© 2001 J. Douglass Klein The Tariff Bill - 1824 Tod replies to Clark. (p. 725) “dismayed as I am...

© 2001 J. Douglass Klein

The Tariff Bill - 1824

Tod replies to Clark. (p. 725)

“dismayed as I am at the time and manner of his renewing this discussion, I am still more dismayed at his arguments.” (725)

“If supported and protected, they [iron workers] will add more real strength and wealth to our country, than the cultivation here of all the cotton raised on this continent, and Egypt and Bengal put together, could possibly do; for this work is carried on by free labor, [and] that [work is carried on] by slaves.” (726)


The Tariff Bill - 1824

Hamilton of South Carolina (p. 726)

Read and understand:

“…if Adam Smith could have risen from his grave...” (727)

“…there are a few salutary truths…” (bottom of 727)

“…if there is any truth which appears to be sustained...” (728)

“…as clear and emphatic as Mr. [Alexander] Hamilton was…” (728)


Documents Relative to the Manufactures


“...the pockets of those that earned the money are the best repository for the same.” (773)

“...we have many men in our country which know nothing about the earning of the money they have in their hands … . Such men I consider dangerous….” (773)

Letter from John Quimby


Documents Relative to Manufactures

“…if … it is found that the interests of the many have been sacrificed, and colossal fortunes thereby erected, for the exclusive benefit of the few, the fact calls upon Government to correct the existing evil by equalizing the burden.” - Henry Stark (684)



Effect of the tariff on agriculturists (pp. 684-85)

1. Raise the price of foreign products.

2. Consume all home (domestic agricultural) production on purchasing high-priced imports.

3. Raise the price of labor.



Effect of the tariff on agriculturists(from letter by Stark, pp. 684-85)

Raise the price of labor: “…to induce men and women to abandon their laudable occupations at home, to the detriment of their farms and households, and … their morals.”



Effect of the tariff on agriculturists (pp. 684-85)

S

D

Labor

WageS

D

Labor

Wage

Labor demand = Value of Marginal Product of Labor

Manufacturing Agriculture

S’S’

P3

D’

P2

P1


Documents Relative to the Manufactures


“...the pockets of those that earned the money are the best repository for the same.” (773)

“...we have many men in our country which know nothing about the earning of the money they have in their hands … . Such men I consider dangerous….” (773)

Letter from John Quimby


Free Trade => Predatory Pricing?

Time

Profits, or prices

Normal

A. Hamilton’s view

B. Smith’s view

C. PredatoryPricing (Dudley’s fear)

D. Dudley’s hope

What happens to domestic prices (and profits) over time with different trade policies? Who gains and who loses?


Eagle Iron Works, p. 291“…I would be annually sinking money, under a protection of 12 1/2 percent. If the General Government, or some file leader of the anti-tariffists, would purchase my property at a fair valuation, I would … cheerfully undertake merchandising, and enjoy thereat the sweets of life, and at the same time educate my family, and clear more money with the capital vested in those works; but a repeal of the duty on iron, without a sale, completely nullifies the capital, for the property is generally calculated for iron works, and would then be come no object to any man of business.”

Some, with good access to resources, would survive and prosper.


Protection or Free Trade (1880)

Thomas H. DudleyWriting in favor of Protection in the U.S.

“You will see what Protection has done and is doing for us; that under its fostering and benign influence we, in almost every branch of manufactures and human industry, are supplying ourselves with products quite equal in finish and quality to those made anywhere…” (p. 3)


Charles Ed. RawlinsReplying to Dudley, and advocating free trade.

“To my mind, the question of Free Trade is primarily a question of principles rather than figures…” (p. 13)

Protection or Free Trade (1880)


Average U.S. Tariff Rates, 1821-1990(Source: Historical Statistics of the US, Series U212; Statistical Abstract, Table 1410)

0

10

20

30

40

50

60

1820 1840 1860 1880 1900 1920 1940 1960 1980Year

Computed as total tar iff revenue divided by

the total value of al l impor ted merchandise.

For a br ief history of the US tar iff ,

see:

9

Funk and Wagnalls

http://www.funkandwagnalls.com/encyclopedia/getpage.asp?book=FWENCOnline&page=025000251.asp


Griff Bower, Michelle Arcuri and Kinzey Fritz Tyler Hagemo and Brian Kallmeyer Vince Nichols, Jon Menz and Lou Iorizzo Ed Mariner, Niraj Patel and Evan Kramer Travis Osborne, Ann Repp and Darius Sabet Matt Johnson, Abe Lehman and Zack Bryden Becca Shaffer, Allan Fiore and Pat St.Denis Tony Annino, Tim Crowell and Sara Dietrich


Which writer, Dudley or Rawlins, had the stronger argument? What, if anything, from the Protection vs. Free Trade debate remains relevant today? You need not restrict yourselves just to the Dudley-Rawlins debate; you may consider the arguments made in any of the tariff readings.

