The Tariif--"Protection," or Special Privilege?

The Tariif--"Protection," or Special Privilege?

Speech by Woodrow Wilson

EVERY business question, in this country, comes back, sooner or later, to the question of the tariff. You cannot escape from it, no matter in which direction you go. The tariff is situated in relation to other questions like Boston Common in the old arrangement of that interesting city. I remember seeing once, in Life, a picture of a man standing at the door of one of the railway stations in Boston and inquiring of a Bostonian the way to the Common. "Take any of these streets," was the reply, "in either direction." Now, as the Common was related to the winding streets of Boston, so the tariff question is related to the economic questions of our day. Take any direction and you will sooner or later get to the Common. And, in discussing the tariff you may start at the centre and go in any direction you please.

Let us illustrate by standing at the centre, the Common itself. As far back as 1828, when they knew nothing about "practical politics" as compared with what we know now, a tariff bill was passed which was called the "Tariff of Abominations," because it had no beginning nor end nor plan. It had no traceable pattern in it. It was as if the demands of everybody in the United States had all been thrown indiscriminately into one basket and that basket presented as a piece of legislation. It had been a general scramble and everybody who scrambled hard enough had been taken care of in the schedules resulting. It was an abominable thing to the thoughtful men of that day, because no man guided it, shaped it, or tried to make an equitable system out of it. That was bad enough, but at least everybody had an open door through which to scramble for his advantage. It was a go-as-you-please, free-for-all struggle, and anybody who could get to Washington and say he represented an important business interest could be heard by the Committee on Ways and Means.

We have a very different state of affairs now The Committee on Ways and Means and the Finance Committee of the Senate in these sophisticated days have come to discriminate by long experience among the persons whose counsel they are to take in respect of tariff legislation. There has been substituted for the unschooled body of citizens that used to clamor at the doors of the Finance Committee and the Committee on Ways and Means, one of the most interesting and able bodies of expert lobbyists that has ever been developed in the experience of any country, men who know so much about the matters they are talking of that you can put your knowledge into competition with theirs. They so overwhelm you with their familiarity with detail that you cannot discover wherein their scheme lies. They suggest the change of an innocent fraction in a particular schedule and explain it to you so plausibly that you cannot see that it means millions of dollars additional from the consumers of this country propose, for example, to put the carbon for electric lights in two-foot pieces instead of one-foot pieces,—and you do not see where you are getting sold, because you are not an expert. If you will get some expert to go through the schedules of the present Payne-Aldrich tariff, you will find a "rigger" concealed in almost every woodpile, -- some little word, some little clause, some unsuspected item, that draws thousands of dollars out of the pockets of the consumer and yet does not seem to mean anything in particular. They have calculated the whole thing beforehand; they have analyzed the whole detail and consequence, each one in his specialty. With the tariff specialist the average business man has no possibility of competition. Instead of the old- scramble, which was bad enough, we get the present expert control of the tariff schedules. Thus the relation between business and government becomes, not a matter of the exposure of all the sensitive parts of the government to all the active parts of the people, but the special impression upon them of a particular organized force in the business world.

Furthermore, every expedient and device of secrecy is brought into use to keep the public' unaware of the arguments of the high protectionists, and ignorant of the facts which refute them; and uninformed of the intentions of the framers of the proposed legislation. It is notorious, even, that many members of the Finance Committee of the Senate did not know the significance of the tariff schedules which were reported in the present tariff bill to the Senate, and that members of the Senate who asked Mr. Aldrich direct questions were refused the information they sought; sometimes, I dare say, because he could not give it, and sometimes, I venture to say, because disclosure of the information would have embarrassed the passage of the measure. There were essential papers, moreover, which could not be got at.

