The Moral Aspect of the Protective Tariff; D.S. Starr

The fundamental idea in American polity is that of a square deal to all men, each standing on his own feet, with exclusive privileges or governmental aid to no man and to no class of men. Inequality before the law, entail, primogeniture, church control of state, state control of church, class con sciousness, and class legislation were evils in English polity which our fathers would not tolerate. On account of these they left England. They chose the hardships of Ply mouth Rock and later the hazards of war rather than to put up with any of them. If there is one American idea or ideal to be segregated from the rest it is this of equality before the law. And it is this ideal which is violated absolutely and continuously in the theory and in the practice of the protective tariff. The protective tariff is a device for en hancing the home price of the articles it covers by a tax on commerce, by forcing the David Starr Jordan (1851-1931), a scientist and educator, was the first president of Stanford University, serving from 1891 to 1913, and as chancellor, 1913 to 1916. Among his books were The Human Harvest and War and Waste.

This essay is from The Independent (Vol. XVI, #3130, November 26, 1908), pp. 1209-1211. body of citizens to pay tribute to producers at home. To these the State in futile fashion tries to guarantee "a reasonable profit." These producers may be capitalists or di rectors of industry, or they may be the laborers who contribute effort only, without responsibility for the way in which effort may be applied. It matters not whether capitalists or laborers, either or both actu ally profit at your expense or mine or that of foreign producers. The protective tariff in tends that they should thus profit, at least to a reasonable degree. But in the theory of our republic it is no part of the State to guarantee to anyone "a reasonable profit," nor to protect anyone from a reasonable loss. its function is to see fair play and freedom of operation. It is a breach of the principle of equality before the law that the State should do anything more. To guarantee anyone a reasonable profit is to do so at the expense of the rest. The theory is one of injustice, whatever its result in practice. In practice, whatever is gained on the one hand is lost on the other. Even if we could force foreigners to pay the tariff taxes, which is sometimes possible, their capacity as buyers is corre spondingly decreased. International trade is barter, and every burden it carries works a corresponding loss to both parties in the transaction. Moreover, as a matter of fact, the protective tariff yields little gain to the laborer, because continued immigration brings him new competitors and because he 20 is in his turn one of the general public who suffer from the commerce tax. If wages are raised by the tariff, so is the cost of living, and the cost of living comes first. For the director or employer of labor, the case is, on the whole, not much better, because the cost of his product is enhanced by the tariff taxes on everything which enters into his process of manufacture. In so far as a tariff is successful in gaining profit, it is so because it is virtually prohibitory. That the evils of prohibitory tariffs are so little felt by us is due to the fact that our country is a world in itself, with untaxed trade throughout a dis trict comprising nearly a third of the spe cialized production area of the globe. Yet within this favored area, with all its vast range in competition, it is possible some times to monopolize production in some particular direction. Such a monopoly we now call a trust. To the development of such monopolies the tariff naturally lends itself, though it would be unfair to declare it to be the parent of all trusts. It is enough to recognize that its general purpose is the same-the development through legal means of industrial and economic monop oly, of the enrichment of a class or of a group of classes at the expense of the citizens at large. This is theoretically contrary to American polity. If the principles of our republic in regard to "equal justice to all, exclusive privileges to none," are right, then the theory and the practice of the protective tariff are wrong. That it works through the method of indirect taxation disguises but does not justify its injustice.

The prohibitory tax on importable prod ucts is said to have brought its justification in the ultimate lowering of price of the articles concerned. The same claim is made in behalf of the trusts, and much evidence is brought forward in both cases to justify this claim. But the real cause of the reduction in price is seldom traceable to the trust or the tariff. Doubtless, for example, iron is cheaper in this country under a high tariff than it once was without the tariff. But the cheapening of all metals, protected and unprotected, is held to depend on the ad vance of the science and the arts of metal21 David Starr Jordan lurgy. The cheapening of gold, a metal out of the range of tariff, is due to improved processes of contraction, and the change threatens to subvert the monetary basis of the world's credit and trade. Metals which have been cheapened in the United States have been similarlyaffected in England. It is not clear that the tariff in this matter holds any important relation of cause to effect.

