rivers and harbours, &c.; and, finally, the development, at
public expense, of a scheme of technical and commercial education—lower
and higher—adapted to discover and train all
the talent in the community available for developing the industry
and commerce of the country.
If such an account of the features of a protective” policy is objected to on the ground that free trade countries like Great Britain have also adopted some of them, it may be replied that in so far as they have done so they have adopted the principle of protection, namely, that government shall adopt a positive policy looking towards the development, by government aid if necessary, of new branches of commerce and industry and the firmer establishment of old branches. It may further be pointed out that the countries which have adopted the protective policy most fully-the United States, France, Germany and Russiahave most consistently followed out the policy here indicated and in all these countries it has been the so-called protectionist party which has identified itself most fully with the comprehensive policy here suggested.
As a doctrine, protection is the set of principles by which this policy of government aid to industry is justified, and these principles have been elaborated hand in hand with the development of the so-called protective policy sometimes outrunning its actual application and advocating its further extension, more often lagging behind Economic Doctrine. and seeking for means of explaining and defending what had already been done. The present development of the system and theory of protection is a result of the growing predominance- of capitalism in modern society, combined with the tendency of modern politics towards the organization and development of great national states, with the resulting desire to secure their industrial as well as their political independence. It has been further favoured in certain ways by the fact that the hnancial needs of modern states require a resort to indirect taxation, thus making it easier for the capitalistic forces to exploit the tax system for their own benefit; while the wars of the 19th century have favoured in many ways the tendency towards the adoption of special means, like high discriminating duties, to accomplish this end. Hand in hand with this has gone a steady tendency to see in the state a powerful means of promoting the development of trade and industry, and a growing disbelief in the more extreme forms of the free trade doctrine, such as the type known as the Manchester School, the theory of the laissez faire, laissez passer school of economics and politics.
Protection, both as a doctrine and policy, can be best understood by examining the course of its development in those countries adopting it most consistently. Germany and the United States offer the two striking examples of great modern nations adopting a system of protection and developing under its influence. They may in a certain sense serve as types of the kind of state which in the 10th century accepted and defended, in its politics at any rate, the so-called protective system. In both cases the high protective system was associated with the development of nationality, of industry, of capitalism, and of a financial system which favoured the growth of certain elements of the protective policy.
The protective system in the United States began with the adoption of the Constitution in 1789, and found its first formal defence in the celebrated report of Alexander Hamilton on manufactures. The argument and the movement were largely academic. As there was no strong manufacturing interest in existence, so there was no United States. organized capitalistic effort to secure manipulation of the tariff duties in the interest of special industries. There was general agreement, however, that it would be desirable to develop a manufacturing industry in the colonies if it were practicable. A high degree of natural protection was already afforded by the cost of transportation. It was felt, therefore, that a small duty on manufactures would probably serve the purpose, since the development of the manufactures would favour the production of raw material, which would therefore need no special encouragement. It was also felt that a small duty, continued for a few years, would result in the establishment of the industry on such a firm basis that all duties might be abolished. The introduction of this form of protection, i.e. discriminating duties upon imported goods, was greatly assisted, if not originally caused, by the fact that the new government needed money which could most easily be obtained by customs duties. Thus all those parties which were opposed to direct taxes joined their efforts with those interested in securing protective duties, in order to commit the government to the policy of basing its revenue system on a tariff on imports. To these considerations must be added the further one that the country had just thrown off political dependence on Europe, and felt that it must now become industrially independent also, if it were to be a great nation. These influences, then, namely, firstly, the desire of the statesmen of the time to create a revenue system for the Federal government' which would make it absolutely independent of the states; secondly; the wish to develop an industry which would serve the needs of the new country while it promoted its complete independence of the Old World, conspired to commit the Federal government from the beginning to a policy of protection based upon a system of discriminating duties. At the same time a system of discriminating tonnage dues and prohibitory regulations relating to foreign shipping in the coasting trade was adopted to promote and foster the shipping interest. Industry and commerce began to thrive as never before, largely because of the absolute free trade which the Constitution had secured among the states of the Union. The long struggle between France and Great Britain, extending from 1806 to 1812, for the possession of the commerce and the trade of the world, combined with the retaliatory measures 'of the American government itself, practically destroyed American commerce for a time, and finally led to the British-American War of 1812, which closed in 1815. The financial system of the Federal government during this war was based on getting the largest returns from the customs, so that the duties were screwed up still higher. The ten years period of non-intercourse, while it had seriously injured American commerce, had fostered the growth of American manufacturing; and when the close of the War of 1812 brought with it an enormous infiux of foreign goods, particularly from the plethoric warehouses and factories of England, it looked for a time as though the new American industries were' destined to vanish as rapidly as they had grown up. And now for the first time appeared a strong, well-developed, capitalistic party, which was, in spite of some drawbacks, destined to grow until it became one of the most characteristic features of the politics of the republic.
The manufacturers of the country determined the tariff policy of the country, and with few reverses pursued a steadily advancing course of victory down to the close of the 10th century. They secured the maintenance of high duties at the close of the war of 1812, and managed to increase them steadily until the reaction of 1830–1833, when they were forced to content themselves with a lower rate, which continued, with a slight interruption in 1842–1846, until the outbreak of the Civil War in 1861. This was an opportunity which they knew how to utilize to the greatest advantage. During the war, when the government was forced to exploit every possible source of revenue, the protectionist party knew how to turn the necessities of the government to its advantage. The rate of duties was pressed ever higher; and when the war closed, and the taxes could again be lowered, the protectionist managers knew how to lower or remit altogether the non-protective duties, and thus keep high, and even advance to a still higher point, the duties which protected them from foreign competition.
In the meantime the country was turning from agriculture to manufactures at an unprecedented rate. The manufacturing party was becoming ever stronger and more aggressive. As it had also been the national party, it profited by the enormous development of the nationalist sentiment during and after the war. It now became patriotic to favour the development of a national industry. It was treason to advocate free trade-that had been the policy of the slave-holders' party, and the Slave-