Take that very interesting matter, that will-o'-the-wisp, known as "the cost of production." It is hard for any man who has ever studied economics at all to restrain a cynical smile when he is told that an intelligent group of his fellow-citizens are looking for "the cost of production" as a basis for tariff legislation. It is not the same in any one factory for two years together. It is not the same in one industry from one season to another. It is not the same in one country at two different epochs. It is constantly eluding your grasp. It nowhere exists, as a scientific, demonstrable fact. But, in order to carry out the presences of the "protective" program, it was necessary to go through the motions of finding out what it was. I am credibly informed that the government of the United States requested several foreign governments, among others the government of Germany, to supply it with as reliable figures as possible concerning the cost of producing certain articles corresponding with those produced in the United States. The German government put the matter into the hands of certain of her manufacturers, who sent in just as complete answers as they could procure from their books. The information reached our government during the course of the debate on the Payne-Aldrich Bill and was transmitted, —for the bill by that time had reached the Senate,—to the Finance Committee of the Senate. But I am told, and I have no reason to doubt it,—that it never came out of the pigeonholes of the committee. I don't know, and that committee doesn't know, what the information it contained was. When Mr. Aldrich was asked about it, he first said it was not an official report from the German government Afterward he intimated that it was an impudent attempt on the part of the German government to interfere with tariff legislation in the United States. But he never said what the cost of production disclosed by it was. If he had, it is more than likely that some of the schedules) would have been shown to be entirely unjustifiable.

Such instances show you just where the centre of gravity is,—and it is a matter of gravity indeed, for it is a very grave matter! It lay during the last Congress in the one person who was the accomplished intermediary between the expert lobbyists and the legislation of Congress. I am not saying this in derogation of the character of Mr. Aldrich. It is no concern of mine what kind of man Mr. Aldrich is; now, particularly, when he has retired from public life, is it a matter of indifference. The point is that he, because of his long experience, his long handling of these delicate and private matters, was the usual and natural instrument by which the Congress of the United States informed itself, not as to the wishes of the people of the United States or of the rank and file of business men of the country, but as to the needs and arguments of the experts who came to arrange matters with the committees.

The moral of the whole matter is this: The business of the United States is not as a whole in contact with the government of the United States. So soon as it is, the matters which now give you, and justly give you, cause for uneasiness will disappear. Just so soon as the business of this country has general, free, welcome access to the councils of Congress, all the friction between business and politics will disappear.

The tariff question is not the question that it was fifteen or twenty or thirty years ago. It used to be said by the advocates of the tariff that it made no difference even if there were a great wall separating us from the commerce of the world, because inside the United States there was so enormous an area of absolute free trade that competition within the country kept prices down to a normal level; that so long as one state could compete with all the others in the United States, and all the others compete with it, there would be only that kind of advantage gained which is gained by superior brain, superior economy, the better plant, the better administration; all of the things that have made America supreme? and kept prices in America down, because American genius was competing with American genius. I must add that so long as that was true, there was much to be said in defense of the protective tariff.

But the point now is that the protective tariff has been taken advantage of by some men to destroy domestic competition, to combine all existing rivals within our free-trade area, and to make it impossible for new men to come into the field. Under the high tariff there has been formed a network of factories which in their connection dominate the market of the United States and establish their own prices. Whereas, therefore, it was once arguable that the high tariff did not create the high cost of living, it is now no longer arguable that these combinations do not,—not by reason of the tariff, but by reason of their combination under the tariff, —settle what prices shall be paid; settle how much the product shall be; and settle, moreover, what shall be the market for labor.

The "protective" policy, as we hear it proclaimed to-day, bears no relation to the original doctrine enunciated by Webster and Clay. The "infant industries," which those statesmen desired to encourage, have grown up and grown gray, but they have always had new arguments for special favors. Their demands have gone far beyond what they dared ask for in the days of Mr. Blaine and Mr. McKinley, though both those apostles of "protection" were, before they died, ready to confess that the time had even then come to call a halt on the claims of the subsidized industries. William McKinley, before he died, showed symptoms of adjustment to the new age such as his successors have not exhibited. You remember what the utterances of Mr. McKinley's last month were with regard to the policy with which his name is particularly identified; I mean the policy of "protection." You remember how he joined in opinion with what Mr. Blaine before him had said—namely, that we had devoted the country to a policy which, too rigidly persisted in, was proving a policy of restriction; and that we must look forward to a time that ought to come very soon when we should enter into reciprocal relations of trade with all the countries of the world. This was another way of saying that we must substitute elasticity for rigidity; that we must substitute trade for closed ports. McKinley saw what his successors did not see. He saw that we had made for ourselves a strait-jacket.

