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 MODERN TARIFF HISTORY 
 GERMANY UNITED STATES FRANCE
 
 MODEEN TAEIFF HISTOEY 
 
 GERMANY-UNITED STATES-FRANCE 
 
 BY PERCY ASHLEY, M.A. 
 
 WITH A PREFACE BY 
 
 THE RT. HON. R. B. HALDANE, LL.D., K.C., M.P. 
 
 AUTHOR OF "THE PATH WAV TO REALITY," ETC. 
 
 LONDON 
 
 JOHN MURRAY, ALBEMARLE STREET 
 1904
 
 LIBRARY 
 
 UNIVERSITY OF CALIFORNIA 
 SAiNTA BARBARA 
 
 CONTENTS 
 
 PART I 
 GERMANY 
 
 CHAPTER PAGE 
 
 I. THE FORMATION OF THE ZOLLVEREIN . . 3 
 
 II. THE BEGINNINGS OF PROTECTION AND THE FIRST 
 
 CRISIS . . ... 20 
 
 III. THE SECOND CRISIS AND THE COMMERCIAL 
 
 TREATIES . . . 35 
 
 IV. THE ZOLLVEREIN AFTER THE TREATIES THE 
 
 COMPLETION OF FREE TRADE AND THE RE- 
 ACTION . . . 48 
 
 V. THE ATTITUDE OF THE ECONOMISTS . . 63 
 
 VI. GERMAN COMMERCIAL POLICY TO 1894 . . 78 
 
 VII. THE REVIVAL OF THE PROTECTIONIST MOVE- 
 MENT, AND THE NEW TARIFF . . .100 
 
 VIII. RECENT ECONOMIC DISCUSSION IN GERMANY . 113 
 A BRIEF BIBLIOGRAPHY . . . 137 
 
 PART II 
 THE UNITED STATES 
 
 I. THE ORIGINS OF AMERICAN COMMERCIAL POLICY 141 
 
 II. THE GROWTH OF PROTECTION AND THE COMPRO- 
 MISE OF 1833 . . . i 60 
 
 III. COMPROMISE, PROTECTION, AND REACTION ECO- 
 
 NOMIC DEVELOPMENT OF THE UNITED STATES 
 
 TO 1860 . . ... 175 
 
 IV. WAR TAXATION AND ITS RETENTION FOR PRO- 
 
 TECTIVE PURPOSES . . . 193
 
 vi CONTENTS 
 
 CHAPTER PAGE 
 
 V. POLITICAL PARTIES AND THE TARIFF ECONOMIC 
 
 PROGRESS OF THE UNITED STATES TO 1890 . 212 
 
 VI. THE NEW THEORY OF PROTECTION AND THE 
 
 McKiNLEY TARIFF . . . .225 
 
 VII. THE WILSON AND DINGLEY TARIFFS . . 239 
 
 VIII. RECIPROCITY UNDER THE AMERICAN TARIFF 
 
 CONCLUSION . . . . . 252 
 
 A BRIEF BIBLIOGRAPHY . . . 263 
 
 PART III 
 FRANCE 
 
 I. FRENCH COMMERCIAL POLICY FROM 1789 TO 1830 267 
 II. THE MONARCHY OF JULY . ... 284 
 
 III. THE SECOND REPUBLIC AND THE SECOND EMPIRE 
 
 THE COMMERCIAL TREATIES . . . 296 
 
 IV. COMMERCIAL POLICY, 1870-81 . . . 313 
 
 V. THE MOVEMENT TOWARDS PROTECTION FOR AGRI- 
 CULTURE THE FRANCO-ITALIAN TARIFF WAR. 327 
 
 VI. THE TARIFF OF 1892 AND SUBSEQUENT DEVELOP- 
 MENTS THE FRANCO-SWISS TARIFF WAR 
 CONCLUSION . . ... 
 
 A BRIEF BIBLIOGRAPHY . ... 
 
 INDEX . . . ... 361
 
 PREFACE 
 
 THE year 1903 will be a memorable one in the 
 history of British politics. After a period notable 
 mainly for its lack of interest a stirring controversy 
 arose. Sides were taken violently, and families 
 were divided. The line of party cleavage was 
 destroyed. There was as much bitterness within 
 the ranks of the Conservative party as there had 
 been, seventeen years before, within the ranks of 
 Liberalism about Home Rule. And yet, as in the 
 latter case, the split was over no novel topic. In 
 both its economic and its Imperial aspects the 
 proposition which convulsed politicians and dis- 
 tracted statesmen had been made many times 
 before. What was fresh was only this, that a 
 protagonist of the first order had come on the 
 scene, a minister of commanding personality and 
 great energy. He declared himself converted to 
 the necessity of the new policy, and it was not 
 long before he found at least half the Unionist 
 party at his back. It is not Mr. Chamberlain's 
 way to do things by halves, and in an incredibly 
 short time he had founded a powerful organisation 
 to support and develop his idea. There were
 
 viii PREFACE 
 
 meetings everywhere, and people could talk of 
 nothing but the fiscal question and its bear- 
 ing on colonial policy. The British public took its 
 usual course. It delights in the spectacle of a 
 strong man fighting, and it showed its pleasure 
 in rounds of applause. But this could not con- 
 tinue. In its heart the public hates everything 
 sudden, especially when it takes the shape of an 
 abstract proposition. What was put before the 
 country, the eloquence and energy of the pro- 
 tagonist notwithstanding, was propounded both 
 suddenly and in an abstract form. People began 
 to ask about the cost, and then to grow suspicious 
 and sulky. The by-elections became ominous, and 
 even London club enthusiasm flattened. At first 
 the prejudice had been unduly for the policy. 
 Later on it became markedly against it. 
 
 The final opinion of the nation still remains for 
 delivery ; the time for judgment has not yet come. 
 Speculation as to what that judgment will be 
 when the British mind has mastered the argument 
 on both sides lies beyond the purpose and scope 
 of these pages. One thing is, however, certain. 
 Much good has arisen from the fact that men and 
 women have been forced to bend their minds on a 
 topic of momentous importance, and to think as 
 closely as they are capable of doing. We are 
 inclined by our national character to avoid sharply 
 defined issues, and to evade them by middle 
 courses. Here, protestations to the contrary not- 
 withstanding, it quickly appeared that no middle
 
 PREFACE ix 
 
 course could be anything but a hollow makeshift. 
 Then there came about another good thing. The 
 public began to feel that platitudes were of little 
 weight on either side of the argument. In the 
 early stage of the controversy they were as 
 abundant as is usual in such discussions. Presently 
 the necessity of precision in reasoning and of 
 accuracy in figures and in materials became ap- 
 parent. The expert rose in the popular estimation, 
 and even the political economist assumed an heroic 
 aspect. The works of Adam Smith, of Friedrich 
 List, and of other great students, began to be 
 displayed in the booksellers' windows. Then 
 there were signs of something further. The public 
 grew discontented with arguments and conclu- 
 sions, however eminent their authors, which be- 
 longed to days that were past. There arose an 
 almost feverish desire for a more modern presenta- 
 tion of the case on both sides, a presentation that 
 should bring it up to date. People began to 
 realise that the conditions of commercial and indus- 
 trial competition had become vastly developed. 
 They grew dimly aware that the controversy was 
 of dimensions even further reaching than they had 
 surmised. They learned that the problem had for 
 a century past been occupying the attention of 
 acute minds abroad, with the most varying and 
 far-reaching results to national policy. They 
 began to see that political as well as economic 
 aspects had been and must be taken into account. 
 In other words, the problem for Great Britain
 
 x PREFACE 
 
 began to display itself as highly complex and full 
 of ramifications, a problem on which the analogy 
 of other countries with different political and geo- 
 graphical conditions could at best throw a very 
 dim light. It became apparent that the most 
 careful scrutiny and weighing were at every point 
 essential. The difficulty of counting the cost of a 
 sweeping change in economic policy became every 
 day more obvious. And yet it was equally ap- 
 parent that the problem of how to bring the 
 machinery of the Empire up to date was a real 
 problem. How to make up his mind grew for the 
 man in the street a question of much greater diffi- 
 culty than he had at first thought. Yet there 
 remained, and remains, the irony of the situation. 
 He has got to make up his mind, and to say 
 " aye " or " no " to those who have presented to 
 him the question for decision. 
 
