever.
The population of the country is now two and a half times what it was in the
war time, and its wealth is probably a much greater multiple. The debts now
outstanding have, with unimportant exceptions, been contracted since the
resumption of specie payments. What is now proposed is to enter upon a
new period of these alternations of wrong and injustice, first to creditors,
then to debtors, and so on, and to do this in a time of peace, not from any
political necessity, but on the ground of some economic interpretations of
the facts of the market, which are incapable of verification and proof, when
they are not obviously erroneous and partisan. The effect of the various
compromises with silver is that the currency is once more intricate and
complicated, excessive and confused, so that few can understand it, and it
offers all sorts of chances for perverse and mischievous interpretations.

Demonetization Removed No Money from Use.

The law of 1873 never threw a dollar of silver or other currency out of
circulation. We hear it asserted that “demonetization” destroyed half the
people’s money. People say this who know nothing of the facts, but infer
that demonetization must mean that some silver dollars which were money
had that character taken from them. No one of the other demonetizations,
which took place in Europe at about the same time, diminished the money
in use. The result of changes in 1873–1874 was that the amount of silver
coin in use in Europe was greatly increased, and has remained so since.
The resumption of specie payments after 1873 by a number of nations
which had issued paper money in the previous period, and the alternate
expenditure and re-collection of war-hoards of gold, had far greater
importance than the demonetizations.
There has been no diminution of the world’s coined money within fifty
years, but a steady and rapid increase of it. There have been fluctuations in
the production of gold and silver such as belong to the production of all
metals and are inevitable.

The Alleged Scramble for Gold.

There has been no “scramble for gold.” Those who do not put any
obstacle in the way of gold get more of it than they want. The Bank of
England has had lately the largest stock of gold that it ever had, and
complaints have begun to be heard of a glut. The gold-production in the last
five years is the greatest ever known and there is no fear of any lack of it,
whatever may be the sense in which any one chooses to speak of a “lack.”
There is not and has not been any “scarcity of gold.” There is no such thing
conceivable, except where paper has been issued in excess, so that it is hard
to keep enough gold to redeem it with.

Proof that there has been no Scarcity of Gold.

There is one proof that there has been no scarcity of money for twenty-
five years past which has not indeed passed unnoticed, but which has not
received the attention which it deserves; that is the rate of interest. The rate
of interest is normally due to the supply and demand of loanable capital,
and has nothing to do with money. The value of money is registered by
prices, not by the rate of interest. But whenever there is a special demand
for money of account—that is, for the solvent of debts—the rate of interest
on capital passes over into a rate for the solvent of debts. Banks lend capital
in its most universal form, i.e., the currency or money of account, or bank
credits. If credit fails, as in a time of crisis and panic, actual cash in the
money of account is wanted. This now is loaned, under a rate, by the same
persons and institutions who formerly loaned capital, and the one
phenomenon passes into the other without any line of demarcation. The
transition, however, never takes place except in time of crisis, and therefore
at a high rate. From this it follows certainly that never when the market rate
is low can it be a rate for the solvent of debts. Now, ever since 1873, with
the exception of periods of special stringency in 1884, 1890, and 1893, we
have had very low rates of interest; the rate for call loans (which in this
connection are the most important) has been about two per cent. This is a
demonstration that the country has not been suffering from a crisis on
account of a lack of currency for the normal needs of business. Proofs could
be presented, on the other hand, that the currency for the last six years has
been constantly in excess, excepting in 1893, when the credit of the
currency failed for a time.

How to Get Poor and Rich at the Same Time.

Mr. St. John tries his hand at the relation between prices and interest in
connection with our subject. He says: “If the dollar can be cheapened by
increasing the number of dollars, so that each dollar will buy less wheat, the
increasing price of wheat will increase the demand for dollars to invest in
its production.” Evidently he fails to distinguish between the rise in price of
wheat from one gold dollar to two gold dollars per bushel, and the rise in
wheat from one gold dollar to two fifty-cent silver dollars per bushel. The
former would undoubtedly stimulate production. The latter would do so

also, among farmers who shared Mr. St. John’s confusion on this matter.
There would be many of them. They would imagine that they were getting
rich by raising wheat to sell at two silver dollars, or five, ten, fifteen, or
twenty paper dollars, as depreciation went on. Hence, as he says, they
would pay a banker eight, ten, twelve, or fifteen per cent, in the depreciated
dollars, in order to get “money,” as he calls it, with which to raise wheat.
Mr. St. John thinks that this would mean that farmer and banker were both
magnificently prosperous. It would mean that the real value which came in
was steadily growing less than that which went out, so that the capital was
being consumed. Hence the high rates of inflation times, and the disaster
which follows when the truth is realized. They told a story in Revolutionary
times of a man who invested his capital in a hogshead of rum which he sold
out at an enormous advance—in Continental paper; but when he went to
buy a new supply, all his “money” would only buy a barrel. This he retailed
out at another enormous advance—in Continental—but when he went to
buy more he had only enough money to buy a gallon. If he had borrowed
his first capital he might have paid twenty per cent for it—in Continental—
but the banker would hardly have made a good affair.

Monopoly of the Money.

We hear it asserted that the gold standard gives the owners of gold
power to appropriate the money and make it scarce, and that they have used
this power. Why, then, under silver or paper, may not the holders of silver
or paper do the same? That the holders of gold have not done it has been
shown above. But nobody can do it with any kind of value money. There
are no “holders of gold.” He who holds gold wins no gains on it. The
bankers who are supposed to hold it, if peace and security reign, put it all
out at loan in order to get gain on it. When peace and security do not reign it
is not safe to put it out, and borrowers, fearing to engage in new enterprises,
do not present a demand for it. Furthermore, the greatest gains can then be
won by holding money ready to buy property when the crash comes. That is
what those who own surpluses are doing now. Hence there are no “holders
of gold” until monetary threats and dangers call them into existence. Silver
legislation has made a great many. The law of 1873 never made any.

There is not, therefore, a fact or deduction about the law of 1873, or the
history of the market since, which the silver men have put forward, which
will stand examination.

A CONCURRENT CIRCULATION OF
GOLD AND SILVER
[1878]

I T seems as if the United States were destined to be the arena for testing
experimentally every fallacy in regard to money which has ever been
propounded. A few years ago only a very few people here had ever heard of
the “double standard” or knew what it meant. In 1873 we became simply
and distinctly a “gold country” in law, as we had been for forty years in
fact. Immediately after that date silver began to fall in value relatively to
gold, so that, if we had been on the “double standard,” and had not been
deterred by considerations of honor, morality, and public credit, which
considerations kept the double-standard countries from taking that course,
we could have paid our debts in silver at an advantage. Forthwith all those
persons who had before been racking their brains to devise some scheme
for resumption without pain or sacrifice, turned their attention to silver, and
began to devise plans for getting back to the position which, as they
thought, we had unwisely abandoned. The consequence has been that, for
the last year, the country has produced numberless editorials, essays,
lectures, and speeches, full of the most crude sophistry, and the most
astonishing errors as to all the elementary doctrines of coinage and money.
The favorite object of all these schemes is to find some means of increasing
the amount of money at the disposal of the world, or of this nation, so as to
raise prices and make it easier to pay debts. These schemes have taken their
point of departure in the speculations of some European economists. In
Europe the propositions of the economists in question have never passed
beyond the realm of speculation and theoretical discussion amongst
professional economists. They have been regarded by some as probably
sound, and capable of being made the basis of advantageous legislation. By
others, superior in number and authority, they have been regarded as
unsound. Inasmuch as they involve an international coinage union between

all civilized countries and could be put to the experiment only on a scale
involving immeasurable risks, the overwhelming judgment has been that
they were out of the question. Here, however, our amateurs and empirics are
in hot haste to make the experiments, without any coinage convention, or
with the coöperation of only a few and the less important nations, that is to
say under circumstances which even the most extreme bimetallists condemn
as ruinous.

It must be observed then that there lies back of all this popular
discussion a scientific and technical question of great delicacy. I might even
say that it is a speculative question, or a question in speculative economics,
for we have no experience of an international coinage union, or of a
concurrent circulation, of the metals. We have to imagine the state of things
proposed and reason a priori as to what must be the result. There is a
postulate to all these schemes which has never been expressed and never
been discussed, but which is assumed to be true. It has two different forms:
(1) A concurrent circulation of gold and silver may be established in any
country: (2) A concurrent circulation of gold and silver may be established
by a coinage union of all civilized nations. These postulates, or we may say
this postulate, for the latter includes the former, I have now to bring in
question. If the science of money teaches that there cannot be a concurrent
circulation of the metals, then the schemes which I have referred to are all
condemned. The question, moreover, has won such an immediate and
practical significance in the country that it is no longer a subject for
academical discussion amongst economists, about whom opinions may
differ without importance.
The Senate of the United States has just passed a bill containing the
following provision:
“Sec. 2. That immediately after the passage of this act the President
shall invite the governments of the countries composing the Latin Union, so
called, and of such other European nations as he may deem advisable, to
join the United States in a conference to adopt a common ratio between
gold and silver for the purpose of establishing internationally the use of
bimetallic money and securing a fixity of the relative value between those
metals; such conference to be held at such a place in Europe or in the
United States at such a time within six months as may be mutually agreed

upon by the executives of the governments joining in the same. Whenever
the governments so invited, or any three of them, shall have signified their
willingness to unite in the same, the President shall, by and with the advice
and consent of the Senate, appoint three commissioners who shall attend
such conference on behalf of the United States, and shall report the doings
thereof to the President, who shall transmit the same to Congress.”
The conception which governed this legislation is plain enough. It
proposes to secure a concurrent circulation of the two metals at a fixed ratio
by an international agreement. The proposition is to put the experiment at
work when only three nations besides ourselves consent and in the
meantime to remonetize silver here at sixteen to one when the market ratio
is seventeen and one-half to one. This adds to the absurdity of the bill, but
has no bearing on my present controversy. I challenge the postulate which is
assumed, which has never been discussed, much less proved, that a
concurrent circulation is possible if an international union can be made.
Anybody who concedes this concedes, as I view it, the fundamental and
controlling error in the silver craze. If this premise is conceded, there can be
no further controversy on the arena of science. It remains only to try to
overcome practical difficulties. Such is the issue I raise with those who,
under any reservations whatsoever, concede that a concurrent circulation is
possible. In a body of scientific gentlemen I need only refer to the mischief
done in science by assuming the truth of postulates without examination,
and I need make no apology for bringing forward with all possible force
and vigor a controversy on a point so essential. It is my duty to say that I
may be in error, and I have the misfortune to differ here with gentlemen
from whom I dissent seldom and unwillingly, but it will not be denied that,
while there is controversy on a point so essential, and at a moment when
practical measures of high importance to every person in this country are
proposed, based on certain views of the matter, I am right in promoting
discussion. I wish to be understood as paying full respect to everybody, but
I address myself, without compliments, to the question in hand. I shall be
satisfied if I make it appear that I have some strong grounds for the position
I take in a long, careful, and mature study of this question in all its bearings.
It will economize time and space, if, before entering on my subject, I
try to clear up two points: (1) what is an economic force or an economic

law, and how ought we to go about the study of economic phenomena? (2)
What is a legal tender?
(1) What should be our conception of an economic force or an
economic law, and how ought we to study economic phenomena? Some
people seem to think that economic phenomena constitute a domain of
arbitrary and artificial action. They think that social phenomena of every
kind are subject to chance or to control. They see no sequence between
incidents of this kind. They have no conception of social forces. They think
economic laws are only formulae established by grouping a certain number
of facts together, like a rule in grammar, and they are prepared for a list of
exceptions to follow. This conception, in its grosser forms, is now banished
from the science, but it still has strong hold on popular opinion. It also still
colors a great many scientific discussions, those, namely, who seek to carry
forward the science by following out the complicated cases produced by the
combined action of economic forces in our modern industrial life, and
describing them in detail. In my opinion such efforts are all mistaken.
I regard economic forces as simply parallel to physical forces, arising
just as spontaneously and naturally, following a sequence of cause and
effect just as inevitably as physical forces—neither more nor less. The
perturbations and complications which present themselves in social
phenomena are strictly analogous to those which appear in physical
phenomena. The social order is, to my mind, the product of social forces
tending always towards an equilibrium at some ideal point, which point is
continually changing under the ever-changing amount or velocity of the
forces or under their new combinations. Consequently, I do not believe that
the advance of economic science depends upon fuller and more minute
description of complicated social phenomena as they present themselves in
experience, but on a stricter analysis of them in order to get a closer and
clearer knowledge of the laws by which the forces producing them operate.
If this can be attained, all the complications which arise from their
combined action will be easily solved. Of course we have peculiar
difficulties to contend with, inasmuch as we cannot constitute experiments,
and it is necessary to rely largely upon historical cases which present now
one and now another force or set of forces in peculiar prominence. The facts
which show the difficulty of the task, however, have nothing to do with its
nature.

According to this view of the matter there is no more reason to be
satisfied with generalities in economics than in physics. Some writers on
economic subjects, who pride themselves upon scientific reluctance, remind
me of Mr. Brooks, in “Middlemarch.” They believe in things up to a certain
point, and are always afraid of going too far. They would be careful about
the multiplication table, and not bear down too hard on the rule of three.
They do not discriminate between care in the application of rules, and
confidence in scientific results; or between harshness in personal relations
and firm convictions in science. The more we come to understand economic
science the more clear it is that we are dealing with only another
presentation of matter and force, that is to say, with quantity and law, so that
we have mathematical relations, and have every encouragement to severity
and exactitude in our methods. When, therefore, it is said that the
economists do not pay sufficient heed to the power of legislation, that is no
stopping place for the argument any more than it would be in physics to say
that sufficient heed was not paid to friction. The question would then arise:
What is the force of legislation? Let us study it, just as we would go on to
study friction in mechanics. When it is loosely said (as if that dismissed the
subject) that men have passions and emotions and do not act by rule, the
objection is not pertinent at all. It is connected with another wide and
common, but very erroneous notion, that economic laws involve some
stress of obligation on men to do or abstain from doing certain things. I
suppose this notion arises from the classification of political economy
amongst the moral sciences. Economic laws only declare relations of cause
and effect which will follow, if set in motion. Whether a man sets the
sequence in motion at all or not, and if he does so, whether he does it from
passion or habit or upon reflection, is immaterial. Such is the case, as I
understand it, with all sciences. They simply instruct men as to the laws of
this world in which we live that they may know what to expect if they take
one course or another, or they instruct men so that they may understand the
relations of phenomena of forces beyond our control so that we may foresee
and guard ourselves against harm. It follows from all this that I demand and
aim at just as close thinking in political economy as in any other science. I
think we must try to get as firm hold of principles and fundamental laws as
we can, and that, especially in the face of speculative propositions, we
ought to cling to and trust the firmly established laws of the science.

(2) As to legal tender, it seems to me that the public mind has been
sadly confused under the régime of paper money. Money is any commodity
which is set apart by common consent to serve as a medium of exchange. If
it is a commodity, it will exchange by the laws of value, and will therefore
serve to measure value. It must therefore be a commodity, an object of
desire requiring onerous exertion to get it. In theory, it may be any
commodity. The question as to what commodity is a question of
convenience—that one which will answer the purpose best. Through a long
period of experiments we have come to use gold or silver, simply because
we found them the best. Convenience here gave rise to custom, and money
of gold or silver owes its existence to custom entirely, and not to law at all.
Law has only in very few instances even selected that one of the two metals
which should be used. Even that has come about through custom. Law,
therefore, here as elsewhere where it has been beneficent and not arbitrary,
has followed custom, recognized it, ratified it, and given it sanctions. (1) A
legal tender law, therefore, where customary money is used, simply declares
that the parties to a contract shall not vex each other by arbitrarily departing
from the custom. The creditor shall not demand, and the debtor shall not
offer, out of spite or malice, anything but the customary money of the
nation. Such a legal tender law has no significance whatever. No one thinks
of it or speaks of it or takes it into account, unless he be one of those whose
idle malice it prevents.
(2) A legal tender law is used where a subsidiary token currency is
employed as a part of the system, to prevent debtors from using it in
payment, and to prevent the system from bringing about a depreciation of
the money. In this case it is part of the device for using a token currency,
and is open to no objection. It would check the debtor when he meant to
perpetrate a wrong. It would not enable him to do one.
(3) A legal tender law has been used very often, however, to give forced
circulation to a depreciated currency of little or no value as a commodity. In
that case the legal tender act enables the debtor to discharge his obligations
with less commodities than he and the creditor understood and expected
when the contract was made. If the creditor appeals to the courts, they are
obliged to rule that the debtor has discharged his obligation, when he has
not, and they give the creditor no relief. Hence it appears that a legal tender
act giving forced circulation to depreciated currency amounts simply to

this: it withdraws the protection of the courts from one party to a contract,
and leaves him at the mercy of the other party to the extent of the
depreciation of the currency. Obviously no other act of legislation more
completely reverses the whole proper object of legislation, or more
thoroughly subverts civil order. The English passed two or three acts of this
nature, although they were not specifically acts for making banknotes legal
tender, during the bank suspension at the beginning of this century. It would
have been interesting to see what English courts would have made of an act
which reversed the whole spirit of English law by diminishing the rights of
one party under a contract, and which made the courts an instrument for his
oppression instead of an institution to provide a remedy, but no case came
up. The twelve judges on appeal overturned the sentence of a man
convicted of buying and selling gold at a premium. Some few persons
demanded and obtained gold payments throughout the suspension but the
paper circulation was really sustained by public opinion and consent, it
being believed that the bank suspension was necessary. This form of legal
tender, therefore, is totally different from that first described. I call it, for
the sake of discrimination, a forced circulation. When a legal tender act
giving forced circulation to a depreciated currency is first passed, if it
applies to existing contracts it transfers a percentage of all capital engaged
in credit operations from the creditor to the debtor. In its subsequent action
it subjects either party to the fluctuations which may occur in the forced
circulation, robbing first one and then another. Hence the debtor interest is
that the depreciation once begun shall go on steadily, because any recovery
would rob debtors as creditors were robbed in the first place.
Having disposed of these two points I now take up the question I
proposed at the outset: Is a concurrent circulation of gold and silver
possible under an international coinage union?
Here we have to make a radical distinction between two different
propositions for an international coinage union. The first is that of M.
Wolowski. He pointed to the comparatively small fluctuations of the
precious metals and to the effect which France had exerted by the double
standard, and inferred that if all civilized nations would join France in her
system they might arrest the fall of either metal before it became important.
If the coinage union fixed upon a ratio of one to fifteen and one-half, then,
if silver fell all would use silver, which would arrest its fall. If gold should

fall, all would use gold. As the metal in use would always be the one which
was cheaper than the legal ratio, the other would be above it, if I may so
express it. Hence neither would be permanently demonetized, because
neither could fall so low as to go out of use. Only one would be used at a
time but the other would be within reach, and if either should rise relatively
to commodities, debtors would not suffer but might even be benefited by
being enabled to turn to the falling metal. This system would require of the
law nothing except to prescribe that the mint should coin either metal
indifferently which people might bring, silver coins being made fifteen and
one-half times as heavy as gold coins of the same denomination, both being
of the same fineness. This is Wolowski’s plan, and these are the advantages
he expected from it. He thought that it would hold the alternative open
between the two metals. He feared that silver, if universally demonetized,
would fall so low as to go out of use entirely for money. He thought that
France and, later, the Latin Union ought not to bear alone the cost of
keeping up the value of silver. He thought the debtor ought not to be
oppressed by being forced to rely on one metal alone which might rise
relatively to commodities. He did not propose to give the debtor the use of
the whole mass of both metals at the same time. Indeed that arrangement
would defeat Wolowski’s purpose, for if the whole mass of both metals
could be brought into use at once prices would rise. Those who are indebted
now would win, but when prices and credit had adjusted themselves to the
bimetallic money the effect would be exhausted. Debts contracted after that
would be relatively just as heavy to pay as they are now, and if the precious
metals taken together rose relatively to commodities, debtors would have no
recourse to anything else. Now this chance of recourse, when the standard
of value rose, was just what Wolowski wanted. His language is very
guarded and scientific. He never went further than to say that his scheme
would restrain and limit the fluctuations of the metals—how far he did not
know and did not pretend to say. He thought the fluctuations would be so
narrow that the transition from one metal to the other would be a relief to
debtors without any appreciable injustice to creditors. All this is very clear
and very sensible. On theory it is open to no radical objection. The
discussion of it turns upon considerations of practicability and expediency.
It is much to be wished that this plan should be called by its proper name:
the alternative standard, or, better still, the alternate standard. It counts

among its adherents a number of strong men, and many others have
signified assent to it on theoretical grounds.
The term “bimetallism” ought to be restricted to another theory of
which Cernuschi is the advocate, which has for its purpose to unite the two
metals at once in the circulation and give debtors the whole mass of both
metals as a means of payment. Cernuschi believes that the international
coinage union could arrest the fluctuations of the metals entirely; or that
there is some narrow limit of fluctuation within which both would remain in
use, and that the coinage union could hold the value-fluctuations of the
metals within these limits. The American schemes are numerous and so
crude that it is difficult to analyze or classify them. They are also of many
different grades. They all, however, seem to have this in common, that they
want to secure to the debtor the use of both metals at once, and that they
aim at a concurrent circulation. They must, therefore, be classed under
bimetallism. These schemes all involve not simply what Wolowski said—
that legislation and union could limit the fluctuations—but the proposers
know how much it would limit them, and they can control the results. This
view has very few adherents in Europe. It has not been discussed there save
by one or two writers. It is passed by in silence for reasons which I shall
soon show.
The opinion has been expressed that these two propositions differ only
in degree. From this opinion I must express my earnest dissent. It is the
very cardinal point of my present argument. Wolowski’s alternate standard
seems to me to rest upon the belief that legislation of the kind proposed
would restrict the fluctuations in value of the metals. It affirms that
legislation would have a certain tendency. Any plan for a concurrent
circulation giving debtors the use of the whole mass of both metals pretends
to say how far the tendency would go and what its results would be. To my
mind the difference between those two propositions is that between a
scientific and an unscientific proposition. We have a parallel case before us.
Some say re-monetization would cause an advance in silver. Others say re-
monetization would make a four hundred and twelve and one-half grain
silver dollar equal in value to a gold one. Are those two propositions the
same save in degree? It seems to me that only a very superficial
consideration of them could so declare. Obviously they differ in quality
more than in degree. The former of these propositions is not false in

