Protective Taxes and Wages; W. G. Sumner

Protective taxes aim to keep for eign products out of the country, in order to secure the home mar ket to the home producers. These taxes, therefore, make commodities dear, scarce, and hard to get. But the commodities in the country are what constitute the wages of la borers. If the amount of these commodities is rendered smaller than it might be, how can that raise wages, looking of course not at money wages, but at real wages, From an essay in the North American Review, January, 1883, pp. 270-76. 56 or the comfort attainable by the laborer? There is no real propriety in discussing wages apart from other elements in the comfort of the population. Protective taxes lessen the' available comfort In the reach of all members of society; they curtail the enjoyment which each citizen might get out of each hun dred dollars of income. If I dis cuss wages as a separate question, I do so only because the question has been so raised, not because I concede that the laborers have any separate interest which can be, or ought to be, discussed by itself. It is pure demagogism to represent it as one of the functions of the Government to make wages high, or in any way to pet the laboring class. The protective taxes press upon all, even upon the protected, who mutually plunder each other.

1966 PROTECTIVE TAXES AND WAGES 57 The lowering of real wages, by making commodities scarcer and dearer, is the way in which the wages-class are subjected to their share of the effects of protective taxes .... Why Wages Are High The fallacy in the notion that protective taxes make wages high is the same as the fallacy in the notion that trades-unionism makes wages high. Protection and trades unionism act on the same princi ple. Trades-unionism inculcates negligence, slackness, and shirk ing . It teaches the men not to take pains, not to try to excel, not to do good work, and the philosophy of it is that the men should not try to produce, but should try not to produce, on the theory that if things are made scarce and dear , and hard to get, that makes "work," and so makes wages high. If that philosophy were sound, all the classes which consume but pro duce nothing - like soldiers, pau pers, idle women, idle rich, gam blers, criminals, and convicts would be all the time raising wages, and they would lower wages if they should go to work, and not only consume but also produce. On the same philosophy, the Pitts burg rioters were sound econo mists when they let the city burn down, thinking that it would make work and raise wages.

The protectionist and the trades unionist both think that wages are increased when things are made scarce and hard to get. First they confuse wages with work, and then they confuse work with toil, and they think that they have increased wages, that is, good things to en joy, when they have only increased the toil by which things are ob tained.The truth is that wages are raised only by industry, thrift, temperance, prudence, and econ omy, producing abundance and in creasing capital, not by any dark and crafty devices for producing scarcity and bad work. We may now look at the other notion, - that high wages make protective taxes necessary. People who believe this must have a queer idea of the economic laws of so ciety. They must think that a blessing and a calamity are not to be distinguished from each other. The wages paid in any industry are only one of the conditions of production ....

Inefficient Management If a capitalist says that he can not pay the current rate of wages, the first answer that should be made to him is to tell him not to do it then, for he must be misap plying his capital in some way or other. The market rate of wages is set by the supply and demand of labor, and there must be some in58 THE FREEMAN November dustries which are able to win profits while paying that rate. But when our petitioners appear before committees of Congress to ask for protection, and allege that they need it because wages are high, when has anyone of them ever been subjected to an examina tion to learn whether he under stands the business he has en gaged in, or has an adequate cap ital, or has faithfully devoted him self to business, or has judiciously located his establishment, or has bought his raw materials wisely, or has adopted new machinery rap idly enough, and yet not too rap idly, or has organized his industry with good judgment, and so on in definitely? Surely these inquiries would be to the point, when a man pleads for power to tax his fellow citizens to make up the losses of his business.

Wages are one of the essential expenses of any business. If it cannot pay wages at the market rate, it is not a "business"; it is either a play or a swindle. If it is said, as it constantly is, that Amer ican industry in general should be protected because American wages are high, the decision is made to turn on a single point when there are a score of conditions of indus try which would need to be taken into account. What are the facts as regards cost and convenience of raw materials, facilities of transportation, cost and quality of ma chinery, climate as affecting indus try, character of the people for in dustry, intelligence, and sobriety, security of property and order un der the Government, excellence or otherwise of the tax system? These are the conditions of industry as between nations, not comparative rates of wages. . . . Who Pays the Tax? It is said that we cannot com pete with those who pay less wages than we. There are two classes of persons with whom one cannot compete,-his inferiors and his superiors. A physician might find that he could not compete with a laborer in digging a ditch, or with a great financier in man aging a hank. Could any tax en able him to compete with the hanker; that is, to compete with his superior? On the contrary, if he should complain that he could not compete with the laborer be cause he could not afford to em ploy his time in an occupation which is less remunerative than his own, everyone would ask him why then he desired to compete?

Now, could a tax enable him to compete with the laborer? Indeed, it could. It could intervene to de prive him of the services of the laborer, and force him to dig his own ditch, abandoning a profes sion in which he could earn ten 1966 PROTECTIVE TAXES AND WAGES 59 dollars a day to spend his time in an occupation worth only a dollar. This last is the only way in which protective taxes enable us to com pete. They put us in a position such that we abandon occupa.tions in which we might earn the high American rates, in order to do things which other people would do for us at half the price. Lower wages abroad, therefore, are not a reason for protective taxes, but just exa.ctly the con trary. Our high wages a.re a proof that we can better occupy our time. They are a proof that we have means of employing our cap ital and labor, which are highly remunerative; and to make them an argument for protection is like arguing that a rich man needs charity, or a strong man help. ~ Comparative Advantages SUPPOSE a physician earning $10,000 a year buys his vegetables from a local farmer whose income is around $3,000. Does that mean that the doctor's income will decline toward that of the farmer? On the contrary! Both are specialists. By having some one else raise his vegetables, the doctor can specialize and be come even more proficient in his job. If he were forced to raise his own vegetables and if the farmer were forced to doctor himself, neither would be as well off. Specialization and free trade im prove the conditions of all participants. This is as true for foreign trade as for domestic trade.

Tariffs encourage the production of some things in which the country is less efficient and discourage the production of other things in which the country has a comparative advantage. The total value of production, so far as consumers are concerned, is less than it would otherwise be - and this means that real wages are held down by reason of tariffs. So, rather than protect ing domestic wages generally, tariffs lower real wages in all countries affected. W. 'M. CURTISS, The Tariff Idea A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN Shedding Friendships JOHN Dos PASSOS is one of those persons who learned the hard way. But he learned. His book about his younger years, The Best Times (New American Library, $5.00), is a record of his travels and friendships up to the mid-nineteen thirties, and they were the "best" years only in the sense that the author was young and adventurous and the "times" were not yet sul lied by the worst of wars. From the standpoint of philosophical and political understanding they were not-good years at all, for during the whole long interwar period John Dos Passos was still under many illusions. He had to outgrow many places and friends in order to discover that freedom was right where he had left it as a boy, in the America of his father's time, which was before the lures of so cialism had captivated the genera tion that came of age around 1917.