V. The Iron Manufacture

We turn now to the early history of the iron manufacture,—the production of crude iron, pig and bar. We shall examine here the production, not of the finished article, but of the raw material. It is true that the production of crude iron takes place under somewhat different conditions from those which affect cotton and woollen goods. The production of pig-iron is more in the nature of an extractive industry, and, under ordinary circumstances, is subject in some degree to the law of diminishing returns. To commodities produced under the conditions of that law, the argument for protection to young industries has not been supposed, at least by its more moderate advocates, to apply, since the sites where production will be carried on to best advantage are apt to be determined by unalterable physical causes.³⁸ It happens, however, that changes in the processes of production, analogous to those which took place in the textile industries, were made at about the same time in the manufacture of crude iron. These changes rendered more possible the successful application of the principle of protection to young industries, and make the discussion of its application more pertinent. There is another reason why we should consider, in this connection, the raw material rather than the finished article. The production of the latter, of the tools and implements made of iron, has not, in general, needed protection in this country, nor has protection often been asked for it. The various industries by which crude iron is worked into tools and consumable articles were firmly established already in the colonial period, and since then have maintained themselves with little difficulty. The controversy on the protection of the iron manufacture has been confined mainly to the production of pig- and bar-iron. It is to this, therefore, that we shall direct our attention. The production of pig- and bar-iron will be meant when, in the following pages, the “iron manufacture” is spoken of.

During the eighteenth century, England was a country importing, and not, as she is now, one exporting, crude iron. The production of pig- and bar-iron was accordingly encouraged in her colonies, and production was carried on in them to an extent considerable for those days. Large quantities of bar-iron were exported from the American colonies to England.³⁹ The manufacture of iron was firmly established in the colonies according to the methods common at the time. During the second half of the eighteenth century, however, the great change took place in England in the production of iron which has placed that country in its present position among iron-making countries, and has exercised so important an influence on the material progress of our time. Up to that time charcoal had been used exclusively for smelting iron, and the iron manufacture had tended to fix itself in countries where wood was abundant, like Norway, Sweden, Russia, and the American colonies. About 1750 the use of coke in the blast furnace began. The means were thus given for producing iron in practically unlimited quantities, without dependence for fuel on forests easily exhaustible; and in the latter part of the century, when the steam-engine supplied the motive power for the necessary strong blast, production by means of coke increased with great rapidity.⁴⁰ At the same time, in 1783 and 1784, came the inventions of Cort for puddling and rolling iron. By these the transformation of pig-iron into bar-iron of convenient sizes was effected in large quantities. Before the inventions of Cort, pig-iron had been first converted into bar under the hammer, and the bar, at a second distinct operation in a slitting mill, converted into bars and rods of convenient size. The rolled bar made by the processes of puddling and rolling—which are still in common use—is inferior in quality, at least after the first rolling, to the hammered and slit iron, known as hammered bar, produced by the old method. Cort’s processes, however made the iron much more easily and cheaply, and the lower price of the rolled iron more than compensated, for most purposes, for its inferior quality. At the same time these processes made easy and fostered the change from production on a small scale to production on a large scale. This tended to bring about still greater cheapness, and made the revolution in the production of iron as great as that in the textile industries, and similar to it in many important respects.

During the period 1789–1808 these changes in the iron manufacture were too recent to have had any appreciable effect on the conditions of production and supply in the United States. The manufacture of iron, and its transformation into implements of various kinds, went on without change from the methods of the colonial period. Pig-iron continued to be made and converted into hammered bar in small and scattered works and forges.⁴¹ No pig-iron seems to have been imported. Bar-iron was imported, in quantities not inconsiderable, from Russia;⁴² but no crude iron was imported from England. The importations of certain iron articles, not much advanced beyond the crude state, such as nails, spikes, anchors, cables, showed a perceptible increase during this period.⁴³ Whether this increase was the result of the general conditions which tended to swell imports during this period or was the first effect of the new position which England was taking as an iron-making country, cannot be determined. Information on the state of the industry during this period is meagre; but it seems to have been little affected by the protective duties which Congress enacted on nails, steel, and some other articles. No protection was attempted to be given to the production of pig or bar-iron, for it was thought that the domestic producers would be able to compete successfully with their foreign competitors in this branch of the iron-trade.

During the period of restriction from 1808 to 1815, the iron and manufactures of iron previously imported, had to be obtained, as far as possible, at home. A large increase in the quantity of iron made in the country accordingly took place. The course of events was so similar to that already described in regard to textile manufactures that it need not be referred to at length. When peace came, there were unusually heavy importations of iron, prices fell rapidly, and the producers had to go through a period of severe depression.