principle; the question in regard to it must be decided by circumstances.
The second is false and erroneous from beginning to end, and would be
false even if temporarily and by force of circumstances the silver dollar
should become equal to the gold dollar, because it rests, like the old
doctrine that nature abhors a vacuum, upon false views of all the forces
involved. Just so with regard to a concurrent circulation or bimetallism as
compared with the alternate standard. The latter predicts tendencies to arise
from the play of certain forces. Those tendencies are the true effect of those
forces. The question may be raised whether the means proposed would
bring those forces into action, whether they would be as great as is
expected, whether they would be counteracted by others, but there is no
error as to the nature and operation of economic forces. Bimetallism
predicts results, not tendencies. It assumes to measure the consequences and
say what will result as a permanent state of things. It therefore involves the
doctrine that legislation can control natural forces for definite results. If
legislation cannot so control natural forces, then we cannot secure a
concurrent circulation, giving the debtor the use of the whole mass of both
metals with which to pay his debts. At a time like this, when the silver craze
seems to be asserting itself as a mania, by sweeping away some who ought
to be most staunch in their adherence to economic laws and most clear in
their perception of economic truths, I may be pardoned for insisting most
strenuously upon this distinction and upon its importance. Many of the
American writers have been betrayed into error by not having examined
these two plans and discriminated between them with sufficient care. It is
very common to see arguments based upon the alternate standard and
inferences drawn as to bimetallism which are entirely fallacious because
they cross the gulf between the two theories without recognizing it.
Bimetallism is so plainly opposed to fundamental doctrines of political
economy that few European economists have felt called upon to discuss it.
Here the case is different, and the more ground it wins, and the more danger
there is that it will affect legislation, the more urgent is the necessity to
resist every form of it.
Now my proposition is that a concurrent circulation, that is a permanent
union of the two metals in the coinage, so that the debtor can use both or
either, is impossible. Permanent stability of the metals in the coinage,
whether with or without an international coinage union, is just as
impossible in economics as perpetual motion is in physics. Against

perpetual motion the physicist sets a broad and complete negation, because
action and reaction are equal. He does not care what the principle may be
on which any one may try to construct perpetual motion. If any one brings
to him a perpetual motion perhaps he will spend time to examine and
analyze it and show how it contravenes the great law of motion. I claim that
a concurrent circulation is impossible on any scheme or under any
circumstances because it contravenes the law of value. Value fluctuates
under supply and demand at a limit fixed by what Cairnes calls cost of
production, or Jevons calls the final increment of utility, or Walras calls
scarcity, all of which on analysis will be found to be the same thing.
Bimetallism affirms that, under legislation, although supply and demand
may vary, value shall not. In order to test this let us next examine the
influence of legislation on value.
The cases in which legislation acts on value are all cases of monopoly.
Such is the case with token money; such is the case with irredeemable
paper. As with every other monopoly, the successful manipulation of these
monopolies consists in controlling supply, to fit the supply to the demand at
the price which the monopolist wants to get. The history of every monopoly
shows the great difficulty, I might say, in the long run, the impossibility, of
doing this. The bimetallists propose not to act on the supply, and so create a
monopoly, but to act upon the demand. This is a new exercise of legislation,
different from any yet tried, and not guaranteed by any experience. Now to
act upon the demand is, in the phrase of the stock brokers, to make a corner,
that is to buy all that is offered at a price. Stock gamblers do this so as to
sell out again at an advance to those who are forced to buy. If there are none
who are forced to buy, then those who bought above the market have lost
their capital. The propositions of the advocates of the alternate standard and
of bimetallism are alike in proposing that all civilized nations shall combine
to make a corner on the falling metal. Whether that is a worthy undertaking
or not I will not stop to inquire. It is evident that the nations of the coinage
union would have no one on whom to unload after they had bought, and
that there would be an inevitable loss and waste of capital in the transaction.
This, however, is not all. A corner is effective or not according to its scope.
It must embrace the whole object to be raised in price, and above all it must
act upon a limited amount which is not fed from any new source of supply.
A corner on the precious metals is not to be made effective even by a
combination of all civilized nations. In my opinion there is a grand fallacy

in the notion that a coinage union would do what France did, only on a
larger scale. Wolowski saw France, lying between Germany, a silver nation,
and England, a gold nation, carry out the compensatory operation, and he
inferred that all nations could agree to do the same, more widely, more
easily, and with wider distribution of the loss. It seems to me that there was
an action and reaction here between members of the group of nations which
one can easily understand, but that if all nations joined in the system, the
alternation would not work at all for want of a point of reaction. If all
nations agreed to join the corner on the falling metal, they could not all
bring their new demand to bear on the new supply at the same time. As the
mines are limited and local, a new supply would touch the market only at
one point. Hence the coinage union implies no aggregation of force at all.
Make the union embrace the whole world, and the effect is just the same as
if there were none at all, the matter standing simply on the natural laws for
the distribution of the precious metals. Control of demand by a corner or of
supply by a monopoly acts more efficiently the smaller and closer the
market is, and, conversely, the larger and wider the transaction, the less the
efficiency. Furthermore, a corner to succeed must make sure that there is no
source of supply, and that it has to deal only with an amount which can be
computed. The gold corner on Black Friday, 1869, was ruined when the
Secretary of the Treasury ordered sales of gold. A monopoly in like manner,
must be able to count on steady and uniform demand. The coal combination
failed when the hard times suddenly contracted the demand for coal. Hence
the movement towards a wider market, embracing a larger quantity, is
always a movement towards less, and not towards greater control by
artificial expedients.
Applying these observations to the matter before us, I have to say (1)
that I consider the inference that a coinage union would do what France did
under the double standard, only more surely and efficiently, quite mistaken;
(2) as to the alternate standard, I do not believe that the alternation would
work on a worldwide scale at all. I regard its operation in France as fully
accounted for by the relations of the three countries, England, France, and
Germany; (3) as to bimetallism, the coinage union, instead of gaining more
stringent control to counteract and nullify the effect of changes in supply of
either metal, would have less effect in that direction the larger it was.

Having thus examined the nature of artificial interferences with value,
and their limitations, I return to my proposition that to establish a
concurrent circulation is just as impossible as to square the circle or to
invent perpetual motion. No doubt it is difficult, perhaps impossible, to
make a demonstration of a negative proposition like this. The burden of
proof lies upon those who bring forward attempts to solve the problem, and
I can justly be held only to examine and refute such attempts. No proof has
ever been offered by any of the persons in question. No one of them has
attempted as much of an analysis of the effect of artificial expedients on
value as the one I have just offered. No one of them has attempted to
analyze the operation of the proposed coinage union, to show how or why
they expect it to act as they say. They pass over this assumption as lightly as
our popular advocates of silver assume that re-monetization would put an
end to the hard times. They content themselves with analogies, or with
loose and general guesses that such and such things would result from a
coinage union. We all know what dangers lurk in the argument from
analogy. The further you follow it the further you are from the point. An
analogy has no proper use save to set in clearer light an opinion or a
proposition which must rest for its merits on an appropriate demonstration.
Thus the attempt has been made to illustrate the power of governments to
control the fluctuations of the metals by the analogy of a man driving two
horses. It is said that this is “controlling natural forces for definite results,”
and it is asked, “if one man in his sphere can do this, why may not the
collective might of the nation do this in its sphere?” My answer is that it is
in the sphere of man to tame horses, but it is not in the sphere of nations to
control value, and therefore the analogy is radically false. I cannot be held
to argue both sides of the question. I am not bound to put all the cases of the
adversaries into proper shape for discussion and then to refute them. I plant
myself squarely upon the fundamental principles of the science of which I
am a student and deny that any concurrent circulation is possible except
under temporary and accidental circumstances, because it involves the
proposition that legislation can control value to bring about desired results.
A concurrent circulation must mean one which is concurrent, and if it is to
offer debtors the whole mass of both metals to pay their debts with, it must
be permanent. If both metals should be used for a time until prices and
contracts were adjusted to them, and then one should rise so much as to go

out of use, the consequences would be disastrous to debtors beyond
anything now apprehended.
I proceed then to criticize the notions of a concurrent circulation, as to
their common features. The error with them all is that they try to corner
commodities the supply of which is beyond their control or knowledge.
That is a fatal error in any corner, as I have already shown. If it were
proposed that each nation should have a certain amount of circulation,
composed of the two metals in equal parts, and then that the circulation
should be closed, then the corner might work and there would be some
sense in it. Suppose that a nation had two hundred millions of fixed
circulation, half gold and half silver, and that this sum was not in excess of
its requirement for money. Then I do not see how either half of the coinage
should fall relatively to the other; but if silver did fall, every dollar of silver
which was sought would involve the relinquishment of a dollar in gold and
this exchange would act on equal and limited amounts of each metal. It
would then depress one metal and raise the other to an exactly equal degree.
The balance might, in that case, be retained. The hypothesis of a closed
circulation is, however, preposterous. No one thinks of it.
The plan of a concurrent circulation with a free mint strikes, upon close
examination, at every step, against difficulties of that sort which warn a
scientific man that he is dealing with an empirical and impossible delusion.
How is it to be brought about? The movement towards a bimetallic
circulation would never begin unless the ratio of the coinage was the market
ratio. It would not go on unless the mint ratio followed every fluctuation of
the market. It would not be accomplished unless the mint ratio at last was
that of the market. It would not remain unless the market ratio remained
fixed. But the mint ratio cannot be changed from time to time. If it were, the
result would be inextricable confusion in the coins, driving us back to the
use of scales and weights with which to treat the coins as bullion.
If we pass over this difficulty, and suppose, for the sake of argument,
that the system had been brought into activity, the reasons why it could not
stand present themselves in numbers. They all come back to this, that the
supply is beyond our knowledge and control. If the supply of either metal
increased, it would overthrow the legal rating at the point at which it was
put into the market, and would destroy the equality there. Its effects would
spread according to the amount of the new supply and the length of time it

continued. The bimetallists seem to forget that an increased demand
counteracts an increased supply only by absorbing it under a price
fluctuation. The same error is familiar in the plans for perpetual motion.
Speculations to that end often overlook the fact that we cannot employ a
force in mechanics without providing an escapement which is always
exhausting the force at our disposal. So the bimetallists seem to think of
their enhanced demand as acting on value without an actual action and
reaction which consist in absorbing supply under a price fluctuation. The
new metal would therefore pass into the circulation and would destroy the
equilibrium of the metals in the coinage. If this new addition were only a
mathematical increment it would suffice to establish the principle for which
I contend and to overthrow the bimetallic theory, for if I see that any force
has a certain effect I must infer that the same force increased or continued
would go on to greater effects; and if the final effect is not reached it is
because the force is not sufficient, not because there is an act of the
legislature in the way. If then, silver entered the circulation, gold would
leave it and be exported, if the exchanges allowed of any export, or would
be hoarded and melted. The silver-producing countries would therefore
gravitate towards a silver circulation only, and other countries towards a
gold circulation.
Here another assumption of the bimetallists is involved. They assume
that the metal to be exported would be the one which falls. Thus, if all
nations had a bimetallic circulation, and if the supply of silver in the United
States increased, it would be necessary that this silver should be
proportionately distributed among all the nations in order to keep up the
bimetallic system. No bimetallist has ever faced this question. They assume
that Americans would pay their foreign debts with silver in that case, and
they rely on the international legal tender law to secure this. This is one of
the fallacies of legal tender referred to at the outset. Rates of exchange and
prices would at once vary to counteract any such operation, just as they
always counteract the injustice of a forced circulation and throw it back on
those who try to perpetrate it. It may suffice to put the case this way. If we
had both metals circulating together so that a merchant obtained both in
substantially equal proportions, and if silver should fall ever so little in our
markets, owing to increased production, and if a foreigner were selling his
products here, intending to carry home his returns in metal, which metal
would he retain to carry away? Obviously that one which at the time and

prospectively had the higher value. Rates of exchange and prices would
adjust themselves so as to bring about the same result through the
mechanism of finance. This is one of the most subtle questions involved in
the general issue, but it is vital to the bimetallic theory.
Some writers have satisfied themselves with general opinions—
guesses, I am obliged to call them—that if the fluctuations were kept within
certain limits the concurrent circulation would stand. They probably rely on
an element analogous to friction which unquestionably acts in economy and
finance. This element consists of habit, prejudice, passion, dislike of
trouble. It acts with great force in retail trade, and in individual cases, and in
small transactions. Its force diminishes as we go upwards towards the
largest transactions, where the smallest percentages give very appreciable
sums. It seems to me that the bimetallic system reduces this friction to a
minimum. If a man has to spend a dollar he does not go to a broker to buy a
trade dollar with a greenback dollar, and save a cent or two, but if he has
both a gold dollar and a silver dollar in his pocket (and, under the bimetallic
system, the chances are that when he has two dollars he will have one of
each), it needs only the lightest shade of difference in value to determine
him which to give and which to hold. A bank of issue, holding equal
amounts of the two metals with which to redeem its notes, would find an
appreciable profit in giving one and holding the other, and it would require
nothing but a word of command to the proper officer, involving no risk at
all. Hence I say this friction would be reduced to its minimum under the
bimetallic system. It is astonishing what light margins of profit suffice to
produce financial movements nowadays; and the tendency is to make the
movements turn on smaller and smaller margins. Five in the thousand above
par carries gold out of this country. Four in the thousand carries it from
England to France. When the French suspended specie payments a
depreciation of two in the thousand on the paper sufficed to throw gold out
of circulation. A variation in the ratio of metals from 15.5:1 to 15.6:1 is a
variation of six and one-half in the thousand. I do not see how small a
variation must be in order to justify any one in saying that a bimetallic
circulation could exist in spite of it. Therefore it seems to me that the more
accurately the bimetallic system was established the more delicate and more
easily overthrown it would be, while if it was not accurately established it
would not come about at all. I submit that such a result is one of the notes
of an absurdity in any science.

An analogy has been suggested in illustration and support of the
bimetallic theory that two vessels of water connected by a tube tend to
preserve a level. I have already indicated my suspicion of all analogies, but
I will alter this one to make it fit my idea of bimetallism. Suppose two
vessels capable of expansion and contraction to a considerable degree,
under the operation of forces which act entirely independently of each
other, so that the variations in shape and capacity of each may have all
conceivable relations to the corresponding variations of the other. Suppose
further that each is fed by a stream of water, each stream being variable in
its flow and the variations of each having all possible relations to the
variations of the other. The fluctuations in capacity may represent
fluctuations of demand, and the fluctuations of inflow, fluctuations of
supply. Would the water in the two vessels stand at the same level except
temporarily and accidentally, even though the two vessels were connected
by a tube? The analogy of the connecting tube could not be admitted even
then, because it brings into play the natural law of the equilibrium of fluids,
to which the legal tie between the metals is not analogous. If we desire to
make the analogy approximately just, in this respect, we may suppose that
each vessel has an outlet and that a man is stationed to open the outlet of the
vessel in which the water is at the higher point so as to try to keep them
both at a level. It is evident that his utmost vigilance would be unavailing to
secure the object proposed. I do not borrow the analogy or adopt it. I only
show how inadequate it is, in the form proposed.
There is another group of propositions which have many advocates
amongst us, of which something ought to be said—propositions of those
who want to use silver as a legal tender at its value, under some scheme or
other. Some want a public declaration, by appointed persons, from time to
time, of the market value. Any such plan would throw on the officers in
question a responsibility which would be onerous in the extreme, so much
so that no one could or would discharge it; and it would introduce a
mischievous element of speculation into the payment of all debts. It is,
besides, open to the objections which may be adduced against the other
plan, which is to have either coins or bars of silver, assayed and stamped,
legal tender for debts at the market quotation. Here we need to remember
the definition of legal tender given at the outset. If these silver coins and
bars are convenient for the purpose they will come into use by custom and
consent at their value. If they really pass at their market value, there will be

no advantage to the debtor. One who has silver and wants to pay a debt can
do so at its value by selling the silver. In this sense every man who produces
wheat, cotton, iron, or personal services, pays his debts with them at their
value. One who produced something else than silver would have no object
in selling it for silver, to pay his debt with at the value of silver. He would
have the trouble of another transaction, he would have to buy silver at its
selling price, and the creditor to whom he paid it would have to sell it for
money at the broker’s buying price, with no advantage to either, but only to
the broker. If silver passes at its value, legal tender has no force for it; if it is
to have forced circulation in some way, it will help the debtor, as all forced
circulation does, by enabling him to keep part of what he borrowed. If then
these schemes really mean that silver shall pass at its value, they are of no
use. It does so now. If they mean that silver shall be enabled to pay debts in
some other way than iron, wheat, cotton, etc., then we know what we are
dealing with. There is just as much reason why the government should pay
for elevators and issue certificates of the amount and quality of grain, which
should be legal tender, as there is why it should assay and stamp silver for
that purpose, and issue notes for it. These cases only serve to bring out the
distinction between money and merchandise, and to show that the
perfection of money does not lie in the direction of a multiple legal tender,
but of a single standard, as sharp and definite as possible. Such a standard
has the same advantages in exchange as the most accurate measures of
length and weight have in surveying or in chemistry, and it is turning
backward the progress of monetary science to introduce fluctuations and
doubt into the standard of value, just as it would be to cultivate inaccuracy
in weights and measures.
Here I am forced to notice another hasty and mischievous analogy.
Some devices for composite measures of length have been adopted to avoid
contraction and expansion, and it is urged that bimetallic money is a step in
the same direction. I by no means assert that science can do nothing to
reach a better standard of value than gold is. What progress in that direction
may lie in the future no one can tell, and he would be rash who should ever
presume to deny that progress can be made; but when any proposition is
presented it will have to show what composite measures of length show,
viz., that its action is founded on natural laws. Heat and cold act oppositely
on the components of the composite measures of length, or the arrangement
is such that the action of the natural forces neutralizes. No such scientific

principle underlies bimetallic money. The forces determining the value of
gold and silver act independently of each other and are not subject to
common influences. They are complex, moreover, and their effects are not
uniform in their different degrees. Therefore this analogy also fails.
The opinion that a concurrent circulation is not possible has led several
of the leading nations of Europe (and, at the time of writing such is still the
system of the United States) to adopt the plan of a permanently false rating
of gold and silver, so as to use silver as a subsidiary coinage. Silver is
permanently overrated, so that it obtains currency above its bullion value. If
the civilized nations want to use silver for money, so that the total amount
of metallic money in the Western world shall be greater than the amount of
gold, and if they are not satisfied with the use of it as subsidiary, then there
is only one way left, and that is for some nations to use gold and some to
use silver. This was the solution of the bimetallic difficulty which China
was forced to adopt a thousand years ago. Some provinces used iron and
some copper. The question then arises as to who will take silver. This brings
me to the last point of which I have to speak.
I have discussed my subject as if gold and silver stood on the same
level of desirability for money, and as if there were no choice of
convenience between them. Such is not the case in fact. It will be observed
that gold and silver never have been used together. Gold has generally been
subsidiary, being employed for large transactions. With the advance of
prices and the increase in variety of commodities, as well as in the
magnitude of transactions, nations have passed from copper money to silver
and from silver to gold. This advance is dictated by convenience. Silver is
no longer as convenient a money for civilized industrial and commercial
nations as gold. We therefore see them gradually abandoning silver, and we
saw the Latin Union set up a bar against silver so soon as the operation of
the double legal tender threatened to take away gold and give it silver.
Whether this movement from silver to gold can be accomplished without
financial convulsions I am not prepared to say, especially in view of the
extent to which the nations have depreciated gold by paper issues, but I
regard the movement as one which must inevitably go forward. The nations
which step into the movement first will lose least on the silver they have to
sell. The nations which use silver until the last will lose most upon it,
because they will find no one to take it off their hands. If we now abandon

the gold standard and buy the cast-off silver of the nations which have been
using it and are now anxious to get rid of it, we voluntarily subject
ourselves to that loss, which we are in no respect called upon to share. The
Dutch at New York kept up the use of wampum longer than the English in
New England. When the Yankees were trying to get rid of it, they carried it
to New York, adding some which they manufactured for the purpose, and
they carried the goods of the Dutchmen away. The latter then found that
they held a currency which they could only get rid of at great loss and delay
to the Indians north and west of them. The Yankees thus early earned a
reputation for smartness. The measure now proposed is a complete parallel,
only that now this nation proposes to take the rôle of the Dutch. We shall
have to give our capital for silver, and after we have suffered from years of
experience with a tool of exchange inferior to that which our neighbors are
using, we shall have to get rid of it and buy the best. Then we shall incur the
loss—to all those who have anything—of the difference between the capital
we gave and that which we can get for the silver. The dreams of getting
silver and keeping gold too, so as to have a concurrent circulation, are all
vain. At the rating proposed there is no difference of opinion on this point
amongst any persons at all qualified to give an opinion. The real
significance of the propositions before the country is to make us one of the
nations to take silver in the distribution I have described. The notion of a
coinage union is impracticable. It would be easier to get up an international
union to do away with war. England is perfectly satisfied with her money.
She appreciates the peril of monetary experiments and will make none.
Germany, Sweden, Finland, Denmark, and Holland have just changed from
silver to gold, and will not enter on any new changes for a long period, if
ever. The coinage union is therefore out of the question. The issue before us
is simply whether we, being a gold nation, will, under these circumstances,
abandon gold and take up silver. No doubt the nations which want gold
would be very glad to have us do it. We should render them a great service;
we should, however, do ourselves great harm, as much so as if we should
buy a lot of cast-off machinery from them. They are waiting to see whether
we are ignorant and foolish enough to put ourselves in this position; and
when they have seen, we shall hear no more of the coinage union.
I have now presented the views to which my study of this question has
led me. It will be perceived that I direct my attack against the postulate of
all the bimetallic theories. I have carefully discriminated between the

alternate standard and bimetallism. I have said little about the former. It is
very much a matter of opinion whether it would work or not. I do not
believe that it would, under a coinage union, but I should not feel forced to
take strong ground against any one who held the contrary opinion. My
subject has been a concurrent circulation of gold and silver, and I have tried
to controvert the notion that any such thing is possible, with or without a
coinage union, because that notion contradicts the first great law of
economic science. If that notion is true, then there is no science of political
economy at all; there are no laws to be found out, a professional economist
has nothing to teach, and he might better try to find some useful occupation.
If that notion is true, we have no ground on which to criticize the
Congressmen who are trying to pass the silver bill. We cannot predict any
consequences or draw any inferences from past experience. If legislation
can control value for definite results, then the whole matter is purely
empirical. In that case, the Congressional experiment may turn out well for
all the grounds we have to assert the contrary; its success would only be
questionable, not impossible; if it failed it would not be because its
supporters had attempted the impossible, but because they had not used
sufficient means. They could go on to try the experiment again and again in
other forms and with other means, and they would indeed be doing right to
proceed with their experiments, like the old alchemists, in the hope of
hitting it at last. No economist would have any ground upon which to step
in and define the limits of the possible, or to prescribe the conditions of
success, or to set forth the methods which must be pursued—if he could not
appeal with confidence to the laws of his science as something to which
legislature as well as individuals must bend. Therefore one who holds the
views I have expressed in regard to economic forces, laws, and phenomena
is compelled, as well by his faith in his science as by the public interests
now at stake in the question, to maintain that a concurrent circulation of
gold and silver, either with or without a coinage union, is impossible.