 Such seems to be the nature of the present 
 situation. Fortunately there is no hurry. It 
 would be disastrous were it otherwise. The 
 public is showing that it means to have full 
 materials before it finally pronounces. It is be- 
 ginning to give a preliminary indication that it 
 regards the question as a twofold one : first, is 
 change necessary? second, ought it, if necessary, 
 to assume the form of renunciation of the freedom 
 which we have to-day of buying where we please 
 at the cheapest rate, and selling where we can 
 in ever - increasing markets? For the necessity 
 of bartering goods for goods in growing quan-
 
 PREFACE xi 
 
 titles is, on balance, ever causing the markets to 
 grow, Protective duties notwithstanding. More- 
 over, logically at least, an alternative is possible. 
 The needed reform of the machinery of the Empire 
 may be capable of being effected in an altogether 
 different fashion. Such seem to be the alter- 
 natives in the end of the year 1904. To discuss 
 them fully would be outside the purpose of this 
 book. I have referred to them only in order to 
 show in what relation the book itself stands to 
 them. As I have already reminded the reader, 
 our problem in this country is original neither on 
 its economic nor on its political side. Germany, 
 the United States, and France have all considered 
 it. The analogy of their cases can help, regard 
 being had to their differing geographical and other 
 conditions, but to a limited amount our judgment 
 about the British case. But there is much that 
 is in the highest degree instructive in the other 
 cases, if they are examined by an adequate method. 
 That method can be one only the historical 
 method. By the historical method I mean the 
 plan of examining the state of things that has 
 to be inquired into in connection with its past, 
 and in the light of all materials which can show 
 why and by what steps it has come about. Such 
 a method has become familiar in this country ; 
 for example, in the study of the constitution, 
 which we all agree can be understood and esti- 
 mated adequately only by the aid of its history, 
 Sir Henry Maine and other writers have applied
 
 xii PREFACE 
 
 the method with conspicuous success to institu- 
 tions of a different kind, mainly juridical. In 
 Germany the method has, however, been applied 
 to the study of economics with a thoroughness 
 that has not been attained here. The result has 
 been great reluctance on the part of German 
 thinkers to treat the question between Free Trade 
 and Protection as an abstract one a reluctance 
 which has its parallel in that which makes English- 
 men refuse to regard such questions as those that 
 have been raised over the monarchy, or the theo- 
 retical perfection of our unwritten constitution as 
 practical questions. These are before us as insti- 
 tutions which have grown up, and are likely to 
 be altered only by a process of growth. Can the 
 economic tradition of the last half -century be 
 regarded as open to reconsideration by Great 
 Britain more readily than modern German econo- 
 mists, such as those of the school of Schmoller, 
 allow the corresponding fiscal condition of Germany 
 to be open to reconsideration ? Must we not regard 
 it as incumbent on us to take a very wide survey 
 of the past as well as the present before we jump 
 at conclusions as regards the future ? Is the 
 problem, or is it not, conditioned by considerations 
 of policy and of geographical position, as much 
 as the problem has been thought to be by foreign 
 statesmen who have had to deal with a past and 
 a present differing from ours in material respects, 
 and with people whose genius is different from 
 ours?
 
 PREFACE xiii 
 
 These questions and others of a kindred nature 
 arose in my mind a year ago, when I had to try to 
 make as unprejudiced a reconsideration of the fiscal 
 question as a politician is capable of. I wanted 
 to examine the new political issue in this spirit, 
 and I was so fortunate as to have the co-operation 
 of the author of this book. Mr. Percy Ashley 
 had been working as an economist at kindred 
 problems ; he was in a more detached position 
 than myself. After twelve months of discussion 
 and joint reading we found we had collected a 
 mass of material a fragment, no doubt, of the 
 whole, but enough to make us feel that we knew 
 better than at the outset where we stood. I sug- 
 gested to Mr. Ashley, who had already con- 
 templated lecturing on these subjects in the 
 London School of Economics, that he should write 
 an introduction to the study of this problem, as 
 it had arisen in Germany, in America, and in 
 France, based on a strict application of the his- 
 torical method. He made the suggestion that 
 I should write something by way of introduction 
 to his introduction. As we had been working 
 continuously together, I agreed, not because I felt 
 I could add much, but because the outcome of 
 our joint studies had made me feel that we were 
 of one mind, and had got materials together which 
 were worthy of a little attention. Such essays as 
 this abound in Germany. Here there are distin- 
 guished economists who have done similar work, 
 but there has been little encouragement given to
 
 xiv PREFACE 
 
 them to throw the results of their labours into 
 a popular form. 
 
 I have stated the origin of the investigation 
 which is recorded in the pages which follow, and 
 have described the spirit in which the endeavour 
 was made to conduct it. The book is, of course, 
 no more than an elementary one. It should, how- 
 ever, serve to show people that there are three 
 large fields of historical study which cannot be 
 safely neglected by anyone who wishes to arrive 
 at conclusions of any value about the wider 
 aspects of the new policy. The essay should also 
 serve to remind the public how vain it is to jump 
 at conclusions based on current opinion in foreign 
 countries. As well might we draw the inference 
 that we should substitute for our own constitution 
 that of the United States or Germany because 
 they are prosperous under their political arrange- 
 ments. Their histories and their needs and the 
 conditions of their development are not as ours. 
 
 If we look at the economic past of these coun- 
 tries in detail, the danger of rash inference becomes 
 obvious. The German Empire has been developed 
 out of a mass of small states, each possessing its 
 own tariff arrangements. Unity had to be bought 
 at a price. That unity was largely based on 
 internal free trade given in exchange for external 
 protection. An immense army had to be provided 
 for the defence of a land with extensive frontiers, 
 a land which had France on one side and Russia on 
 the other. Internal sources had to be maintained
 
 PREFACE xv 
 
 from which could be drawn a race of strong 
 soldiers, and an adequate home food-supply in 
 case of war. This meant that agriculture had to 
 be artificially fostered and protected. The alterna- 
 tive of command of the sea could be no alternative 
 for Germany. The spirit of militarism, if it was 
 necessary that it should continue to be dominant, 
 must largely affect both the form of the constitu- 
 tion of the German Empire and the fiscal and 
 industrial policy of her rulers. Yet the course has 
 not been a plain one. The ominous growth of the 
 Social Democratic party, and the division of 
 opinion among German statesmen and economists 
 in recent years as to which of two kinds of evil it 
 was better to accept in the interests of national 
 safety, has caused much uneasiness. To-day a 
 majority of their economists remind us, at times 
 impatiently, that they too have studied Adam 
 Smith, and know the argument for Free Trade in 
 England. But they add that England is not Ger- 
 many, and that for Germany other considerations 
 have to be taken into account besides those of how 
 wealth may be best produced and distributed. 
 
 Readers of the essays by prominent writers which 
 are published from year to year in Professor 
 Schmoller's Jahrbuch know how often irritation 
 is shown over the advice which we are so fond 
 of giving to our foreign neighbours. But not less 
 striking is the recognition that protective duties 
 are dangerous instruments, and the opinion, very 
 generally expressed, that we have been lucky in
 
 xvi PREFACE 
 
 being able, by our position as a sea power, to be 
 rid of them. Even List declared such duties to 
 be of a merely temporary value, and looked forward 
 to a time when Germany might be as able as 
 England to be free of them. It was to the self- 
 confidence of Cobden, rather than to his principles, 
 that List took exception. When writers like 
 Professor Wagner point out that British commerce 
 shows signs of stagnation, they are careful to insist 
 that this has little or nothing to do with Free 
 Trade, and that the same symptoms will inevitably 
 develop themselves in German commerce when 
 it reaches a similar state of development. The 
 world is producing for itself now, and no nation can 
 hope to keep a monopolist position. That is one 
 of the lessons which the historical method teaches, 
 and a Protectionist writer like Wagner frankly 
 tells us that it is not on the ground of commercial 
 advantage, but despite commercial disadvantage, 
 that he wishes to put restrictions on trade liberty 
 in order to keep agriculture in Germany pros- 
 perous in the interest of the safety of the empire. 
 In one conclusion, however, the majority of German 
 writers seem to concur. They declare that the 
 system of duties in Germany is in danger of being 
 abused through the undue influence of the manu- 
 facturers. Protection may be, they think, a useful 
 servant, but it is a very bad master. It leads 
 to officials being subjected to pressure from the 
 capitalists. 
 