When I reflect upon the "protective" policy of this country, and observe that it is the later aspects and the later uses of that policy which have built up trusts and monopoly in the United States, I make this contrast in my thought: Mr. McKinley had already uttered his protest against what he foresaw; his successor saw what McKinley had only foreseen, but he took no action. His successor saw those very special privileges, which Mr. McKinley himself began to suspect, used by the men who had obtained them to build up a monopoly for themselves, making freedom of enterprise in this country more and more difficult. I am one of, those who have the utmost confidence that Mr. McKinley would not have sanctioned the later developments of the policy with which his name stands identified.

What is the present tariff policy of the protectionists? It is not the ancient protective policy to which I would give all due credit, but an entirely new doctrine. I ask anybody who is interested in the history of high "protective" tariffs to compare the latest platforms of the two "protective" tariff parties with the old doctrine. Men have been struck, students of this matter, by an entirely new departure. The new doctrine of the protectionist is that the 'tariff should represent the difference between the cost of production in America and the cost of production in other countries, plus a reasonable profit to those who are engaged in industry. This is the new part of the protective doctrine: " plus a reasonable profit." It openly guarantees profit to the men who come and ask favors of Congress. The old idea of a protective tariff was designed to keep American industries alive and, therefore, keep American labor employed. But the favors of protection have become so permanent that this is what has happened: Men, seeing that they need not fear foreign competition, have drawn together in great combinations. These combinations include factories (if it is a combination of factories) of all grades: old factories and new factories, factories with antiquated machinery and factories with brand new machinery; factories that are economically and factories that are not economically administered; factories that have been long in the family, which have been allowed to run down, and factories with all the new modern inventions. As soon as the combination is effected the less efficient factories are generally put out of operation. But the stock issued in payment for them has to pay dividends. And the United States government guarantees profit on investment in factories that have gone out of business. As soon as these combinations see prices falling they reduce the hours of labor, they reduce production, they reduce wages, they throw men out of employment,—in order to do what? In order to keep the prices up in spite of their lack of efficiency.

There may have been a time when the tariff did not raise prices, but that time is past; the tariff is now taken advantage of by the great combinations in such a way as to give them control of prices. These things do not happen by chance. It does not happen by chance that prices are and have been rising faster here than in any other country. That river that divided us from Canada divides us from much cheaper living, notwithstanding that the Canadian Parliament levies duties on importations.

But "Ah!" exclaim those who do not understand what is going on; " you will ruin the country with your free trade!" Who said free trade? Who proposed free trade? You can't have free trade in the United States, because the government of the United States is of necessity, with our present division of the field of taxation between the federal and state governments, supported in large part by the duties collected at the ports. I should like to ask some gentlemen if very much is collected in the way of duties at the ports under the particular tariff schedules under which they operate. Some of the duties are practically prohibitive, and there is no tariff to be got from them.

When you buy an imported article, you pay a part of the price to the Federal government in the form of customs duty. But, as a rule, what you buy is, not the imported article, but a domestic article, the price of which the manufacturer has been able to raise to a point equal to, or higher than, the price of the foreign article plus the duty. But who gets the tariff tax in this case? The government' Oh, no; not at all. The manufacturer The American manufacturer, who says that while he can't sell goods as low as the foreign manufacturer, all good Americans ought to buy of him and pay him a tax on every article for the privilege. Perhaps we ought. The original idea was that, when he was just starting and needed support, we ought to buy of him, even if we had to pay a higher price, till he could get on his feet. Now it is said that we ought to buy of him and pay him a price 15 to 120 per cent. higher than we need pay the foreign manufacturer, even if he is a six-foot, bearded "infant," because the cost of production is necessarily higher here than anywhere else. I don't know why it should be. The American workingman used to be able to do so much more and better work than the foreigner that that more than compensated for his higher wages and made him a good bargain at any wage.

