§ 3. Growth of a protective system. The protective policy developed at first accidentally, as it were, out of the practice of levying taxes for revenue only. Tolls, dues (or duties), customs (that is, in former times the customary dues paid by merchants, now the dues fixed by law), tariffs (that is, schedules or lists of rates of duties) were at first intended to raise revenues for the sovereign, the city, or the state. The unintended, and to some degree inevitable, result of the taxation of goods in commerce, whether imports or exports, is to prevent and discourage trade and to raise the prices of the goods imported. Any change in tariff duties, therefore, at once alters the previously existing adjustment of profits and of industries in a country.

The first effect of the tariff is the same as that of any new factor in enterpriser's cost; the same, for example, as that of a new domestic tax on an article or as that of a rise of freight rates - the domestic price of the taxed article tends to rise. Other results then follow. If the article cannot, even at the higher price, be produced within the country (as in the cases of oranges, spices, and coffee in England, Norway, and Sweden), its consumption is reduced. The lessening of demand may, however, depress somewhat the price in the producing country. But as such a tariff does not increase home production of the taxed article, it is therefore for revenue, not for protection.

But if the article can be profitably produced in the importing country at the new price, "home industries" will start. Where the transportation charges are low, as on the coasts and on the main lines of railways, some imported goods may be bought, while farther inland, where transportation charges are higher, home production of some or all grades of such goods may take place. If the whole demand at home is supplied and all imports stop, therewith cease all revenues to the government from that source. A completely protective tariff is completely prohibitive.

Experience abundantly shows that, with a few exceptions, due to climate and natural resources, it is impossible to put into effect the most moderate schedule of duties without the increase in price at once causing some men to shift their occupations, and to begin producing articles of the kinds that have risen in price. At once appears a group of "protected industries," the owners of which are dependent for the safety and profits of their investments, and workmen in which are dependent for the security of their present jobs (possibly for the chance to continue the pursuit of highly skilled trades), on the continuance, if not the increase, of the existing tariff rates. A tariff may be adopted mainly from stress of financial need (as in our own history in 1789 or in 1861), but its modification or repeal cannot be decided by fiscal considerations. The "incidental protection" it affords has created a wealthy and influential group of employers and a large body of employees who are irresistibly tempted to exercise their influence in politics almost solely in favor of continuing and of increasing the rates to the sacrifice of the higher civic life of their communities. Of course, the beneficiaries of the tariff usually believe sincerely that it is indispensable for the prosperity of the country as a whole, and they can do much to persuade others to the same opinion. This commercial motive for maintaining existing protective tariffs explains in large part their wide prevalence, whatever other reasons may be adduced in their justification.

§ 4. The infant-industry argument. Most free-trade writers concede a limited validity to the claim that protection may be used to encourage infant industries and thus diversify the industries of the country. If the natural resources of a land are adapted to an industry, it may be called into being earlier by a fostering protective tariff. This is merely anticipating and hastening the natural order of progress. In the American colonies the manufactures of such goods as iron, cloth, hats, ships, and furniture sprang up and continued not only without "protection," but despite numerous harassing trade restrictions made in the interest of English merchants. Can it be doubted that many of these industries would have developed and flourished after the adoption of the Constitution with no other favoring influences than those of rich resources and of economy in freights? In the Mississippi Valley since 1880 natural gas, abundant coal, ore, and timber have made possible a great growth of industries without protection against the eastern states. Industries capable of eventual self-support must in most cases naturally appear in due time. Economic forces will bring them out. Protection of infant industries may be likened to a hothouse, anticipating the season by a few weeks and at great cost. The question is whether the mere possession of the hothouse is a luxury worth the price, if meantime the products can be got more cheaply by trade. English manufacturers flourished in the nineteenth century because they were well established, had excellent coal supplies, good stores of iron ore, and low-paid labor which did not have the opportunity of better alternatives, as did the American workman. If America had imported more (it would not have been all) of her iron and coal, the English mines would have begun to shown signs of exhaustion earlier, and America's advantage surely would have asserted itself in time. Her iron manufactures undoubtedly were hastened - they cannot truly be said to have been created - by the protective tariff.

The peculiar advantages of a new country attract labor and enterprise into a few lines. Industries are forced into an earlier diversification by tariffs. Which is the better economic situation? Contrast the life of the workers in Iowa, the Dakotas, and Minnesota, or Kansas, if you please, with that in crowded tenements of New York and in the mining regions of Pennsylvania. Is it so certain that a dense population congested in cities and crowded in factories and mines is a more ideal social aggregation than is a community of prosperous farmers? The smoky industrialism fostered by protection often puts a premium on a low grade of immigrants, crowds them into city slums and into forlorn mill towns, and keeps them aliens to the American spirit. It would be surprising if Americanism on the western plains were not as sound as in the crowded cities. But the infant-industry argument appeals strongly to the enterprise and the speculative spirit of Americans, who like to do all things rapidly and on a large scale. Every village aspires to be a great industrial center. Americans are impatient of the suggestion that things "will come in time"; they like things to come at once.

It must, however, be recognized that in a new country there is often a certain monotony and poverty of life because of the lack of diversified industries. There are not sufficiently varied avenues for the expression and use of the manifold talents of the nation. There are unused materials and opportunities; but the initial expense of experimentation, the initial difficulties of gathering and training a working force, are discouraging to individual enterprise, prices being as they are. A protective tariff is not necessarily and always the best way, but it is one way of helping private enterprise to establish and conduct such industries through their initial period. But, as has been pointed out by many writers, the infant-industry argument is self-limiting, and involves always the assumption that the industries selected as fit for protection are such as ultimately, and within a moderately short period, can grow into self-dependence. The infant must sometime grow to be a man and stand on his own legs, or he is either a chronic invalid or a degenerate.