Nor would the general policy of taxing one group of men, or even one generation for the benefit of the next, be justified if it were so. The Greater Evil The tariff is defended on the ground of the value to the growing nation of the advance ment of infant industries-of the develop ment of diversified economies. We may not deny the importance of such development. We may admit that at many places and for definite periods there has been a financial gain to the community at large, through taxing the farmer to build up the manufac22 THE FREEMAN • JANUARY 1994 turer. We may admit that nation buildinghas been hastened by it. But for all that it is not politically right nor just to do this, for the gain to one has gone with loss to others. The policy in practice assumes the form of a vested right which becomes in time a vested wrong. But even if we admit the past value of protection, the greater evil comes when we cannot let go. Around these vested rights other conditions grow up, and a change of any sort works havoc with related or asso ciated interests. Justice to the new interests becomes possible only by the perpetration of varied forms of injustice. To touch the tariff in any way now sends a shock through the financial world, throughout the body politic. Tariff revision in our day is therefore an operation which can be based on no principles. It is a blind rush among various choices of evils. To put revision in the hands of friends of the tariff means still suppres sion of reform, the further extension of the evil itself. To put revision into other hands means a commercial crisis. And sooner or later commercial crisis must come. The only permanence lies in making tariff taxation like other taxation, a non-respecter of per sons, its sole function that of raising reve nue. Justice is always blind, knowing noth ing of indirect or ulterior advantages.

Historically, the theory of the infant in dustry has proved fallacious. There are in America today no infant industries. These infants have grown more rapidly than the nation has. Our huge industrial combina tions overshadow the world. Just as in their alliance they dominate us, in similar degree they have the whip hand over other nations. If anything American can take care of itself, it is our infant industries. Yet these organi zations demand the tariff as a necessity of existence as insistently as ever they did. They exact tribute from all of us, because they can get it. The lull in the self-assertion just at present is due to the handwriting on the wall, not to any lessening desire to be fed at the public expense. The actual injury to American prosperity traceable to the tariff may not be enor mously great. It has doubtless been exag gerated. It lends itself to exaggeration. It makes us angry when we think of it, and wrath carries always a magnifyingglass. Its greatest evil is moral, not economic. It lies in the perversion of our theories of govern ment, the introduction of the idea of class enrichment through legislation.

National Meddling with Individual Rights Doubtless much of the prosperity of the United States is due to the protective tar iff-the prosperity of some of us. But in like degree the non-prosperity of some of us, some of the very same persons, for that matter, is due to the same national meddling with individual rights. The apparent pros perity of any community could be greatly enhanced by taking property away from half the people to put it into the hands of the others who know better how to use it. Some of this sort has lain at the foundation of British polity. It is the theory by which no bilityand aristocracy justify themselves. It is not the theory of democracy. It is not the principle on which our nation was founded. Thus, behind all discussion of sources and means of prosperity the fact remains that democratic justice, that fundamental equity between man and man, can never be real ized in America so long as any trace of the protective tariff remains on our statute books. It is another illustration of the truth that "they enslave their children's children who make compromise with sin." This law applies to economic lapses, to time-serving legislation, as well as to moral sins. D THEFREEMAN IDEASON LIBERTY WE NEED FREE TRADE IN DEED AS WELL AS WORD by Gary M. Galles M Uch of the economic success of the early United States was due to the fact that the Constitution not only restricted the federal government's ability to hurt some citizens for the benefit of others (e.g., the takings, tax uniformity, due process, and equal protection clauses), but also abolished states' attempts to take advantage of each other through restrictions on interstate com merce (the famous commerce clause). The result was the world's largest free trade zone. Everyone benefited, as neither the state nor federal government could impose extra burdens on mutually beneficial trades just because shipments originated across a state border.