The Forgotten Man, and Other Essays — A Closer Reading

ly papers boast of every step in this development as a thing to be proud of and rejoice in, but in the meantime the legislators on both sides of the water are hard at work to neutralize it by taxation. We, in the United States, have multiplied monstrous taxes on all the things which others make and which we want, to prevent them from being brought to us. The statesmen of the European continent are laying taxes on our meat and wheat, lest they be brought to their people. The arts are bringing us together; the taxes are needed to keep us apart. In France, for instance, the agriculturist complains of American competition--not “pauper labor,” but gratuitous soil and sunlight. He does not want the French artisan to have the benefit of our prairie soil. The government yields to him and lays a tax on our meat and wheat. This raises the price of bread in Paris, where the reconstruction of the city has collected a large artisan population. The government then finds itself driven to fix the price of bread in Paris, to keep it down. But the reconstruction of the city was accomplished by contracting a great debt, which means heavy taxes. These taxes drive the population out into the suburbs. At least one voice has been raised by an owner of city property that a tax ought to be laid on suburban residents to drive them back to the city,[9] and not let them escape the efforts of the city landlord to throw his taxes on them. Then, again, France has been subsidizing ships, and when the question of renewing the subsidy came up, it was argued that the ships subsidized at the expense of the French taxpayer had lowered freight on wheat and made wheat cheap; that is, as somebody justly replied, had wrought the very mischief against which the increased tax had just been demanded on wheat. Therefore the taxpayer had been taxed first to make wheat cheap, and then again to make it dear.

76. Tax A to favor B. If A complains, tax C to make it up to A. If C complains, tax B to favor C. If any of them still complain, begin all over again. Tax them as long as anybody complains, or anybody wants anything. This is the statesmanship of the last quarter of the nineteenth century.

77. Bismarck, too, is going into the business. He has to rule a people who live on a poor soil and have to bear a crushing military system. The consequence is that the population is declining. Emigration exceeds the natural increase. Bismarck’s cure for it is to lay protective taxes against American pork and wheat and rye. This will protect the German agriculturist. If it lowers still more the comfort of the buyers of food, and drives more of them out of the country, then he will go and buy or fight for colonies at the expense of the German agriculturists whom he has just “protected,” although the surplus population of Germany has been taking itself away for thirty years without asking help or giving trouble. What can Germany gain by diverting her emigrants to her own colony unless she means to bring the able-bodied men back to fight her battles? If she means that, the emigrants will not go to her colony.

78. France is also reviving the old colonial policy with discriminating favors and compensatory restraints. She already owns a possession in Algeria, which is the best example of a colony for the sake of a colony. It has been asserted in the French Chambers that each French family now in Algeria has cost the Government (_i.e._, the French taxpayer) 25,000 francs.[10] The longing of these countries for “colonies” is like the longing of a negro dandy for a cane or a tall hat so as to be like the white gentlemen.

(_B_) SUGAR BOUNTIES.

79. The worst case of all, however, is sugar. The protectionists long boasted of beet-root sugar as a triumph of their system. It is now an industry in which an immense amount of capital is invested on the Continent, but cheap transportation for cane sugar, and improvements in the treatment of the latter, are constantly threatening it. Mention is made in _Bradstreet’s_ for June 28, 1885, of a very important improvement in the treatment of cane which has just been invented at Berlin. Germany has an excise tax on beet-root sugar, but allows a drawback on it when exported which is greater than the tax. This acts as a bounty paid by the German taxpayer on the exportation. Consequently, beet-root sugar has appeared even in our market. The chief market for it, however, is England. The consequence is that the sugar, which is nine cents a pound in Germany, and seven cents a pound here, is five cents a pound in England, and that the annual consumption of sugar per head in the three countries[11] is as follows: England, sixty-seven and a half pounds; United States, fifty-one pounds; Germany, twelve pounds. I sometimes find it difficult to make people understand the difference between wanting an “industry” and wanting goods, but this case ought to make that distinction clear. Obviously _the Germans have the industry and the Englishmen have the sugar_.

80. No sooner, however, does Germany get her export bounty in good working order than the Austrian sugar refiners besiege their government to know whether Germany is to have the monopoly of giving sugar to the Englishmen.[12] They get a bounty and compete for that privilege. Then the French refiners say that they cannot compete, and must be enabled to compete in giving sugar to the Englishmen. I believe that their case is under favorable consideration.

