Imagens das páginas
PDF
ePub

development of the country. In America the trend from 1828 onwards was towards lower tariff duties, while the British colonies followed a policy of almost free imports during their first ten years of self-government. Thus the middle years of the century found the equality of natives and strangers in commercial dealings established, the exclusive or preferential exploitation of colonies renounced, navigation freed from discriminations and restraint, lower tariffs general, and government control of commerce at low ebb. Disraeli, looking round in about 1860, came to the conclusion that protection was not merely dead, but damned. That this obituary was at least premature the next chapter will show.

[ocr errors]
[ocr errors]

Books Recommended. Armitage-Smith, G. A., "The Free Trade Movement and its Results''; Cunningham, W., "The Free Trade Movement''; Morley, J., "Life of Cobden"; Ogg, F. A., Economic Development of Modern Europe, chaps. 4, 12-15; Levi, L., "History of British Commerce"; Slater, G., "Making of Modern England"; Porter, G., "Progress of the Nation"; Gide, C., "Political Economy," chapter on "Commercial Policy"; Taussig, F. W., "Principles of Economics"; Buxton, S., "Arguments on Either Side of the Fiscal Question"; Levy, H., "Economic Liberalism'; Day, C., "History of Commerce.'

THE RETURN TO PROTECTION.

'I BELIEVE that if you abolish the Corn Laws honestly, and adopt free trade in its simplicity, there will not be a tariff in Europe that will not be changed in less than five years to follow your example." So prophesied Cobden in the days of the fight against the Corn Laws, and Peel and others were firmly convinced that other countries would follow England's example. To some extent the forecast was correct, for during the 20 years after 1846 there was an almost universal trend towards free trade. But the movement was checked about 1871; from that date onwards most countries returned to a protectionist policy, and England witnessed kcen agitations in favour of such a return. This turning on one's tracks needs some explanation.

Causes of the Protectionist Reaction. (1) The growth of nations and national sentiment. The free trade period coincided with that of national wars and national unification. Between 1846 and 1871 three new nations emerged. Italy fused her many small states into one kingdom, and Rome became the capital of a united Italy. On the victories gained over Denmark, Austria, and France Bismarck built up the German Empire. The American Civil War decided definitely that the United States should be one nation. In Russia the serfs were freed, and a vigorous development policy was adopted. Finally, in the East, Japan opened her doors to the outside world, and began to transform herself into a modern state In each of these lands the nation experienced a new sense of strength and optimism. Military and political power were now theirs, and they held their heads high, at times too high. Under the influence of a new-found patriotism the demand arose for economic strength and independence as an essential to real national strength. We have our own army, laws, and constitution; why not our own industries? Thinking in terms of the nation became the rule, and as each country set out not merely to build its own industries, but aiso to wrangle with other nations for slices of Asia and Africa, a bitter international spirit was fostered, of which protection was the natural consequence.

(2) The need for revenue. One of the chief features of modern politics has been the increase in the cost of government. Laissez-faire kept state activities and expenditure down to a minimum, and therefore taxation was low. In 1874 Gladstone could pay his wav with 17 articles on the customs list and an income-tax of 2d. in the £. But even before that time government spending was increasing. The many wars between 1853 and 1871 -in the Crimea, India, Austria, Italy, France, and U.S.A.-all loaded the governments concerned with heavy debts, to meet which additional revenue must be raised. Then in the eighties the race in armaments began, and most countries committed themselves to heavy expenditure in the interests of peace. Meanwhile the abandonment of laissez-faire involved governments in large outlays for internal work. Education, insurance, old-age pensions, poor relief, the administration of industrial laws, etc., all made imperative demands for new sources of revenue. Hence, with defence calling for its tens of millions, and social reform for its millions, new taxation must be

[ocr errors]

imposed. There were two alternatives-direct and indirect taxation. The former, in the shape of land or income-tax, would create much opposition, and might lose for the political party which imposed it a certain amount of support. Indirect taxation, on the other hand, could be dressed up in attractive guise by declaring, "Let us put duties on imported goods, and. then the foreigner will pay the tax. In practice, the foreigner did not as a rule pay, but the customer; but as the payment was made in the form of an extra few pence on the price of the article, the purchaser did not notice it sufficiently to grumble. In certain governments indirect taxation was almost essential. The German Imperial Government needed revenue of its own, in addition to that required by the various states. But since it was forbidden to levy income-tax, it was driven to use the tariff, so adjusted as to compromise between revenue-producing and industry-protecting. The same applied to Australia during the years preceding the War.

