The Policy of a Protective Tariff

mation of a monopoly by domestic producers. Then, too, the rate may intentionally be fixed so as to make just possible the survival of the most favorably located or most efficiently oper ated establishments, while compelling the abandonment of other establishments.

It will be seen that the rule of equalizing the cost of production is really not an additional argument for pro tection, but rather is a rule for fixing the proper rate, on the assumption that "protection" is desirable on grounds of any or all of the staple arguments offered in its support. Just how high ought and must the rate on a particular article be to start an infant industry, to preserve the home market for any group of producers, to retain both profits, to give a "favorable balance of trade," to raise wages, and to prevent unemployment? The answer given by the rule is: high enough to prohibit the importation of goods. Either the rule of equalizing monetary costs, or the competitive principle, if strictly applied in favor of all producers, would prohibit all imports. If applied in varying measure in favor of the more favorably situated producers (as regards loca tion, transportation, natural resources, skill, capital, etc.), the rule would protect some and eliminate other home pro ducers. Here again is seen the truth that protection, if it protects, is prohibition of imports.

§ 13. Tariff legislation and business depressions.

The re lation between new tariff legislation and the business condi tions following it has been the subject of much delate in political campaigns. In the few cases where •a relationship has been most often asserted to exist, it is more probable that the tariff change was the result of business conditions pre ceding it than that it was the cause of the conditions follow ing it. For usually a tariff has been revised downward be cause a few years of prosperity with large imports had so increased customs duties that the government has had sur plus revenues. Just when the tariff was reduced, the condi tions were ripe for a crisis. This happened in 1857 (already in 1856 there had been a preliminary halt of business), again in 1872, and on a small scale in 1883. But the main reduc tion resulting from the compromise act of 1833 did not occur until after the crisis of 1837-39 ; the Walker Act of 1846 was passed just as business was starting upward on a long wave of prosperity; and the act of 1894 was passed a full year after the severe crisis of 1893, when business had already entered upon a period of depression. In none of these cases

does it seem reasonable to attribute business depression to the reduction of the tariff, as is commonly done in protec tionist arguments even to the point of attributing the panic of 1893 to the reduction of the tariff a year later ! At several times the tariff has been raised soon after a crisis when a good occasion was presented by the need of larger revenues, as in 1842, 1860, 1875, and 1897. Business at such times is just at the point of the cycle when prosperity is due. The higher tariff of 1842 was succeeded by the low tariff of 1846 without any check to business. The war obscured the ordinary industrial effects of the tariff acts of the sixties. The increase in the year 1875 was followed by four years of hard times and slow recovery. The increase of the tariff in 1890 occurred as business was nearing the top of the cycle, and was followed by two years of prosperity, culminating in the very severe crisis of 189.3. The authors of the tariff of 1897 were peculiarly fortunate in the time of their action, for the country was just fairly recovering from the very severe crisis of 1893, and prosperity was to continue (with brief hesitation in 1900 and 1903) until the severe crisis and panic of 1907.

The advocated' of higher rates are, of course, correct in declaring that the great business prosperity of the years 1915 and 1916 resulted from the unexpected demands in foreign trade growing out of the war, and is not to be credited in large measure to the act of 1913. But reason requires that the same restraint be exercised in crediting to higher protective acts the prosperity that has in some—not all—eases followed their enactment; and requires further that the act of 1913 be not held accountable for the reaction of trade in 1920, inasmuch as a reaction was sure to occur soon after the war ended no matter what kind of tariff act we might chance to have at the time.