 Much as we may have to learn from Germany
 
 PREFACE xvii 
 
 in other spheres, we seem to have nothing to envy 
 here. At best she bears her burden cheerfully in 
 the interest of what she considers her own safety, 
 with the aim of being, as far as she can be, self- 
 sufficing. But she is under no illusion about the 
 fact that she has had a price to pay, and that a 
 growing political party is grumbling about that 
 price. What we have to admire is the wonderful 
 faculty of organisation which has enabled the 
 nation, by the application of science to its indus- 
 tries and by such steps as the taking control of its 
 railway system, to reduce its difficulties to a mini- 
 mum. The story of the protective movement in 
 Germany is summarised in the eighth chapter of 
 the first part of this book. Anyone who wishes to 
 find the strongest statement of the case for Pro- 
 tection from its German champions cannot do 
 better, after going through the first part, than to 
 read through the short treatise lately published by 
 Professor Wagner under the title, Agrar- und 
 Industriestaat. But how far the conclusions of 
 that treatise are from receiving general acceptance 
 he will speedily discover if he turns to the writings 
 even of those German economists who favour a 
 tariff for " big revolver " purposes. And if he 
 goes still further and looks into the arguments of 
 yet another group, he will find that they look on 
 the " big revolver " as not only a dubious posses- 
 sion in point of utility, but as a drawback to its 
 possessors in matters that are of vital importance. 
 The story of the tariff movement in the United
 
 xviii PREFACE 
 
 States is a wholly different one. Considerations of 
 national defence have, of course, had no place in it, 
 at all events for a long time past. But the protec- 
 tionist traditions which arose in the end of the 
 eighteenth century under the influence of Hamil- 
 ton have retained a deep hold. The reasons are 
 not difficult to discern. The United States possess 
 an enormous and still growing home market, which 
 diminishes the importance for the Republic of 
 foreign commerce. The country produces its own 
 food in abundance. The tariff question in Ameri- 
 can politics has not, like the tariff question with 
 us, been dwarfed in importance by other topics. 
 On the contrary, it has been throughout one of the 
 most important issues with which Congress has 
 been called on to deal. The result of this has 
 been that the manufacturers have brought influ- 
 ence to bear in a fashion which has no parallel 
 in this country. To the manufacturers Protection 
 has undoubtedly afforded facilities which they 
 could not have had without it. By means of the 
 tariffs they have been enabled to develop the 
 trust system to an extent which would have been 
 impossible in the face of free competition. Of the 
 effect of this on the public mind in the United 
 States it is not easy for a foreigner to judge. But 
 there are indications that the very independent and 
 practical mind of the nation is becoming disposed 
 to inquire into the utility of these huge monopolist 
 organisations more closely than before. It would 
 probably be very difficult to bring the mind of the
 
 PREFACE xix 
 
 American people strongly on the side of Free 
 Trade. They have not had occasion to feel the 
 want of it. Yet it would probably be still more 
 difficult to get that people to agree in stating the 
 principle on which the defence of their protec- 
 tionist system rests. The impression one gathers 
 from the study of such books as Taussig's Tariff 
 History is that the United States have gained, at 
 all events in recent times, nothing at all by Pro- 
 tection, and that they would be just as well off 
 to-day had their system been a Free Trade one. 
 Apart from the disturbing effect on the individual 
 manufacturer of the trust, the cost of production 
 has been greatly raised under the American tariff 
 system, to the serious detriment of certain great 
 industries, such as shipbuilding. What is clear 
 is that in the case of America also no analogy 
 presents itself which could be usefully followed by 
 Great Britain from an economic standpoint. 
 
 France presents to the eye of the student of 
 finance a spectacle which is by no means satisfac- 
 tory. The inference which a study of her economic 
 history suggests is that she has suffered so severely 
 from want of liberty to buy when her people best 
 could, that but for an exceptionally fertile soil 
 she would have been to-day in a very serious 
 position. The story is told by Mr. Ashley in the 
 last part of this volume, and I shall not try to 
 summarise it. Unlike Germany, and like our own 
 country, she has a great seaboard, and might have 
 had a great foreign trade, with a consequent 
 
 32
 
 xx PREFACE 
 
 development of her home industries. She has not 
 been hampered by the geographical conditions 
 which have played their part in determining the 
 rulers of Germany to subordinate considerations of 
 economic development to those of national defence. 
 She has throughout been able to look to sea power, 
 in large measure, at all events, for the protection 
 of her avenues of food-supply on north, on west, 
 and on south. So far as a foreigner may presume 
 to form an opinion, she would have been better off 
 throughout under a Free Trade system. Her 
 people possess great intelligence, industry, and 
 adaptability, and she has large supplies of raw 
 materials. But the class influence of the manu- 
 facturers on her politics has been immense, and she 
 has had to pay for this. Her history is a striking 
 illustration of the tendency of a protective system 
 to get the upper hand, and, having got it, to 
 keep it. 
 
 I come back to the case of Great Britain. Are 
 we, then, it will be asked, satisfied that we live and 
 compete under the best of all possible conditions ? 
 Do you say that there is nothing which remains to 
 be done ? My answer is in the negative. To me 
 it seems that what has emerged from the discussion 
 which has been raging for more than a year is that 
 there is much room for reform. But in the case of 
 a small island with a great seaboard, and with a great 
 national capacity for command of the sea, protective 
 remedies seem to me to be no remedies. I do not 
 lose sight of the considerations that weigh on the
 
 PREFACE xxi 
 
 minds of many thoughtful people. The burden of 
 the Empire and of its defence is growing, and 
 must in time outstrip our resources. We cannot 
 hope, unless aided by the over-sea dominions of 
 the Crown, to be able permanently and adequately 
 to watch over their safety. 
 
 We have no longer the monopoly of days gone 
 by. Foreign countries have developed not only 
 their manufactures, but their fleets and armies. 
 Great as has been the growth of our national 
 wealth, our comparatively small home population 
 has, so far as capacity for manufacture is concerned, 
 probably got near to saturation point. But can we 
 infer that it is possible to bring the subjects of the 
 Empire within an economic ring-fence, such as the 
 geographical conditions of Germany and the United 
 States have made possible ? Our loose-jointed 
 Empire, loose-jointed in area and in constitution 
 alike, does not seem to admit of this. Its history 
 reminds us that its cohesion has rested on just this 
 looseness of jointing ; never on mechanical devices, 
 but always upon the simple co-existence of 
 common purpose and sentiment with the most 
 complete local liberty. What is has not been put 
 together from without. It is the result of a pro- 
 cess of growth. When I consider two things the 
 first, the extreme difficulty of avoiding the friction 
 arising from the want of local liberty which every 
 tariff system tends to bring with it ; the second, 
 the impossibility of counting, for a country so 
 peculiarly conditioned as is ours, the economic
 
 xxii PREFACE 
 
 price which must be paid if we part with the exist- 
 ing liberty of buying and selling I feel misgiving 
 about the new policy. Its risk is tremendous, and 
 what is risked is nothing short of the cohesion of 
 the Empire. Surely the burden of proof rests 
 heavily on those who invite us to leap with them. 
 Vestigia nulla retrorsum ! 
 
 There seems to be another way along which one 
 can see further. For the sake of the Empire, as 
 well as for our own sakes, we must seek to develop 
 the wealth of the islands which form the centre of 
 the Empire, and to expand their commerce. In 
 days gone by it was the production of the best 
 quality of goods that gave us a monopolist posi- 
 tion. We cannot again hope for a monopolist 
 position. But with the development of the im- 
 port trade of the world larger markets than ever 
 are open to our people for competition. That this 
 must be so the theory of exchange on which 
 foreign trade rests shows. That it is so the statistics 
 demonstrate. If we would remain ahead of our 
 rivals, we must continue to be ahead of them in 
 quality of what we make. No tariff can keep out 
 that quality which is the key to quantity. On 
 this side I hope and believe that the recent con- 
 troversy has wakened up the nation, and made it 
 see that alike on the side of economic as of social 
 and imperial questions the key to progress is 
 method and the education in the widest sense of 
 our people. 
 