THE INFLUENCE OF COMMERCIAL
CRISES ON OPINIONS ABOUT
ECONOMIC DOCTRINES
[1879]

A NY ONE who follows the current literature about economic subjects
will perceive that it is so full of contradictions as to create a doubt
whether there are any economic laws, or whether, if there are any, we know
anything about them. No body of men ever succeeded in molding the
opinions of others by wrangling with each other, and that is the present
attitude in which the economists present themselves before the public. Like
other people who engage in wrangling, the economists have also allowed
their method to degenerate from argument to abuse, contempt, and sneering
disparagement of each other. The more superficial and self-sufficient the
opinions and behavior of the disputants, the more absolutely they abandon
sober arguments and devote themselves to the method I have described. As
I have little taste for this kind of discussion and believe that it only degrades
the science of which I am a student, I have taken no part in it. In answer to
your invitation, now, what I propose to do is to call your attention to some
features of the economic situation of civilized nations at the present time
with a view to establish two points:

1. To explain the vacillation and feebleness of opinions about economic
doctrine which mark the present time, and
2. To show the necessity, just at this time, of calm and sober
apprehension of sound doctrine in political economy.
At the outset let me ask you to notice the effects which have been
produced during the last century by the developments of science and of the
industrial arts. Formerly, industry was pursued on a small scale, with little
or no organization. Markets were limited to small districts, and commerce

was confined to raw materials and colonial products. Producer and
consumer met face to face. The conditions of the market were open to
personal inspection. The relations of supply and demand were matters of
personal experience. Production was carried on for orders only in many
branches of industry, so that supply and demand were fitted to one another,
as we may say, physically. Disproportionate production was, therefore,
prevented and the necessity of redistributing productive effort was made
plain by the most direct personal experience. Under such a state of things,
much time must elapse between the formation of a wish and its realization.
Within a century very many and various forces have been at work to
produce an entire change in this system of industry. The invention of the
steam engine and of the machines used in the textile fabrics produced the
factory system, with a high organization of industry, concentrated at certain
centers. The opening of canals and the improvement of highways made
possible the commerce by which the products were distributed. The
cheapening of printing and the multiplication of means of advertising
widened the market by concentrating the demand which was widely
dispersed in place, until now the market is the civilized world. The
applications of steam power to roads and ships only extended further the
same development, and the telegraph has only cheapened and accelerated
the means of communicating information to the same end.
What have been the effects on industry?
1. The whole industry and commerce of the world have been built up
into a great system in which organization has become essential and in which
it has been carried forward and is being carried forward every day to new
developments. Industry has been growing more and more impersonal as far
as the parties to it are concerned. Our wants are satisfied instantaneously
and regularly by the coöperation of thousands of people all over the world
whom we have never seen or heard of; and we earn our living daily by
contributing to satisfy the wants of thousands scattered all over the world,
of whom we know nothing personally. In the place of actual contact and
acquaintance with the persons who are parties to the transactions, we now
depend upon the regularity, under the conditions of earthly life, of human
wants and human efforts. The system of industry is built upon the constancy
of certain conditions of human existence, upon the certainty of the
economic forces which thence arise, and upon the fact that those forces act

with perfect regularity under changeless laws. If we but reflect a moment,
we shall see that modern industry and commerce could not go on for a day
if we were not dealing here with forces and laws which may properly be
called natural because they come into action when the conditions are
fulfilled, because the conditions cannot but exist if there is a society of
human beings collected anywhere on earth, and because, when the forces
come into action, they work themselves out, according to their laws,
without possible escape from their effects. We can divert the forces from
one course to another; we can change their form; we can make them expend
themselves upon one person or interest instead of upon another. We do this
all the time, by bad legislation, by prejudice, habit, fashion, erroneous
notions of equity, happiness, the highest good, and so on; but we never
destroy an economic force any more than we destroy a physical force.
2. Of course it follows that success in the production of wealth under
this modern system depends primarily on the correctness with which men
learn the character of economic forces and of the laws under which those
forces act. This is the field of the science of political economy, and it is the
reason why it is a science. It investigates the laws of forces which are
natural, not arbitrary, artificial, or conventional. Some communities have
developed a great hatred for persons who held different religious opinions
from themselves. Such a feeling would be a great social force, but it would
be arbitrary and artificial. Many communities have held that all labor, not
mental, was slavish and degrading. This notion, too, was conventional, but
it was a great social force where it existed. Such notions, either past or
present, are worth studying for historical interest and instruction, but they
do not afford the basis for a science whose object is to find out what is true
in regard to the relations of man to the world in which he lives. The study of
them throws a valuable sidelight on the true relations of human life, just as
the study of error always throws a sidelight upon the truth, but they have no
similarity to the law that men want the maximum of satisfaction for the
minimum of effort, or to the law of the diminishing return from land, or to
the law of population, or to the law of supply and demand. Nothing can be
gained, therefore, by mixing up history and science, valuable as one is to
the other. If men try to carry on any operation without an intelligent theory
of the forces with which they are dealing, they inevitably become the
victims of the operation, not its masters. Hence they always do try to form
some theory of the forces in question and to plan the means to the end

accordingly. The forces of nature go on and are true only to themselves.
They never swerve out of pity for innocent error or well-intentioned
mistakes. This is as true of economic forces as of any others. What is meant
by a good or a bad investment, except that one is based on a correct
judgment of forces and the other on incorrect judgment? How would
sagacity, care, good judgment, and prudence meet their reward if the
economic forces swerved out of pity for error? We know that there is no
such thing in the order of nature.
I repeat, then, that the modern industrial and commercial system,
dealing as it does with vast movements which no one mind can follow or
compass in their ramifications and which are kept in harmony by natural
laws, demands steadily advancing, clear, and precise knowledge of
economic laws; that this knowledge must banish prejudices and traditions;
that it must conquer baseless enthusiasms and whimsical hopes. If it does
not accomplish this, we can expect but one result—that men will chase all
sorts of phantoms and impossible hopes; that they will waste their efforts
upon schemes which can only bring loss; and that some will run one way
and some another until society loses all coherence, all unanimity of
judgment as to what is to be sought and how to attain to it. The destruction
of capital is only the least of the evils to be apprehended in such a case. I do
not believe that we begin to appreciate one effect of the new civilization of
the nineteenth century, viz., that the civilized world of to-day is a unit, that
it must move as a whole, that with the means we have devised of a common
consent in regard to the ends of human life and the means of attaining them
has come also the necessity that we should move onward in civilization by a
common consent. The barriers of race, religion, language, and nationality
are melting away under the operation of the same forces which have to such
an extent annihilated the obstacles of distance and time. Civilization is
constantly becoming more uniform. The conquests of some become at once
the possession of all. It follows that our scientific knowledge of the laws
which govern the life of men in society must keep pace with this
development or we shall find our social tasks grow faster than our
knowledge of social science, and our society will break to pieces under the
burden. How, then, is this scientific knowledge to grow? Certainly not
without controversy, but certainly also not without coherent, steady, and
persistent effort, proceeding on the lines already cut, breaking new ground
when possible, correcting old errors when necessary.

3. It is another feature of the modern industrial system that, like every
high organization, it requires men of suitable ability and skill at its head.
The qualities which are required for a great banker, merchant, or
manufacturer are as rare as any other great gifts among men, and the
qualities demanded, or the degree in which they are demanded, are
increasing every day with the expansion of the modern industrial system.
The qualities required are those of the practical man, properly so called:
sagacity, good judgment, prudence, boldness, and energy. The training, both
scientific and practical, which is required for a great master of industry is
wide and various. The great movements of industry, like all other great
movements, present subordinate phenomena which are apparently opposed
to, or inconsistent with their great tendencies and their general character.
These phenomena, being smaller in scope, more directly subject to
observation and therefore apparently more distinct and positive, are well
calculated to mislead the judgment, either of the practical man or of the
scientific student. In nothing, therefore, does the well-trained man
distinguish himself from the ill-trained man more than in the balance of
judgment by which he puts phenomena in their true relative position and
refuses to be led astray by what is incidental or subsidiary. If, now, the
question is asked, whether we have produced a class of highly trained men,
competent to organize labor, transportation, commerce, and banking, on the
scale required by the modern system, as rapidly as the need for them has
increased, I believe no one will answer in the affirmative.
4. Another observation to which we are led upon noticing the character
of the modern industrial system is that any errors or follies committed in
one portion of it will produce effects which will ramify through the whole
system. We have here an industrial organism, not a mere mechanical
combination, and any disturbance in one part of it will derange or vitiate,
more or less, the whole. The phenomena which here appear belong to what
has been called fructifying causation. One economic error produces fruits
which combine with those of another economic error, and the product of the
two is not their sum, nor even their simple product, but the evil may be
raised to a very high power by the combination. If a number of errors fall
together the mischief is increased accordingly. Currency and tariff errors
constantly react upon each other, and multiply and develop each other in
this way. Furthermore, the errors of one nation will be felt in other nations
through the relations of commerce and credit which are now so close. There

is no limit to the interest which civilized nations have in each other’s
economic and political wisdom, for they all bear the consequences of each
other’s follies. Hence when we have to deal with that form of economic
disease which we call a commercial crisis, we may trace its origin to special
errors in one country and in another, and may trace out the actions and
reactions by which the effects have been communicated from one to another
until shared by all; but no philosophy of a great commercial crisis is
adequate nowadays unless it embraces in its scope the whole civilized
world. A commercial crisis is a disturbance in the harmonious operation of
the parts of the industrial organism. During economic health, the system
moves smoothly and harmoniously, expanding continually, and its health
and vigor are denoted by its growth, that is, by the accumulation of capital,
which stimulates in its turn the hope, energy, and enterprise of men.
Industrial disease is produced by disproportionate production, a wrong
distribution of labor, erroneous judgment in enterprise, or miscalculations
of force. These all have the same effect, viz., to waste and destroy capital.
Such causes disturb, in a greater or less degree, the harmonious working of
the system, which depends upon the regular and exact fulfillment of the
expectations which have been based on coöperative effort throughout the
whole industrial body. The disturbance may be slight and temporary, or it
may be very serious. In the latter case it will be necessary to arrest the
movement of the whole system and to proceed to a general liquidation,
before starting again. Such was the case from 1837 to 1842, and such has
been the case for the last five years. It is needless to add that this arrest and
liquidation cannot be accomplished without distress and loss to great
numbers of innocent persons, and great positive loss of capital, to say
nothing of what might have been won during the same period but must be
foregone.
The financial organization is the medium by which the various parts of
the industrial and commercial organism are held in harmony. It is by the
financial organization that capital is collected and distributed, that the
friction of exchanges is reduced to a minimum, and that time is
economized, through credit, between production and consumption. The
financial system furnishes three indicators—prices, the rate of discount, and
the foreign exchanges—through which we may read the operation of
economic forces now that their magnitude makes it impossible to inspect
them directly. Hence the great mischief of usury laws which tamper with

the rate of discount, and of fluctuating currencies which falsify prices and
the foreign exchanges. They destroy the value of the indicators, and have
the same effect as tampering with the scales of a chemist or the steam-
gauge of a locomotive.
In the matter of prices we have another difficulty to contend with,
which is inevitable in the nature of things. We must choose some
commodity to be the denominator of value. We can find no commodity
which is not itself subject to fluctuation in its ratio of exchange with other
things. Great crises have been caused in past times by fluctuations in the
value of the commodities chosen as money, and such an element is, no
doubt, at hand in the present crisis, although it had nothing to do with
bringing it about. It follows that any improvement in the world’s money is
worth any sacrifice which it can possibly cost, if it tends to secure a more
simple, exact, and unchanging standard of value.
The next point of which I wish to speak is easily introduced by the last
remark; that point is the cost of all improvement. The human race has made
no step whatever in civilization which has not been won by pain and
distress. It wins no steps now without paying for them in sacrifices. To
notice only things which are directly pertinent to our present purpose: every
service which we win from nature displaces the acquired skill of the men
who formerly performed the service; every such step is a gain to the race,
but it imposes on some men the necessity of finding new means of
livelihood, and if those men are advanced in life, this necessity may be
harsh in the extreme. Every new machine, although it saves labor, and
because it saves labor, serves the human race, yet destroys a vested interest
of some laborers in the work which it performs. It imposes on them the
necessity of turning to a new occupation, and this is hardly ever possible
without a period of distress. It very probably throws them down from the
rank of skilled to that of unskilled labor. Every new machine also destroys
capital. It makes useless the half-worn-out machines which it supersedes.
So canals caused capital which was invested in turnpikes and state coaches
to depreciate, and so railroads have caused the capital invested in canals and
other forms to depreciate. I see no exception to the rule that the progress
won by the race is always won at the expense of some group of its
members.

Any one who will look back upon the last twenty-five years cannot fail
to notice that the changes, advances, and improvements have been
numerous and various. We are accustomed to congratulate each other upon
them. There can be no doubt that they must and will contribute to the
welfare of the human race beyond what any one can now possibly foresee
or measure. I am firmly convinced, for my opinion, that the conditions of
wealth and civilization for the next quarter of a century are provided for in
excess of any previous period of history, and that nothing but human folly
can prevent a period of prosperity which we, even now, should regard as
fabulous. We can throw it away if we are too timid, if we become frightened
at the rate of our own speed, or if we mistake the phenomena of a new era
for the approach of calamity, or if the nations turn back to mediæval
darkness and isolation, or if we elevate the follies and ignorances of the past
into elements of economic truth, or if, instead of pursuing liberty with full
faith and hope, the civilized world becomes the arena of a great war of
classes in which all civilization must be destroyed. But, such follies apart,
the conditions of prosperity are all provided.
We must notice, however, that these innovations have fallen with great
rapidity upon a vast range of industries, that they have accumulated their
effects, that they have suddenly altered the currents of trade and the
methods of industry, and that we have hardly learned to accommodate
ourselves to one new set of circumstances before a newer change or
modification has been imposed. Some inventions, of which the Bessemer
steel is the most remarkable example, have revolutionized industries. Some
new channels of commerce have been opened which have changed the
character and methods of very important branches of commerce. We have
also seen a movement of several nations to secure a gold currency, which
movement fell in with a large if not extraordinary production of silver and
altered the comparative demand and supply of the two metals at the same
time. This movement had nothing arbitrary about it, but proceeded from
sound motives and reasons in the interest of the nations which took this
step. There is here no ground for condemnation or approval. Such action by
sovereign nations is taken under liberty and responsibility to themselves
alone, and if it is taken on a sufficiently large scale to form an event of
importance to the civilized world, it must be regarded as a step in
civilization. It can only be criticized by history. For the present, it is to be
accepted and interpreted only as an indication that there are reasons and

motives of self-interest which can lead a large part of the civilized world to
this step at this time.
The last twenty-five years have also included political events which
have had great effects on industry. Our Civil War caused an immense
destruction of capital and left a large territory with millions of inhabitants
almost entirely ruined in its industry, and with its labor system exposed to
the necessity of an entire re-formation. Part of the expenditures and losses
of the war were postponed and distributed by means of the paper currency
which, instead of imposing industry and economy to restore the losses and
waste, created the foolish belief that we could make war and get rich by it.
The patriotic willingness of the nation to be taxed was abused to impose
taxes for protection, not for revenue, so that the industry of the country was
distorted and forced into unnatural development. The collapse of 1873,
followed by a fall in prices and a general liquidation, was due to the fact
that every one knew in his heart that the state of things which had existed
for some years before was hollow and fictitious. Confidence failed because
every one knew that there were no real grounds for confidence. The Franco-
Prussian war had, also, while it lasted, produced a period of false and
feverish prosperity in England. It was succeeded by great political changes
in Germany which, together with the war indemnity, led to a sudden and
unfounded expansion of speculation, amounting to a mania. Germany
undoubtedly stands face to face with a new political and industrial future,
but she has postponed it by a headlong effort to realize it at once. In France,
too, the war was followed by a hasty, and, as we are told, unwise extension
of permanent capital, planned to meet the extraordinary demand of an
empty market. In England the prosperity of 1870–1872 has been followed
as usual by developments of unsound credit, bad banking, and needless
investments in worthless securities.
Here then we have, in a brief and inadequate statement, circumstances
in all these great industrial nations peculiar to each, yet certainly sufficient
to account for a period of reaction and distress. We have also before us great
features of change in the world’s industry and commerce which must
ultimately produce immeasurable advantages, but which may well,
operating with local causes, produce temporary difficulty; and we have to
notice also that the local causes react through the commercial and credit
relations of nations to distribute the evil.

It is not surprising, under such a state of things, that some people
should lose their heads and begin to doubt the economic doctrines which
have been most thoroughly established. It belongs to the symptoms of
disease to lose confidence in the laws of health and to have recourse to
quack remedies. I have already observed that certain phenomena appear in
every great social movement which are calculated to deceive by apparent
inconsistency or divergence. Hence we have seen the economists, instead of
holding together and sustaining, at the time when it was most needed, both
the scientific authority and the positive truth of their doctrines, break up and
run hither and thither, some of them running away altogether. Many of them
seem to be terrified to find that distress and misery still remain on earth and
promise to remain as long as the vices of human nature remain. Many of
them are frightened at liberty, especially under the form of competition,
which they elevate into a bugbear. They think that it bears harshly on the
weak. They do not perceive that here “the strong” and “the weak” are terms
which admit of no definition unless they are made equivalent to the
industrious and the idle, the frugal and the extravagant. They do not
perceive, furthermore, that if we do not like the survival of the fittest, we
have only one possible alternative, and that is the survival of the unfittest.
The former is the law of civilization; the latter is the law of anti-civilization.
We have our choice between the two, or we can go on, as in the past,
vacillating between the two, but a third plan—the socialist desideratum—a
plan for nourishing the unfittest and yet advancing in civilization, no man
will ever find. Some of the crude notions, however, which have been put
forward surpass what might reasonably have been expected. These have
attached themselves to branches of the subject which it is worth while to
notice.
1. As the change in the relative value of the precious metals is by far
the most difficult and most important of the features of this period, it is
quite what we might have expected that the ill-trained and dilettante writers
should have pounced upon it as their special prey. The dabblers in philology
never attempt anything less than the problem of the origin of language.
Every teacher knows that he has to guard his most enthusiastic pupils
against precipitate attempts to solve the most abstruse difficulties of the
science. The change in the value of the precious metals which is going on
will no doubt figure in history as one of the most important events in the
economic history of this century. It will undoubtedly cost much

inconvenience and loss to those who are in the way of it, or who get in the
way of it. It will, when the currency changes connected with it are
accomplished, prove a great gain to the whole commercial world. The
nations which make the change do so because it is important for their
interests to do it. Now, suppose that it were possible for those who are
frightened at the immediate and temporary inconveniences, to arrest the
movement—the only consequence would be that they would arrest and
delay the inevitable march of improvement in the industrial system.
2. The second field, which is an especial favorite with the class of
writers which I have described, is that of prognostications as to what
developments of the economic system lie in the future. Probably every one
has notions about this and every one who has to conduct business or make
investments is forced to form judgments about it. There is hardly a field of
economic speculation, however, which is more barren.
3. The third field into which these writers venture by preference is that
of remedies for existing troubles. The popular tide of medicine is always
therapeutics, and the less one knows of anatomy and physiology the more
sure he is to address himself exclusively to this department, and to rely
upon empirical remedies. The same procedure is followed in social science,
and it is accompanied by the same contempt for scientific doctrine and
knowledge and remedies. To bring out the points which here seem to me
important, it will be necessary to go back for a moment to some facts which
I have already described.
One of the chief characteristics of the great improvements in industry,
which have been described, is that they bring about new distributions of
population. If machinery displaces laborers engaged in manufactures, these
laborers are driven to small shopkeeping, if they have a little capital; or to
agricultural labor, if they have no capital. Improvements in commerce will
destroy a local industry and force the laborers to find a new industry or to
change their abode. When forces of this character coöperate on a grand
scale, they may and do produce very important redistributions of
population. In like manner legislation may, as tariff legislation does, draw
population to certain places, and its repeal may force them to unwelcome
change. We may state the fact in this way: let us suppose that, in 1850, out
of every hundred laborers in the population, the economical distribution
was such that fifty should be engaged in agriculture, thirty in

manufacturing, and the other twenty in other pursuits. That is to say that,
with the machinery and appliances then available, thirty manufacturing
laborers could use the raw materials and food produced by fifty agricultural
laborers so as to occupy all to the highest advantage. Now suppose that, by
improvements in the arts, twenty men could, in 1880, use to the best
advantage the raw materials and food produced by sixty in agriculture. It is
evident that a redistribution would be necessary by which ten should be
turned from manufacturing to land. That such a change has been produced
within the last thirty years and that it has reached a point at which is setting
in the counter movement to the former tendency from the land to the cities
and towns, seems to me certain. There are even indications of great changes
going on in the matter of distribution which will correct the loss and waste
involved in the old methods of distribution long before any of the fancy
plans for correcting them can be realized, and which are setting free both
labor and capital in that department. Now if we can economize labor and
capital in manufacturing, transportation, and distribution, and turn this labor
and capital back upon the soil, we must vastly increase wealth, for that
movement would enlarge the stream of wealth from its very source.
Right here, however, we need to make two observations.
1. The modern industrial system which I have described, with its high
organization and fine division of labor, has one great drawback. The men,
or groups of men, are dissevered from one another, their interests are often
antagonistic, and the changes which occur take the form of conflicts of
interest. I mean this: if a shoemaker worked alone, using a small capital of
his own in tools and stock, and working for orders, he would have directly
before him the facts of the market. He would find out without effort or
reflection when “trade fell off,” when there was risk of not replacing his
capital, when the course of fashion or competition called upon him to find
other occupation, and so on. When a journeyman shoemaker works for
wages, he pays no heed to these things. The employer, feeling them, has no
recourse but to lower wages. It is by this measure that, under the higher
organization, the need of new energy, or of a change of industry, or of a
change of place is brought home to the workman. To him, however, it seems
an arbitrary and cruel act of the master. Hence follow trade wars and strikes
as an especial phenomenon of the modern system. It is just because it is a
system, or more properly still, an organism, that the readjustments which

are necessary from time to time in order to keep its parts in harmonious
activity, and to keep it in harmony with physical surroundings, are brought
about through this play of the parts on each other.
2. A general movement of labor and capital towards land, throughout
the civilized world, means a great migration towards the new countries.
This does not by any means imply the abandonment or decay of older
countries, as some have seemed to believe. On the contrary, it means new
prosperity for them. When I read that the United States are about to feed the
world, not only with wheat and provisions, but with meat also, that they are
to furnish coal and iron to mankind, that they are to displace all the older
countries as exporters of manufactures, that they are to furnish the world’s
supply of the precious metals, and I know not what all besides, I am forced
to ask what is the rest of the world going to do for us? What are they to give
us besides tea, coffee, and sugar? Not ships, for we will not take them and
are ambitious to carry away all our products ourselves. Certainly this is the
most remarkable absurdity into which we have been led by forgetting that
trade is an exchange. Neither can any one well expect that all mankind are
to come and live here. The conditions of a large migration do, however,
seem to exist. A migration of population is still a very unpopular idea in all
the older states. The prejudice against it is apparent amongst Liberals and
Tories, economists and sentimentalists. There is, however, a condition
which is always suppressed in stating the social problem as it presents itself
in hard times. That problem, as stated, is: “How are the population to find
means of support?” and the suppressed condition is: “if they insist on
staying and seeking support where they are and in pursuits to which they
are accustomed.” The hardships of change are not for one moment to be
denied, but nothing is gained by sitting down to whine about them. The
sentimental reasons for clinging to one’s birthplace may be allowed full
weight, but they cannot be allowed to counterbalance important advantages.
I do not see that any but land owners are interested to hold population in
certain places, unless possibly we add governing classes and those who
want military power. When I read declamations about nationality and the
importance of national divisions to political economy (observe that I do not
say to political science), I never can find any sense in them, and I am very
sure that the writers never put any sense into them.