In 1816 Congress was asked to extend protection to the manufacture of iron, as well as to other industries. The tariff of 1816 imposed a duty of 45 cents a hundred-weight on hammered-bar iron, and one of $1.50 a hundred-weight on rolled bar, with corresponding duties on sheet, hoop, and rod iron. Pig-iron was admitted under an ad valorem duty of 20 per cent. At the prices of bar-iron in 1816, the specific duty on hammered bar was equivalent to about 20 per cent.,⁴⁴ and was, therefore, but little higher than the rates of 15 and 17½ per cent, levied in 1804 and 1807. The duty on rolled bar was much higher, relatively to price, as well as absolutely, than that on hammered bar, and was the only one of the iron duties of 1816 which gave distinct and vigorous protection. These duties were not found sufficient to prevent the manufacturers from suffering heavy losses, and more effective protection was demanded. In 1818, Congress, by a special act, raised the duties on iron considerably, at the same time, as was noted above,⁴⁵ that it postponed the reduction from 25 to 20 per cent. on the duty on cottons and woollens. Both of these measures were concessions to protective feeling, and they may have been the result of an uneasy consciousness of the disturbed state of the country and of the demand for protection which was to follow the financial crisis of the next year.⁴⁶ The act of 1818 fixed the duty on pig-iron at 50 cents per hundredweight—the first specific duty imposed on pig-iron; hammered bar was charged with 75 cents a hundredweight, instead of 45 cents, as in 1816; and higher duties were put on castings, anchors, nails, and spikes.⁴⁷ These duties were comparatively heavy; and with a steady fall in the price of iron, especially after the crisis of 1818–19, they became proportionately heavier and heavier. Nevertheless, in the tariff of 1824 they were further increased. The rate on hammered bar went up to 90 cents a hundredweight; that on rolled bar still remained at $1.50, as it had been fixed in 1816. In 1828 a still further increase was made in the specific duties on all kinds of iron, although the continual fall in prices was of itself steadily increasing the weight of the specific duties. The duty on pig-iron went up to 64 cents a hundred-weight; that on hammered bar to a cent a pound (that is, $1.12 a hundred-weight); that on tolled bar to $37 a ton. In 1832 duties were reduced in the main to the level of those of 1824, and in 1833 the Compromise Act, after maintaining the duties of 1832 for two years, gradually reduced them still further, till in 1842 they reached a uniform level of 20 per cent. On the whole, it is clear that after 1818 a system of increasingly heavy protection was applied to the iron manufacture, and that for twenty years this protection was maintained without a break. From 1818 till 1837 or 1838, when the reduction of duty under the Compromise Act began to take effect to an appreciable extent, the duties on iron in its various forms ranged from 40 to 100 per cent. on the value.

It is worth while to dwell for a moment on the heavy duty on rolled iron—much higher than that on hammered iron—which was adopted in 1816, and maintained throughout this period. Congress attempted to ward off the competition of the cheaper rolled iron by this heavy discriminating duty, which in 1828 was equivalent to one hundred per cent. on the value. When first established in 1816, the discrimination was defended on the ground that the rolled iron was of inferior quality, and that the importation of the unserviceable article should be impeded for the benefit of the consumer. The scope of the change in the iron manufacture, of which the appearance of rolled iron was one sign, was hardly understood in 1816 and 1818, and this argument against its use may have represented truthfully the animus of the discriminating duty. But in later years the wish to protect the consumer from impositions hardly continued to be the motive for retaining the duty. Rolled bar-iron soon became a well-known article, of considerable importance in commerce. The discriminating duty was retained throughout, and in 1828 even increased; it was still levied in the tariff of 1832; it reappeared when the Whigs carried the tariff of 1842 and it did not finally disappear till 1846. The real motive for maintaining the heavy tax through these years undoubtedly was the unwillingness of the domestic producers to face the competition of the cheaper article. The tax is a clear illustration of that tendency to fetter and impede the progress of improvement which is inherent in protective legislation. It laid a considerable burden on the community, and, as we shall see, it was of no service in encouraging the early growth of the iron industry. It is curious to note that the same contest against improved processes was carried on in France, by a discriminating duty on English rolled iron, levied first in 1816, and not taken off till 1860.⁴⁸

After 1815 the iron-makers of the United States met with strong foreign competition from two directions. In the first place, English pig and rolled iron was being produced with steadily decreasing cost. The use of coke became universal in England, and improvements in methods of production were constantly made. Charcoal continued to be used exclusively in the furnaces of this country; for the possibility of using anthracite had not yet been discovered, and the bituminous coal fields lay too far from what was then the region of dense population to be available. While coke-iron was thus driving out charcoal-iron for all purposes for which the former could be used, the production of charcoal-iron itself encountered the competition of Sweden and Russia. As the United States advanced in population, the more accessible forests became exhausted, and the greater quantity of charcoal-iron needed with the increase of population and of production, could be obtained at home only at higher cost. The Scandinavian countries and Russia, with large forests and a population content with low returns for labor, in large part supplied the increased quantity at lower rates than the iron-makers of this country. Hence the imports of iron show a steady increase, both those of pig-iron and and those of rolled and hammered bar; the rolled bar coming from England, and the hammered bar from Sweden and Russia. The demand for iron was increasing at a rapid rate, and there was room for an increase both of the domestic production and of imports; but the rise in imports was marked. Notwithstanding the heavy duties, the proportion of imported to domestic iron from 1818 to 1840 remained about the same.⁴⁹

Since importations continued regularly and on a considerable scale, the price of the iron made at home was clearly raised, at the seaboard, over the price of the foreign iron by the amount of the duty. The country, therefore, paid the iron tax probably on the greater part used, whether of foreign or domestic origin, in the shape of prices from forty to one hundred per cent. higher than those at which the iron could have been bought abroad.