 In the distant parts of the King's dominions
 
 PREFACE xxiii 
 
 there is reproducing itself rapidly among those of 
 our own race the unwritten and developing con- 
 stitution under which we ourselves live. Its basis 
 is liberty government of the people by the people 
 for the people. But such liberty, as experience 
 has shown, makes for and does not exclude the 
 common ends and ties of feeling which are the real 
 basis on which rests the unity of the subjects of 
 the Crown. Is it beyond the capacity of a suffi- 
 ciently broad-minded statesmanship to turn its 
 attention to these vital matters, steadily keeping 
 in view that bargains and written rules and what- 
 ever restricts complete freedom are perilous to 
 them ? Such a statesmanship might find real work 
 to do in bringing the machinery of the Empire 
 into the shape which would allow of the greatest 
 liberty of development alike at home and across 
 the seas. The way may be difficult, but the 
 histories of foreign nations can hardly be relied on 
 to point us to any other. 
 
 R. B. HALDANE. 
 
 CLOANDEN, AUCHTERARDER, 
 1st September, 1904.
 
 NOTE 
 
 THE present volume is based chiefly on lectures 
 delivered at the London School of Economics in 
 the Lent and Summer Terms of 1904. They 
 were an attempt to provide students with a brief 
 and, so far as possible, unpartisan sketch of the 
 development of tariff policy in those states which 
 are most frequently compared with the United 
 Kingdom ; and of the forces, political and eco- 
 nomic, which have determined that development. 
 The writer does not profess to offer the results of 
 much original research ; the bibliographies and 
 footnotes will, it is hoped, sufficiently indicate the 
 
 extent of his indebtedness to others. 
 
 P. A. 
 
 August, 1904.
 
 PART I 
 GERMANY
 
 MODEKN TAEIFF HISTOKY 
 
 CHAPTER I 
 
 THE FORMATION OF THE 
 ZOLLVEREIN 
 
 AT the close of the Napoleonic wars Germany 
 was in a state of the utmost political and economic 
 confusion, and the Congress of Vienna did little 
 to remedy the evil. It gave the new Germanic 
 Confederation a constitution vague and impractic- 
 able, and it offered no effective means of dealing 
 with the most pressing problem, that of economic 
 reorganisation. One of the worst results of Ger- 
 man particularism was the existence of a separate 
 customs system in each of the thirty-nine states, 
 many of them very small, which composed the 
 Confederation ; and, moreover, commerce was ham- 
 pered in every conceivable way, not merely within 
 Germany, but also within the larger states, such as 
 Prussia. In that kingdom there were nearly sixty 
 different local tariffs with a total of nearly two
 
 4 THE FORMATION OF THE ZOLLVEREIN 
 
 thousand eight hundred classes of goods ; l in 
 some of its provinces, particularly in the western 
 part of the monarchy, the importation of foreign 
 manufactures and products was allowed free or 
 on payment of only moderate duties, in others 
 it was either absolutely prohibited or subject to 
 extremely heavy duties. 
 
 The first reforms came in Prussia by the Tariff 
 Act of 1818. Its authors Biilow, the Minister of 
 Finances, and Maassen, who was responsible for 
 the details of the tariff were greatly influenced 
 by the economic ideas of Adam Smith, which 
 were at that time making their way in Germany ; 
 the internal customs were abolished, and the whole 
 tariff policy reformed in the direction of the estab- 
 lishment of greater liberty of trade and commerce. 
 Under the new system the importation of raw 
 materials was to be free ; an average duty of 10 
 per cent, was imposed on manufactured goods ; 
 " colonial produce " was to pay up to 20 per cent. ; 
 and there were to be moderate duties on the 
 transit of goods passing through Prussia to other 
 states. There was also to be an excise levied 
 on the consumption of certain goods in Prussia 
 itself. The tariff so adopted was more liberal 
 than any continental tariff of the time, and in 
 some ways the new policy was more advanced 
 than that even of Great Britain. Germany par- 
 ticularly the northern part was predominantly 
 agrarian, and exported considerable quantities of 
 
 1 Zimmermann, i. 1.
 
 THE PRUSSIAN TARIFF OF 1818 5 
 
 agricultural produce to foreign markets. The 
 landowners in Prussia were interested in Free 
 Trade, and so were the coast towns on the Baltic 
 with their extensive carrying trade. Manufac- 
 tures were developing slowly ; they had received 
 some stimulus from the "continental system" of 
 Napoleon, but the new tariff gave only a moderate 
 protection to the home manufacturers, who were 
 by no means satisfied with it ; and it contained no 
 prohibitions of import except in regard to salt and 
 playing cards, which were Government monopolies. 
 It had one peculiarity the new duties were not 
 levied on the value of the imported goods, but 
 consisted of a fixed charge on a given weight 
 or measure of each commodity. These " specific " 
 duties were on the average at first about 10 per 
 cent, on the estimated value of the goods, and 
 remained not at the same percentage, but at the 
 same actual amount, whatever changes came over 
 the value. This procedure had the advantage of 
 simplicity ; it was not necessary to provide a staff 
 of expert valuers at all the customs stations. On 
 the other hand, there was the distinct disadvantage, 
 which later was severely felt, that there came 
 to be no particular relation between the value 
 of the commodity and the duty ; if the value of 
 the given quantity of a particular article declined 
 for any reason, the old duty might become ex- 
 tremely heavy ; whilst on the other hand, if the 
 quality improved, and with it the value, the duty 
 became proportionately so much smaller. So that
 
 6 THE FORMATION OF THE ZOLLVEREIN 
 
 the duties tended to become much more protective 
 for goods of inferior quality than for the better 
 class of commodities. 1 
 
 The new tariff came into force on January 1st, 
 1819, and in the same year a policy was inaugurated 
 which was destined to have the most far-reaching 
 results. In the kingdom of Prussia there were no 
 less than thirteen " enclaves," petty states or parts 
 of states completely surrounded by Prussian terri- 
 tory. All of these attempted to maintain customs 
 systems of their own, and as a result came into 
 sharp conflict with Prussia, whose new tariff and 
 its vigorous enforcement against them roused con- 
 siderable indignation in Germany. It was, how- 
 ever, impossible for them permanently to resist 
 the pressure, and in 1819 the little principality 
 of Schwarzburg-Sondershausen accepted Prussia's 
 offer to take over the administration of its customs, 
 and in return to give it the right of trading with 
 
 1 la the report of Dr. (afterwards Sir John) Bowring, who visited 
 Germany to report on the Zollverein to the British Government in 
 1840, it is stated that the effect of the fall in prices since 1818 and of 
 some increases of duty had been to make the duties on some kinds 
 of manufactured goods anything from 20 to 80 per cent., so that 
 in some cases they became absolutely prohibitive. These duties had 
 come to be higher on goods of coarse quality than on fine qualities ; 
 the actual duty on woollen goods varied from 3 to 120 per cent. 
 Friedrich List welcomed this effect of the Tariff, because it gave pro- 
 tection to ' ' articles of common use, which every land can best manu- 
 facture for itself, and of which the home manufacture, on account 
 of its great amount, is most important for the country" (Schippel, 
 p. 86). This system has been commonly adhered to throughout 
 German tariff legislation, as in Great Britain since the middle of 
 last century, mainly because of its superior administrative advantages. 
 For an account and criticism of the alternative method of ad valorem 
 duties, see pp. 168 n., and 236-8.
 
 PROPOSALS OF NEBENIUS 7 
 
 Prussia free from all restrictions, and a proportion 
 of the total joint customs revenue. But there was 
 much indignation in particularist circles, and it 
 was only very slowly that the other enclaves 
 followed the example ; in fact, the next instance 
 was not till 1822. 
 
 The policy of Prussia, as exemplified in the 
 agreement with Schwarzburg-Sondershausen, was 
 to take the absolute control of any union which 
 might be formed ; but it was quite evident that 
 whatever the small states might do, the larger 
 states would not agree to any such system. All 
 clung to their independence ; the small states 
 would not subordinate themselves to the larger, 
 save under compulsion, and scarcely any state was 
 willing to consider the economic interests of the 
 whole Confederation as superior to its own private 
 aims ; there was, in fact, an incessant commercial 
 and industrial war. But already there were signs 
 that the people were becoming weary of these con- 
 ditions. Early in 1819, Nebenius, an official of 
 Baden, issued on behalf of his Government a 
 memorandum on the economic condition of 
 Germany. He pointed out that, though that 
 country suffered from the tariff system of its 
 neighbours, it suffered still more from the com- 
 mercial policy of its own component states. The 
 only real remedy was the formation of a league 
 of the German states, the abandonment of their 
 protective policy against each other, and the adop- 
 tion of a common tariff against foreign countries.
 