We may now return to consider the remedies proposed for hard times.
We shall see that although they are quack remedies, and although they set at
defiance all the economic doctrines which have been so laboriously
established during the last century, they are fitted to meet the difficulty as it
presents itself to land owners, governments, military powers, socialists, and
sentimentalists. The tendency is towards an industrial system controlled by
a natural coöperation far grander than anybody has ever planned, towards a
community of interest and welfare far more beneficent than any universal
republic or fraternity of labor which the Internationalists hope for, and
towards a free and peaceful rivalry amongst nations in the arts of
civilization. It is necessary to stop this tendency. What are the means
proposed?
1. The first is to put a limit to civil liberty. By civil liberty (for I feel at
once the need of defining this much-abused word) I mean the status which
is created for an individual by those institutions which guarantee him the
use of his own powers for his own development. For three or four centuries
now, the civilized world has been struggling towards the realization of this
civil liberty. Progress towards it has been hindered by the notion that liberty
was some vague abstraction, or an emancipation from some of the hard
conditions of human life, from which men never can be emancipated while
they live on this earth. Civil liberty has also been confused with political
activity or share in civil government. Political activity itself, however, is
only a means to an end, and is valuable because it is necessary to secure to
the individual free exercise of his powers to produce and exchange
according to his own choice and his own conception of happiness, and to
secure him also that the products of his labor shall be applied to his
satisfaction and not to that of any others. When we come to understand civil
liberty for what it is, we shall probably go forward to realize it more
completely. It will then appear that it begins and ends with freedom of
production, freedom of exchange, and security of property. It will then
appear also that governments depart from their prime and essential function
when they undertake to transfer property instead of securing it, and it may
then be understood that legal tender laws, and protective tariffs as amongst
the last and most ingenious devices for transferring one man’s product to
another man’s use, are gross violations of civil liberty. At present the
attempt is being made to decry liberty, to magnify the blunders and errors of
men in the pursuit of happiness into facts which should be made the basis of

generalizations about the functions of government, and to present the
phenomena of the commercial crisis as reasons for putting industry once
more in leading strings. It is only a new foe with an old face. Those who
have held the leading strings of industry in time past have always taken rich
pay for their services, and they will do it again.
2. The second form of remedy proposed is quite consistent with the
last. It consists in rehabilitating the old and decaying superstition of
government. It is called the state, and all kinds of poetical and fanciful
attributes are ascribed to it. It is presented, of course, as a superior power,
able and ready to get us out of trouble. If an individual is in trouble, he has
to help himself or secure the help of friends as best he can, but if a group of
persons are in trouble together, they constitute a party, a power, and begin to
make themselves felt in the state. The state has no means of helping them
except by enabling them to throw the risks and losses of their business upon
other people who already have the burdens and losses of their own business
to bear, but who are less well organized. The “state” assumes to judge what
is for the public interest and imposes taxes or interferes with contracts to
force individuals to the course which will realize what it has set before
itself. When, however, all the fine phrases are stripped away, it appears that
the state is only a group of men with human interests, passions, and desires,
or, worse yet, the state is, as somebody has said, only an obscure clerk
hidden in some corner of a governmental bureau. In either case the
assumption of superhuman wisdom and virtue is proved false. The state is
only a part of the organization of society in and for itself. That organization
secures certain interests and provides for certain functions which are
important but which would otherwise be neglected. The task of society,
however, has always been and is yet, to secure this organization, and yet to
prevent the man in whose hands public power must at last be lodged from
using it to plunder the governed—that is, to destroy liberty. This is what
despots, oligarchs, aristocrats, and democrats always have done, and the
latest development is only a new form of the old abuse. The abuses have
always been perpetrated in the name of the public interest. It was for the
public interest to support the throne and the altar. It was for the public
interest to sustain privileged classes, to maintain an established church,
standing armies, and the passport and police system. Now, it is for the
public interest to have certain industries carried on, and the holders of the
state power apportion their favor without rule or reason, without

responsibility, and without any return service. In the end, therefore, the high
function of the state to regulate the industrial organization in the public
interest is simply that the governing group interferes to make some people
give the products of their labor to other people to use and enjoy. Every one
sees the evils of the state meddling with his own business and thinks that he
ought to be let alone in it, but he sees great public interests which would be
served if the state would interfere to make other people do what he wants to
have them do.
Now if these two measures could be carried out—if liberty could be
brought into misapprehension and contempt, and if the state-superstition
could be saved from the decay to which it is doomed, the movements of
population and the changes in industry, commerce, and finance, could be
arrested. The condemnation of all such projects is, once and for all, that
they would arrest the march of civilization. The joy and the fears which
have been aroused on one side and on the other by the reactionary
propositions which have been made during the last five years are both
greatly exaggerated. Such reactionary propositions are in the nature of
things at such a time. It must be expected that the pressure of distress and
disappointed hopes will produce passionate reaction and senseless outcries.
From such phenomena to actual practical measures is a long step. Every
step towards practical realization of any reactionary measures will
encounter new and multiplying obstacles. A war of tariffs at this time would
so fly in the face of all the tendencies of commerce and industry that it
would only hasten the downfall of all tariffs. Purely retaliatory tariffs are a
case of what the children call “cutting off your nose to spite your face.”
Some follies have become physically impossible for great nations
nowadays. Germany has been afflicted: first, by too eager hopes, second, by
the great calamity of too many and too pedantic doctors, third, by a
declining revenue, and fourth, by socialistic agitation amongst the new
electors. It appears that she is about to abandon the free-trade policy
although she does not embrace protection with much vigor. The project
already comes in conflict with numerous and various difficulties which had
not been foreseen, and, in its execution, it must meet with many more. The
result remains to be studied. France finds that the expiration of each treaty
of commerce produces consequences upon her industry which are
unendurable, and while the task of adjusting rival and contending interests
so as to create a new system drags along, she is compelled to ward off, by

temporary arrangements, the revival of the general tariff which the treaties
had superseded. In the meantime her economists, who are the most sober
and the best trained in the world, are opening a vigorous campaign on the
general issue. If England should think of reviving protection, she would not
know what to protect. If she wanted to retaliate, she could only tax raw
materials and food. The proposition, as soon as it is reduced to practical
form, has no footing. As for ourselves we know that our present protective
system never could have been fastened upon us if it had not been concealed
under the war legislation, and if its effects had not been confused with those
of the war. It could not last now if the public mind could be freed from its
absorption in sectional politics, so that it would be at liberty to turn to this
subject.
In conclusion, let me refer again to another important subject on which
I have touched in this paper—what we call the silver question. It would, no
doubt, be in the power of civilized nations to take some steps which would
alleviate the inconveniences connected with the transition of several
important nations from a silver to a gold currency. For one nation, which
has no share in the trouble at all, to come forward out of “magnanimity” or
any other motive to save the world from the troubles incident to this step, is
quixotic and ridiculous. It might properly leave those who are in the trouble
to deal with it amongst themselves. Either they or all might, however, do
much to modify the effects of the change. The effort to bring about an
international union to establish a bimetallic currency at a fixed ratio is quite
another thing. It will stand in the history of our time as the most singular
folly which has gained any important adherence. As a practical measure the
international union is simply impossible. As a scientific proposition,
bimetallism is as absurd as perpetual motion. It proposes to establish
perpetual rest in the fluctuations of value of two commodities, to do which
it must extinguish the economic forces of supply and demand of those
commodities upon which value depends. The movement of the great
commercial nations towards a single gold currency is the most important
event in the monetary history of our time, and one which nothing can
possibly arrest. It produces temporary distress, and the means of alleviating
that distress are a proper subject of consideration; but the advantages which
will be obtained for all time to come immeasurably surpass the present loss
and inconvenience.

I return, then, to the propositions with which I set out. Feebleness and
vacillation in regard to economic doctrine are natural to a period of
commercial crisis, on account of the distress, uncertainty, and disorder
which then prevail in industry and trade; but that is just the time also when
a tenacious grasp of scientific principles is of the highest importance. The
human race must go forward to meet and conquer its problems and
difficulties as they arise, to bear the penalties of its follies, and to pay the
price of its acquisitions. To shrink from this is simply to go back and to
abandon civilization. The path forward, as far as any human foresight can
now reach, lies in a better understanding and a better realization of liberty,
under which individuals and societies can work out their destiny, subject
only to the incorruptible laws of nature.

THE PHILOSOPHY OF STRIKES41

T HE progress in material comfort which has been made during the last
hundred years has not produced content. Quite the contrary: the men
of to-day are not nearly so contented with life on earth as their ancestors
were. This observation is easily explainable by familiar facts in human
nature. If satisfaction does not reach to the pitch of satiety, it does not
produce content, but discontent; it is therefore a stimulus to more effort, and
is essential to growth. If, however, we confine our study of the observation
which we have made to its sociological aspects, we perceive that all which
we call “progress” is limited by the counter-movements which it creates,
and we also see the true meaning of the phenomena which have led some to
the crude and silly absurdity that progress makes us worse off. Progress
certainly does not make people happier, unless their mental and moral
growth corresponds to the greater command of material comfort which they
win. All that we call progress is a simple enlargement of chances, and the
question of personal happiness is a question of how the chances will be
used. It follows that if men do not grow in their knowledge of life and in
their intelligent judgment of the rules of right living as rapidly as they gain
control over physical resources, they will not win happiness at all. They will
simply accumulate chances which they do not know how to use.

The observation which has just been made about individual happiness
has also a public or social aspect which is important. It is essential that the
political institutions, the social code, and the accepted notions which
constitute public opinion should develop in equal measure with the increase
of power over nature. The penalty of failure to maintain due proportion
between the popular philosophy of life and the increase of material comfort
will be social convulsions, which will arrest civilization and will subject the
human race to such a reaction toward barbarism as that which followed the
fall of the Roman Empire. It is easy to see that at the present moment our
popular philosophy of life is all in confusion. The old codes are breaking
down; new ones are not yet made; and even amongst people of standing, to

whom we must look to establish the body of public opinion, we hear the
most contradictory and heterogeneous doctrines about life and society.
The growth of the United States has done a great deal to break up the
traditional codes and creeds which had been adopted in Europe. The
civilized world being divided into two parts, one old and densely populated
and the other new and thinly populated, social phenomena have been
produced which, although completely covered by the same laws of social
force, have appeared to be contradictory. The effect has been to disturb and
break up the faith of philosophers and students in the laws, and to engender
numberless fallacies amongst those who are not careful students. The
popular judgment especially has been disordered and misled. The new
country has offered such chances as no generation of men has ever had
before. It has not, however, enabled any man to live without work, or to
keep capital without thrift and prudence; it has not enabled a man to “rise in
the world” from a position of ignorance and poverty, and at the same time
to marry early, spend freely, and bring up a large family of children.
The men of this generation, therefore, without distinction of class, and
with only individual exceptions, suffer from the discontent of an appetite
excited by a taste of luxury, but held far below satiety. The power to
appreciate a remote future good, in comparison with a present one, is a
distinguishing mark of highly civilized men, but if it is not combined with
powers of persevering industry and self-denial, it degenerates into mere
day-dreaming and the diseases of an overheated imagination. If any number
of persons are of this character, we have morbid discontent and romantic
ambition as social traits. Our literature, especially our fiction, bears witness
to the existence of classes who are corrupted by these diseases of character.
We find classes of persons who are whining and fault-finding, and who use
the organs of public discussion and deliberation in order to put forth
childish complaints and impossible demands, while they philosophize about
life like the Arabian Nights. Of course this whole tone of thought and mode
of behavior is as far as possible from the sturdy manliness which meets the
problems of life and wins victories as much by what it endures as by what it
conquers.
Our American life, by its ease, exerts another demoralizing effect on a
great many of us. Hundreds of our young people grow up without any real
discipline; life is made easy for them, and their tastes and wishes are

consulted too much; they grow to maturity with the notion that they ought
to find the world only pleasant and easy. Every one knows this type of
young person, who wants to find an occupation which he would “like,” and
who discusses the drawbacks of difficulty or disagreeableness in anything
which offers. The point here referred to is, of course, entirely different from
another and still more lamentable fact, that is, the terrible inefficiency and
incapability of a great many of the people who are complaining and
begging. If any one wants a copyist, he will be more saddened than annoyed
by the overwhelming applications for the position. The advertisements
which are to be found in the newspapers of widest circulation, offering a
genteel occupation to be carried on at home, not requiring any previous
training, by which two or three dollars a day may be earned, are a proof of
the existence of a class to which they appeal. How many thousand people in
the United States want just that kind of employment! What a beautiful
world this would be if there were any such employment!
Then, again, our social ambition is often silly and mischievous. Our
young people despise the occupations which involve physical effort or dirt,
and they struggle “up” (as we have agreed to call it) into all the nondescript
and irregular employments which are clean and genteel. Our orators and
poets talk about the “dignity of labor,” and neither they nor we believe in it.
Leisure, not labor, is dignified. Nearly all of us, however, have to sacrifice
our dignity, and labor, and it would be to the purpose if, instead of
declamation about dignity, we should learn to respect, in ourselves and each
other, work which is good of its kind, no matter what the kind is. To spoil a
good shoemaker in order to make a bad parson is surely not going “up”; and
a man who digs well is by all sound criteria superior to the man who writes
ill. Everybody who talks to American schoolboys thinks that he does them
and his country service if he reminds them that each one of them has a
chance to be President of the United States, and our literature is all the time
stimulating the same kind of senseless social ambition, instead of
inculcating the code and the standards which should be adopted by orderly,
sober, and useful citizens.
The consequences of the observations which have now been grouped
together are familiar to us all. Population tends from the country to the city.
Mechanical and technical occupations are abandoned, and those
occupations which are easy and genteel are overcrowded. Of course the

persons in question must be allowed to take their own choice, and seek their
own happiness in their own way, but it is inevitable that thousands of them
should be disappointed and suffer. If the young men abandon farms and
trades to become clerks and bookkeepers, the consequence will be that the
remuneration of the crowded occupations will fall, and that of the neglected
occupations will rise; if the young women refuse to do housework, and go
into shops, stores, telegraph offices and schools, the wages of the crowded
occupations will fall, while those of domestic servants advance. If women
in seeking occupation try to gain admission to some business like
telegraphing, in competition with men, they will bid under the men. Similar
effects would be produced if a leisure class in an old country should be
compelled by some social convulsion to support themselves. They would
run down the compensation for labor in the few occupations which they
could enter.
Now the question is raised whether there is any remedy for the low
wages of the crowded occupations, and the question answers itself: there is
no remedy except not to continue the causes of the evil. To strike, that is, to
say that the workers will not work in their chosen line, yet that they will not
leave it for some other line, is simply suicide. Neither can any amount of
declamation, nor even of law-making, force a man who owns a business to
submit the control of it to a man who does not own it. The telegraphers have
an occupation which requires training and skill, but it is one which is very
attractive in many respects to those who seek manual occupation; it is also
an occupation which is very suitable, at least in many of its branches, for
women. The occupation is therefore capable of a limited monopoly. The
demand that women should be paid equally with men is, on the face of it,
just, but its real effect would be to keep women out of the business. It was
often said during the telegraphers’ strike that the demand of the strikers was
just, because their wages were less than those of artisans. The argument has
no force at all. The only question was whether the current wages for
telegraphing were sufficient to bring out an adequate supply of telegraphers.
If the growing boys prefer to be artisans, the wages of telegraphers will rise.
If, even at present rates, boys and girls continue to prefer telegraphing to
handicraft or housework, the wages of telegraphers will fall. Could, then, a
strike advance at a blow the wages of all who are now telegraphers? There
was only one reason to hope so, and that was that the monopoly of the trade
might prove stringent enough and the public inconvenience great enough to

force a concession—which would, however, have been speedily lost again
by an increased supply of telegraphers.
Now let us ask what the state of the case would be if it was really
possible for the telegraphers to make a successful strike. They have a very
close monopoly; six years ago they nearly arrested the transportation of the
country for a fortnight; but they were unable to effect their object. More
recently the freight-handlers struck against the competition of a new influx
of foreign unskilled laborers, and in vain. The printers might make a
combination, and try to force an advance in wages by arresting the
publication of all the newspapers on a given day, but there are so many
persons who could set type, in case of need, that such an attempt would be
quite hopeless. In any branch of ordinary handicraft there would be no
possibility of creating a working monopoly or of producing a great public
calamity by a strike. If we go on to other occupations we see that
bookkeepers, clerks, and salesmen could not as a body combine and strike;
much less could teachers do so; still less could household servants do so.
Finally, farmers and other independent workers could not do it at all. In
short, a striker is a man who says: “I mean to get my living by doing this
thing and no other thing as my share of the social effort, and I do not mean
to do this thing except on such and such terms.” He therefore proposes to
make a contract with his fellow-men and to dictate the terms of it. Any man
who can do this must be in a very exceptional situation; he must have a
monopoly of the service in question, and it must be one of which his fellow-
men have great need. If, then, the telegraphers could have succeeded in
advancing their wages fifteen per cent simply because they had agreed to
ask for the advance, they must have been far better off than any of the rest
of their fellowmen.
Our fathers taught us the old maxim: Cut your coat according to your
cloth; but the popular discussions of social questions seem to be leading up
to a new maxim: Demand your cloth according to your coat. The fathers
thought that a man in this world must do the best he could with the means
he had, and that good training and education consisted in developing skill,
sagacity, and thrift to use resources economically; the new doctrine seems
to be that if a man has been born into this world he should make up his
mind what he needs here, formulate his demands, and present them to
“society” or to the “state.” He wants congenial and easy occupation, and

good pay for it. He does not want to be hampered by any limitations such as
come from a world in which wool grows, but not coats; in which iron ore is
found, but not weapons and tools; in which the ground will produce wheat,
but only after hard labor and self-denial; in which we cannot eat our cake
and keep it; in which two and two make only four. He wants to be
guaranteed a “market,” so as not to suffer from “overproduction.” In private
life and in personal relations we already estimate this way of looking at
things at its true value, but as soon as we are called upon to deal with a
general question, or a phenomenon of industry in which a number of
persons are interested, we adopt an entirely conventional and unsound mode
of discussion. The sound gospel of industry, prudence, painstaking, and
thrift is, of course, unpopular; we all long to be emancipated from worry,
anxiety, disappointment, and the whole train of cares which fall upon us as
we work our way through the world. Can we really gain anything in that
struggle by organizing for a battle with each other? This is the practical
question. Is there any ground whatever for believing that we shall come to
anything, by pursuing this line of effort, which will be of any benefit to
anybody? If a man is dissatisfied with his position, let him strive to better it
in one way or another by such chances as he can find or make, and let him
inculcate in his children good habits and sound notions, so that they may
live wisely and not expose themselves to hardship by error or folly; but
every experiment only makes it more clear that for men to band together in
order to carry on an industrial war, instead of being a remedy for
disappointment in the ratio of satisfaction to effort, is only a way of
courting new calamity.

STRIKES AND THE INDUSTRIAL
ORGANIZATION42

A NYONE who has read with attention the current discussion of labor
topics must have noticed that writers start from assumptions, in
regard to the doctrine of wages, which are as divergent as notions on the
same subject-matter well can be. It appears, therefore, that we must have a
dogma of wages, that we cannot reason correctly about the policy or the
rights of the wages system until we have such a dogma, and that, in the
meantime, it is not strange that confusion and absurdity should be the chief
marks of discussion carried on before this prime condition is fulfilled.

Some writers assume that wages can be raised if the prices of products
be raised, and that no particular difficulty would be experienced in raising
prices; others assume that wages could be raised if the employers would be
satisfied with smaller profits for themselves; still others assume that wages
could be raised or lowered according as the cost of living rises or falls.
These are common and popular assumptions, and have nothing to do with
the controversies of professional economists about the doctrine of wages.
The latter are a disgrace to the science, and have the especial evil at this
time that the science cannot respond to the chief demand now made upon it.
If the employer could simply add any increase of wages to his prices,
and so recoup himself at the expense of the consumer, no employer would
hold out long against a strike. Why should he? Why should he undertake
loss, worry, and war, for the sake of the consumers behind him? If an
employer need only submit to a positive and measurable curtailment of his
profits, in order to avoid a strike and secure peace, it is probable that he
would in almost every case submit to it. But if the employees should
demand five per cent advance, and the employer should grant it, adding so
much to his prices, they would naturally and most properly immediately
demand another five per cent, to be charged to the consumers in the same
way. There would be no other course for men of common sense to pursue.