80_a._ I have found it harder (as is usually the case) to get recorded information about the trade and industry of our own country than about those of foreign nations. However, we too, although we do not raise beet-sugar, have our share in this bounty folly, as may be seen by the following statement, which comes to hand just in time to serve my purpose.[13] “The export of refined sugar [from the United States] is entirely confined to hard sugars, or, to be more explicit, loaf, crushed, and granulated. This is because the drawback upon this class of sugar is so large that refiners are enabled to sell them at less than cost. The highest collectable duty upon sugar testing as high as 99° is but 2.36, but the drawback upon granulated testing the same, and in the case of crushed and loaf less, is 2.82 less 1 per cent. This is exactly 43 cents per one hundred pounds more than the government receives in duty. But it rarely happens that raw sugar is imported testing 99°, and never for refining purposes. The following table gives the rates of duty upon the average grades used in refining:

Degrees Duty Fair refining testing 89 1.96 Fair refining testing 90 2.00 Centrifugal testing 96 2.28 Beet-sugar testing 88 1.92

It will be clearly seen from the above figures that with a net drawback upon hard sugar of 2.79 our refiners are able to sell to foreigners, through the assistance of our Treasury, sugar at less than cost. Taking, for instance, the net price of centrifugal testing only 97° and the net price less drawback of granulated:

Centrifugal raw sugar testing 97° 6.00 Less duty 2.28 Net ----- 3.72 Granulated refined testing 99° 6.37½ Less drawback 2.71 Net ----- 3.66½ -------- 6½

Nothing could demonstrate the absurdity of the present rate of drawback more clearly than the above. A refiner pays 6½ cents per hundred more for raw sugar testing 2° less saccharine than he sells refined for. Not, however, to the American consumers, but to foreigners. After paying the expenses necessary to refining by the assistance of a drawback, which clearly amounts to a subsidy of about 50 cents a hundred pounds, our large sugar monopolists are assisted by the government to increase the cost of sugar to American consumers. One firm controls almost the entire trade of the east; at all events it is safe to say that the trade of the entire country is controlled by three firms, and the Treasury assists this monopoly in sustaining prices against the interest of the country at large. Up to date the exports of refined sugar have amounted to 83,340 tons, which, taken at 50 cents a hundred, has cost the treasury over $830,000. All this may not have gone into the pockets of the refiners, as the ship owners have obtained a share, but the fact remains that the Treasury is the loser by this amount. Besides this bounty presses hard upon the consumers. They not only have to pay the tax, but during the late rise they were compelled to pay more for their sugar than they otherwise would have done had not the export demand caused by selling sugar to foreigners at less than cost, the Treasury paying the difference, increased prices. While an American consumer is charged 6½ cents for granulated, foreign buyers, through the liberality of our government, can buy it under 3¾ cents. Certainly it is time that the Secretary of the Treasury asked the sugar commission to commence a comprehensive and impartial inquiry.”

81. Of course the story would not be complete if the English refiners did not besiege their government for a tax to keep out this maleficent gift of foreign taxpayers. This, say they, is not free trade. This is protection turned the other way around. We might hold our own on an equal footing, but we cannot contend against a subsidized industry. A superficial thinker might say that this protest was conclusive. The English government set on foot an investigation, not of the sugar refining, but of _those other interests which were in danger of being forgotten_. There was a tariff investigation which was worth something and was worthy of an enlightened government. It was found that the consumers of sugar had gained more than all the wages paid in sugar refining. But, on the side of the producers, it was found that 6,000 persons are employed and 45,000 tons of sugar are used annually in the neighborhood of London in manufacturing jam and confectionery. In Scotland there are eighty establishments, employing over 4,000 people and using 35,000 tons of sugar per annum in similar industries. In the whole United Kingdom, in those industries, 100,000 tons of sugar are used and 12,000 people are employed, three times as many as in sugar refining. Within twenty years the confectionery trade of Scotland has quadrupled and the preserving trade--jam and marmalade--has practically been originated. In addition, refined sugar is a raw material in biscuit making and the manufacture of mineral waters, and 50,000 tons are used in brewing and distilling. Hence the _Economist_ argues (and this view seems to have controlled the decision): “It may be that the gain which we at present realize from the bounties may not be enduring, as it is impossible to believe that foreign nations will go on taxing themselves to the extent of several millions a year in order to supply us and others with sugar at less than its fair price, but that is no reason for refusing to avail ourselves of their liberality so long as it does last.”[14] (See § 83, note.)

82. One point in this case ought not to be lost sight of. If the English government had yielded to the sugar refiners without looking further, all these little industries which are mentioned, and which in their aggregate are so important, would have been crushed out. Ten years later they would have been forgotten. It is from such an example that one must learn to form a judgment as to _the effect of our tariff in crushing out industries_ which are now lost and gone, and cannot even be recalled for purposes of controversy, but which would spring into existence again if the repeal of the taxes should give them a chance.

83. On our side the water efforts have been made to get us into the sugar struggle by the proposed commercial treaties with Spain and England, which would in effect have extended our protective tariff around Cuban and English West Indian sugar.[15] The sugar consumers of the United States were to pay to the Cuban planters the twenty-five million dollars revenue which they now pay to the treasury on Cuban sugar, on condition that the Cubans should bring back part of it and spend it among our manufacturers. It was a new extension of the plan of taxing some of us for the benefit of others of us. Let it be noticed, too, that when it suited their purpose, the protectionists were ready to sacrifice the sugar industry of Louisiana without the least concern. We have been trying for twenty-five years to secure the home market and keep everybody else out of it. _As soon as we get it firmly shut, so that nobody else can get in, we find that it is a question of life and death with us to get out ourselves._ The next device is to tax Americans in order to go and buy a piece of the foreign market. At the last session of Congress Senator Cameron proposed to allow a drawback on raw materials used in exported products. On that plan the American manufacturer would have two costs of production, one when he was working for the home market, and another much lower one when working for the foreign market. As it is now, the exports of manufactured products, of which so much boasting is heard, are for the most part articles sold abroad lower than here so as not to break down the home monopoly market. The proposed plan would raise that to a system, and we should be giving more presents to foreigners.