 8 THE FORMATION OF THE ZOLLVEREIN 
 
 At the same time, it would be necessary for the 
 German states to bring their system of internal 
 taxation into something approaching uniformity. 
 It is this memorandum which has given Nebenius 
 the credit of being the father of the idea of the 
 later Zollverein, but the idea was not confined to 
 him. In April, 1819, a deputation of manufacturers 
 and others, chiefly from the South German states, 
 appeared at the Federal Diet to urge the adoption 
 of a similar policy : that deputation represented 
 a commercial and trade union, which had been 
 formed two or three years before, largely under 
 the leadership of Friedrich List, and, unlike 
 Nebenius, it was avowedly protectionist in the 
 interests of German industry. Unfortunately the 
 Federal Diet was hopelessly weak, and exercised 
 practically no influence on the policy of the various 
 states ; it could do nothing in the direction pro- 
 posed, and reform had to come in another way. 
 
 The southern states set to work to attain the 
 desired end by treaties among themselves ; it was 
 absolutely necessary for them to do something, 
 since they were harassed in the north by the 
 growing Prussian Union and in the south by 
 Austria both with their transit duties. So there 
 began a series of conferences between the southern 
 states at Darmstadt between 1820 and 1823 on 
 schemes to resist Prussia, and to combine on a 
 common tariff policy conferences which had no 
 practical result, but at their close " offered foreign 
 countries a new and pitiable picture of German
 
 UNION OF BAVARIA AND WURTTEMBURG 9 
 
 confusion, and of the triumph of petty particular- 
 ist interests over the common good." 1 The failure 
 of the conferences was followed by a new tariff 
 war in Southern Germany, and such a condition 
 of affairs could not long continue. Wiirttemberg 
 in particular was untiring in its efforts to improve 
 the situation ; it called a fresh conference at 
 Stuttgart (1823 to 1825), which was again unsatis- 
 factory and produced no immediate result. Re- 
 course was then had to separate treaties. Already 
 in 1824 an agreement had been made between 
 Baden and Hesse-Darmstadt, and also one between 
 Wiirttemberg and the Hohenzollern principalities 
 in its midst. Early in 1825 Wurttemberg and 
 Bavaria had agreed on a scheme of Customs Union 
 under joint administration, and they now tried to 
 get Baden, Hesse, Electoral Hesse and Nassau 
 to join them. These negotiations failed, but in 
 April, 1827, a provisional agreement, confirmed and 
 completed in January of the following year, 
 established a Union of Bavaria and Wurttemberg 
 on the basis of a common tariff, abolition of duties 
 on commodities passing between the two contract- 
 ing countries, joint administration of the customs, 
 and division of the net proceeds of the duties 
 according to population. 
 
 Prussia had not failed to follow the course of 
 these negotiations, or to learn the lesson which 
 they taught. Until this time, it seems that the 
 Prussian statesmen had not thought of a larger 
 
 1 Weber, p. 34.
 
 10 THE FORMATION OF THE ZOLLVEREIN 
 
 union, except in the form of a customs system 
 under the direction of themselves alone. They 
 had treated the other enclaves, which had united 
 with them - - Schwarzburg - Rudolstadt, Saxe - 
 Weimar, Lippe, Mecklenburg -Schwerin just as 
 Schwarzburg-Sondershausen ; the small states were 
 given no share in the management of the Union. 
 " In the south, on the other hand, Bavaria and 
 Wurttemberg had fully realised the idea of a 
 union with equal rights to all its members, with 
 independent administration and complete reserva- 
 tion of all individual rights, without prejudice to 
 the necessary unity of the whole and to the 
 common end in view. Clearly this system must 
 commend itself to the Governments of the minor 
 states rather than the Prussian plan, which in- 
 volved some loss of independence." 1 The Prussian 
 rulers saw the danger, and changed their policy. 
 In February, 1825, less than a month after the 
 completion of the treaty between Bavaria and 
 Wurttemberg, and largely because of that treaty, 2 
 an agreement was made between Prussia and 
 Hesse-Darmstadt, which laid the foundation of 
 the later Zollverein. No changes were to be made 
 without mutual consent, and Hesse kept control 
 of the customs administration within its own area. 
 Events now moved rapidly. In August, 1828, 
 
 1 Weber, p. 61. 
 
 2 "The political purpose had triumphed over the fears of the 
 Prussian financiers, for, shortly before, on the 18th of January, 
 Bavaria and Wurttemberg had finally completed their Customs 
 Union" (Zimmermaun, i. p. 53).
 
 THE FINAL NEGOTIATIONS 11 
 
 some of the minor states, including Hanover, 
 Brunswick, and the two Hanse towns, Hamburg 
 and Bremen, formed a Middle German Commercial 
 Union, under the leadership of Saxony, chiefly to 
 resist the pressure of the two existing unions. 
 But the new organisation was inchoate and short- 
 lived ; it had no definite policy or purpose beyond 
 that of resistance, and found no means of recon- 
 ciling the interests of its constituent members. In 
 fact, the small states were in an impossible posi- 
 tion, and their difficulties were intensified when in 
 May, 1829, an agreement was made between the 
 Prussian Union and Bavaria and Wiirttemberg, 
 on the basis of reciprocal reduction of duties to 
 the extent of 20 to 50 per cent, on many com- 
 modities, the approximation of the two customs 
 systems to a common form, and yearly conferences. 
 The Middle German Union was breaking down ; 
 its members were showing an inclination to draw 
 near to the Prussian Union or the Southern Union, 
 as suited them best, and in 1830 Saxony intimated 
 to Prussia its desire to enter into negotiations for 
 its entry into the Prussian Union. The collapse 
 was completed when Electoral Hesse joined Prussia 
 in 1831 an event of considerable importance, since 
 the geographical position of that state between 
 the western provinces of Prussia and Hesse-Darm- 
 stadt could establish or prevent the real effective- 
 ness of the commercial alliance of these two. The 
 Northern and Southern Unions now drew together, 
 and the final negotiations commenced. They were
 
 12 THE FORMATION OF THE ZOLLVEREIN 
 
 most delicate and difficult, for there were many 
 diverse interests to be reconciled. In Prussia 
 itself, the sea-towns and the agricultural provinces 
 were favourable to freedom of trade, and the 
 manufacturers desired protection ; the former, how- 
 ever, had the upper hand. The northern states 
 of Germany, and especially the Hanse towns, 
 supported the liberal policy ; and so did the great 
 commercial centre of Frankfurt - on - Main. In 
 Saxony, the traders of Leipzig inclined towards 
 union with Prussia since they sympathised with 
 the ideas which underlay her tariff; the manu- 
 facturers who wanted protection were hostile. The 
 southern states were divided in the same way. 
 Moreover, the manufacturers of Prussia felt that 
 they would be seriously menaced by the free com- 
 petition, from the industries of Saxony for example, 
 which must follow a complete union. The divisions 
 to be made of the proceeds of the tariff were also 
 a difficult matter, for the consumption of " colonial 
 produce" per head was much greater in Prussia 
 than in the south ; and further, some of the smaller 
 states were strongly averse to the surrender of any 
 sovereign rights. 1 The Prussian ministers were by 
 
 1 It is curious to observe how indifferent Austria was to these 
 negotiations ; Metternich and his colleagues did not regard them as 
 dangerous, and did not believe that they could be successful. They 
 might possibly have drawn the southern states towards Austria by 
 commercial treaties, but the efforts which they made in this direction 
 were scarcely serious, and altogether ineffective. Great Britain, on 
 the other hand, was fully alive to the danger which threatened her 
 position in the German market, and attempted to check the formation 
 of a great German customs area by treaties with various small German
 
 ORGANISATION AND POLICY 13 
 
 no means optimistic, but the negotiations were 
 carried to a successful issue, partly because of 
 economic considerations, and partly because of 
 political motives on the part of Prussia these 
 latter were in fact the determining consideration. 1 
 The work was done by Maassen, now Minister of 
 Finance in Prussia, and Von Mieg, who represented 
 Bavaria and Wiirttemberg. On the 22nd of March, 
 1833, Bavaria and Wiirttemberg joined the Prussian 
 Union, and the example was immediately followed 
 by Saxony. Negotiations had meanwhile been 
 going on with Hesse- Cassel and the Thuringian 
 states, and in May of the same year they also 
 gave their adhesion. 
 