They would repeat this process until at some point or other they found
themselves arrested by some resistance which they could not overcome.
Similarly, if wages could be increased at the expense of the employer’s
gains, the employer who yielded one increase would have to yield another,
until at some point he decided to refuse and resist. In either case, where and
what would the limit be? Whenever the point was reached at which some
unconquerable resistance was encountered, the task of the economist would
begin.
There is no rule whatever for determining the share which any one
ought to get out of the distribution of products through the industrial
organization, except that he should get all that the market will give him in
return for what he has put into it. Whenever, therefore, the limit is reached,
the task of the economist is to find out the conditions by which this limit is
determined.
Now it is the character of the modern industrial system that it becomes
more and more impersonal and automatic under the play of social forces
which act with natural necessity; the system could not exist if they did not
so act, for it is constructed in reliance upon their action according to
ascertainable laws. The condition of all social actions and reactions is
therefore set in the nature of the forces which we have learned to know on
other fields of scientific investigation, and which are different here only
inasmuch as they act in a different field and on different material. The
relations of parties, therefore, in the industrial organism is such as the
nature of the case permits. The case may permit of a variety of relations,
thus providing some range of choice.
A person who comes into the market, therefore, with something to sell,
cannot raise the price of it because he wants to do so, or because his “cost
of production” has been raised. He has already pushed the market to the
utmost, and raised the price as high as supply and demand would allow, so
as to win as large profits as he could. How, then, can he raise it further, just
because his own circumstances make it desirable for him so to do? If the
market stands so that he can raise his price, he will do it, whether his cost of
production has increased or not. Neither can an employer reduce his own
profits at will; he will immediately perceive that he is going out of business,
and distributing his capital in presents.

The difficulty with a strike, therefore, is, that it is an attempt to move
the whole industrial organization, in which all the parts are interdependent
and intersupporting. It is not, indeed, impossible to do this, although it is
very difficult. The organization has a great deal of elasticity in its parts—an
aggressive organ can win something at the expense of others. Everything
displaces everything else; but if force enough is brought to bear, a general
displacement and readjustment may be brought about. An organ which has
been suffering from the aggression of others may right itself. It is only by
the collision of social pressure, constantly maintained, that the life of the
organism is kept up, and its forces are developed to their full effect.
Strikes are not necessarily connected with violence to either persons or
property. Violence is provided for by the criminal law. Taking strikes by
themselves, therefore, it may be believed that they are not great evils; they
are costly, but they test the market. Supply and demand does not mean that
the social forces will operate of themselves; the law, as laid down, assumes
that every party will struggle to the utmost for its interests—if it does not do
so, it will lose its interests. Buyers and sellers, borrowers and lenders,
landlords and tenants, employers and employees, and all other parties to
contracts, must be expected to develop their interests fully in the
competition and struggle of life. It is for the health of the industrial
organization that they should do so. The other social interests are in the
constant habit of testing the market, in order to get all they can out of it. A
strike, rationally begun and rationally conducted, only does the same thing
for the wage-earning interest.
The facts stare us plainly in the face, if we will only look at them, that
the wages of the employees and the price of the products have nothing to do
with each other; that the wages have nothing to do with the profits of the
employer; that they have nothing to do with the cost of living or with the
prosperity of the business. They are really governed by the supply and
demand of labor, as every strike shows us, and by nothing else.
Turning to the moral relations of the subject, we are constantly
exhorted to do something to improve the relations of employer and
employee. I submit that the relation in life which has the least bad feeling or
personal bitterness in it is the pure business relation, the relation of contract,
because it is a relation of bargain and consent and equivalence. Where is
there so much dissension and bitterness as in family matters, where people

try to act by sentiment and affection? The way to improve the relation of
employer and employee is not to get sentiment into it, but to get sentiment
out of it. We are told that classes are becoming more separated, and that the
poor are learning to hate the rich, although there was a time when no class
hatreds existed. I have sought diligently in history for the time when no
class hatreds existed between rich and poor. I cannot find any such period,
and I make bold to say that no one can point to it.

TRUSTS AND TRADES-UNIONS43

I HAVE attempted to show, in foregoing essays,44 what an immense rôle
is played by monopoly throughout the whole social life of mankind in
all its stages. There would not be any struggle for existence if it were not
true that the supply in nature of the things necessary for human existence is
niggardly. The struggle for existence consists in a contest against the
constraints by which human life is surrounded; the process by which men
have won something in that contest, in the course of time, has consisted in
playing off one of nature’s monopolies against another—the process,
namely, which we call “employing natural agents.” On its social and
political side, the advance has consisted in securing for the individual a
chance in some degree to control his own destiny; not to be at the sport of
natural and social forces, but to bring his own energy to bear to enlarge his
own conditions of enjoyment and survival.

At every stage of history, however, the natural monopolies have formed
the basis of social and political monopolies. The possession of those powers
which, under the circumstances, were most efficient for the acquisition of
what men want has always given superiority and dominion in human
society, whether those powers were physical force, beauty, learning, virtue,
capital, or anything else. Where does any one find ground to believe that the
fact will ever be different, and that those who have the powers which are
most potent in the society in which they live will use those powers, not to
get the things which all men want for themselves, but to get those same
things for other people?
The fashion has always been in the past for those who possessed the
essential powers to take control of the state and realize their monopoly in
that way. If plutocracy should now prevail it would be simply a repetition of
that experience. The only device which has ever given promise of wider and
more humane organization of the state is constitutional liberty, which
compels, by the intervention of institutions created to serve this purpose, the

ruling class, whoever they were, to respect the recognized and defined
rights of all the rest.
Now, democracy having sapped and dissolved all the inherited forms of
social organization and reduced the social body to atoms, it is most
interesting to observe the inevitable recurrence of all the old tendencies, in
new forms fitted to the times. Some of us thought that liberty was won
forever, and that the race was nevermore to be disturbed by its old
problems, but it is already apparent that, when a society is resolved into its
constituent atoms, the question under what forces, and upon what nuclei, it
will crystallize into new forms, has acquired an importance never known
before.
Just now public attention is all absorbed by the new name “trust”
applied to one of these phenomena. I can see nothing new in a trust as
compared with the rings, pools, etc., with which we have been familiar
during this generation, except the guarantee which the trust secures to all
the members of the same that no one inside of it shall play traitor to the rest.
The greatest difficulty with modern combinations has been that there have
been no sanctions by which the members could be bound, and that the
profits of the insider who turned against his comrades have always been an
irresistible temptation. In the mediæval guilds, which were “trusts” of the
most solid construction, the sanctions were of the sternest kind—religious,
political, and social—and yet they never succeeded in their purpose. In
modern times, as is well known to all who are acquainted with the attempts
which have been made, inside of various branches of industry, to arrange
agreements which have not been large enough or public enough to get into
the newspapers the difficulty of enforcing loyalty against those who felt
strong enough to beat the rest if they should go alone, or against those who
saw a chance to sell out on the rest, or against those who were in desperate
straits for cash, has been the constant stumbling-block. Fifty years ago, in
the last days of the United States Bank, Nicholas Biddle organized a cotton
trust, to try to control the cotton market of the world. It was a complete
failure. In general, combinations of this character are in constant dilemma:
they must always grow bigger and bigger, in order to encompass a sufficient
area to constitute a unit; but the bigger they grow, the less is their internal
cohesion. The exception to this must be noted in a moment.

The great expansion of the market by modern inventions in
transportation has broken up all the former local and petty monopolies, and
is rapidly making of the industry and commerce of mankind a whole which
cannot be divided by geographical lines. The conditions of competition in
such a system are no doubt onerous to the last degree. The conditions that
must be taken into account to win success are numerous and complicated.
The nerve-strain of comprehending and of justly estimating the factors, and
of following their constant variations, is too great for any one to endure.
Foresight must be used, yet there are so many unknown quantities that
foresight is impossible; if the attempt is made to master all the unknown
quantities, then the task is so enormous that it cannot be accomplished.
Furthermore, the relations with other persons in the industrial system are
necessarily close. It is impossible to escape such relations, and it is
impossible to avoid a share in the consequences of the mistakes and
incompetence of the others. It must be added that, at a time when the
advance in the arts has forced the whole industry of the globe into intimate
relations which nothing can possibly cut off, legislative interferences have
produced artificial and erratic currents in the industrial and commercial
relations of all countries. The consequences are disappointing and
disastrous incidents in the history of industry. At the same time the
improvements in the communication of intelligence have made it possible
for men farthest apart in space, language, and nationality, if they have
confidence in each other’s business ability and command of capital, to
coöperate by personal agreements.
Trusts are an attempt to deal with this state of things. It is, of course, a
jest when the makers of a trust affirm that they make it for the benefit of
consumers, and it may very well be doubted whether a trust is a feasible and
beneficial device in the interest of either party; but it is wrong to overlook
the fact that the trust, in its efforts to deal with the case, and to secure
orderly and rational development, instead of heats and chills in industry, has
a real and legitimate task on hand. It is certain that there is room for the
introduction of intelligent method into modern industry, under forms which
shall be germane to modern conditions, and it is certain that this will never
be done properly by legislation, but only by the voluntary and intelligent
coöperation of the parties interested. It is also by no means certain that this
systematization of industry, under intelligent coöperation of the parties
conducting it, would cost consumers anything, provided always that there

was no legislation to prevent the recourse at any time to any other sources
of supply which might be available. The economies of management under
intelligent administration are a source from which gains may be made
which will cost the consumer nothing. The expenses of industrial war
constitute a big fund for dividends to which the consumer does not
contribute.
It is worth while to notice, by some familiar examples, what the motive
of a trust is; it will be found a far more everyday matter than most people
suppose. A man who owns a house and lot buys the vacant lot adjacent in
order to control it. He and his neighbors buy up all the vacant lots on the
street in order to prevent undesirable contact with anything which would
deteriorate their property. They have already fallen victims to the spirit of
monopoly, and are subject to all the denunciations heaped upon aristocrats
and exclusivists. In their case already the practical difficulty of defining the
unit to be comprehended, in order to attain the object and no more, is
apparent. Examples are furnished every day in which capital is refused for
certain enterprises because it is seen that the investment might no sooner be
made than its profits might be destroyed by another enterprise parallel with
it. The thing cannot be done at all until it is done on a scale sufficiently
large to constitute a complete unit. We are familiar enough with the
dilemma offered to us when, on the one hand, railroads which consolidate
put themselves in a position to serve us far more efficiently, yet on the other
hand, railroads which consolidate cease to compete with each other for our
benefit. Which do we want them to do? The railroads themselves are
familiar with the experience that they are constantly forced to make
extensions in order to secure a certain territory, that is, to establish a closed
unit, and that every extension, instead of attaining a finality, only makes
further extension unavoidable. This is the class of facts in the industrial
development of our time which has produced the trusts, and it is certain that
they offer another motive than that of simple desire to secure means of
extortion.
I am not yet able to see that any trust can succeed unless it is founded
on a natural or legislative monopoly, and furthermore on a monopoly whose
product cannot be produced in an amount exceeding the demand at the price
which has been customary before the formation of the trust; and I cannot
see any chance for legislation to do any good unless it is in the repeal of all

such laws as are found to furnish a basis for the organization of an artificial
monopoly.
It cannot have escaped the attention of the reader that trades-unions are
a monopolistic organization on the side of labor entirely parallel with the
trusts on the side of capital, “a product of the same age and of the same
forces,” and an endeavor to deal with the same problem from the standpoint
of another interest. The motives of coercion, discipline, and strict internal
organization are the same in both cases, and some of the sanctions are the
same; for the pools and rings have tried the boycott until they have proved
its worthlessness. There is a notion afloat that the modern trades-union is a
descendant of the mediæval gild. It might, with equal truth, and equal
futility, be asserted that the modern college, stock exchange, and joint stock
company, are descended from the mediæval gild. The nineteenth-century
trades-union is a nineteenth-century institution, as much or more so than the
ring, pool, corner, or trust. They are all products of the same facts in the
industrial development, and one is just as inevitable, and, in that sense,
legitimate, as the other. There are some who, while vehemently denouncing
trusts, offer us, with great complacency and satisfaction, as a solution of the
“labor question,” the assertion that the employers and employees ought to
combine or coöperate in some way; they do not appear to see at all that if
any such thing should be brought about it would be the most gigantic
“trust” that could possibly be conceived.

AN OLD “TRUST”45

I N the year 1579, Conrad Roth, a merchant of Augsburg, who had been
interested in the trade in spices between Lisbon and Germany,
proposed to an officer of the treasury of the Elector of Saxony a scheme for
a company to monopolize the pepper trade. The Elector was one of the most
enterprising and enlightened princes of his time, and the proposition was
really intended to be made to him as the only person who could command
the necessary capital and had, at the same time, courage and energy to
undertake the enterprise.

A company was formed of officers of the treasury, called the
Thuringian Company, and a warehouse was prepared at Leipzig. It was
reckoned that if the company could raise the price of pepper one groschen
per pound, the profits would be over 38,000 florins per annum. Roth and
the Thuringian Company were to participate in the enterprise equally, but
the Prince was to put up all the capital, and Roth was to do all the work.
The latter also owned a very valuable contract with the King of Portugal,
according to which he was, for five years, to send to India money enough to
buy up all the pepper produced, so that none could come into Europe
through Egypt and Italy. Before that time the Portuguese officers had
illegally sold some of it, so that it did get into Europe that way; but by
buying in India this was now to be stopped.
Roth proposed to divide Europe into three sections: Portugal, Spain,
and the West; Italy and the South; Germany and the North. The Saxon
company was to have the last as its share of the monopoly. It was hoped
that the gains might be forced up to a much higher figure than the one
above given, if only all pepper then in Frankfort, Venice, Nuremberg, and
Hamburg could be bought up.
No sooner was the plan formed, however, than Roth began to reach out
after extensions to it. He wanted to include the trade in other spices. He also
proposed that the Elector should provide the capital for an exchange bank to

do the exchange business between Leipzig and Lisbon. Next he found that
the existing postal arrangements were entirely inadequate to the
requirements of his business, and he proposed to the Elector a complete
plan for a postal service between Italy, Germany, France, Spain, and
Portugal. Then, having found the shipping facilities unsatisfactory, he
proposed that the Elector should enter into a contract with the King of
Denmark, by which the latter, who owned ships, should provide a regular
service between Lisbon and the Elbe.
These plans all show the grand energy of this projector, and the Elector
entered into them all. He could not carry out the postal service without the
consent of the Emperor, and this he was unable to get. Roth and the Elector
were ahead of their time; the Emperor was not; he said that the plan
proposed “something new, which had never been in use in the time of their
ancestors.” The attempt to unite private merchants in the speculation also
failed at Leipzig, and elsewhere the attitude toward it was extremely
unfriendly.
When the stock of pepper began to accumulate at Leipzig, it was found
that the article did not begin to be scarce elsewhere. Although the advances
of the Prince were already far greater than he had promised when the plan
was formed, it was found impossible to begin sales until all the pepper on
the European market elsewhere could be bought up; and at the same time
reports came that, in spite of Roth’s contract, any one who had money could
buy all the pepper he wanted in India, and that it was coming into Europe
freely through Egypt and Venice. In the spring of 1580 the supply in the
cities of Holland and Germany was ample. It appeared that Roth could not
prevent the contractors for other parts of Europe from shipping to Germany,
and the price was falling there; instead of being at fifteen groschen, where
the speculators hoped to hold it, it was below twelve. At this point Roth’s
creditors began to put attachments on his property. All this led the Elector to
say: “We fear that there has been a great mistake in Roth’s original and still
repeated assertion that all the pepper which comes into Europe comes
through Lisbon.”
In April Roth committed suicide upon hearing of the death of the King
of Portugal. It was known that the King of Spain intended to claim the
succession, and that the Portuguese would resist; this war and the
possibility of a Spanish succession meant ruin to the speculation. The

Elector was obliged to send agents in every direction to get possession of
the assets of the company, in order to recover his funds. In the end it
appears that he escaped without very serious loss; he sold the whole stock
to a syndicate of South German merchants, at a price which restored all his
capital. After moralizing on his experience he declared: “Inasmuch as I am
now weary and sick, and am anxious to pass the remaining time which God
vouchsafes me in quiet, I have firmly determined to have done with
commerce, whether it would bring me gain or loss.” “I have,” he says again,
46
“strengthened my head and I will have done with false commerce.”
This enterprise was plainly an attempt to exploit a natural monopoly,
and to do it by an operation which should embrace the whole world; it was
a purely money-making scheme, unrelieved by any social or industrial
advantage. It shows how erroneous it is to suppose that the merchants of the
fifteenth and sixteenth centuries were inferior in boldness to those of to-day,
or superior to them in disposition to sacrifice themselves for the public
good; it would be easy to accumulate any amount of evidence that they
were, on the contrary, entirely unscrupulous in the pursuit of gain, and that
they were bold beyond anything known to modern merchants. They might
well be so. This story shows what great risks, dangers, perplexities, and
disappointments they were subject to. The risk element was plainly
enormous, but the gains corresponded, of course, and hence we find some
of these men enormously rich; but it is plain that there was no routine to
help the man who had less natural ability. There was no regularity in any of
the contributory operations, such as shipping lines and post-office; there
were no regular and adequate banking facilities. If by “trust” we mean a
combination to exploit a monopoly, either natural or artificial, the men of
that period had made an art of that sort of undertaking, and had a skill in it
of which the moderns have no conception.
One cannot help admiring the courage and energy of this Roth. He had
everything to contend with; he was far in advance of his age. If he had lived
in our time he would have been a great captain of industry—we could have
given him something better to do than making a corner on pepper.
In our current social discussions there is a special kind of fallacy which
consists in quasi-historical assertions. For instance, it is said that the power
of capital is increasing and is greater than it ever has been. This is in form

an historical assertion, but those who make it never expect to be held to an
historical responsibility for it. They throw it out with a kind of risk, because
they are not very accurately informed as to the power of capital in former
times, and have not heard that it used to act as it does now. Capitalists never
had less irresponsible power than now. It is said that monopoly is growing
evil; that it never was so great. If people choose to pass laws to make
monopolies, they must, of course, take the consequences; but there never
was a time when the control of natural monopolies was so rational as now,
and there never was a time when the efforts of cliques to make artificial
monopolies could be so easily frustrated as now. It is said that trusts
embracing the whole world are a new and threatening danger, never heard
of before. It has seemed to me that, if we are to have history, it might be
well for once to see some facts which illustrate “the good old times” as they
really were. Of course nothing is thereby proved as to the good or ill of
trusts; but something is proved as to the fallacy of that class of quasi-
historical assertions which I have described.

SHALL AMERICANS OWN SHIPS?47

S INCE the war, public attention has been drawn more or less to the
marked decline in American shipping. It has been generally assumed
and conceded that this was a matter for regret, and some discussion has
arisen as to remedies—what to do, in fact, in order to bring it about that
Americans should own ships. In these discussions, there has generally been
a confusion apparent in regard to three things which ought to be very
carefully distinguished from each other: ship-building, the carrying trade,
and foreign commerce.

1. As to ship-building—Americans began to build ships, as an industry,
within fifteen years after the settlement at Massachusetts Bay. Before the
Revolution they competed successfully as ship-builders with the Dutch and
English, and they sold ships to be used by their rivals. Tonnage and
navigation laws played an important part in the question of separation
between the colonies and England, and the same laws took an important
place in the formation of the Federal Constitution. One generation was
required for the people of this country to get over the hard logical twist in
the notion that laws which were pernicious when laid by Great Britain were
beneficial when laid by ourselves. The vacillation which has marked the
history of our laws about tonnage and navigation is such that it does not
seem possible to trace the effects of legislation upon ship-building. In the
decade 1850–1860 a very great decline in the number of ships built,
especially for ocean traffic, began to be marked. Sails began to give way to
steam, but the building of steamships required great advantages of every
kind in the production of engines and other apparatus—that is, it required
the presence, in a highly developed state, of a number of important
auxiliary and coöperating industries. As iron was introduced into ship-
building, of course the ship-building industry became dependent upon
cheap supplies of iron as it had before been dependent on cheap supplies of
wood. No doubt these changes in the conditions of the industry itself have
been the chief cause of the decline in ship-building in this country, and

legislation has had only incidental effects. It is a plain fact of history that
the decline in ship-building began before the war and the high tariff. Of
course the effects produced by changes in the conditions of an industry are
inevitable; they are not to be avoided by any legislation. They are annoying
because they break up acquired habits and established routine, and they
involve loss in a change from one industry to another, but legislation can
never do anything but cause that loss to fall on some other set of people
instead of on those directly interested. Within the last few years it has
become certain that steel is to be the material of ocean vessels—a new
improvement which will not tend to bring the industry back to this country.
On the whole, therefore, the decline in ship-building of the last twenty-five
years seems to indicate that somebody else than ourselves must build the
world’s ships for the present. We have, by legislative devices, forced the
production of a few ocean steamers, but these cases prove nothing to the
contrary of our inference. If this nation has a hobby for owning some ships
built in this country, and is willing to pay enough for the gratification of that
hobby, no doubt it can secure the pleasure it seeks. A fisherman who has
caught nothing sometimes buys fish at a fancy price; he saves himself
mortification and gets a dinner, but the possession of the fish does not prove
that he has profitably employed his time or that he has had sport.
2. The carrying trade differs from ship-building as carting differs from
wagon-building. Carrying is the industry of men who own ships; their
interests are more or less hostile to those of the ship-builders. Ship owners
want to buy new ships at low prices; they want the number of competing
ships kept small; they want freights high. In all these points the interest of
the ship-builder is the opposite: the ship owner is indifferent where he gets
his ships; he only wants them cheap and good. There is no sentiment in the
matter any more than there is in the purchase of wagons by an express
company, or carriages by a livery-stable keeper.
3. Foreign commerce is still another thing. It consists in the exchange
of the products of one country for those of another. The merchant wants
plenty of ships to carry all the goods at the lowest possible freights, but it is
of no importance to him where the ships were built, or who owns and sails
them.
A statement and definition of these three industries suffices to show
what confusion must arise in any discussion in which they are not properly

