This section is from the "The Science Of Wealth" book, by Amasa Walker.
The tariff of 1816 was the first ever laid for protection, and is estimated at twenty-four per cent. Four years afterwards, viz. in 1820, the tariff was increased. Eight years afterwards (1828), a very great advance was made, which is placed in our estimate at forty-eight per cent; but it may have been much higher than that, as many articles were charged with high specific duties, amounting to from one hundred to two hundred per cent. It was almost prohibitory, and gave such umbrage to South Carolina and other cotton-growing States, that the celebrated compromise tariff of 1832 was enacted, which reduced the duties at the rate of ten per centum, on all over twenty per cent, for ten years; so that, at the end of that time, there would only remain the twenty-per-cent duty.
This tariff came down to its minimum in 1842, a time of great depression of prices and trade, growing out of the monetary revulsion through which the country had just passed. A strong and successful appeal was made for an increase of duties; and the tariff known as that of 1842 was established, giving high protection. This occasioned so much dissatisfaction, that, after four years, the rates were again reduced by the tariff of 1846. This remained in operation for the unprecedented period of eleven years, when another reduction was effected by the tariff of 1857. This lasted for four years, when the necessities of the treasury, in consequence of war, required the imposition of higher duties in 1861; since which they have been still further advanced.
With these explanations of the diagram, we are prepared to inquire into its teachings.
Is there any such correspondence between the two lines as to indicate that one is governed by the other? Does it appear, that, as the tariff rises, importations fall off; that, as it is lowered, importations increase? Certainly not. We can perceive no such striking correspondence between the two lines as to lead us to believe that importations are governed greatly by the tariff.
There seems to be a disturbing influence which deranges the natural movement of the line of consumption.
The two lines clearly do not show such a correspondence as to prove that importations are uniformly governed by the tariff.
A reference to Diagram No. 8 will, we think, show the disturbing cause, or rather by what law importations are controlled.
Here we find a correspondence so uniform and persistent as to decide the question, beyond cavil, that the demand for foreign merchandise depends upon the quantity of currency in the country; and, as that increases or diminishes, so does the consumption of imported articles.
The immense expansion of 1836 carried the consumption up to $10.93 per capita, under a medium tariff; while, under a still lower one, in 1840, the consumption was but $5.21. Whereas, if consumption is governed by the tariff, it should have been higher than in 1836.
According to the natural effects of the tariff (the enhanced price of foreign commodities), consumption should be highest when the tariff is lowest, and vice versa. We have seen that such correspondence does not take place. We then conclude that some other force or influence operates to neutralize the power of protective duties, and even reverse the natural effect. The last diagram proves the existence of such a cause, and shows its effects on imports.
Hence we may lay it down as a principle, that a sound currency is more important, as affording protection against foreign competition, than a high tariff.
We close our remarks on this subject, by quoting the following forcible and just statement, found in the " Bankers' Magazine " (New York) for 1859-60, page 2: —
" So far as the currency of a country is alloyed, so far as any thing inferior to bullion is allowed to ride as a dead weight on bullion's back, it is of little consequence whether such dead weight be composed of lead or copper, paper or leather; nor, so far as the country's home trade is concerned, does it matter whether the substitute for bullion circulates in distinct pieces, or is incorporated into the gold and silver coin at the mint. It is of great importance to the profits of our foreign trade, however, that every fraction of gold and silver in our currency should have its own proper share of alloy, or paper inseparably attached to it; so that foreign producers, after they have taken paper-money prices of us for their goods, shall not wind up their business (as they have done hitherto) by palming their share of paper money upon us at par for actual gold. As things now are managed, American trade and industry are made to buy paper at the banks at the price of gold, and sell gold to foreigners at the price of paper."