holders’ Rebellion, as the Civil War was called, had drawn its
strength largely from the free-trade sentiment. The policy of the
protectionist party had expanded with the growth of the country
and the necessity of coming to terms with the antagonistic
elements. Thus at first the platform of the protectionists had
been one of reasonably low duties on manufactured commodities,
low duties on half-manufactured and no duties at all on raw
material. But as the country advanced, and it was seen how the
interests of manufacturing had been quickened by the policy
of discrimination, those engaged in producing raw materials and
half-manufactured commodities demanded that they too should
be considered. As this concession had to be made by the manufacturers,
they were compelled to justify it by other arguments
than those used at first. The infant-industry argument gave
place to the proposition, that as long as the prices of raw materials
and labour were higher in America than abroad, it would be
necessary to maintain countervailing duties at least equal to
this difference, in order to protect American industry. One
branch after another of manufacturing or agriculture was
included and given the benefit of protection. In order to
have satisfactory theoretical basis for such a policy, the theory
was advanced that foreign trade was a necessary evil, to be
diminished as much as possible. The ideas were advanced and
spread throughout the country: that the home market should
be reserved for home products; that the labourers should be
protected against the infiux of foreign cheap labour (Chinese
Exclusion Acts; restrictive immigration laws); that prices
should be kept high, so as to enable employers to pay high wages;
that shipping should be encouraged by subsidies, the sugar
industries by bounties; that the nation should become ever more
independent of foreign nations for all its industrial products,
and capable of holding its own against the world in industry as
well as in arms.
The protective party has been the national party during a time when the greatest question before the American people was whether it was to be one nation, or two, or twenty, and it naturally profited by the inevitable victory of nationalism; it has always stood for honest payment of national and state debts, if not in the standard according to which they were contracted, in a still better one, and it has profited naturally by this attitude in a country where the development of trade and industry was rapidly and steadily towards a capitalistic state of society in which such policy is favoured; it has stood for a vigorous and active independence in the field of world politics, and it has naturally profited by this fact in a country which was rapidly forging ahead to take its place among the greatest of existing nations, and with an ever-increasing self-consciousness was ready to assert itself among the nations of the world; it has stood for free labour against slave labour, and consequently profited here again in a country whose greatest conflict turned upon the question whether the system of slave labour should be extended or not; it has stood for high wages for American labourers, and in words at any rate has advocated a policy directed to protecting them against competition with the “pauper labour” of the Old World. It has stood for government activity in the direction of developing railways and canals; of establishing education upon national lines, making it free, in all grades from the kindergarten to the university, to all citizens of the republic, and it has profited by this association in a country where all influences were telling in favour of this tendency. In short, whatever one may think of the wisdom or folly of trying to develop national industry by a system of discriminating duties, the protective party as such in the United States has been on the progressive side of so many of the deep questions of national importance that it has obtained and kept the allegiance of thousands of men who would have been glad to see a change, or indeed a reversal, in the tariff policy of the party.
The history of the tariff policy in Germany had been very similar to that of the United States. Beginning with the establishment of absolute free trade among the various German states in the earlier customs union, it extended this policy, by the establishment of the North German Confederation and the new German Empire, to all the states nowGermany. included in the federation. The long-wished-for political union meant political independence, and when political independence was once achieved, industrial and commercial independence were next desired. Within the empire itself it was necessary, if the new organization were to be strong and vigorous, that the central government should become independent of the individual states; and this could be best effected by giving it a. revenue system based upon import duties, which in the long run has enabled the central government to subsidize the state governments, and thus bring them still further under its influence. To develop this system the political support of some strong party was needed. This party was found in the protectionist elements, which have thus again become the national party in a state which was being rapidly nationalized; the industrial party in a society which was rapidly passing from the agricultural to the industrial condition; the capitalistic party in a society which was rapidly becoming capitalistic in all its tendencies. It stood for industrial and commercial, as well as political, independence of other countries, and thus satisfied the longing for national unity and independence of a people which had suffered for centuries from disunion and dependence.
These two examples may serve to explain how the two most powerful industrial nations next to Great Britain became and remained highly protectionist in sentiment and in action, and how they both opened the 20th century with a more openly declared and a more fully developed system of protection than ever before.
Protection as a theory or doctrine is to a certain extent an outgrowth or modification of the old doctrines of mercantilism. In its modern form, however, it dates really from the celebrated report on manufactures made by Alexander Hamilton when secretary of the U.S. Treasury in the year 1791. The views there advanced have Modern Advocates and Critics. been further developed by Friedrich List and Henry C. Carey, and have in later years been carried along somewhat different lines to their logical conclusions by Simon N. Patten and George Gunton. Starting from an argument in favour of temporary duties on manufactured goods imported from abroad until such time as the infant industry might take firm root, the development proceeded through List, who favoured the maintenance of such duties until the country had passed into the manufacturing stage as a whole, and then through Carey to Patten and Gunton, who maintain that a protective policy, extended to cover agriculture, trade and mining, should be preserved as the permanent policy of the country until the entire world is one nation, or all nations have reached the same level of political, economic and social efficiency. The protective policy, which a century ago was to be, in the view of its advocates, temporary and partial, has become to-day, in the arguments of its apologists, permanent and comprehensive. We must content ourselves here with a brief statement of the arguments of the leading and most successful defenders of modern protectionism.
Alexander Hamilton, at that time secretary of the treasury, submitted his celebrated report on manufactures to the Congress of the United States on the 5th of December 1791. It is in a certain sense the first formulation of the modern doctrine of protection, and all later developments start from it as a basis. It is a positive argument directed to proving thatHamilton. the existence of manufacturing is necessary to the highest development of a nation, and that it may be wisely promoted by various means, of which the most important is a system of discriminating duties upon foreign imports. Among the objects to be attained by the development of a flourishing manufacturing industry are mentioned: (1) Independence of foreign nations for military and other essential supplies. (2) A positive augmentation of the produce and revenue of society, growing out of (a) division of labour, (b) extensive use of machinery, (c) additional employment to classes of the community not ordinarily engaged in business. (3) An increase in the immigration of skilled labourers from foreign countries. (4) A greater scope for the diversity