distinguished. It is plain that there are three different questions: (1) Can the
farmer build a vehicle? (2) Can he get his crop carried to market? (3) Can
he sell his crop? It is evident that a country which needs a protective tariff
on iron and steel must give up all hopes of building ships for ocean traffic.
For the country which, by the hypothesis, needs a protective tariff on iron
and steel cannot produce those articles as cheaply as some other country. Its
ships, however, must compete upon the ocean with those of the country
which has cheap iron and steel. The former embody a larger capital than the
latter, and they must be driven from the ocean. If, then, subsidies are given
to protect the carrying trade, when prosecuted in ships built of protected
iron, the loss is transferred from the ship owners to the people who pay
taxes on shore. These taxes, however, add to the cost of production of all
things produced in the country, and thereby lessen the power of the country
to compete in foreign commerce. This lessens the amount of goods to be
carried both out and in, lowers freights, throws ships out of use, and checks
the building of ships; and the whole series of legislative aids and
encouragements must be begun over again, with a repetition and
intensification of the same results. As long as the system lasts it works
down, and the statistics show, very naturally, that fewer and fewer ships are
built in the country, and that less and less of the carrying trade is carried on
under the national flag. In view of the three different and sometimes
adverse interests which are connected by their relation to the shipping
question, it is not strange that when the representatives of those interests
meet to try to consider that question, there should simply be a scramble
between them to see which can capture the convention. The last convention
of this sort was captured by the owners of a lot of unsalable and unsailable
old hulks, who had hit upon the brilliant idea of getting the nation to pay
them an annual bounty for the use of their antiquated and dilapidated
property. Strange to say, in a country which is charged with being too
practical and hardheaded, this proposition received respectful attention and
consideration. It is also strange that our people should believe that taxing
farmers to force the production of iron, taxing farmers again to force the
production of ships out of protected iron, and taxing farmers again to pay
subsidies to enable protected ships to do business, is a way to make this
country rich.
So soon as the three different industries, or departments of business,
which I have described are distinguished from each other, it is apparent that

the fundamental one of the three is foreign commerce. If we have no
commerce we need no carrying, and it would be absurd to build ships; if we
have foreign commerce its magnitude determines the amount of demand
there is for freight and for ships. The circle of taxation which I have
mentioned, and which is obviously only a kind of circuit, described from
and upon the farmer as a center and fulcrum to bear the weight of the
whole, is necessarily and constantly vicious, because it presses down on the
foreign commerce, which is the proper source of support for carrying and
ship-building. On the other hand, the emancipation of foreign commerce
from all trammels of every sort is the only means of increasing the natural,
normal, and spontaneous support of carrying and ship-building, assuming
that the carrying trade and ship-building are ends in themselves.
It is, however, no object at all for a country to have either ship-building
industry, or carrying trade, or foreign commerce; herein lies the
fundamental fallacy of all the popular and Congressional discussions about
ships and commerce. It is only important that the whole population should
be engaged in those industries which will pay the best under the
circumstances of the country. For the sake of exposing the true doctrine
about the matter, we may suppose (what is not conceivable as a possible
fact) that a country might not find greater profit in the exportation of any
part of any of its products than in the home use of the same. If this could be
true, and if it were realized, the proof of it would be that no foreign trade
would exist. There would be no ground for regret since the people would be
satisfied and better off than as if they had a foreign trade. Carrying trade
and ship-building would not exist.
If a country had a foreign trade of any magnitude whatever, it would
not be any object for that country to do its own carrying. The figures which
show the amount paid by the people of the United States to non-American
ship owners for freight, and the figures which show the small percentage of
our foreign commerce which is carried under the American flag, in
themselves prove nothing at all. The only question which is of importance
is this: are the people of the United States better employed now than they
would be if engaged in owning and sailing ships? If they were under no
restraints or interferences, that question also would answer itself. If
Americans owned no ships and sailed no ships, but hired the people of other
countries to do their ocean transportation for them, it would simply prove

that Americans had some better employment for their capital and labor.
They would get their transportation accomplished as cheaply as possible.
That is all they care for, and it would be as foolish for any nation to insist
on doing its own ocean transportation, devoting to this use capital and labor
which might be otherwise more profitably employed, as it would be for a
merchant to insist on doing his own carting, when some person engaged in
carting offered him a contract on more advantageous terms than those on
which he could do the work.
Furthermore, the people of a country which had little foreign commerce
might find it very advantageous to prosecute the carrying trade. In history,
the great trading nations have been those which had a small or poor territory
at home: the Dutch were the great carriers of the seventeenth and eighteenth
centuries, when the foreign commerce of their own territory was
insignificant; the New Englanders of the last century and of the first quarter
of this century became the carriers of commodities to and fro between all
parts of the world, especially between our middle and southern states and
the rest of the world. They took to the sea because their land did not furnish
them with products which could remunerate their capital and labor so well
as the carrying trade did. They won a high reputation for the merchant
service, which was in their hands, and they earned fortunes by energy,
enterprise, promptitude, and fidelity. The carrying trade is an industry like
any other; it is neither more nor less desirable in itself than any other. In any
natural and rational state of things it would be absurd to be writing essays
about it. If any one thought he could make more profit in that business than
in some other he would set about it. When the census was taken he would
be found busy at that business, would be so reported, and that would be the
end of the matter as a phenomenon of public interest.
If a nation had foreign commerce, and some of its citizens found the
carrying trade an advantageous employment for their labor and capital as
compared with other possible industries in the country, it would not follow
that some other citizens of that country ought to engage in ship-building. It
is no object to build ships, but only to get such ships as are wanted, in the
most advantageous manner. If a man should refuse to carry on a carting
business unless he could make his own wagons, it would be such a
reflection on his good sense that his business credit would be very low. If
some Americans could buy and sail ships so as to make profits, what is the

sense of saying that they shall not do it because some other Americans
cannot build ships at a profit? Only one answer to this question has ever
been offered by anybody, and that is the prediction that, some day, if we go
without ships long enough, we shall, by the mere process of going without,
begin to get some—a prediction for which the prophets give no guarantee,
in addition to their personal authority, save the fact that we have fewer ships
and worse ones every year.
I have said above that, if there were no restraints or interferences, we
should simply notice whether any Americans took to the carrying trade or
not, and should thence infer that they might or might not be better
employed in some other industry. It is impossible, now, to say whether, if all
restrictions were removed, the carrying trade or ship-building would be a
profitable industry in the United States or not. Any opinion given by
anybody on that point is purely speculative. The present state of the iron
and steel industries, and of the manufacture of engines and machinery, is so
artificial that no one can judge what would be the possibilities of those
industries under an entirely different state of things. It is, however, just
because the present state of things prevents a free trial that it is indefensible;
we are working in the dark and on speculation all the time and have none of
the natural and proper tests and guarantees for what we are doing. We are
controlled by the predictions of prophets, the notions of dogmatizers, the
crude errors of superficial students of history, the wrong-headed inferences
of shallow observers, and the selfish machinations of interested persons. We
can distinguish many forces which are at work on our ship-building and on
our carrying trade, but none of them are genuine or respectable. We are
submitting to restraints and losses, and we have no guarantee whatever that
we shall ever win any compensation. The teaching of economic science is
distinctly that we never shall win any. We are expending capital without any
measurement or adjustment of the quid pro quo; we are spending without
calculation, and receiving something or nothing—we do not know which.
The wrong of all this is not in the assumption that we have not certain
industries which we would have (for we cannot tell whether that is so or
not), but the wrong is in the arbitrary interference which prevents us from
having them, if any man wants to put his capital into them, and which
prevents us from obtaining the proper facts on which to base a judgment
about the state and relations of industries in the country.

Whenever the question of ships is raised, the clamor for subsidies and
bounties is renewed, and we are told again that England has established her
commerce by subsidies. It would be well if we could have an
understanding, once for all, whether England’s example is a good argument
or not. As she has tried, at some time or other, nearly every conceivable
economic folly, and has also made experiment of some sound economic
principles, all disputants find in her history facts to suit them, and it needs
only a certain easily acquired skill in misunderstanding things to fashion
any required argument from the economic history of England. Some of our
writers and speakers seem to be under a fascination which impels them to
accept as authoritative examples the follies of English history, and to reject
its sound lessons. In the present case, however, the matter stands somewhat
differently. England is a great manufacturing area; it imports food and raw
materials, and exports finished products; it has, therefore, a general and
public interest in maintaining communication with all parts of the world.
The analogy in our case is furnished by the subsidized railroads in our new
states, or, perhaps even better, by the mail routes which we sustain all over
our territory, from general considerations of public advantage, although
many such routes do not pay at all. Subsidies to ships for the mere sake of
having ships, or ocean traffic, when there is no business occasion for the
subsidized lines, would have no analogy with English subsidies.
If then the question is put: Shall Americans own ships? I do not see
how any one can avoid the simple answer: Yes, if they want them.
Universally, if an American wants anything, he ought to have it if he can get
it, and if he hurts no one else by getting it. To enter on the question whether
he is going to make it or buy it, and whether he is going to buy it of A or of
B, is an impertinence. We boast a great deal of having a free country; our
orators shout themselves hoarse about liberty and freedom. Stop one of
them, however, and ask him if he means free trade and free ships, and he
will demur. No; not that; that will not do. He is in favor of freedom for
himself and his friends in those respects in which they want liberty against
other people, but he is not in favor of freedom for other people against
restraints which are advantageous to him and his political allies. He is in
favor of freedom for those who are being oppressed—by somebody else;
not for those who are being oppressed by himself. I heard it asserted not
long ago that we have no monopolies in this country, because it is a free
country. It is not a free country, because there are more artificial monopolies

in it than in any other country in the world. The popular notion that it is free
rises from the fact that there are fewer natural monopolies in it than in any
other great civilized country. It is necessary, however, to go to Turkey or
Russia to find instances of legislative and administrative abuses to equal the
existing laws and regulations of the United States about ships, the carrying
trade, and foreign commerce. These laws have been brought to public
attention again and again, but apparently with little effect in awakening
popular attention, while the newspapers carry all over the country details
about abuses in Ireland, Russia, and South Africa. We should stop bragging
about a free country and about the enlightened power of the people in a
democratic republic to correct abuses, while laws remain which treat the
buying, importing, owning, and sailing of ships as pernicious actions, or, at
least, as doubtful and suspicious ones. I have no conception of a free man or
a free country which can be satisfied if a citizen of that country may not
own a ship, if he wants one, getting it in any legitimate manner in which he
might acquire other property; or may not sail one, if he finds that a
profitable industry suited to his taste and ability; or may not exchange the
products of his labor with that person, whoever he may be, who offers the
most advantageous terms.

POLITICS IN AMERICA, 1776–187648

W HEN the Continental Congress met in 1774, few persons in the
colonies perceived that the ties to the mother country were about to
be severed, and few, if any, were republicans in theory, or contemplated a
“revolution” in the political system. The desire for independence was
developed during 1775, and the question as to the form of government to be
adopted came up by consequence. It presented no real difficulty. The political
organization of some of the colonies was such already that there were no signs
of dependence except the arms and flag, the form of writs, and a responsibility
to the Lords of Trade which sat very lightly upon them. Necessary changes
being made in these respects, those colonies stood as complete republics. The
others conformed to this model.

In bringing about these changes great interest was developed in political
speculations, an interest which found its first direction from Paine’s “Common
Sense,” and was sustained by diligent reading of Burgh’s “Political
Disquisitions,” and Macaulay’s “History of England.” The same speculations
continued to be favorite subjects of discussion for twenty-five years
afterwards. The journals of the time were largely made up of long essays by
writers with fanciful noms de plume, who discussed no simple matters of
detail, but the fundamental principles of politics and government. The method
of treatment was not historical, unless we must except crude and erroneous
generalizations on classical history, and it seemed to be believed that the
colonial history of this country was especially unfit to furnish guidance for the
subsequent period; but the disquisitions in question pursued an a priori
method, starting from the broadest and most abstract assumptions. The same
method has marked American political philosophy, so far as there has been any
such thing, ever since. It is very much easier than the method which requires a
laborious study of history.
The natural effect of the war, but still more of the doctrines in regard to
liberty taught by Paine, and of the deplorable policy of local terrorism pursued
by the Committees of Safety against Tories and Refugees, was to produce and
bring into prominence a class of active, shallow men, who felt their new

powers and privileges but not the responsibility which ought to go with these.
The old colonial bureaucracy, which had enjoyed all the social preëminence
that colonial life permitted, was gone. Office was open to many who, before
the war, had little chance of attaining it. They sought it eagerly, expecting to
enjoy the social advantages they had formerly envied. In the northern states a
class of eager office-seekers arose who gained a great influence, saw their
arena in the states especially, and jealously opposed the power of the
Confederation. This class made hatred to England almost a religion, and
testified to their political virtues by persecuting Tories and Refugees. They
found popular grievances also ready to their hand as a means of advancement.
The mass of the people had been impoverished by the war. The attempts at
commercial war had reacted upon the nation with great severity. The paper
issues of the Congress and the states had wrought their work to derange values,
violate contracts, inflate credit, and destroy confidence. On the return of peace
the industries which had been sustained only by war ceased to be profitable;
the reduction of prices spread general ruin and left thousands indebted and
impoverished. The consequence was discontent and disorder. All this was
heightened by the contrast with another class which had been enriched by
privateering, contracts, and “financiering.” The soldier who returned in rags,
bringing only a few bits of scrip worth fifteen or twenty cents on the dollar,
found his family in want, and some of his neighbors, who had borne few of the
sacrifices of the war, enriched by it and now enjoying its fruits. It seemed to
this whole class that they had not yet got liberty, or that they did not know
what it was. They did not look for it to a closer union.
This party, for it soon became a party, found an alliance in a quarter where
it would hardly have been expected, in the slave-owning planters of the South
—an alliance which has been of immense importance in our political history.
The planters, at the outbreak of the war, had been heavily indebted to English
capitalists and merchants. They now feared that they would be compelled to
pay their debts, and they saw in the treaty-making power of the general
government the source from which this compulsion would come. They
therefore opposed any union which would strengthen and give vigor to that
power. To this party were added those who had adopted, on theoretical and
philosophical grounds, the enthusiasm for liberty which was then prevalent in
both hemispheres. It should be added to the characteristics of this party that it
looked with indifference upon foreign commerce, cared little for foreign
opinion, would have been glad to be isolated from the Old World, and had very
crude opinions as to the status and relations of European nations.

This party naturally went on to confound liberty with equality, and
political virtue with tenacity of rights. It furthermore confounded power with
privilege, and thought that it must allow no civil power or authority to exist if
it meant really to exterminate aristocratic privilege. It was not so clear in its
conception of political duties, and certainly failed to see that the best citizen is
not the one who is most tenacious of his political rights, but the one who is
most faithful to his political duties; that envy and jealousy are not political
virtues; and that equality can be attained only by cutting off every social
advance and setting up as the standard, not what is highest, but what is a low
average.
An opposing party gradually formed itself of men of wider information
and superior training. These men understood the institutions of Great Britain
and their contrast to those of any other country in Europe. They understood
just what the war had done for the Colonies. They did not consider that it had
altered the internal institutions inherited from the mother country, or set the
Colonies adrift upon a sea of political speculation to try to find a political
utopia. Some of them joined for a time in the prevalent opinion that the
Americans were better and purer than the rest of mankind, but experience soon
taught them their error. Tradition and experience still had weight with them;
and in making innovations they sought development rather than destruction
and reconstruction. They were conservative by property, education, and
character.
To this party it was evident that the colonies had lost much by falling out
of the place in the family of nations which they had filled as part of the British
Empire, and they believed that a similar place must now be won on an
independent footing. They understood the necessity of well-regulated foreign
relations, of foreign commerce, and of public credit. Their general effort was,
therefore, to secure order and peace in the internal relations of the country by
establishing liberty indeed, but liberty under law; and to secure respectability
and respect abroad by fidelity to treaties and pecuniary engagements, by a
reputation for commercial integrity, and by a development of the arts of peace.
The first requisite to all this was a more perfect union.
The two parties, therefore, formed about the issue of a revision of the
Articles of Confederation, but it was not until the absolute necessity of the
objects aimed at by the Federalists—objects which are in their nature less
directly obvious and tangible—had been demonstrated by experience, that this
revision was brought about. The Union was not the result of a free and

spontaneous effort, but was “extorted from the grinding necessity of a reluctant
people.” A political party which resists a proposed movement by predicting
calamitous results to flow from it must abide by the verdict of history. Tried by
this test, the anti-Federalists are convicted of resisting the most salutary action
in our political history. The victory was won, not by writing critical essays
about the movement and the relations of parties, but by the direct and energetic
activity of those men of that generation who had enjoyed the greatest
advantages of education and culture.
Three evils were inherited under the new Constitution from the old
system: slavery (which the framers of the Constitution tolerated, thinking it on
the decline), paper money (which they thought they had eradicated), and the
mercantile theories of political economy. These three evils, in their single or
combined development, have given character to the whole subsequent political
history of the country. One of them has been eliminated by a civil war. The
other two confront us as the great political issues of to-day.
The framers of the Constitution, without having any precise definition of a
republic in mind, knew well that it differed from a democracy. No one of them
was a democrat. They were, at the time of framing the Constitution, under an
especial dread of democracy, on account of the rebellion in Massachusetts.
They meant to make a Constitution in order to establish organized or
articulated liberty, giving guarantees for it which should protect it from
popular tyranny as much as from personal despotism. Indeed, they recognized
the former as a great danger, the latter as a delusion. They therefore established
a constitutional republic. The essential feature of such a system of government
(for it is a system of government, and not a political theory) is that political
power be conferred under a temporary and defeasible tenure. That it be
conferred by popular election is not essential, although it is convenient in
many cases. This method was the one naturally indicated by the circumstances
of the United States. The system which was established did not pretend to give
direct effect to public opinion according to its fluctuations. It rather interposed
delays and checks in order to secure deliberation, and it aimed to give
expression to public opinion only after it was matured. It sought to eliminate
prejudice and passion by prescribing beforehand methods which seemed just in
themselves, independently of conflicting interests, in order that, when a case
arose, no advantage of procedure might be offered to either party; and it aimed
to subject action to organs whose operation should be as impersonal as it is
possible for the operation of political organs to be.

Democracy, on the other hand, has for its essential feature equality, and it
confers power on a numerical majority of equal political units. It is not a
system of government for a state with any but the narrowest limits. On a wider
field it is a theory as to the depositary of sovereignty. It seizes upon majority
rule, which is only a practical expedient for getting a decision where
something must be done and a unanimous judgment as to what ought to be
done is impossible, and it makes this majority the depositary of sovereignty,
under the name of the sovereignty of the people. This sovereign, however, is as
likely as any despot to aggrandize itself, and to promulgate the unformulated
doctrines of the divine right of the sovereign majority to rule, the duty of
passive obedience in the minority, and that the majority can do no wrong.
Opposition to the Federal Constitution died out in a year or two, and no
one could be found who would confess that he had resisted its adoption.
Parties divided on questions of detail and of interpretation, and the points on
which they differed were those by which the Constitution imposed delays and
restraints upon the popular will. The administrations of Washington and
Adams threw continually increasing weight in favor of constitutional
guarantees, as the history of the French Revolution seemed to the Federalists
to furnish more and more convincing proofs of the dangers of unbridled
democracy. The opposition saw nothing in that history save the extravagant
ebullitions of a people new to freedom—saw rather examples to be imitated
than dangers to be shunned. Sympathy and gratitude came in to exercise a
weighty influence on political issues. The personal executive and the judiciary
were the chief subjects of dislike, and General Washington himself finally
incurred abuse more wanton and severe than any President since, except the
elder Adams, has endured, because the fact was recognized that Washington’s
personality was the strongest bulwark which the system possessed at the
outset.
Democracy, however, was, and still is, so deeply rooted in the physical
and economic circumstances of the United States, that the constitutional
barriers set up against it have proved feeble and vain. Fears of monarchy have
now almost ceased or are ridiculed. Monarchist and aristocrat are now used
only as epithets to put down some over-bold critic of our political system; but
in the early days of the Republic the mass of the people believed that the
supporters of the first two administrations desired aristocracy and monarchy. In
a new country, however, with unlimited land, the substantial equality of the
people in property, culture, and social position is inevitable. Political equality
follows naturally. Democracy is given in the circumstances of the case. The

yeoman farmer is the prevailing type of the population. It is only when the
pressure of population and the development of a more complex social
organization produce actual inequality in the circumstances of individuals, that
a political aristocracy can follow and grow upon a social aristocracy. The
United States are far from having reached any such state as yet. These facts
were felt, if not distinctly analyzed and perceived, even by those who might on
theory have preferred monarchical institutions; and, as Washington said, there
were not ten men in the country who wanted a monarchy.
The Federalists repaid their opponents with a no less exaggerated fear of
their principles and intentions, regarding them as Jacobins and sans culottes,
who desired to destroy whatever was good and to produce bloodshed and
anarchy. Party spirit ran to heights seldom reached since. Partisan abuse
outstripped anything since. It was an additional misfortune that the questions at
issue were delicate questions of foreign policy and international law. It is a
great evil in a republic that parties should divide by sympathy with two foreign
nations, and it is the greatest evil possible that they should not believe in each
other’s loyalty to the existing constitution.
The deeper movement which was stirring to affect the general attitude or
standpoint from which the Constitution was viewed (a matter, of course, of the
first importance under a written constitution), and which was changing the
constitutional republic into a democratic republic, did not escape the
observation of the most sagacious men of the earliest days. Fisher Ames wrote
to Wolcott in 1800: “The fact really is, that over and above the difficulties of
sustaining a free government, and the freer the more difficult, there is a want
of accordance between our system and the state of our public opinion. The
government is republican; opinion is essentially democratic. Either events will
raise public opinion high enough to support our government, or public opinion
will pull down the government to its own level.” The fact was that the
government could not, under the system, long remain above the level of public
opinion. The Federalists, assisted by the prestige of Washington’s name, held it
there for twelve years; but they probably never, on any of the party issues,
even with a restricted suffrage, had a majority of the voters. Dating the rise of
parties from the time of Jay’s Treaty, they had a majority of the House of
Representatives only under the excitement of French insult in 1798.
The leading men of 1787–1788, as has been said, worked industriously
and energetically for political objects. The first decade of the Republic had not
passed by, however, before men began to estimate the cost and sacrifices of

