§ 8. The claim that protection raises wages. The most effective popular claim made for protection is that it raises, or maintains, the general scale of wages in the country. This argument takes two forms: first, when wages are low in a country it is claimed that a tariff is needed to raise them; and, secondly, when wages are high it is argued that a tariff alone can preserve them. In Germany the fear was of the higher paid and more efficient labor of England. In America, where general wages at all times have been higher than in England, it was first argued (in the time of Henry Clay) that because of the greater cost of production, due to high wages, the tariff was needed to start certain industries; but after the tariff had long been established and the old argument had been forgotten (even since 1865), it has been urged that the tariff is the cause of high wages, and must be maintained to protect against the "pauper" labor of the older countries. The higher wages in new countries where a tariff exists are always claimed to be the fruits of a protective policy.

7 That there is a certain measure of truth in this opinion is recognized in our discussion of the standard of deferred payments, ch. 5, § 9. But the relation of a world-wide appreciation of the standard money commodity with the burden that this change puts upon debtors has nothing to do with the question now before us, viz.: Does a protective tariff enable a country to keep and increase its proportion of the world's stock of gold; and if it could, would it be a general benefit.

The true cause of the high general scale of wages in America is the greater efficiency of industry under existing conditions.8 Labor is surrounded here with advantages in the forms of rich natural resources and of mechanical appliances such as never before were combined. Because of the scarcity of workers in particular protected industries, wages may be temporarily higher in them than in some other industries; but such workers form a small fraction of the population, and it is impossible to show that the general scale of wages in all occupations is raised by the tariff protecting this fraction.

There is, of course, no question that every tariff change af fects certain enterprises and classes of workmen. Enterprisers already acquainted with and engaged in a business always may hope to gain by the higher prices immediately following a rise in the tariff rates on their particular products. Though they are granted no enduring monopoly by the protection, they for a time enjoy the advantage of being on the ground, and may reap the first fruits of the favoring conditions. The enterpriser usually profits when the price of his product suddenly rises. Usually skilled workmen are affected slowly by competition when there is any considerable increase of prices in their special industries. The important question is, Who bears the burden of the higher prices that result from a tariff? The burden is very soon distributed. A part of it may be for a short time borne by the retail merchants, but ultimately nearly the whole of it must be borne by their customers, the unfortunate, less favored citizens. The weight falling on each is usually small, often unsuspected, always hard to measure. The increased benefit is concentrated in a few industries and accrues to a comparatively few producers. Here is a recipe for riches: get everybody to give you a penny; it's so little that no one will miss it, and it will mean a great deal to you. Something like this happens in the case of many protected industries; every consumer of the article pays a few cents more, a small group of wage-earners temporarily gains, and a few enterprisers wax wealthy.

8 See Vol I, especially p. 228, and chs. 34 and 36.

§ 9. Tariffs and unemployment. The claim that a low tariff is bad for the workers is made with peculiar success in any period when unemployment is greater than usual. It is usually unconvincing to reply that again and again equally bad periods of unemployment have occurred when a high tariff was in force, and that often the most highly protected industries are most affected. It is unconvincing to suggest that fluctuations of unemployment are related rather to the rhythm of industrial cycles and panics, than to any particular level of the tariff, whatever it be.9 The fact that at the moment is seen is that here are some men for the time out of work, and here are some foreign goods coming in. Of course, what is not seen is that if we stop importing goods we thereby eventually will stop the exportation of goods of equal value now being sent in payment, and this must throw as many men out of jobs as we helped into jobs by raising the tariff. But the view easy to take is the short view, and the ulterior consequences seem to the popular mind to be vain imaginings.

An explanation of periodic unemployment involving the same error in a smaller degree is to attribute it to immigration. It is true that after a crisis has occurred, and during the period of widespread unemployment, limitation or prohibition of immigration may prevent aggravating the evil at the time. But immigration as a continuing policy is not the cause of periodic unemployment, but its bad effects will rather be shown in the permanent lowering of the general level of wages.10 But, whatever be the general level of wages, periods of unemployment will recur as long as means have not been found to control marked credit and price fluctuations within the business cycle.

9 See on wages in times of crises, ch. 10, § 6 and § 7; and on tariff changes, ch. 10, § 11 and § 13 below.

§ 10. Exports and exhaustion of the soil. It has been ingeniously argued that a tariff may keep some of the natural agricultural resources of a new country from becoming quickly exhausted. The export of food takes out of the soil and out of the country fertile qualities never to be returned. The shipment of several hundred million dollars worth of food products year after year represented a tremendous drain from the soil of the United States, but this has now largely ceased. The assumption, however, that the use of the food in this country preserves the fertility of our own fields is in the main mistaken. The fertile material in the food for human consumption hauled to a town five miles away from the field is almost as entirely lost as if it were shipped to Europe. Engineering skill has as yet succeeded in returning economically to the fields from which it comes hardly a fraction as much fertile organic matter as that which flows into the sewers, that is dumped into river and ocean, and that is buried in heaps at the borders of our own cities. Artificial fertilizers are increasingly used, to be sure, but they are obtained in other ways. On the other hand, the increased use of iron, coal, and timber, as a result of encouraging manufacturers, has very effectually hastened the exhaustion of the natural resources of the country.