 The Zollverein, so formed by a series of 
 treaties, and including seventeen states with a 
 population of some twenty-three millions, came 
 into force on January 1st, 1834. Policy was to be 
 determined from time to time by an annual meet- 
 ing of representatives of the constituent states, but 
 any change required unanimous approval ; this 
 (though probably unavoidable in view of the 
 tenacity with which the several states clung to 
 their independence) was one of the weak points of 
 the organisation a proposal, approved by all the 
 
 states. The treaty completed with the free city of Frankfurt did for 
 some time prevent that city from joining the Zollverein. France made 
 a number of attempts to detach the smaller states, especially those 
 along the Rhine, by the offer of special tariff treatment, but without 
 success (Weber, p. 105). 
 
 1 " The anxiety of the economist had been forced to yield to the 
 hopes of the statesman " (Von Treitschke).
 
 14 THE FORMATION OF THE ZOLLVEREIN 
 
 states chiefly concerned, might be vetoed by one 
 of the least important members of the Union. A 
 common tariff (based in the main on the rates in 
 force in Prussia) against all states outside the 
 Union, and the abolition of all duties on goods 
 passing between the various members, were the 
 fundamental principles ; but each state kept its 
 own commercial code, its own patent laws (with 
 the right to tax commodities, coming from other 
 members, which would infringe patents) and its 
 own Government monopolies. The proceeds of the 
 customs duties were to be divided amongst the 
 states in proportion to population. The tariff rates 
 imposed moderate duties on manufactured articles, 
 duties for revenue on colonial produce, and gave 
 freedom of import for raw materials and some 
 manufactured articles required for industry. Much 
 still remained to be done before the Zollverein 
 became a unified commercial and industrial organi- 
 sation, but the foundations were firmly laid. 
 
 Many important states still stood aloof, particu- 
 larly the northern states Hanover, Brunswick, 
 Oldenburg, Holstein, the two Mecklenburgs, the 
 three Hanse towns and Luxemburg with Baden 
 and the important commercial city of Frankfurt. 
 Some of these did not long remain outside the 
 Union ; the accession of the isolated Grand -Duchy 
 of Baden, realised by its Government to be inevit- 
 able after the breakdown of the Middle German 
 Union, was delayed only till May, 1835, by the 
 hostility to Prussia of some of its political parties.
 
 FOREIGN RELATIONS 15 
 
 In the same year Nassau joined the Zollverein, 
 and the example was followed by Frankfurt after 
 long and difficult negotiations at the beginning of 
 1836. In the next five years a number of small 
 and not very important territories such as Wai- 
 deck, Pyrmont, and Lippe-Detmold were in- 
 cluded in the Zollverein without receiving the 
 rights of independent members. Most of the 
 larger states which persisted in their independence 
 continued to act separately, but in May, 1834, 
 Hanover, Oldenburg, and Brunswick, whose in- 
 terests were nearly identical, formed a union of 
 their own, called the Steuerverein. 
 
 Almost immediately after the completion of the 
 work of organisation, attempts were made to place 
 the relations of the Zollverein with the neighbour- 
 ing states on a more satisfactory footing. The 
 diplomatic representation was entrusted to Prussia, 
 but the first efforts were by no means successful. 
 The negotiations with Russia, which pursued an 
 almost prohibitive policy, failed completely, as did 
 those with Austria ; * whilst the Zollverein was 
 distinctly worsted in a conflict with the Govern- 
 ment of Louis Philippe in France. 2 The chief 
 treaties actually completed were with Holland and 
 Great Britain. In the former case there was some- 
 thing like a short customs war ; the Dutch 
 Government desired a commercial treaty, and to 
 enforce its desire, and partly also to protect Dutch 
 
 1 The details of these negotiations can be read in Zimmermann, i. 
 pp. 138-52. 2 Ibid., p. 162.
 
 16 THE FORMATION OF THE ZOLLVEREIN 
 
 agriculture against German competition, it im- 
 posed higher duties on grain in October, 1835. 
 The Zollverein replied by the imposition of higher 
 duties on Dutch sugar, and by the abolition of 
 privileges enjoyed by Dutch vessels on the Rhine. 
 Negotiations for a treaty then began, but broke 
 down over the sugar question, since the growing 
 sugar industry in Germany was strongly hostile to 
 any concessions to Holland in this matter. So at 
 first it was only possible to make an agreement in 
 1837 in regard to shipping, which put the vessels 
 of the two nations on an equality. Negotiations 
 continued, however, and in the beginning of 1839 
 a further treaty was completed, which reduced a 
 number of duties on Dutch produce. But it was 
 speedily felt in the Zollverein that the concessions 
 made to Holland were too great, and certainly 
 there is in this case no sign of the skill which sub- 
 sequently characterised the conduct of German 
 commercial negotiations. Consequently the treaty 
 was denounced by the Zollverein less than two 
 years later. The treaty with Great Britain, com- 
 pleted in March, 1841, was also limited to the 
 matter of shipping ; it exempted Prussia from 
 many of the restrictions contained in the English 
 Navigation Acts, and on the whole was of some 
 benefit to Germany, whilst Great Britain, in return, 
 got the same reduction in the duties on sugar and 
 rice as had been granted to Holland. The treaty 
 was not popular, in the southern states particularly, 
 and came to an end in 1848.
 
 FIRST RENEWAL OF THE ZOLLVEREIN 17 
 
 In 1841 the formal renewal of the Zollverein 
 took place. It was perfectly clear that its institution 
 had been of the utmost benefit to the constituent 
 states ; industrial and commercial development had 
 been greatly stimulated ; many of the causes of 
 inter-state disputes had been removed, and Govern- 
 ments and people were on the whole alike well 
 satisfied. The only difficulty at the renewal was 
 caused by Prussia, for the financial arrangements of 
 the Union had benefited the smaller states, but had 
 reduced the revenues of Prussia, and her statesmen 
 were somewhat dissatisfied, though they recognised 
 fully the advantages which they had gained. 1 But 
 the difficulty was not insuperable, for no one was 
 anxious to break up the Union ; certain additional 
 financial arrangements were made, not quite satis- 
 factory to Prussia, but accepted by her, and the 
 Zollverein was renewed on May 8th, 1841, for 
 twelve years. Immediately afterwards there came 
 fresh additions of territory. Brunswick was dis- 
 contented with the action of Hanover in the Steuer- 
 verein, and quitted that organisation in 1842 ; in 
 the same year it entered the Zollverein. So did 
 Lippe-Detmold and Schaumburg, and, much more 
 important still, Luxemburg, which, though in 
 personal union with the kingdom of Holland, was 
 
 1 " Although Prussia does not fail to recognise that its subjects 
 have shared in the general advantageous results of the Union, yet the 
 position is altogether different when viewed from the financial stand- 
 point" (Circular of the Prussian Government, 1839 ; quoted in Weber, 
 p. 185). It would have been inadvisable to refer to the political 
 advantages accruing to Prussia, 
 Q
 
 18 THE FORMATION OF THE ZOLLVEREIN 
 
 itself a member of the Germanic Confederation. 
 In the last case special arrangements had to be 
 made to prevent the Dutch Government making 
 use of the position of Luxemburg to influence the 
 policy of the Zollverein, and so the representation 
 of the Duchy in the Councils of the Union was 
 entrusted to Prussia. 
 
