§ 14. Harm of sudden tariff reductions. It is rarely ap preciated how great is the tactical advantage which the advo cates of a high tariff enjoy in popular political discussion. 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. When a protective rate is first applied or is increased, it calls into existence something visible and tangible, which can be measured in terms of factories built, men employed, and products turned out. The increased cost of these results is diffused among many consumers and reaches them in such indirect ways and in such small increments of price that they are quite un aware of the way they are affected 16 On the other hand, reduction of the tariff works in a direc tion the reverse of its enactment. It may cause local crises and may even bring on a general crisis. The benefits of the lower prices are diffused and lost to view ; the immediate in jury is concentrated and strikingly evident. Factories are closed, investments depreciate, laborers are thrown out of em ployment. The organic nature of local industry causes these evils to be felt by many classes. Merchants, professional men, servants, and skilled laborers, that are tributary to the de pressed industry, suffer. The effects are transmitted to com mercial and financial centers and often credit is much shaken. Then follows a slow and painful process of readjustment.
The low-tariff advocates in America undoubtedly have un derestimated these immediate effects. They have been too ab stractly doctrinaire, have argued too absolutely for the merits of free trade, to be applied instantly regardless of the exist ing distribution of investments and of occupations. They 16 See 8. On the next paragraph, see ch. 10, 11.
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 unim portant in our present conditions. It can, however, be truly said that business can adjust itself in large measure to any settled conditions, and that radical changes, especially sudden and large reductions, are fraught with evils. Long before a new tariff law goes into effect, even months in advance of its passage, while it is merely in prospect, the course of trade is abnormally affected. If the rate is likely to be raised, large importations take place under the lower rate, and for a con siderable time after the law goes into effect imports are small, while prices rise and domestic production gradually increases. But if the rate is likely to fall, importations are for months meager, stocks of goods are reduced to the lowest point, and when the lower rate goes into effect, large importations follow to the injury of domestic producers. In many cases a year or two of notice, time given to enterprisers to adjust their business, would probably do away with a large part both of the serious losses and of the lottery-like gains that other wise occur.
The obvious measure of precaution and of justice would be to put any new rate into effect gradually." The difficulties are of a political nature and in the desire of the party in power to "make a showing" at once of the results of its cam 16 For example, the maximum alteration in any year might be limited to 3.65 per cent of the value of the goods and in any case not to exceed one tenth of the old duty, this change to be applied day by day. Thus, if, on a valuation of $1000, the duty collected under the old rate has been $400 and under the new law is to be $290.50, three years would be required for the full change to become effective, the (eduction each day being $.10 per $1000 valuation. The administration of such a rule
would be simple, and it has been favored by men of practical commer cial experience.
paign pledges, in the one case by starting and stimulating in dustries through a higher tariff and in the other by reducing prices to consumers through a lower tariff. Under the new permanent tariff board, constituted to suggest tariff changes and to administer the tariff laws, it would be possible to apply some such feature.
§ 15. Some lessons from our tariff history. From the checkered 'course of tariff history in America it is difficult to draw clear lessons of wisdom for the future ; but at least certain negative conclusions may be safely drawn. It is a history of a vacillating public opinion toward the policy of protective duties. Always the policy has kept some hold on public sentiment, but it has varied in strength, now waxing, now waning. The time of revisions has been determined nearly always by varying needs of revenue. When more in come has had to be raised, this has nearly always been made the occasion and pretext for increasing the degree of pro tection for many industries. This is not at all a necessary connection, for it would be possible to couple internal revenue taxes and customs duties in such a way that the rates would go up and down together and give the varying amounts of revenue required for the government without appreciably altering the relative profitableness of various private enter prises. Now that customs duties are no longer the chief source of revenues for the federal government, and are out weighed many times in fiscal importance by income taxes and internal revenues, the question of fostering favored in dustries should be more easily kept distinct from that of raising public revenues.
Our tariff history is too largely a record of special favors granted to classes of citizens, to citizens of certain locali ties, and to particular enterprises. This is apparent even in a general survey, but almost every more detailed examination of particular•protective rates reveals evidence of suspicious and sometimes scandalous personal influences at work. The protective policy has always professedly been advocated for the general welfare, to raise wages or to make the country prosperous; but the initiative has always been taken, and the valiant work in contributing funds for campaign purposes and in lobbying bills through Congress has been done, by the interested manufacturers. Even if it were beyond ques tion sound in principle to exclude goods that can be bought more cheaply by trade, it is very doubtful whether any net good could have resulted from this policy as it has been in fact applied and followed. The frequent and unpredictable changes have been a great evil, and have again and again brought unmerited losses to the many in business and still greater and unearned gains to a favored few. It is incredible that such a hit-or-miss, in large part selfishly determined, policy could have been an important cause of our national prosperity. The fundamental causes of the general high wages and popular welfare that we have enjoyed is to be found rather in our rich natural resources, our capacity for self government with free institutions, and the industrial energies of our people." 17 See Vol. I, e.g., pp. 228, 431, 445ff, 466, 490, 506ff. REFERENCES.
Johnson, E. H., The effect of a tariff on production. Q. J. E., 18: 135-137. 1903-1904.
Patten, S. N., The economic basis of protection. Phil. Lippincott. 1890.