What about NAFTA (the North American Free Trade Agreement)?

What about attempts to “export” US jobs to countries with lower environmental and worker safety regulations (and lower wages)?

What about national defense?

What about human rights violations in other countries?

Do the basic principles apply in arenas other than the tariff debate?


Free Trade

Charles Ed. RawlinsReplying to Dudley, and advocating free trade.

3. Explain Rawlins on pp. 17-21 that “We regard Free Trade as a great moral principle.” (p. 17)

4. Explain why “Your Agriculturists are, then, your Free Traders. … the Party who so long upheld personal bondage may give you yet commercial Freedom” (p. 29)


Protection or Free Trade

1. Summarize the major benefits Dudley attributes to Protection.

2. Explain Dudley’s argument that the U.S. has nothing to gain from free trade, while Britain has nothing to lose. (See p. 10, “In the discussion of the question …” to the end.)


4. Explain why “Your Agriculturists are, then, your Free Traders. … the Party who so long upheld personal bondage may give you yet commercial Freedom” (p. 29)




“There must be two sides to a bargain, and two articles to an exchange…. Unless a mutual advantage be obvious, no exchange can take place.” (19)



You say: “’ Protection … builds up and sustains manufactories, thereby making a market for the farmers … But for our Protective Tariff we should not have had the silk manufactures.’” ( quoting Dudley, p. 21)

“But I cite this passage of your letter as an illustration of a fatal difference I always observe between Protectionists and Free Traders in their method of studying Economic questions.” (21)



“The Free Trader considers the interests of Consumers as paramount to all other interests. The Protectionist, on the contrary, would expend all his care on the Producer.” (p. 21)

“Though … a given article cannot be made at home as cheaply as it can be imported from abroad, the Protectionist still imagines that the extra expenditure through the employment it gives, adds to the wealth of the country.” (21)

“His error [is in] looking at the good concentrated, and failing to see the evil diffused. He sees what the Producer gains, but fails to see what the Consumer loses.” (21)


Wayland - 1837 (Union grad)

Describe the ideal tax system.

What should be taxed? What is taxed?

coffeeteadried fruitsspiceswinesilkscarpetingcoach

Coalcandlescordagecotton baggingironsaltsteelwoolflour


Wayland - 1837

What are the consequences of surplus revenue?

Surplus revenue is a public nuisance.

“…gives [the majority] the means of perpetuating that power, indefinitely.” (p. 451)


Remaining Readings on the Tariff

Wayland and Chapin

- Echo Rawlins: “…to protective theory still lingers … [because] what the few protected manufacturers gain is obviously seen by all, while what the many consumers lose is concealed from view.” (377)

- discuss the problem of lobbying and purchasing political influence: “The few more easily combine to perpetuate their advantage…” (379)


Remaining Readings on the Tariff

Cleveland (1887) “A Condition not a Theory”

“Our scheme of taxation, by means of which this needless surplus I taken from the people and put into the public treasury, consists of a tariff or duty… ” (518)

“The question of free trade is absolutely irrelevant…” (520)


Orange Protection

“Orange growers benefit enormously from protection of the industry and therefore lobby Congress for protection from foreign competition. The restrictions on exchange impose costs on consumers that are greater as a whole than the benefits enjoyed by the orange growers. However, the consumers damaged by ther restrictions are hurt so little that they bring little or no political pressure to bear on the government to allow free exchange”

- Source: Fox & Pope, American Heritage, 6th ed. (1992) p. 289.


Orange Protection

“In Madison’s terms, the zeal of a faction is going to depend on how much is at stake.” (290)

Industry Consumer Losses Consumer Loss from Trade Barriers per Job Saved

Orange Juice $525 million $240,000Steel 7 billion 750,000Textiles 20 billion 42,000Color TVs 420 million 420,000

Fox and Pope, p. 290, adapted from Gary Hufbauer, et al., Trade Protection in the United States, 31 Case Studies, Institute for International Economics, 1986.

© 2001 J. Douglass Klein The Tariff Bill - 1824 Tod replies to Clark. (p. 725) “dismayed as I am...

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Transcript of © 2001 J. Douglass Klein The Tariff Bill - 1824 Tod replies to Clark. (p. 725) “dismayed as I am...