 One other important event of this period, which 
 it will be convenient to notice here, was the treaty 
 with Belgium. It was desirable that the relations 
 between that country and the Zollverein should be 
 as amicable as possible, since a great part of the 
 German import and export trade passed over the 
 Belgian railways and through Belgian ports. For 
 the purposes of negotiations, then, the Belgian 
 Government was in a strong position owing to this 
 fact, and also because its geographical situation 
 enabled it to play off France against Germany. 
 The result was the treaty of 1844, by which the 
 Zollverein gave a reduction of duties on com- 
 modities coming from Belgium, and on some articles 
 of Belgian origin (particularly iron) ; whilst Belgium, 
 on its side, guaranteed the existing freedom of 
 transit for goods coming from or going to the 
 Zollverein, and established certain preferences for 
 German products. The shipping of the two nations 
 was put on an equal footing. Weber holds that 
 the treaty chiefly benefited Belgium, since she 
 gained easier access to German markets with her 
 iron, whilst the Zollverein got no new concession 
 of importance ; and he adds that Prussia would
 
 NEGOTIATIONS WITH BELGIUM 19 
 
 never have yielded so much but for the fear of 
 Belgian alliance with France 1 ; but the Zollverein 
 had secured freedom of transit for its goods through 
 Belgium, and the establishment of an entrepot at 
 Antwerp, and these were matters of no small im- 
 portance. 2 
 
 1 Weber, pp. 213, 214. 
 
 2 Zimmermann, i. p. 278.
 
 CHAPTER II 
 
 THE BEGINNINGS OF PROTECTION 
 AND THE FIRST CRISIS 
 
 DURING the early years of the Zollverein there had 
 been only a few increases in the customs duties, 1 
 but after 1840 there was a marked upward tendency 
 in the tariff rates, due to a distinct movement 
 towards Protection, which found its scientific ex- 
 pression in the writings of Friedrich List, and 
 particularly in his System of National Economy, 
 published in 1841. His doctrine, that protection is 
 necessary to enable a nation to pass from the purely 
 agricultural condition of society to a higher stage 
 of combined industry and agriculture, 2 that the en- 
 couragement of " production " was less immediately 
 important than the development of "productive 
 powers," and that if Germany was to make economic 
 
 1 On cotton and woollen yarn from six to eight thaler per centner, 
 and on the finer qualities of bar iron from one thaler to three thaler. 
 
 2 " In short, history and statistics alike prove the correctness of 
 the dictum expressed by the ministers of George I. : that nations are 
 richer and more powerful the more they export manufactured goods 
 and import the means of subsistence and raw materials. In fact, it 
 may be proved that entire nations have been ruined merely because 
 they have exported only means of subsistence and raw materials, and 
 have imported only manufactured goods " (List, System of Political 
 Economy, trans. Lloyd, p. 218). 
 
 20
 
 A MOVEMENT TOWARDS PROTECTION 21 
 
 progress in the face of the overwhelming industrial 
 supremacy of Great Britain, a reasoned policy of 
 Protection was essential rthis doctrine found ready 
 acceptance in the industrial circles of the Zollverein. 
 List pointed always to the example of Great Britain, 
 whose long-continued policy, he held, had been to 
 secure the home market for its manufacturers, to 
 encourage the increase of " productive powers " by 
 the free admission, not of foreign goods, but of 
 foreign workmen, and to bear a temporary loss for 
 the sake of an ultimate gain. This policy had laid 
 the foundation of Great Britain's industrial power, 
 and he called on Germany to follow the example. 1 
 The practical demand for the application of 
 List's doctrine came from the manufacturers of 
 iron and the cotton-spinners, and over this proposal 
 there arose, between 1841 and 1850, the first real 
 struggle between the rival policies of Free Trade 
 and Protection. In the case of the iron producers, 
 the call for increased duties was due largely to the 
 over-production in England and the consequent 
 reduction of the prices of English iron in the 
 
 1 " If any nation whatever is qualified for the establishment of a 
 national manufacturing power, it is Germany. ... If any nation what- 
 ever has a right to anticipate rich results from a protective system 
 adapted to her circumstances, for the progress of her home manu- 
 factures, for the increase of her foreign trade and her navigation, for 
 the perfecting of her internal means of transport, for the prosperity of 
 her agriculture, as also for the maintenance of her independence and 
 the increase of her power abroad, it is Germany. Yes, we venture to 
 assert, that on the development of the German protective system 
 depend the existence, the independence, and the future of the German 
 nationality " (List, System of Political Economy, trans. Lloyd, p. 425). 
 For a general statement of List's view see below, pp. 65 aeq., and 72.
 
 22 THE BEGINNINGS OF PROTECTION 
 
 foreign market to a point at which continental 
 manufacturers could not compete with them. 
 There was a great increase in the importation of 
 iron into Germany, from 0*9 million centner in 
 1839 to 2-6 million in 1842, and 4'2 million in 
 1843. In 1839 the German iron works produced 
 78 per cent, of the total amount consumed in 
 Germany, whilst by 1843 their share had fallen to 
 45 per cent. 1 The cotton-spinning industry had 
 been growing rapidly in Prussia, Saxony, and the 
 south-western states since the establishment of the 
 Zollverein, but it was not yet firmly established, 
 and in 1842 the import of cotton was more than 
 double the home production. The request for 
 protection for these two industries naturally led to 
 a sharp conflict of interests between the producers 
 and the consumers of the two commodities. There 
 was a growing demand for industrial machinery, 
 and the manufacturers were opposed to any policy 
 likely to increase its cost ; and to the producers of 
 cotton goods (an industry which had made rapid 
 progress of recent years, and supplied one of the 
 chief exports of the Zollverein) an ample supply 
 of British cotton was an absolute necessity. The 
 division over the question was also territorial. On 
 the whole the north was in favour of Free Trade. 
 The attitude of the Prussian Government was de- 
 termined in the main by the agricultural and com- 
 mercial interests. Large quantities of agricultural 
 
 1 Seriug, Geschichte der preussischdeutschen Eisenzolle von 1818 bis 
 zur Gegenwart (1882).
 
 THE FREE TRADE FORCES 23 
 
 produce, chiefly grain and timber, were exported, 
 especially to Great Britain after the repeal of the 
 Corn Laws : and on the other hand, the landowners 
 needed agricultural machinery and feared an in- 
 crease in its price as a result of the proposed higher 
 duties ; so that the Prussian Conservatives, whose 
 strength lay in the agricultural districts, were, 
 unlike their English contemporaries, strong advo- 
 cates of freer trade. The Baltic ports Dantzig, 
 Stettin, Elbing, Konigsberg, and others were 
 engaged in the export of grain and timber, and 
 were opposed to anything which might tend to 
 restrict trade. 1 These influences were strong enough 
 to overcome any inclination on the part of the 
 Prussian Government to accede to the demands of 
 the iron producers of the Rhine province. The 
 two great Hanse towns (Hamburg and Bremen) 
 took the same line ; both had a large trade with 
 Great Britain and America, exporting linen, timber, 
 minerals, woollens, glassware, and wines, and im- 
 porting manufactured goods, tobacco, and colonial 
 produce generally. Frankfurt, which was the 
 great entrepot for British trade, also stood firmly 
 on the Free Trade side. Saxony was carried the 
 same way by the influence of the traders of Leipzig 
 and the weavers, whose industry far exceeded in 
 importance that of the spinners. The Thuringian 
 states followed the lead of Prussia and Saxony. 
 
 1 Schippel points out that in the absence of a well-organised railway 
 system the sea made foreign markets nearer to the lands along the 
 Baltic than the inland territories of the Zollverein.
 
 24 THE BEGINNINGS OF PROTECTION 
 
 Brunswick and Nassau supported Prussia largely 
 because the financial results of the Zollverein had 
 been for them so favourable that they were un- 
 willing to break with her. 
 
 The southern states, on the other hand, were 
 distinctly inclined to Protection. Bavaria wavered ; 
 it was difficult for its Government to decide between 
 the rival spinning and weaving industries, but it 
 was carried into the protectionist movement by the 
 personal authority of King Ludwig I., who seems 
 to have been influenced chiefly by political con- 
 siderations. Wiirttemberg and Baden, on the other 
 hand, were anxious for the protection of the cotton- 
 spinning industry, which had been most successful 
 in those territories ; and they were supported by 
 Hesse. 
 