public life and the worry of abuse and misrepresentation, to compare this with
what they could accomplish in politics, and to abandon the contest. To the best
public men professions and other careers offered fame, fortune, honorable and
gratifying success. In public life they struggled against, and were defeated by,
noisy, active men who could not have competed with them in any other
profession. Their best efforts were misunderstood and misrepresented. They
had no reward but the consciousness of fulfilling a high public duty.
Furthermore they lacked, as a class, the tact and sagacity which the system
indispensably requires. The leaders of the Federal party committed a political
blunder of the first magnitude in quarrelling with John Adams, whatever may
have been his faults. They thereby separated themselves from the mass of their
own party, and at a time when parties were so evenly balanced that they
required harmony for any chance of success; and they put themselves in the
position of a junto or cabal, trying to dictate to the party without guiding its
reason. Those of them who had withdrawn from, or had been thrown out of
political life by the causes above mentioned were most active in this work of
disorganization. They had abandoned that sort of task which they had engaged
in at the outset, and which, difficult as it is, is permanently incumbent on the
cultured classes of the country—to make the culture of the nation
homogeneous and uniform by imparting and receiving, by living in and of and
for the nation, contributing to its thought and life their best stores, whatever
they are. A breach was opened there which has gone on widening ever since,
and which has been as harmful to our culture as to our politics. On the one side
it has been left to anti-culture to control all which is indigenous and
“American”; and on the other hand American culture has been like a plant in a
thin soil, given over to a sickly dilettantism and the slavish imitation of foreign
models, ill understood, copied for matters of form, and, as often as not,
imitated for their worst defects.
An actual withdrawal of the ablest men from political life, such as we
have come to deplore, began, then, at this early day. Many others were thrown
out for too great honesty and truth in running counter to the popular notions of
the day. John Adams incurred great unpopularity for having said that the
English Constitution was one of the grandest achievements of the human race
—an assertion which Callender disputed, with great popular success, by
dilating upon the corruption of the English administration under George III,
but an assertion which, in the sense in which it was made, no well-informed
man would question. Sedgwick laid down the principle that the government
might claim the last man as a soldier and the last dollar in taxation—an

abstract proposition which is unquestionable, but which Callender disputed,
once more with great popular success, by arguing as if it were a proposition to
take the last man and the last dollar. Dexter lost a reëlection by opposing a
clause of the naturalization law, that a foreign nobleman should renounce his
titles on being naturalized. It was opposed as idle and frivolous, and favored as
if every foreign nobleman would otherwise become by naturalization a
member of Congress. Hamilton and Knox abandoned the public service on
account of the meagerness of their salaries. Pickering, who left office really
insolvent, and with only a few hundred dollars in cash, was pursued by charges
of corruption on the ground of unclosed accounts. Wolcott, at the end of long
and faithful service, was charged with the responsibility for a fire which broke
out in his office, as if he had sought to destroy the records of corrupt
proceedings.
It is no wonder that these men abandoned public life, and that their
examples deterred others, unless they were men born to it, who could not live
out of the public arena; but it is true now, as it was then, that men of true
culture, high character, and correct training can abandon public political effort
only by the surrender of some of the best interests of themselves and their
posterity. The pursuit of wealth, which is the natural alternative, has always
absorbed far too much of the ambition of the nation, and under such
circumstances there could be no other result than that a wealthy class should
arise, to whom wealth offers no honorable social power, in whom it awakens
no intellectual or political ambition, to whom it brings no sense of
responsibility, but for whom it means simply the ability to buy what they want,
men or measures, and to enjoy sensual luxury. A class of men is produced
which mocks at the accepted notions while it uses them, and scorns the rest of
us with a scorn which is so insulting only because it is so just. It is based on
the fact that we will not undergo the sacrifices necessary to self-defense. This
pursuit of wealth was almost the only pursuit attractive to able men who turned
their backs on the public service in the early days. In later years professional
careers and scientific and literary pursuits have disputed to a great and greater
extent the dominion of wealth over the energies of the nation; but politics have
not yet won back their due attraction for able and ambitious men.
The Federalists also held a defective political philosophy. They did not see
that the strength of a constitutional republic such as they desired must be in the
intelligent approval and confidence of the citizens. Adams and Hamilton
agreed in supposing that some artificial bond must be constructed to give
strength to the system. Hamilton looked for it in the interest of the wealthy

class, which he wanted to bind up in the system—a theory which would have
changed it into a plutocracy. Adams sought the bond in ambition for social
eminence, and did not see that, where such eminence sprang only from wealth
or official rank, the very principle of human nature which he invoked would,
under the form of envy, counteract his effort.
The presidential election of 1801 having been thrown into the House of
Representatives, the Federalists added to their former blunder another far more
grave. Abandoning their claims to principle and character, they took to
political intrigue and bargaining, in the attempt to elect Burr over Jefferson.
Their exit from power might otherwise have been honorable, and they might,
as an opposition party, have made a stand for inflexible principle and political
integrity; but it was hard for them after this to talk of those things, especially
as Burr went on to develop the character which Hamilton had warned them
that he possessed. They fell into the position of “independent voters,” throwing
their aid now with one and now with the other faction of the majority; but
history does not show that they ever forced either one or the other to “adopt
good measures,” for the obvious reason that the majority possessed the
initiative. The purchase of Louisiana seemed to them to transfer the power of
the Union to the southern and frontier states, the seat of the political theories
which they regarded as reckless and lawless. They feared that the power of the
Union would be used to sacrifice commerce and to put in operation wild
theories by which the interests of the northern and eastern states would be
imperiled, and the inherited institutions of constitutional liberty, which they
valued as their best possessions, would be overthrown. The Embargo and Non-
intercourse Acts seemed only the fulfillment of these fears. The recourse of a
minority has always been to invoke the Constitution and to insist upon the
unconstitutionality of what they could not resist by votes, each party in turn
thereby bearing witness to the truth that the Constitution is the real safeguard
of rights and liberty. In the last resort also the minority, if it has been local, and
has seen the majority threatening to use the tremendous power of the
Confederation to make the interests of the minority subservient to the interests
of the rest, has felt its loyalty to the Union decline. How far the Federalists
went in this direction it is difficult to say, but they certainly went farther than
they were afterwards willing to confess or remember. They gradually faded out
of view as a political power after the second war and in the twenties
“Federalist” became a term of reproach.
The opposite party, called by themselves Republicans after 1792, took
definite form in opposition to Washington’s administration on the question of

ratifying Jay’s Treaty. They were first called Democrats in 1798, the name
being opprobrious. They adopted it, however, first in connection with the
former name; and the joint appellation, Democratic Republicans, or either
separately, was used indifferently down to the middle of this century. Jefferson
was the leader of this party. He did not write any political disquisitions or aid
in the attempts which have been mentioned to form public opinion; but his
expressions in letters and fugitive writings struck in with the tide of
Democracy so aptly and exactly that he seemed to have put into people’s
mouths just the expression for the vague notions which they had not yet
themselves been able to get into words. Jefferson, in fact, was no thinker. He
was a good specimen of the a priori political philosopher. He did not reason or
deduce; he dogmatized on the widest and most rash assumptions, which were
laid down as self-evident truths. He did not borrow from the contemporaneous
French schools, for his democracy is of a different type; but both sprang from
the same germs and pursued the same methods of speculation. Freneau, Bache,
Callender, and Duane wrought continually upon public opinion, and Jefferson
entered into the leadership of the party they created, by virtue of a certain skill
in giving watchwords and dogmatic expressions for the ideas which they
disseminated.
The dogmas which Jefferson taught, or of which he was the exponent,
were not without truth. Their fallacy consisted in embracing much falsehood,
and also in excluding the vast amount of truth which lay outside of them. For
instance, the dogma that the voice of the people is the voice of God is not
without truth, if it means that the enlightened and mature judgment of mankind
is the highest verdict on earth as to what is true or wise. This is the truth which
is sought to be expressed in the ecclesiastical dogma of Catholicity, but the
political and the ecclesiastical dogma have the same limitation. This verdict of
mankind cannot be obtained in any formal and concrete expression, and is
absolutely unattainable on grounds of speculation antecedent to experiment. It
is in history only; or, rather, it constitutes history. In Jefferson’s doctrine and
practice it resolved itself simply into this practical rule: the test of wisdom for
the statesman and of truth for the philosopher is popularity. When the
statesman has a difficult practical question before him as to what to do,
according to this theory he puts forward what seems to him best as a
proposition. If, then, the return wave of popular sympathy comes back to him
with promptitude and with the intensity to which he is accustomed, he infers
that he has proposed wisely, and goes forward. If there is delay or uncertainty
in the response, he draws back. The actual operation of this theory is that, if

the statesman in question is the idol of a popular majority, the approving
response is quick and sure, because the proposition comes from him, not
because the tribunal of appeal has considered or can consider the question. If
an unpopular man endeavors to use the same test, the answer is doubtful,
feeble, hesitating, or impatient, because those to whom he appeals have not the
necessary preparation, or time, or interest to judge in the matter. In general, the
theory is popular, because it flatters men that they can decide anything
offhand, by the light of nature, or by some prompt application of assumptions
as to “natural rights,” or by applying the test of a popular dogma or prejudice.
It tramples study and thought and culture under foot and turns their boasts to
scorn. On the other hand, it makes statesmanship impossible. Study and
thought go for nothing. There can be no authority derived from information or
science or training, and no leadership won by virtue of these. If the decision is
to come from a popular vote, why not abandon useless trouble and trust to that
alone?
Such has been the outcome in history, as will appear further on, of the
doctrines which are associated with the name of Jefferson, although they really
had their origin in the great social tendencies of the time and in the
circumstances of the American people. The love of philosophizing about
government was a feature in the life of the second half of the eighteenth
century. The method of philosophizing on assumptions was the only one
employed. The Americans, with meager experience and high purposes, readily
took refuge in abstractions. The habit of pursuing two or three occupations at
once destroyed respect for special or technical knowledge. There seemed to be
nothing unreasonable in referring a question of jurisprudence or international
law to merchants, farmers, and mechanics, for them to give an opinion on it as
a mere incident in their regular occupations. Jefferson himself could sit down
and develop out of his own consciousness a plan for fortifications and a navy,
for a nation in imminent danger of war, with no more misgivings, apparently,
than if he was planning an alteration on his estate.
“The further democracy was pushed, first in theory, then in practice, the
more completely was the belief in the equality of all [in rights and privileges]
converted, in the minds of the masses, into the belief in the equal ability of all
to decide political questions of every kind. The principle of mere numbers
gradually supplanted the principle of reflection and study.” This tendency
reaches its climax in the popular doctrines that every man has a right to his
opinion and that one man’s opinion is as good as another’s. We have abundant
illustration of the might which it gives to “the phrase.”

It has been well said that “men can reason only from what they know”—a
doctrine which would reduce the amount of reasoning to be done by anybody
to a very little. The common practice is to reason from what we do not know,
which makes every man a philosopher.
Jefferson’s election was the first triumph of the tendency towards
democracy—a triumph which has never yet been reversed. The old
conservatism of the former administrations died out, and it is important to
observe that, from this time on, we have in conflict not the same two parties as
before, but only factions or subdivisions of the one party which, under
Washington and Adams, was in opposition to the administration.
The event did not justify the fears which were entertained before the
election. Jefferson did not surrender any of the power of the executive. He
aggrandized it as neither of his predecessors would have dared to do. He did
not surrender the central power in favor of states’ rights; and his foreign policy,
governed by sympathy to France and hatred to England, was only too sharp
and spirited. It seldom happens to an opposition party, coming into power, to
have the same question proposed to it as to its predecessor, and to put its own
policy to trial. This happened to Jefferson. Jay’s Treaty was hesitatingly signed
by Washington, and it gave the country ten years of peace and neutrality.
Pinckney and Monroe’s Treaty was rejected by Jefferson, and in six years the
country was engaged in a fruitless war.
Madison’s administration revived many of the social usages which
Jefferson had ostentatiously set aside, in consistency with the general spirit of
preference, on the ground of republican simplicity, for what is common over
what is elegant and refined. The natural tendency of the party in power to think
that what is is right, and that while they are comfortable other people ought to
be so, was apparent here. It went on so far during Madison’s first term, that the
leaders thought it necessary to break the monotony and to secure again, in
some way, the readiness and activity of political life which had prevailed under
Jefferson. They forced Madison into the war with England—a war which
brought disturbance into the finances and spread distress amongst the people,
which won some glory at sea only by vindicating the old Federalist policy in
regard to a navy, but which was marked by disaster on land until the battle of
New Orleans. At the return of peace in Europe, England was left free to deal
with the United States, and a peace was hastily made in which the question of
impressment, the only question at issue, was left just where it had been at the
beginning.

There ensued in our internal politics an “era of good feeling.” The old
parties no longer had any reason to exist. Some of the Federal doctrines had
been adopted. The navy was secure in its popularity. The Federal financial
system had been adopted by the party in power. They had contracted a debt,
laid direct taxes, and enlisted armies. When confronted by problems of war
and debt, they had found no better way to deal with them than the ways which
had been elaborated by the older nations, and which they had blamed the
Federalists for adopting. The questions of neutrality had disappeared with the
return of peace in Europe. The fears of Jacobinism on the one hand and of
monarchy on the other were recognized as ridiculous. If, however, any one is
disposed to exaggerate the evils of party, he ought to study the history of the
era of good feeling. Political issues were gone, but personal issues took their
place. Personal factions sprang up around each of the prominent men who
might aspire to the Presidency, and, in their struggles to advance their favorites
and destroy their rivals, they introduced into politics a shameful series of
calumnies and personal scandals. Every candidate had to defend himself from
aspersions, from attacks based upon his official or private life. The newspapers
were loaded down with controversies, letters, documents, and evidence on
these charges. The character of much of this matter is such as to awaken
disgust and ridicule. Mr. A. tells Mr. B that, when in Washington, he was
present at a dinner at the house of Mr. C at which Mr. D said that he came on
in the stage with Mr. E, who told him that Mr. F had seen a letter from Mr. G, a
supposed friend of one candidate, to Mr. H, the friend of another candidate,
making charges against the first candidate, which he (Mr. G) felt bound in
honor to make known. Mr. B publishes his information, and then follow long
letters from all the other gentlemen, with explanations, denials, corroborative
testimony, and so on, in endless reiteration and confusion. It was another
noteworthy feature of this period, that every public man seemed to stand ready
to publish a “vindication” at the slightest provocation, and that in these
vindications a confusion between character and reputation appears to be
universal.
These faction struggles culminated in the campaign of 1824. The first
mention of General Jackson for the Presidency seems to be in a letter from
Aaron Burr to his son-in-law, Alston of South Carolina, in 1815. An effort was
being made to form a party against the Virginia oligarchy. Those who were
engaged in it sought a candidate who might be strong enough to secure
success. Burr justified his reputation as a politician by pointing out the man,
but it was yet too soon. The standard of what a Federal officer ought to be was

yet too high. The Albany Argus said of the nomination, in 1824: “He [Jackson]
is respected as a gallant soldier, but he stands in the minds of the people of this
state at an immeasurable distance from the executive chair.” The name of
Jackson was used, however, in connection with the Presidency, by various
local conventions, during 1822 and 1823; and, although the nomination was
generally met with indifference or contempt in the North and East, it soon
became apparent that he was the most dangerous rival in the field. The
nominations had hitherto been made by caucuses of the members of Congress
of either party. Until Jefferson’s second nomination, these had been held under
a decent veil of secrecy. Since that time they had exerted more and more
complete and recognized control. Crawford was marked for the succession,
although he was under some discipline for having allowed his name to be used
in the caucus of 1816 against Monroe. The opposing candidates now
discovered that caucus nominations were evil, and joined forces in a
movement to put an end to them. This movement gained popular approval on
general principles. When the caucus was called, naturally only the friends of
Crawford attended—sixty-six out of two hundred and sixteen Republican
members. The nomination probably hurt him. It was proudly said that King
Caucus was now dethroned, but never was there a greater mistake. He had
only just come of age and escaped from tutelage. He was about to enter on his
inheritance.
General Jackson obtained the greatest number of votes in the electoral
college; and when the election came into the House, a claim was loudly put
forward which had been feebly heard in 1801, that the House ought simply to
carry out the “will of the people” by electing him. This claim distinctly raised
the issue which has been described, of democracy against the Constitution.
Does the Constitution give the election to the House in certain contingencies,
or does it simply charge it with the duty of changing a plurality vote into an
election? No one had a majority, but the House was asked really to give to a
major vote the authority which, even on the democratic theory, belongs to a
majority.
The election could not but result in the discontent of three candidates and
their adherents, but the Jackson party was by far the most discontented and
most clamorous. They proceeded to organize and labor for the next campaign.
They were shrewd, active men, who knew well the arena and the science of the
game. They offered to Adams’s administration a ruthless and relentless
opposition. There were no great party issues; indeed, the country was going
through a period of profound peace and prosperity which offered little material

for history and little occasion for active political combat. The administration
was simple and businesslike and conducted the affairs of the government with
that smoothness and quiet success which belong to the system in times of
peace and prosperity. Mr. Adams was urged to consolidate his party by using
the patronage of the executive, and the opinion has been expressed that, if he
had done so, he could have won his reëlection. He steadfastly refused to do
this.
The truth was that a new spirit had come over the country, and that the
candidacy of Jackson was the form in which it was seeking admission into the
Federal administration. Here we meet with one of the great difficulties in the
study of American political history. The forces which we find in action on the
Federal arena have their origin in the political struggles and personal jealousies
of local politicians, now in one state and now in another; and the doctrines
which are propounded at Washington, and come before us in their maturity,
have really grown up in the states. Rotation in office began to be practiced in
New York and Pennsylvania at the beginning of the century. The Federalists
then lost power in those states, and their political history consists of the
struggles of factions in the Republican party. Jefferson and Madison taught
Democracy in Virginia, but it never entered their heads that the “low-down
whites” were really to meddle in the formative stage of politics. They expected
that gentlemen planters would meet and agree upon a distribution of offices,
and that then the masses should have the privilege of electing the men they
proposed. The Clintons and Livingstones in New York were Democrats, but
they likewise understood that, in practice, they were to distribute offices
around their dinner-tables.
In the meantime men like Duane were writing essays for farmers and
mechanics, which were read from one end of the Union to the other, in which
they were preaching hostility to banks and the “money power,” hostility to the
judiciary and to the introduction of the common law of England, the election
of judicial officers, rotation in office, and all the dogmas which we generally
ascribe to a much later origin. These notions even found some practical
applications, as in the political impeachment of judges in Pennsylvania in 1804
—acts which fortunately did not become precedents. The new constitutions
which were adopted from time to time during the first quarter of this century
show the slow working of this leaven, together with the gradual adoption of
improvements far less questionable.

After 1810 began also the series of great inventions which have really
opened this continent to mankind. The steamboat was priceless to a country
which had grand rivers but scarcely any roads. In 1817 De Witt Clinton
persuaded New York to commence the Erie Canal, and before it was finished
scores of others were projected or begun. Politically and financially the system
of internal improvements has proved disastrous, but those enterprises helped
on the events which we are now pursuing, for they assisted in opening the
resources of the continent to the reach of those who had nothing. The great
mass of the population found themselves steadily gaining in property and
comfort. Their independence and self-reliance expanded. They developed new
traits of national character, and intensified some of the old ones. They had full
confidence in their own powers, feared no difficulties, made light of
experience, were ready to deal offhand with any problems, laughed at their
own mistakes, despised science and study, overestimated the practical man,
and overesteemed material good. To such a class the doctrines of democracy
seemed axiomatic, and they ascribed to democracy the benefits which accrued
to them as the first-comers in a new country. They generally believed that the
political system created their prosperity; and they never perceived that the very
bountifulness of the new country, the simplicity of life, and the general
looseness of the social organism, allowed their blunders to pass without the
evil results which would have followed in an older and denser community. The
same causes have produced similar results ever since.
Political machinery also underwent great development during the first
quarter of the century. In New York there was perhaps the greatest amount of
talent and skill employed in this work, and the first engine used was the
appointing power. The opposing parties were only personal and family
factions, but they rigorously used power, when they got it, to absorb honors
and places. That conception of office arose, under which it is regarded as a
favor conferred on the holder, not a position in which work is to be done for
the public service. Hence the office-holder sat down to enjoy, instead of going
to work to serve. If some zealous man who took the latter view got into office,
he soon found that he could count upon being blamed for all that went amiss,
but would get little recognition or reward while things went well, and that the
safest policy was to do nothing. The public was the worst paymaster and the
most exacting and unjust employer in the country, and it got the worst service.
The consequence was that the early political history of New York is little more
than a story of the combinations and quarrels of factions, annual elections, and
lists of changes in the office-holders. The Clintons and Livingstones united

against Burr, who was the center of an eager and active and ambitious coterie
of young men, who already threatened to apply democratic doctrines with a
consistency for which the aristocratic families were not prepared. Then they
began to struggle with each other until the Livingstones were broken up. Then
the “Martling men” and the Clintonians, the Madisonians and the Clintonians,
the “Bucktails” and the Clintonians, with various subdivisions, kept up the
conflict until the Constitution of 1821 altered the conditions of the fight, and
Regency and Anti-regency, or Regency and People’s Party, or Regency and
Workingmen’s Party became the party headings. The net result of all this for
national politics was the production of a class of finished “politicians,” skilled
in all the work of “organization” which in any wide democracy must be the
first consideration. Some of these gentlemen entered the national arena in
1824. The Regency was then supporting Crawford as the regular successor. On
its own terms it could have been won for Adams, but this arrangement was not
brought about. It did not require the astuteness of these men to see on
reflection, that Jackson was the coming man. He was in and of the rising
power. He represented a newer and more rigorous application of the
Jeffersonian dogmas. His manners, tastes, and education, had nothing cold or
aristocratic about them. He had never been trained to aim at anything high,
elegant, and refined, and had not been spoiled by contact with those who had
developed the art of life. He had, moreover, the great advantage of military
glory. He had bullied a judge, but he had won the battle of New Orleans. He
had hung a man against the verdict of a court-martial, but the man was a
British emissary. It was clear that a tide was rising which would carry him into
the Presidential chair, and it behooved other ambitious men to cling to his
skirts and be carried up with him.
It is in and around the tariff of 1828 that the conflict centers in which these
various forces were combined or neutralized to accomplish the result. The
student of our economic or political history cannot pay too close study to that
crisis. For the next fifteen years the financial and political questions are
inextricably interwoven.
The election of Jackson marks a new era in our political history. A new
order of men appeared in the Federal administration. The whole force of local
adherents of the new administration, who had worked for it and therefore had
claims upon it, streamed to Washington to get their reward. It seems that
Jackson was forced by the rapacity of this crowd into the “reformation” of the
government. The political customs which had grown up in New York and
Pennsylvania were transferred to Washington. Mr. Marcy, in a speech in the