Economic Arguments for Protection. The economic arguments for protection have undergone considerable changes during the last 130 years. The first modern protectionist was Alexander Hamilton, who in 1791 submitted to the United States Government a report in favour of such temporary protection as would enable industries to be established in that country. Hamilton said that America must be economically independent of Europe. He maintained that a diversity of industries would enable men to put their talents to the best use, and bring greater wealth to the young nation. Therefore, in order to get new occupations established, let a system of duties and prohibitions on manufactured articles le erected. This, supplemented by the encouragement of inventions, the giving of bounties, and the creation of a sound currency, would bring industries into existence and protect them during their passage through the infant stage. But the protection was only to be for a time, for when the industries had reached adult stature the tariff was to be abolished, and free trade become the rule. Thus in the beginning protection was advocated as a temporary and partial measure. It was to apply only to manufactured articles, and disappear when its purpose had been served.

This idea was elaborated by Frederick List, whose "National System of Political Economy" (1841) became the text-book of German protectionists. List declared that there were three stages in the economic growth of a nation. The first was agricultural. In this stage the best policy for the country was free imports, so that it might get its cloth, agricultural implements, etc., as cheaply as possible. But, said List, no nation can afford to remain permanently agricultural. If it does so, it is helpless when attacked, since it cannot supply its own war requirements. A bad season will ruin it if all its eggs are in the agricultural basket, and the closing of foreign markets against its produce may destroy its export trade. Therefore, no matter at what cost, the nation must pass sooner or later to the second stage, that of industrial development. During this period, its infant industries must be protected by a high tariff wall, and everything sacrificed to secure industrial strength. Under the influence of such a policy the nation will reach economic independence, supplying all its own essential requirements, agricultural and industrial alike, and safe against any fear of inadequate supplies in time of war. When that stage has been reached, industry and agriculture are alike able to stand alone, unaided by government support. They have won the home market, which is the most important one. Foreign competition is now desirable and not dangerous, in

order to compel producers to keep on the most efficient plane. Further, some native goods may even have a chance of finding markets abroad, bringing in return those commodities which other nations are especially well fitted to produce. Therefore let the third stage te ushered in-agriculture, industry, and foreign commerce---with full free trade as the final policy.

Most countries accepted List's arguments so far as the first two stages were concerned. But when it came to the removal of protection from grown-up industries, such as, for instance, the American or German steel trades, protests were made, and List was ignored. Instead of following List and Hamilton, protectionists turned to the arguments of two Americans, Henry Carey and Simon Patten, who advocated protection as a permanent policy for every branch of economic activity. The two chief arguments of these men ran somewhat as follows: (a) The cost of producing raw material and agricultural commodities is lower in some countries than in others, either because of the fertility of the soil, the character of the climate, the cheapness of land, the small amount of taxation or the low cost of labour. Therefore if free trade is the final state, less favoured countries will be unable to find profitable uses for their land and labour. To equalize conditions, therefore, a nation must Landicap the produce of other lands, just as men are handicapped or horses weighted in a race. (b) A tariff not merely assists in the creation of industries; it also helps to establish a certain standard of living, with recognized rates of wages, interest, and profit. If this standard is high it may be wrecked by allowing the free entry of goods produced under a lower standard. For instance, America, behinu her tariff, has built up industries worked by high-paid labour; but if those industries were subjected to the competition of Japanese or Chinese industries, where the workers are said to live on handfuls of rice, then the American standard could not hope to survive the test. Therefore protection must be a permanent policy, or at any rate must continue until the world is one nation, or until all nations enjoy the same economic, social, and political standards These arguments were widely accepted by modern protectionists, and most wage-earners who support protection do so because of their fear of the products of sweated alien labour.