The fact that the manufacture, notwithstanding the heavy and long-continued protection which it enjoyed, was unable to supply the country with the iron which it needed, is of itself sufficient evidence that its protection as a young industry was not successful. It is an essential condition for the usefulness of assistance given to a young industry, that the industry shall ultimately supply its products at least as cheaply as they can be obtained by importation; and this the iron manufacture failed to do. There is, however, more direct evidence than this, that the manufacture was slow to make improvements in production, which might have enabled it eventually to furnish the whole supply needed by the country, and in this way might have justified the heavy taxes laid for its benefit. Pig-iron continued to be made only with charcoal. The process of puddling did not begin to be introduced before 1830, and then inefficiently and on a small scale.⁵⁰ Not until the decade between 1830 and 1840, at a time when the Compromise Act of 1833 was steadily decreasing duties, was puddling generally introduced.⁵¹ The iron rails needed for the railroads built at this time—the first parts of the present railroad system—were supplied exclusively by importation. In 1832 an act of Congress had provided that duties should be refunded on all imported rails laid down within three years from the date of importation. Under this act all the first railroads imported their rails without payment of duty. Finally, the great change which put the iron manufacture on a firm and durable basis did not come till the end of the decade 1830–40, when all industry was much depressed, and duties had nearly reached their lowest point. That change consisted in the use of anthracite coal in the blast-furnace. A patent for smelting iron with anthracite was taken out in 1833; the process was first used successfully in 1836. In 1838 and 1839 anthracite began to be widely used. The importance of the discovery was promptly recognized; it was largely adopted in the next decade, and led, among other causes, to the rapid increase of the production of iron, which has been so often ascribed exclusively to the protection of the tariff of 1842. With this change the growth of the iron manufacture on a great scale properly begins.⁵²

It seems clear that no connection can be traced between the introduction and early progress of the iron manufacture, and protective legislation. During the colonial period, as we have seen, under the old system of production of iron, the country had exported and not imported iron. The production of charcoal-iron and of hammered bar was carried on before the adoption of the Constitution. During the first twenty years after 1789, the iron-makers still held their own, although the progress of invention elsewhere, and the general tendency in favor of heavy imports, caused a growing importation from abroad. The production of iron by the old methods and with the use of charcoal was therefore in no sense a new industry. If the business of making charcoal-iron could not be carried on or increased during this and the subsequent period, the cause must have lain in natural obstacles and disadvantages which no protection could remove. After 1815, the new régime in the iron trade had begun; the use of coke in the blast-furnace, and the production of wrought-iron by puddling and rolling, had changed completely the conditions of production. The protective legislation which began in 1818, and continued in force for nearly twenty years, was intended, it is true, to ward off rather than to encourage the adoption of the new methods; but it is conceivable that, contrary to the intentions of its authors, it might have had the latter effect. No such effect, however, is to be seen. During the first ten or fifteen years after the application of protection, no changes of any kind took place. Late in the protective period, and at a time when duties were becoming smaller, the puddling process was introduced. The great change which marks the turning-point in the history of the iron manufacture in the United States—the use of anthracite—began when protection ceased. It is probably not true, as is asserted by advocates of free trade,⁵³ that protection had any appreciable influence in retarding the use of coal in making iron. Other causes, mainly the refractory nature of the fuel, sufficiently account for the failure to use anthracite at an earlier date. The successful attempts to use anthracite were made almost simultaneously in England and in the United States.⁵⁴ The failure to use coke from bituminous coal, which had been employed in England for over half-a-century, was the result of the distance of the bituminous coal-fields from the centre of population, and of the absence of the facility of transportation which has since been given by railroads. It is hardly probable, therefore, that protection exercised any considerable harmful influence in retarding the progress of improvement. But it is clear, on the other hand, that no advantages were obtained from protection in stimulating progress. No change was made during the period of protection which enabled the country to obtain the metal more cheaply than by importation, or even as cheaply. The duties simply taxed the community; they did not serve to stimulate the industry, though they probably did not appreciably retard its growth. We may therefore conclude that the duties on iron during the generation after 1815 formed a heavy tax on consumers; that they impeded, so far as they went, the industrial development of the country; and that no compensatory benefits were obtained to offset these disadvantages.