84. To return to sugar, our treaty with the Sandwich Islands has produced anomalous and mischievous results on the Pacific coast. In the southern Pacific New Zealand is just going into the plan of bounties and protection on sugar.[16] It would not, therefore, be very bold to predict a worldwide catastrophe in the sugar industry within five years.

85. Now what is it all for? What is it all about? Napoleon Bonaparte began it in a despotic whim, when he determined to force the production of beet-root sugar to show that he did not care for the supremacy of England at sea which cut him off from the sugar islands. In order not to lose the capital engaged in the industry, protection was continued. But this led to putting more capital into it and further need of protection. The problem has tormented financiers for seventy-five years. There are two natural products, of which the cane is far richer in sugar. But the processes of the beet-sugar industry have been improved, until recently, far more rapidly than those of the cane industry. Then the refining is a separate interest. If, then, a country has cane-sugar colonies which it wants to protect against other colonies, and a beet-sugar industry which it wants to protect against neighbors who produce beet-sugar, and refiners to be protected against foreign refiners, and if the relations of its own colonial cane-sugar producers to its own domestic beet-sugar producers must be kept satisfactorily adjusted, in spite of changes in processes, transportation, and taxation, and if it wants to get a revenue from sugar, and to use the colonial trade to develop its shipping, and if it has two or three commercial treaties in which sugar is an important item, the statesman of that country has a task like that of a juggler riding several horses and keeping several balls in motion. Sugar is the commodity on which the effects of a world-embracing commerce, produced by modern inventions, are most apparent, and it is the commodity through which all the old protectionist anti-commercial doctrines will be brought to the most decisive test.

(_C_) FORCED FOREIGN RELATIONS TO REGULATE IMPROVEMENT WHICH CAN NO LONGER BE DEFEATED.

86. If we turn back once more to our own case, we note the rise in 1883–1884 of the policy of commercial treaties and of a “vigorous foreign policy.” For years a “national policy” for us has meant “securing the home market.” The perfection of this policy has led to isolation and ostentatious withdrawal from cosmopolitan interests. I may say that I do not write out of any sympathy with vague humanitarianism or cosmopolitan sentiments. It seems to me that local groupings have great natural strength and obvious utility so long as they are subdivisions of a higher organization of the human race, or so long as they are formed freely and their relations to each other are developed naturally. But now suddenly rises a clap-trap demand for a “national policy,” which means that we shall force our way out of our tax-created isolation by diplomacy or war. The effort, however, is to be restrained carefully and arbitrarily to the western hemisphere, and we have anxiously disavowed any part or lot in the regulation of the Congo, although we shall certainly some day desire to take our share in the trade of that district. Our statesmen, however, if they are going to let us have any foreign trade, cannot bear to let us go and take it where we shall make most by it. They must draw _a priori_ lines for it. They have taxed us in order to shut us up at home. This has killed the carrying trade, for, if we decided not to trade, what could the shippers find to do? Next ship-building perished, for if there was no carrying trade why build ships, especially when the taxes to protect manufactures were crushing ships and commerce? (§ 101.) Next the navy declined, for with no commerce to protect at sea, we need no navy. Next we lost the interest which we took thirty years ago in a canal across the isthmus, because we have now, under the no-trade policy, no use for it. Next diplomacy became a sinecure, for we have no foreign relations.

87. Now comes the “national policy,” not because it is needed, but as an artificial and inflated piece of political bombast. We are to galvanize our diplomacy by contracting commercial treaties and meddling in foreign quarrels. No doubt this will speedily make a navy necessary. In fact our proposed “American policy” is only an old, cast-off, eighteenth-century, John Bull policy, which has forced England to keep up a big army, a big navy, heavy debt, heavy taxes, and a constant succession of little wars. Hence we shall be taxed some more to pay for a navy. Then it is proposed to tax us some more to pay for canals through which the navy can go. Then we are to be taxed some more to subsidize merchant ships to go through the canal. Then we are to be taxed some more to subsidize voyages, _i.e._, the carrying trade. Then we are to be taxed some more to provide the ships with cargoes (§ 83).

88. All this time, the whole West Indian, Mexican, and Central and South American trade is ours if we will only stand out of the way and let it come. It is ours by all geographical and commercial advantage, and would have been ours since 1825 if we had but taken down the barriers. Instead of that we propose to tax ourselves some more to lift it over the barriers. Take the taxes off goods, let exchange go on, and the carrying trade comes as a consequence. If we have goods to carry, we shall build or buy ships in which to carry them. If we have merchant ships, we shall need and shall keep up a suitable navy. If we need canals, we shall build them, as, in fact, private capital is now building one and taking the risk of it. If we need diplomacy we shall learn and practice diplomacy of the democratic, peaceful, and commercial type.