Agricultural Competition. Most of the above arguments, and many others, centring on the fear of the destructive effects of foreign competition, were brought out into sharp relief after 1871 by the action of two countries, Fussia and the United States. Various wars (1854-1878) loaded Russia with debt, the creditors for which were foreigners. During the same period the government was busily pushing a large scheme of state railways, and here again the money used was foreign. Further, Russia wished to get a stock of gold on which to found her currency. Finally, she was importing most of her manufactures. But her exports of goods, especially agricultural, were small, and so she had to pay interest on her national debt and pay for her manufactured imports with gold. She now determined to take drastic steps to turn this outflow of gold into an influx, and therefore erected a high tariff to keep out manufactured imports, while encouraging the export cf timber, wheat, and butter by providing low railway freights to the ports. In this way she hoped not merely to meet her debts, but also to export such a surplus of corn that part payment would have to be made to her in gold. This policy was fairly successful, and under the shelter of the tariff new industries soon sprang up. Her industrial progress was, however, accomplished at the expense of the peasantry, who had to pay high prices for their

manufactured goods, while at the same time being compelled to sell their Produce abroad at very low rates in order to find a market for it. This ricant the flooding of Europe with cheap corn and butter.

A similar flood came from the United States. There, during the Civil War, a heavy tariff had been imposed to help pay for the war, and the manufacturing interests were so strong that the tariff was not reduced when peace came. ilence, on the one side, imports were discouraged. On the other, there was a big agricultural expansion, due to the erection of many railways into the very heart of the arable areas. In these districts of the Middle-West land was given to settlers, no manure was required for the production of crops, and barns or storehouses were unnecessary, because the wheat went straight from the fieid to the elevator. All this meant cheap production. Then the railways made it possible to take the grain to the ports, and the development in steamship traffic allowed cheap carriage to Europe. America was able to flood Europe with cheap food from the west, while Russia did it from the east. Australasia did its bit from the south. The flood ame in full force about 1879. Bad weather had prevailed throughout Western Europe in 1875-6-7, but in 1879 came perhaps the worst summer of the century. The sun seldom shone; the rain seldom stopped. Crops rotted unripe in the fields; there was a small harvest that year. This gave America and Russia their chance. Their corn invaded the market in much larger quantities than before, and, once in, stopped there. Its price was so low that European farmers could not hope to compete. The English farmer must realize 33/- a quarter if he was to pay his way, but the imported grain gave a handsome profit at 25/-. Hence during the years 1876-1893 wheat fell 52 per cent. in price, and the farmers had either to abandon wheat or get protection from their governments. In England they tried to turn from wheat to other products; but barley came down 37 per cent., oats 34 per cent., so there was no hope in that direction. In despair they turned arable land into pasture. In 20 years the area of arable land in Great Britain was reduced by over 2,000,000 acres. Cattle and dairy work were tried, but with no greater success, for butter, cheese, cattle, frozen meat, eggs, fruit, etc., came from the new countries with the provision of refrigeration facilities. Wherever he turned the farmer was beaten by the cheap imported produce. Between 1876 and 1893 beef fell in price 24 per cent., mutton 20 per cent., butter 25 per cent., cheese 30 per cent., and wool 50 per cent. Farms were deserted; between 1881 and 1901 the number of agricultural labourers and farm servants in England and Wales fell 30 per cent., and the capital value of agricultural land was reduced by 50 per cent. between 1875 and 1894.

The above figures apply to British conditions, but affairs in the other Western European countries promised to be as bad. In France disease ruined the vine crop and let in Italian wines. In Germany the chief fear was of American and Russian produce. In short, agriculture was shaken to its very foundations, and the rural interests in France, Germany, and to some extent in England, therefore clamoured loudly for protection.

Industrial Competition. Meanwhile international industrial competition was becoming keener by reason of the rise of new industrial powers. America made great strides after the Civil War; Germany's infant industries grew up with prodigious rapidity, while Japan's industrial expansion came after 1884. In each of these countries the competition of England was felt at first, and therefore industrial interests joined the farmers in demanding

« AnteriorContinuar »