I. The Argument for Protection to Young Industries

OF THE ARGUMENTS in favor of protection, none has been more frequently or more sincerely urged than that which is expressed in the phrase “protection to young industries.” None has received so generally the approval of economists, even of those little disposed to acknowledge the validity of any reasoning not in accordance with the theory of free exchange. Mill gave it the weight of his approval in a passage which has been frequently cited. Later English writers have followed him in granting its intrinsic soundness. The reasoning of List, the most prominent protectionist writer among the Germans, is based, so far as it is purely economic, on this argument, and since List’s time the argument has taken an established place in German treatises on political economy, even though it be admitted that the conditions to which it fairly applies belong to the past.

The argument is, in brief, that it may be advantageous to encourage by legislation a branch of industry which might be profitably carried on, which is therefore sure to be carried on eventually, but whose rise is prevented for the time being by artificial or accidental causes. The essential point of the argument lies in the assumption that the causes which prevent the rise of the industry, and render protection necessary, are not natural and permanent causes,—not such as would permanently prevent, under a state of freedom, the growth of the industry. Let it be supposed, for instance, that the industry to be encouraged is the cotton manufacture. The natural advantages of a given country for making cotton cloths are good, we may suppose, in comparison with the advantages for producing other things. The raw material is cheap, power for machinery is abundant, the general intelligence and industry of the people—which, since they admit of but very slow change, must be considered natural advantages—are such as to fit them for complex industrial operations. There is no permanent cause why cotton goods should not be obtained at as low cost by making them at home as by importing them; perhaps they can even be produced at lower cost at home. But the cotton manufacture, let it be further supposed, is new: the machinery used is unknown and complicated, and requires skill and experience of a kind not attainable in other branches of production. The industry of the country runs by custom in other grooves, from which it is not easily diverted. If, at the same time, the communication of knowledge be slow, and enterprise be hesitating, we have a set of conditions under which the establishment of the cotton manufacture may be prevented, long after it might have been carried on with advantage. Under such circumstances it may be wise to encourage the manufacture by duties on imported goods, or by other analogous measures. Sooner or later the cotton manufacture will be introduced and carried on, even without assistance; and the government’s aid will only cause it to be established with less friction, and at an earlier date, than would otherwise have been the case.

It may illustrate more clearly the conditions under which such assistance may be useful, to point out those under which it is superfluous. The mere fact that an industry is young in years—has been undertaken only within a short period of time—does not supply the conditions under which protection is justified by this argument. An industry recently established, but similar in kind to other branches of production already carried on in the country, would hardly come within its scope. But where the industry is not only new, but forms a departure from the usual track of production; where, perhaps, machinery of an entirely strange character, or processes hitherto unknown, are necessary; where the skill and experience required are such as could not be attained in the occupations already in vogue; under these circumstances protection may be applied with good results, if no natural disadvantages, in addition to the artificial obstacles, stand in the way. The manufacture of linen goods in the United States, at the present time, probably supplies an example of an industry which, though comparatively new, can hardly be said to deserve protection as a young industry. The methods and machinery in use are not essentially different from those of other branches of textile manufactures. No great departure from the usual track of production is necessary in order to make linens. Manufactures of the same general character are established on all sides. Work-people and managers with experience in similar work can be easily found. Moreover, the means of obtaining and communicating knowledge at the present time are such that information in regard to the methods and machinery of other countries can be easily obtained, while workmen can be brought from abroad without difficulty. Those artificial obstacles which might temporarily prevent the rise of the industry do not exist, and it may be inferred that, if there are no permanent causes which prevent linens from being made as cheaply in the United States as in other countries, the manufacture will be undertaken and carried on without needing any stimulus from protecting duties.

There are two sets of conditions under which it is supposable that advantages not natural or inherent may be found in one country as compared with another, under which causes merely temporary and accidental may prevent the rise of certain branches of industry in the second country, and under which, therefore, there may be room for the application of protection. These are, first, the state of things in a new country which is rapidly growing in population, and in which, as population becomes more dense, there is a natural change from exclusive devotion to the extractive industries toward greater attention to those branches of production classed as manufactures. The transition from a purely agricultural state to a more diversified system of industry may be retarded, in the complete absence of other occupations than agriculture, beyond the time when it might advantageously take place. Secondly, when great improvements take place in some of the arts of production, it is possible that the new process may be retained in the country in which they originate, and may fail to be applied in another country, through ignorance, the inertia of habit, and perhaps in consequence of restrictive legislation at the seat of the new methods. Here, again, the obstacles to the introduction of the new industry may be of that artificial kind which can be overcome most easily by artificial means. Now, both these sets of conditions seem to have been fulfilled in the United States in the beginning of the 19th century. The country was normally emerging, to a considerable extent, from that state of almost exclusive devotion to agriculture which had characterized the colonies. At the same time great changes were taking place in the mechanical arts, and new processes, hardly known outside of England, and held under a practical monopoly there, were revolutionizing the methods of manufacturing production. Under these circumstances there would seem to have existed room for the legitimate application of protection for young industries.

The more detailed examination in the following pages of the industrial condition of the country during the earlier part of the 19th century will bring out more clearly the reasons why protection may then have been useful. It may be well, however, to notice at this point one difference between those days and the present which must seriously affect the application of the argument we are considering. Even if we were to suppose the conditions of 1810 to exist now; if the country were now first beginning to attempt manufactures, and if a great revolution in manufacturing industry happened to make the attempt peculiarly difficult; even then the obstacles arising from the force of custom, and from the want of familiarity with new processes, would be much more easy to overcome now than sixty years ago. The ties of custom in industry have become much loosened in the last half century; capital and labor turn more easily to new employments. The railroad, the telegraph, the printing-press, the immense increase in the facility of communication, the constant change in methods of production in all industries, have tended to make new discoveries and inventions common property, and to do away with advantages in production based on other than permanent causes. It is true that there are still appreciable differences in the arts of production in different countries, and that some may have a superiority over others based on the merely accidental or temporary possession of better processes or more effective machinery. But the United States hardly lag behind in the industrial advance of the present day, and where they do labor under artificial or factitious disadvantages, these cannot endure long or be of great consequence under a system of freedom.

Eighty years ago, however, the state of things was very different. The conditions were then in force under which protection might be needed to enable useful industries to be carried on. The argument for protection to young industries was accordingly the most effective of those urged in favor of the protective policy. During the twenty years which followed the war of 1812 the protective controversy was one of the most important features in the political life of the nation; and the young industries argument was the great rallying-cry of the protectionists. It is of interest to examine how far protection of the kind advocated was actually applied, and how far it was the cause, or an essential condition, of that rise of manufactures which took place. The object of this paper is to make such an investigation.