Of course, if we are going to agree to give any fellow-citizen who takes a notion to go into some business or other for which the country is not especially adapted,—if we are going to give him a bonus on every article he produces big enough to make up for the handicap he, labors under because of some natural reason or other,—why, we may indeed gloriously diversify our industries, but we shall beggar ourselves. On this principle, we shall have in Connecticut, or Michigan, or somewhere else, miles of hothouses in which thousands of happy American workingmen, with full dinner-pails, will be raising bananas,—to be sold at a quarter apiece. Some foolish person, a benighted Democrat like as not, might timidly suggest that bananas were a greater public blessing when they came from Jamaica and were three for a nickel, but what patriotic citizen would listen for a moment to the criticisms of a person without any conception of the beauty and glory of the great American banana industry, without realization of the proud significance of the fact that Old Glory floats over the biggest banana hothouses in the world!

But that is a matter on one side. What I am trying to point out to you now is that this " protective " tariff, so-called, has become a means of fostering the growth of particular groups of industry at the expense of the economic vitality of the rest of the country. What the people now propose is a very practical thing indeed: They propose to unearth these special privileges and to cut them out of the tariff. They propose not to leave a single concealed private advantage in the statutes concerning the duties that can possibly be eradicated without affecting the part of the business that is sound and legitimate and which we all wish to see promoted.

Some men talk as if the tariff-reformers, as if the Democrats, weren't part of the United States. I met a lady the other day, not an elderly lady, who said to me with pride: "Why, I have been a Democrat ever since they hunted them with dogs." And you would really suppose, to hear some men talk, that Democrats were outlaws and did not share the life of the United States. Why, Democrats constitute nearly one half the voters of this country. They are engaged in all sorts of enterprises, big and little. There isn't a walk of life or a kind of occupation in which you won't find them; and as a Philadelphia paper very wittily said the other day, they can't commit economic murder without committing economic suicide. Do you suppose, therefore, that half of the population of the United States is going about to destroy the very foundations of our economic life by simply running amuck amidst the schedules of the tariff? Some of the schedules are so tough that they wouldn't be hurt, if it did. But that isn't the program, and anybody who says that it is simply doesn't understand the situation at all. All that the tariff-reformers claim is I this: that the partnership ought to be bigger than it is. Just because there are so many of them, they know how many are outside. And let me tell you, just as many Republicans are outside. The only thing I have against my protectionist fellow-citizens is that they have allowed themselves to be imposed upon so many years. Think of saying that the "protective" tariff is for the benefit of the workingman, in [the presence of all those facts that have just been disclosed in Lawrence, Mass., where the worst schedule of all—"Schedule K" -- operates to keep men on wages on which they cannot live. Why, the audacity, the impudence, of tile claim is what strikes one; and in face of the fact that the workingmen of this country who are in unprotected industries are better paid than those who are in "protected" industries; at any rate, in the conspicuous industries! The Steel schedule, I dare say, is rather satisfactory to those who manufacture steel, but is it satisfactory to those who make the steel with their own tired hands? Don't you know that there are mills in which men are made to work seven days in the week for twelve hours a day, and in the three hundred and sixty-five weary days of the year can't make enough to pay their bills? And this in one of the giants among our industries, one of the undertakings which have thriven to gigantic size upon this very system.

Ah, the whole mass of the fraud is falling away, and men are beginning to see disclosed little groups of persons maintaining a control over the dominant party and through the dominant party over the government, in their own interest, and not in the interest of the people of the United States!

Let me repeat: There cannot be free trade in the United States so long as the established fiscal policy of the federal government is maintained. The federal government has chosen throughout all the generations that have preceded us to maintain itself chiefly on indirect instead of direct taxation. I dare say we shall never see a time when it can alter that policy in any substantial degree; and there is no Democrat of thoughtfulness that I have met who contemplates a program of free trade.