Senate, January 24, 1832, on Van Buren’s nomination as minister to England,
boldly stated the doctrine that to the victors belong the spoils, avowing it as a
doctrine which did not seem to him to call for any delicacy on the part of
politicians. In fact, to men who had grown up as Mr. Marcy had, habit in this
respect must have made that doctrine seem natural and necessary to the
political system. The New York politicians had developed an entire code of
political morals for all branches and members of the political party machine.
They had studied the passions, prejudices, and whims of bodies of men. They
had built up an organization in which all the parts were adjusted to support and
help one another. The subordinate officers looked up to and sustained the party
leaders while carrying the party machinery into every nook and corner of the
state, and the party leaders in turn cared for and protected their subordinates.
Organization and discipline were insisted upon throughout the party as the first
political duty. There is scarcely a phenomenon more interesting to the social
philosopher than to observe, under a political system remarkable for its
looseness and lack of organization, the social bond returning and vindicating
itself in the form of party tyranny, and to observe under a political system
where loyalty and allegiance to the Commonwealth are only names, how
loyalty and allegiance to party are intensified. It is one of the forms under
which the constant peril of the system presents itself, namely, that a part may
organize to use the whole for narrow and selfish ends. The idea of the
commonwealth is lost and the public arena seems only a scrambling-ground
for selfish cliques. In the especial case of the New York factions, this was all
intensified by the fact that there were no dignified issues, no real questions of
public policy at stake, but only factions of the ins and the outs, struggling for
the spoils of office. Naturally enough, the contestants thought that to the
victors belong the spoils—otherwise the contest had no sense at all. In this
system, now, fidelity to a caucus was professed and enforced. Bolting, or
running against a regular nomination, were high crimes which were rarely
condoned. On the other hand, the leaders professed the doctrine that a man
who surrendered his claims for the good of the party, or who stood by the
party, must never be allowed to suffer for it. The same doctrines had been
accepted more or less at Washington, but in a feeble and timid way. From this
time they grew into firm recognition. Under their operation politics became a
trade. The public officer was, of necessity, a politician, and the work by which
he lived was not service in his official duty, but political party labor. The
tenure of office was so insecure and the pay so meager, that few men of
suitable ability could be found who did not think that they could earn their
living more easily, pleasantly, and honorably in some other career. Public

service gravitated downwards to the hands of those who, under the
circumstances, were willing to take it. It presented some great prizes in the
form of collectorships, etc., the remuneration for which was in glaring contrast
with the salaries of some of the highest and most responsible officers in the
government; but, for the most part, the public service fell into the hands of
men who were exposed to the temptation to make it pay.
After the general onslaught on the caucus, in 1824, it fell into disuse as a
means of nominating state officers, and conventions took its place. At first
sight this seemed to be a more complete fulfillment of the democratic idea.
The people were to meet and act on their own motion. It was soon found,
however, that the only change was in the necessity for higher organization. In
the thirties there was indeed a fulfillment of the theory which seems now to
have passed away; there was a spontaneity and readiness in assembling and
organizing common action which no longer exists; there was a public interest
and activity far beyond what is now observable. One is astonished at the slight
occasion on which meetings were held, high excitement developed, and
energetic action inaugurated. The anti-Masonic movement, from 1826 to 1832,
is a good instance. The “Liberty party” (Abolitionists), the “Native
Americans,” the “Anti-renters,” all bear witness to a facility of association
which certainly does not now exist. It is, however, an indispensable
prerequisite to the pure operation of the machinery of caucus and convention.
The effort to combine all good men has been talked about from the beginning,
but it has always failed on account of the lack of a bond between them as
strong as the bond of interest which unites the factions.
During the decade from 1830 to 1840 a whole new set of machinery was
created to fit the new arrangements. This consisted in committees, caucuses,
and conventions, ramifying down finally into the wards of great cities, and
guided and handled by astute and experienced men. Under their control the
initiative of “the people” died out. The public saw men elected whom they had
never chosen, and measures adopted which they had never desired, and
themselves, in short, made the sport of a system which cajoled and flattered
while it cheated them. If a governor had been elected by some political trickery
a little more flagrant than usual, he was very apt, in his inaugural, to draw a
dark picture of the effete monarchies of the Old World, and to congratulate the
people on the blessings they enjoyed in being able to choose their own rulers.
This period was full of new energy and turbulent life. Railroads were just
beginning to carry on the extension of production which steamboats and canals

had begun. Immigration was rapidly increasing. The application of anthracite
coal to the arts was working a revolution in them. On every side reigned the
greatest activity. Literature and science, which before had had but a meager
existence, were coming into life. The public journals, which had formerly been
organs of persons and factions, or substitutes for books, now began to be
transformed into the modern newspaper. The difficulties and problems
presented by all this new life were indeed great, and the tasks of government,
as well to discriminate between what belonged to it and what did not, as to do
what did belong to it, were great. On the general principles of the Democratic
party of the day in regard to the province of government, history has already
passed the verdict that they were sound and correct. On the main questions
which divided the administration and the opposition, it must pass a verdict in
favor of the administration. These issues were not indeed clear and the parties
did not, as is generally supposed, take sides upon them definitely. Free trade,
so far as it was represented by the compromise tariff, was the result of a
coalition between Clay and Calhoun against the administration, after
Calhoun’s quarrel with Jackson had led the latter to revoke the understanding
in accordance with which Calhoun retired from the contest of 1824 and took
the second place. The South was now in the position in which the northeastern
states had found themselves at the beginning of the century. The Southerners
considered that the tariff of 1828 had subjected their interests to those of
another section which held a majority in the general government, and that the
Union was being used only as a means of so subjecting them. They seized
upon the Kentucky and Virginia resolutions of 1798, which Jefferson and
Madison had drawn when in opposition, as furnishing them a ground of
resistance, and threw into the tariff question no less a stake than civil war and
disunion. On this issue there were no parties. South Carolina stood alone.
Banks had been political questions in the states and in the general
government from the outset. The history of Pennsylvania and New York
furnishes some great scandals under this head. From time to time, the methods
of banking employed had called down the condemnation of the most
conservative and sensible men, and had aroused some less well-balanced of
judgment to indiscriminate hostility. Jackson’s attack on the Bank of the
United States sprang from a political motive, and he proposed instead of it a
bank on the “credit and revenues of the government”—a proposition too vague
to be understood, but which suggested a grand paper-machine, at a time when
the Bank of the United States was at its best. This attack rallied to itself at once
all the local banks; the great victory of 1832 was not a victory for hard money

so much as it was a victory of the state banks over the national bank. The
removal of the deposits was a reckless financial step, and the crash of 1837
was its direct result.
The traditional position of the Democratic party on hard money has
another source. In 1835 a party sprang up in New York City, as a faction of
Tammany, which took the name of the “Equal Rights party,” but which soon
received the name of the “Locofoco party” from an incident which occurred at
Tammany Hall, and which is significant of the sharpness of party tactics at the
time. This party was a radical movement inside of the administration party. It
claimed, and justly enough, that it had returned to the Jeffersonian fountain
and drawn deeper and purer waters than the Jacksonian Democrats. It
demanded equality with a new energy, and in its denunciations of monopolies
and banks went very close to the rights of property. It demanded that all
charters should be repealable, urgently favored a metallic currency, resisted the
application of English precedents in law courts and legislatures, and desired an
elective judiciary. It lasted as a separate party only five or six years, and then
was cajoled out of existence by superior political tactics; but it was not without
reason that the name spread to the whole party, for, laying aside certain
extravagances, two or three of its chief features soon came to be adopted by
the Democrats.
On the great measures of public policy, therefore, the position of the
administration was not clear and thorough, but the tendency was in the right
direction, especially when contrasted with the policy urged by the Whigs. In
regard to internal improvements, the administration early took up a position
which the result fully justified, and in its opposition to the distribution of the
surplus revenue its position was unassailable. In its practical administration of
the government there is less ground for satisfaction in the retrospect. Besides
the general lowering of tone which has been mentioned, there were scandals
and abuses which it is not necessary to specify. General Jackson’s first cabinet
fell to pieces suddenly, under the effect of a private scandal and of the
President’s attempt to coerce the private social tastes of his cabinet, or rather of
their wives. He held to the doctrine of popularity, and its natural effect upon a
man of his temper, without the sobriety of training and culture, was to
stimulate him to lawless self-will. He regarded himself as the chosen
representative of the whole people, charged, as such, with peculiar duties over
against Congress. The “will of the people” here received a new extension. He
found it in himself, and what he found there he did not hesitate to set in
opposition to the will of the people as this found expression through their

constitutional organs. At the same time the practice of “instructions” marked
an extension, on another side, of the general tendency to bring public action
closer under the control of changing majorities.
Van Buren’s election was a triumph of the caucus and convention, which
had now been reduced to scarcely less exactitude of action than the old
congressional caucus. Van Buren, however, showed more principle than had
been expected from his reputation. He had to bear all the blame for the evil
fruits resulting from the mistakes made during the last eight years. Moving
with the radical or Locofoco tendency, he attempted to sever bank and state by
the independent treasury, and in so doing he lost the support of the “Bank
Democrats.” This, together with the natural political revulsion after a financial
crisis, lost him his re-election.
The Whig party was rich in able men, which makes it the more astonishing
that one cannot find, in their political doctrines, a sound policy of government.
The national bank may still be regarded as an open question, and favoring the
bank was not favoring inconvertible paper money; but their policy of high
tariff for protection, of internal improvements, and of distribution of the
surplus revenue, has been calamitous so far as it has been tried. They also
present the same lack of political sagacity which we have remarked in the
Federalists, whose successors in general they were. They oscillated between
principle and expediency in such a way as to get the advantages of neither; and
they abandoned their best men for available men at just such times as to throw
away all their advantages. The campaign of 1840 presents a pitiful story. There
are features in it which are almost tragic. An opportunity for success offering, a
man was chosen who had no marks of eminence and no ability for the position.
His selection bears witness to an anxious search for a military hero. It resulted
in finding one whose glory had to be exhumed from the doubtful tradition of a
border Indian war. The campaign was marked by the introduction of mass
meetings and systematic stump-speaking, and by the erection of “log-cabins,”
which generally served as barrooms for the assembled crowd, so that many a
man who went to a drunkard’s grave twenty or thirty years ago dated his ruin
from the “hard-cider campaign.” After the election it proved that hungry
Whigs could imitate the Democrats of 1829 in their clamor for office, and, if
anything, better the instruction. The President’s death was charged partly to
worry and fatigue. It left Mr. Tyler President, and the question then arose what
Mr. Tyler was—a question to which the convention at Harrisburg, fatigued
with the choice between Clay and Harrison, had not given much attention. It
was found that he was such that the Whig victory turned to ashes. No bank was

possible, no distribution was possible, and only a tariff which was lame and
feeble from the Whig point of view. The cabinet resigned, leaving Mr. Webster
alone at his post. In vain, like a true statesman, he urged the Whigs to rule with
Mr. Tyler, since they had got him and could not get rid of him or get anybody
else. Like a true statesman, again, he remained at his post, in spite of
misrepresentation, until he could finish the English treaty, and it was another
feature of the story that he lost position with his party by so doing. The system
did not allow Mr. Webster the highest reward of a statesman, to plan and mold
measures so as to impress himself on the history of his country. It allowed him
only the work of reducing to a minimum the harm which other people’s
measures were likely to do. In the circumstances of the time war with England
was imminent, and there was good reason for fear if the negotiation were to
fall into the hands of the men whom Mr. Tyler was gathering about him. The
Whigs were broken and discouraged, and as their discipline had always been
far looser than that of their adversaries, they seemed threatened with
disintegration. The other party, however, was divided by local issues and
broken into factions. Its discipline had suffered injury, and its old leaders had
lost their fire while new ones had not arisen to take their places. The western
states were growing into a size and influence in the confederation which made
it impossible for two or three of the old states to control national politics any
longer.
In this state of things the southern leaders came forward to give impetus
and direction to the national administration. They had, what the southern
politicians always had, leisure for conference. They had also character and
social position, and a code of honor which enabled them to rely on one another
without any especial bond of interest other than the general one. They had such
a bond, common and complete, in their stake in slavery. They could count,
without doubt or danger, on support throughout their entire section. They had a
fixed program also, which was an immense advantage for entering on the
control of a mass of men under no especial impetus. They had besides their
traditional alliance with the Democrats of the North—an alliance which always
was unnatural and illogical, and which now turned to the perversion of that
party. They prepared their principles, doctrines, and constitutional theories to
fit their plans.
Difficulties with Mexico in regard to Texas had arisen during Jackson’s
administration. These difficulties seemed to be gratuitous and unjust on the
part of the United States, and they seemed to be nursed by the same power.
The diplomatic correspondence on this affair is not pleasant reading to one

who would see his country honorable and upright, as unwilling to bully as to
be bullied. Such was not the position of the United States in this matter.
It was determined by the southern leaders to annex Texas to the United
States, and to this end they seized upon the political machinery and proceeded
to employ it.
The election of Polk is another of the points to which the student of
American politics should give careful attention. The intrigues which
surrounded it have never been more than partially laid bare, but, if fairly
studied, they give deep insight into the nature of the forces which operate in
the name of the will of the people. The slavery issue was here introduced into
American politics; and when that question was once raised, it “could not be
settled until it was settled right.” For ten years efforts were made to keep the
issue out of politics and to prevent parties from dividing upon it. What was
desired was that the old parties should stand in name and organization, in order
that they might be used, while the actual purposes were obtained by
subordinate means. A party with an organization and discipline, and a history
such as the Democratic party had in 1844, is a valuable property. It is like a
well-trained and docile animal which will go through the appointed tasks at the
given signal. It disturbs the discipline to introduce new watchwords and to
depart from the routine, in order to use reason instead of habit. Hence the
effort is to reduce the new and important issues to subordinate places, to carry
them incidentally, while the old commonplaces hold together the organization.
It is safe to say, however, that, in the long run, the true issues are sure to
become the actual issues, and that delay and deceit only intensify the conflict.
Upon Polk’s election the independent treasury and comparative free trade
were fixed in the policy of the government for fifteen years, with such
beneficial results as to render them the proudest traditions of the party which
adopted them.
Mr. Calhoun had abandoned the opposition during Van Buren’s
administration, and had begun to form and lead the southern movement. His
own mind moved too rapidly for his adherents, and he could not bring them to
support him up to the positions which he considered it necessary to take; but,
even as it was, the steps of the southern program came out with a rapidity, and
were of a character, to shock the imperfectly prepared northern allies. The
Democratic party of the North was not a proslavery party. Whigs and
Democrats at the North united in frowning down Abolition excitements, and in
maintaining the compromises of the Constitution. Old-line Whigs and hunker

Democrats agreed in the conservatism which resisted the introduction of this
question; but when, in 1844, Van Buren was asked, as a test question to a
candidate, whether he would favor the annexation of Texas, the subject of
slavery in the territories was thrown into the political arena from the southern
side. It was not then a question of abolishing slavery in the southern states,
which could not have obtained discussion except in irresponsible newspapers
and on irresponsible platforms. It was not a question of spreading slavery into
the old territories, for Texas and the Indian Territory barred the way to all
which the Missouri Compromise left open. It was now a question of taking or
buying or conquering new territory for slavery, and every one knew well that
the chief reason for the revolt of Texas was that Mexico had abolished slavery.
The South indeed claimed to have suffered aggressions and encroachments in
regard to slavery ever since the adoption of the Constitution, and the attempt
was now to be made to secure recompense. In the form in which the
proposition came up it was no slight shock to those who had always been in
alliance with the South. Party men like Van Buren and Benton drew back.
Southerners like Clay resisted. The actual clash of arms, fraudulently brought
about and speciously misrepresented, put an end to discussion, and aroused a
war fever under the pernicious motto, “Our country, right or wrong.” If we are
a free people and govern ourselves, our country is ourselves, and we have no
guaranty of right and injustice if we throw those standards behind us the
moment we have done wrong enough to find ourselves at war. The war ended,
moreover, in an acquisition of territory, which, of course, was popular; and it
proved that this territory was rich in precious metals, which added to the
popular estimate of it. The antecedents of the war were forgotten.
Its political results, however, were far more important. Calhoun now came
forward to ward off a long conflict in regard to slavery in these territories, by
the new doctrine that the Constitution extended to all the national domain, and
carried slavery with it—a doctrine which his followers did not, for ten years
afterwards, dare to take up and rigorously apply, and which divided the
Democratic party of the North. The repeal of the Missouri Compromise and
the enactment of the Fugitive Slave Law were only steps in the conflict which
was as yet confused, but which was clearing itself for a crisis. The South, like
every clamorous suitor, reckless of consequences, obtained wide concessions
from an adversary who sought peace and contentment, and who saw clearly
the dangers of a struggle outside the limits of constitution and law.

* * * * *

The Abolitionists, from their first organization, pursued an
“irreconcilable” course. They refused to vote for any slaveholder, or for any
one who would vote for a slaveholder, and refused all alliances which involved
any concession whatever. They more than once, by this course, aided the party
most hostile to them, and, in the view of the ordinary politician, were guilty of
great folly. They showed, however, what is the power of a body which has a
principle and has no ambition, and is content to remain in a minority. Probably
if the South had been more moderate, the Abolitionists would have attracted
little more notice than a fanatical religious sect; but, as events marched on,
they came to stand as the leaders in the greatest political movement of our
history. The refusal of the Whig Convention of 1848 to adopt an antislavery
resolution, and the great acts above mentioned, together with the popular
reaction against a party which, if it had had its way, would never have won the
grand territories on the Pacific, destroyed the Whig party. The party managers,
enraged at the immense foreign element which they saw added year by year to
their adversaries, forming a cohort, as it appeared, especially amenable to party
discipline and the dictation of party managers, took up the Native American
movement, which had had some existence ever since the great tide of
immigration set in. The effort was wrecked on the obvious economic follies
involved in it. How could a new country set hindrances against the
immigration of labor? Politically, the effect was great in confirming the
allegiance of naturalized voters, as a mass, to the Democratic party as the party
which would protect their political privileges against malicious attacks. The
formation of the Free-Soil party or its development into the Republican party,
brought the extension of slavery into the territories, and the extension of its
influence in the administration of the government, distinctly forward as the
controlling political issue.
On this issue the Democratic party, as a political organization, made up
traditionally of the southern element which has been described, of so much of
the old northern Democratic party as had not been repelled by the recent
advances in Southern demands, and of the large body of immigrants who
regarded that party as the poor man’s and the immigrant’s friend, fell out of the
place it had occupied as the representative of the great democratic tide which
flows through and forms our political history. This movement has been in
favor of equality. It has borne down and obliterated all the traditions and
prejudices which were inherited from the Old World. It has eliminated from
our history almost all recollection of the old Federal party, with its ideas of
social and political leadership. It has crushed out the prestige of wealth and

education in politics. It has, by narrow tenures, and by cutting away all terms
of language and ceremonial observances tending to mark official rank,
restrained the respect and authority due to office. The Northern hatred of
slavery in the later days was due more to the feeling that it was undemocratic
than to the feeling that it was immoral. It was always an anomaly that the
Virginians should be democrats par excellence, and should regard the yeomen
farmers of New England as aristocrats, when, on any correct definitions or
standards, the New England States were certainly the most democratic
commonwealths in the world. Slavery was an obvious bar to any such
classification; and when slavery became a political issue, the parties found
their consistent and logical position. The rise and victory of the Republican
party was only a continuation of the same grand movement for equality. The
old disputes between Federalists and Jeffersonians had ended in such a
complete victory for the latter, that the rising generation would have
enumerated the Jeffersonian doctrines as axioms or definitions of American
institutions. Every schoolboy could dogmatize about natural and inalienable
rights, about the conditions under which men are created, about the rights of
the majority, and about liberty. The same doctrines are so held to-day by the
mass of the people, and they are held so implicitly that corollaries are deduced
from them with a more fearless logic than is employed upon political questions
anywhere else in the world. Even scholars and philosophers who reflect upon
them and doubt them are slow to express their dissent, so jealous and quick is
the popular judgment of an attempt upon them. The Democratic party of the
fifties was, therefore, false to its fundamental principle of equality when it
followed its alliance with the South and allowed itself to be carried against
equality for negroes. Whether there were not subtle principles of human nature
at work is a question too far-reaching to be followed here.
With the rise of the Republican party there came new elements into
American politics. The question at stake was moral in form. It enlisted
unselfish and moral and religious motives. It reached outside the proper
domain of politics—the expedient measures to be adopted for ends recognized
as desirable—and involved justice and right in regard to the ends. It enlisted,
therefore, heroic elements: sacrifice for moral good, and devotion to right in
spite of expediency. At the same time, the issue was clear, simple, single, and
distinct. The organization upon it was close and harmonious, not on account of
party discipline, but on account of actual concord in motive and purpose. The
American system was here seen in many respects at its best, and it worked
more nearly up to its theoretical results in the election of Lincoln, a thoroughly

representative man out of the heart of the majority, than in any other election in
our history. It is probably the recollection and the standard of this state of
things which leads men now on the stage to believe that corruption is
spreading and that the political system is degenerating. It is one of the
peculiarities of the government of the United States, that it has little historical
continuity. If it had more, or if people had more knowledge of their own
political history, the above-mentioned opinion would find little ground. The
student of history who goes back searching for the golden age does not find it.
All the heroic elements in the political issue of 1860 were, of course,
intensified by the war. There was the consciousness of patriotic sacrifice in
submitting to loss, bloodshed, and taxation for the sake of an idea, for the
further extension of political blessings long enjoyed and highly esteemed.
After the war, national pride and consciousness of power expanded naturally,
but the questions which then arose were of a different order. They were
properly political questions. They concerned taxation, finance, the
reconstruction of the South, the status of the freedmen. The war fervor, or the
moral fervor of the political contest, could not remain at the former high pitch.
There followed a natural reaction. Questions which touched the results of the
war brought a quick and eager response. It would not be in human nature that
that response should not be tinged by hatred of rebels and by the worse
passions which war arouses. For war is at best but a barbarous makeshift for
deciding political questions. Let them be never so high and pure in their moral
aspects, war drags them down into contact with the lowest and basest passions
—with cruelty, rapacity, and revenge. Moreover, it was natural that people
should want rest and quiet after the anxiety and excitement of war. Every
householder desired to enjoy in peace the political system which he had
defended and established by war; he did not care to renew the excitement on
the political arena. The questions which arose were no longer such as could be
decided by reference to a general political dogma or a moral principle or a text
of Scripture. They were such as to perplex and baffle the wisest constitutional
lawyer or the ablest financier or the wisest statesman. The indifference and
apathy which ensued were remarkable, and they probably had still other
causes. The last twenty-five years have seen immense additions to the number
and variety of subjects which claim a share of the interest and attention of
intelligent men. Literature has taken an entirely new extension and form.
Newspapers bring daily information of the political and social events of a half-
dozen civilized countries. New sciences appeal to the interest of the entire
community. Educational, ecclesiastical, sanitary, and economic undertakings,