Tariff Reform

But the problem of how to avert the economic disaster which may follow taking them off is new. Of course the state of mind revealed by the formulation of the above problem is the result of a long habit of regarding taxation as an industrial force, or, at least, as an effective condition of industrial success. There is, however, a problem; in regard to that fact all concur. It is also a rare problem, one for which the only precedent is to be found in our own history, and when the case occurred before, it proved to be fraught with calamity. We are confronted by the dangers of a surplus revenue, and no proposal to do away with the surplus in extravagant 1 Independent, August 16, 1888. 115 116 THE FORGOTTEN MAN AND OTHER ESSAYS expenditures can stand before the common sense of the people. If the taxes are collecting more than the public necessi ties require, then the simple and obvious, and, in fact, the only solution, is not to collect the taxes; let the people keep their own products and do what they please with them. If we do not make a problem there will not be any; if we simply do in the most straightforward manner what the common sense of the situation demands, there will be no difficulty; the consequences will all take care of them selves, and all the imaginary calamities will fail to appear.

If, however, we must have a grand scheme of national prosperity established in advance, then the case is different. During the war a notion grew up here that, through some new dispensation of fate, it was possible for the American people to make war and prosper by it. After the war the notion grew up that the paper money was a condition of success and that we should be ruined if we resumed specie payments. Now we are met by the doctrine that we can not repeal the taxes which were laid during the war, partly in order to carry it on, because our national prosperity is bound up in them. These notions, in fact, are all consistent, and all hang together; they all belong to a philosophy that men prosper by discord and war, not by peace and har mony. According to that philosophy we touched unawares the springs of prosperity when we engaged in a civil war, incurred an immense debt, and laid crushing taxes. Now, therefore, when we ask that the taxes which are no longer necessary may be taken off, the men who have fallen under the dominion of these fallacies tell us that it cannot be done; that our prosperity would be undermined by it.

They have been assuring us for years past that the protec tive system was sure to produce a solid and stable prosper ity; now, by their own statement, it has produced a state of things so weak and unstable that it must be maintained TARIFF REFORM 117 by heavy taxes. The industrial prosperity of the United States proves to be as burdensome to it as the armaments of the European nations are to them. The notion seems to be that protective taxes, laid on imports, are the particular kind of taxes which make na tional prosperity, and which therefore ought not to be touched. It is proposed that internal taxes shall be re duced. If local taxes on real estate, etc., are reduced, everyone rejoices; that is supposed to be a clear and simple gain. I have known the same man to exert him self very actively to scrutinize local expenditures, and reduce local taxes, and to boil with rage against free traders who want to reduce protective taxes. However, there is probably no tax of any kind whatsoever which does not inter fere with the conditions of supply and demand, or indus trial competition, in such a way as to give "protection"

to somebody at the expense of somebody else. There are persons who are now enjoying great advantages in their business from the whisky and tobacco taxes which they would lose if those taxes were repealed. This is one of the incidental mischiefs of all taxation and one of the reasons for insisting that taxation shall be as slight as possible, and, to that end, that government functions shall be limited as much as possible. We are, therefore, face to face with the question whether we are able to reduce our own taxes, and whether we are free to do so. We may fairly ask: if not, why not? It is plain that this is a question of domestic policy and of our own interest altogether. All the attempts to prejudice it by talking about "England" are impertinent, and all alle gations that those of us who want to reduce our own taxes are trying "to give away our market," etc., belong to the worst abuses of political discussion. What is true is that we have built up a vast combination of vested interests, which in a few cases have, and in nearly all cases think US THE FORGOTTEN MAN AND OTHER ESSAYS they have, an interest in maintaining the taxes. These are among ourselves; what they gain, they gain from us; it is with them that we have to contend. They have thus far carried on the fight by all the methods dear to vested interests; they have put forth plausible fallacies, sought alliances, procured delays, appealed to prejudices.

Behind these selfish and sordid interests, however, there is the strong and sincere prejudice which still prevails among the civilized nations of to-day, and which is divid ing them into hostile parties, carrying on tariff wars with each other. I call it "protectionism," because it is not a policy, but a philosophy of national welfare. In the United States it takes the form of various fallacies about the home markets, diversification of industry, wages, etc. As these are all questions of political economy, and as all who talk on the subject at all are talking political economy of some sort or other, it seems that a great work of educa tion is to be done here on the field of economic doctrine. Hitherto the attempt of the politicians has been not to per form this work of education but to thrust it aside. As soon as the issue is formed, however, and the protec tionists are forced to formulate their doctrine, as a doc trine, its absurdity becomes apparent. It is not capable of statement. If we are to have temporary protection, in order to start infant industries, then it will become impera tively necessary, so soon as public attention is occupied by the subject, to say how, and how far, and how long, the system is to be kept up, and the public will demand to know how it is getting on, and at what rate it is approach ing its goal. For this reason those who have any logical directness of thinking, have already advanced to a more intense position; they advocate protectionism as a per manent and universal economic philosophy. In that form it flies in the face of common sense and civilization; in some of the latest forms which it has taken on in the hands TARIFF REFORM 119 of some professors of political economy, it is a kind of economic mysticism.

If, however, the United States could be cut off from all the rest of the world as regards trade and industry, then at least it should be plain that whatever material prosper ity they could gain would be just what they, with their energy, enterprise, and capital, are able to extract from such soil and climate as nature has given to us here. What would be the difference if, then, there were no tax barriers? Certainly none whatever. The wealth which the American people get they must produce by applying their labor and capital to the natural advantages which they possess. With foreign trade open to them, they will not make use of it unless they find an advantage in it; that is, unless Ameri can labor and capital can attain more wealth through ex change than without it. The task of American producers will still be to attain the greatest possible wealth byexpend ing their labor and capital on American soil, either directly, or with an intermediate step of exchange. Wages are only a part of the product of the country; if then, trade increased the amount of commodities at the disposition of the people, it would increase the amount of each share in the distribu tion. This is the simplest common sense of the matter, stripped of all technicalities, and to this the whole discus sion must again and again return.

If now we begin to reduce and abolish the taxes which were laid during the war, we shall simply begin to free the American people from a clog on their energies and a waste of their industrial strength. Every step in this direction is an emancipation under which we may be sure that the national energy which is set free will spring up with the quickest response. The guarantee of this is in the character of the people, and in the natural advantages which they pos sess. Whatever chances we have, we have in the nature of the case; the tariff could not give us any; it could only di120 THE FORGOTTEN MAN AND OTHER ESSAYS vert in one way or another those which nature has given us. This diversion or perversion has now entered into the ex perience and education of our generation. We have no idea of the welfare we should enjoy if we were only free to use the chances which are within our reach: and a great many of us have spun out a kind of political economy to prove that the cords which bind us are the tools by which we work.

WHAT IS FREE TRADE?