1. An increase of the tariff is favorable to many capitalists and to many owners of natural resources. A denial of large general advantages in protection is not the denial of all its influence on value. On the contrary, it cannot be too strongly emphasized that manifold interests are affected by the tariff. Owners of natural mineral resources are among the first to benefit. When the price of iron is low, many iron- and coal-mines may yield no rent and have small prospective values. A tariff forcing home production opens the marginal resources and gives them a large capital value. Factory sites and surrounding lands leap from the level of rural prices to that of city real estate. The owners of farms situated near the new industries have a home market and get scarcity prices, as they alone can supply the needed fresh vegetables and dairy products. Wealth less favorably situated, however, is in many cases depressed in value because its products exchange for smaller amounts of other products.

Influence on the value of capital.

The special gains and the general burden.

2. A tariff is immediately favorable to some enterprises and to special 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 the time enjoy the advantage of being on the ground and 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 their special industry. The burden of higher prices is very soon distributed to a number of less favored citizens. A part of it may be borne by the retail merchant, a part by his customers. 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; they'll not 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 penny more, a few wage-earners gain, and a few enterprisers wax wealthy.

Sudden tariff reduction injurious.

3. A sudden reduction of the tariff causes local crises and may bring on a general crisis. The repeal of the tariff works in a direction the reverse of its enactment. The benefits of the lower prices are diffused; the immediate injury is concentrated and acute. Factories are closed, capital is depreciated, labor is thrown out of employment. The organic nature of local industry causes the evil to be felt by many classes. Merchants, professional men, servants, and skilled laborers that are tributary to the depressed industry, suffer. The effects are transmitted to commercial and financial centers and credit is shaken. The readjustment of industry is slow and much capital is lost in the process.

It is rarely appreciated how great is the tactical advantage enjoyed in political contests by the advocates of a high tariff. They can so easily impress the popular judgment with the evident fruits of their own policy, and with the immediate dangers of the policy of their opponents. The low-tariff advocates in America undoubtedly have made the mistake of underestimating or of quite overlooking these immediate effects. They have been too abstractly doctrinaire, and have argued too absolutely for the merits of free trade. They have opposed one extreme system by another, with no thought of the inexpediency and injustice of sweeping changes. There is a strong feeling among business men that any tariff, be it high or low, is better than a shifting policy. Despite the great preponderance of domestic production over foreign trade, it is perhaps too much to say that the tariff is unimportant in our present conditions. It can, however, be said that the tariff agitation has taught that radical changes, especially sudden and large reductions, are fraught with evils, and that business can adjust itself in large measure to any settled conditions. The future of the tariff discussion in America is hard to prophesy. The infant-industry argument now is of little force. With the widening of our international relations are growing interests favorable to reciprocity or to other freer trade relations.

The two policies in political discussion.

Questions On Chapter 51. The Protective Tariff

1. If all trade is exchange do not the members of a trust reduce their income when they raise the price of their products by artificial agreement?

2. Is there any likeness between trade-unions and tariffs? Between tariffs and factory legislation?

3. Can it be of advantage to trade freely with one nation if general free trade is bad?

4. Who gained when Hawaiian sugar (before annexation) was admitted free of duty, while other sugar was taxed?

5. If it would pay us to admit goods free, may we be justified in taxing them to force concessions from the other country?

6. What have you read this year about reciprocity?