But what we intend to do, what the House of Representatives has been attempting to do and will attempt to do again, and succeed in doing, is to weed this garden that we have been cultivating. Because, if we have been laying at the roots of our industrial enterprises this fertilization of protection, if we have been stimulating it by this policy, we have found that the stimulation was not equal in respect of all the growths in the garden, and that there are some growths, which every man can distinguish with the naked eye, which have so overtopped the rest, which have so thrown the rest into destroying shadow, that it is impossible for the industries of the United States as a whole to prosper under their blighting shade. In other words, we have found out that this that professes to be a process of protection has become a process of favoritism, and that the favorites of this policy have flourished at the expense of all the rest. And now we are going into this garden and weed it. We are going into this garden and give the little plants air and light in which to grow. We are going to pull up every root that has so spread itself as to draw the nutriment of the soil from the other roots. We are going in there to see to it that the fertilization of intelligence, of invention, of origination, is once more applied to a set of industries now threatening to be stagnant, because threatening to be too much concentrated The policy of freeing the country from the restrictive tariff will so variegate and multiply the undertakings in the country that there will be a wider market and a greater competition for labor; it will let the sun shine through the clouds again as once it shone on the free, independent, unpatronized intelligence and energy of a great people.

One of the counts of the indictment against the so-called "protective'' tariff is that it has robbed Americans of their independence, resourcefulness, and self-reliance. Our industry has grown invertebrate, cowardly, dependent on government aid. When I hear the argument of some of the biggest business men in this country, that if you took the "protection" of the tariff off they would be overcome by the competition of the world, I ask where and when it happened that the boasted genius of America became afraid to go out into the open and compete with the world? Are we children, are we wards, are we still such puerile infants that we have to be fed out of a bottle? Isn't it true that we know how to make steel in America better than anybody else in the world?

Yet they say, "For Heaven's sake don't expose us to the chill of prices coming from any other quarter of the globe." Mind you, we can compete with those prices. Steel is sold abroad, steel made in America is sold abroad in many of its forms, much cheaper than it is sold in America. It is so hard for people to get that into their heads!

We set up a kindergarten in New York. We called it the Chamber of Horrors. We exhibited there a great many things manufactured in the United States, with the prices at which they ere sold in the United States, and the prices at which they were sold outside of the United States, marked on them. If you tell a woman that she can buy a sewing machine for eighteen dollars in Mexico that she has to pay thirty dollars for in the United States, she will not heed it or she will forget it unless you take her and show her the machine with the price marked on it. My very distinguished friend, Senator live, of Oklahoma, made this interesting proposal: that we should pass a law that every piece of goods sold in the United States should have on it a label bearing the price at which it sells under the tariff and the price at which it would sell if there were no tariff, and then the Senator suggests that we have a very easy solution for the tariff question. He does not want to oblige that great body of our fellow-citizens who have a conscientious belief in "protection" to turn away from it. He proposes that everybody who believes in the "protective" tariff should pay it and the rest of us should not; if they want to subscribe, it is open to them to subscribe.

As for the rest of us, the time is coming when we shall not have to subscribe. The people of this land have made up their minds to cut all privilege and patronage out of our fiscal legislation, particularly out of that part of it which affects the tariff. We have come to recognize in the tariff as it is now constructed, not a system of protection, but a system of favoritism, of privilege, too often granted secretly and by subterfuge, instead of openly and frankly and legitimately, and we have determined to put an end to the whole bad business, not by hasty and drastic changes, but by the adoption of an entirely new principle,—by the reformation of the whole purpose of legislation of that kind. We mean that our tariff legislation henceforth shall have as its object, not private profit, but the general public development and benefit. We shall make our fiscal laws, not like those who dole out favors, but like those who serve a nation. We are going to begin with those particular items where we find special privilege entrenched. We know what those items are; these gentlemen have been kind enough to point them out themselves. What we are interested in first of all with regard to the tariff is getting the grip of special interests off the throat of Congress. We do not propose that special interests shall any longer camp in the rooms of the Committee on Ways and Means of the House and the Finance Committee of the Senate. We mean that those shall be places where the people of the United States shall come and be represented, in order that everything may be done in the general interest, and not in the interest of particular groups of persons who already dominate the industries and the industrial development of this country. Because no matter how wise these gentlemen may be, no matter how patriotic, no matter how singularly they may be gifted with the power to divine the right courses of business, there isn't any group of men in the United States or in any other country who are wise enough to have the destinies of a great people put into their hands as trustees. We mean that business in this land shall be released, emancipated.

Source: Woodrow Wilson, The New Freedom ( New York: Doubleday, Page,1913):136-162 by Cindy Alexander