Stedman and Hutchinson, comps. A Library of American Literature: An Anthology in Eleven Volumes. 1891. Vols. IXXI: Literature of the Republic, Part IV., 18611889
Examination of a Cardinal Protectionist Theory
By William Graham Sumner (18401910)
[Born in Paterson, N. J., 1840. Died in Englewood, N. J., 1910. Protectionism. 1885.]
THE PROTECTIONIST says 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 protectionists definition, 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.
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, As 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.
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?
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?
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 98 cents apiece. The case for coercion is when it is desired to make them buy dollars at 101 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 101 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 protectionists 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.
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 poor-house, and a prison cannot be put in the same economic category. We know that the community must be taxed to support insane-asylums, poor-houses, 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 .
But the factories and farms and founderies are the productive institutions which must provide the support of these consuming institutions. If the factories, etc., put themselves on a line with the poor-houses, 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.
If a protectionist shows me a woollen-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 then it is out of this discussion as much as a farm or a doctors practice. If he says yes, then I answer that the mill is not an industry at all. We pay 60 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 woollen-mill, we should get all the cloth we want, but the mill is simply an institution for making cloth cost per yard 60 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 societyworks 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 getwhich makes harder the terms of acquisition when we are all the time struggling by our arts and sciences to make those terms easieris a harmful thing, and noxious to the common interest.
Hence, once more, starting from the protectionists 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 protectionists 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.