 The conflict continued for several years and 
 was particularly keen at the annual conferences. 
 After the Karlsruhe Conference in 1845 feeling 
 was so strong that Prussia was accused of being 
 unduly under the influence of Great Britain. On 
 the other hand, the Prussian Government had 
 declared, as early as 1842, that the southern 
 Governments took too narrow a view of the eco- 
 nomic interests of Germany, and were swayed 
 by the cotton-spinners, who were suffering from 
 bad organisation and the over-hasty development of 
 their industry. 1 Both sides gave way somewhat, 
 and by 1850 the duties had been considerably 
 increased. In 1843 the duty on certain kinds 
 
 1 Zimniermanu, pp. 190 and 200.
 
 INCREASE OF DUTIES 25 
 
 of cotton yarn was increased by 50 per cent. ; 
 in 1844 a small duty was imposed on pig-iron, 
 hitherto admitted free, and there were slight in- 
 creases on iron bars and rails. In the same year 
 the duties on various kinds of woollen goods were 
 increased 33 per cent., and those on gold and 
 silver articles and leather gloves were doubled. 
 In 1846 there were still further increases on all 
 kinds of cotton yarn, linen yarn and twist, and 
 various other commodities. On the other hand, 
 however, there were reductions on a number of 
 raw materials, and in the transit dues in 1850. It 
 must be remembered also that the changes in the 
 price of commodities (and there had been a very 
 marked fall during this period) had not been 
 followed by any corresponding change in the 
 amount of the duties which, as already pointed 
 out, had been fixed according to the value thirty 
 years before of a particular quantity of each com- 
 modity. The result was that duties, which had 
 been quite moderate originally, had now come 
 to be in some cases almost prohibitive. 1 It is 
 impossible to say how much further the movement 
 towards Protection would have gone had it not 
 been for political considerations, and particularly 
 the problem of the relation of Austria to the 
 Zollverein. 
 
 The Austrian Government, under Prince Met- 
 ternich, had paid little attention to the negotiations 
 
 1 Michaelis, Kommissionsbericht fiber den premsischfranzosinchen 
 Handelsvertrugentwurf, quoted in tichippel, pp. 135-7 ; cf. note oil p. 6.
 
 26 THE BEGINNINGS OF PROTECTION 
 
 for the formation of the Zollverein ; its attempts 
 to interfere had been unimportant, and its whole 
 action in the matter had been marked by that 
 complete indifference to economic questions which 
 was its peculiar characteristic amongst the Govern- 
 ments of Europe. Its own tariff policy was pro- 
 tectionist, or rather in many cases prohibitive. 
 But after 1833 even Metternich awoke to the 
 danger which threatened Austrian authority in 
 the Germanic Confederation from the growing 
 influence of Prussia, and, as time went on, he 
 realised that the economic leadership of that state 
 in the Zollverein might easily be extended to 
 political action also. In 1841 the Austrian minis- 
 ters began to consider the possibility of the ad- 
 hesion of the Austrian Empire to the Zollverein, 
 but came to the conclusion that for the time being, 
 at any rate, it was impracticable, partly owing 
 to the supposed impossibility of abandoning the 
 policy of high Protection, and partly because of 
 the peculiar position of Hungary, which was not in 
 economic union with the rest of the empire. 1 But 
 from that time onward the problem was always 
 under consideration, and the discussion became 
 vigorous after the renewal of the Zollverein. In 
 Austria itself the manufacturers clung to the pro- 
 tective policy, but in the community as a whole 
 there was considerable dissatisfaction with it ; and, 
 further, the Austrian statesmen were more and 
 more impressed by the political necessity of check- 
 
 1 Weber, p. 244.
 
 AUSTRIA AND THE ZOLLVEREIN 27 
 
 ing the Prussian advance. Consequently, the 
 Austrian efforts were now directed towards forcing 
 an entrance into the Zollverein, or, as a less prefer- 
 able alternative, towards destroying it. These 
 efforts became much more vigorous after the 
 events of the revolutionary years 1848 and 1849. 
 For one thing, the action of the National Assembly 
 at Frankfurt, in offering to Frederick William IV. 
 of Prussia the Imperial Crown of a Germany from 
 which Austria was excluded, had brought home to 
 the Austrian statesmen the extreme weakness of 
 their position ; and further, Metternich had been 
 succeeded by one of the ablest and strongest min- 
 isters Austria has ever had, Prince Schwarzenberg. 1 
 Moreover, the conditions in the Zollverein were 
 not unfavourable. It has already been pointed 
 out that difficulties had arisen between Prussia 
 and her colleagues in 1841 over the division of the 
 customs revenue, and the dissatisfaction then 
 created in the southern states had been increased 
 by the growing preponderance of Prussia. They 
 were, therefore, not unwilling to admit Austria, 
 partly to keep Prussia in check thus adopting 
 in the Zollverein that policy of " balance " which 
 had reduced the Confederation to impotence and 
 partly because they desired support for their pro- 
 tectionist schemes. They were, however, ham- 
 pered by the knowledge that with the compara- 
 
 1 Prussian diplomacy had received its severest blow in the Treaty 
 of Olmutz in November, 1850, on the questions of the Elbe Duchies 
 and Hesse-Cassel.
 
 28 THE BEGINNINGS OF PROTECTION 
 
 lively small consumption of imported goods in 
 Austria any division of the customs revenues on 
 the old lines would seriously reduce their revenues. 1 
 In 1849 the Austrian Government began to put 
 forward proposals for the complete economic union 
 of Germany and the non-German territories of the 
 Austrian monarchy. It proposed, that is to say, 
 the establishment of a complete industrial state, 
 including a large part of Middle Europe and a 
 population of over seventy millions ; in this state 
 neither the commercial, nor the industrial, nor the 
 agricultural class would be predominant, but a 
 tariff policy was to be adopted which would 
 equally guard all three. 
 
 The Prussian Government from the first realised 
 the political effect of an acceptance of the Austrian 
 proposals, and set itself resolutely to oppose her 
 admission. The most striking manifestation of this 
 was its action in regard to Hanover. It has already 
 been mentioned that in 1834 Hanover had formed, 
 particularly with Oldenburg and Brunswick, a 
 Steuerverein in the north. Since then there had 
 been constant disputes with Prussia, which con- 
 tinued even after the adhesion of Brunswick to the 
 Zollverein, an event destructive of the effective- 
 ness of the Northern Union, and seriously crippling 
 Hanover by cutting her territory in two. Negotia- 
 tions had been going on for years between Prussia 
 
 1 Thus in October, 1851, Beust declared that, for financial and 
 economic reasons, Saxony could not leave the Zollverein ; and Bavaria 
 and Wiirttemberg requested Austria to guarantee the maintenance of 
 their existing revenues (Ziminermauu, p. 358).
 
 AGREEMENT BETWEEN PRUSSIA AND HANOVER 29 
 
 and Hanover, but without success, owing to the 
 excessive demands made by the latter ; but now 
 suddenly Prussia gave way, and concluded in 
 September, 1851, a treaty in which she accepted 
 most of the conditions which she had hitherto 
 decisively rejected. Hanover received permission 
 to import iron rails free of duty, and a guarantee 
 of a larger share of the customs revenue than she 
 would have received on the basis of population. 
 The treaty was advantageous to Hanover in many 
 ways, since it was clearly impossible for her much 
 longer to maintain her economic isolation ; and for 
 Prussia also the results were of great importance. 
 For, in the first place, the alliance with Hanover 
 secured the connection of her territories, even if 
 the Zollverein should break up; and secondly, it 
 strengthened the Free Trade party, as did the 
 treaty between Prussia and Oldenburg early in 
 the following year. 1 But the treaty was with 
 Prussia not with the Zollverein ; it was therefore 
 necessary for Prussia either to force the other 
 states to accept the treaty, or to break up the 
 Zollverein and throw herself into union with the 
 northern states. 2 
 
 Negotiations for the renewal of the Zollverein 
 had already begun under the terms of the treaty 
 of 1841, and they were complicated by the simul- 
 taneous discussions with Austria. In form, the 
 controversy arose over the procedure to be 
 
 1 Neither Hanover nor Oldenburg had any industries to protect. 
 
 2 Weber, pp. 294, 297.
 
 30 THE BEGINNINGS OF PROTECTION ' 
 
 adopted. Prussia insisted that the renewal of the 
 Zollverein, with the acceptance of the treaty with 
 Hanover and the various modifications of the 
 tariff required by that, or considered necessary 
 after the experiences of recent years, must precede 
 any treaty with Austria. The southern states, 
 on the other hand, wished the negotiations with 
 Austria to be completed before the settlement of 
 the future constitution of the Zollverein, since 
 those negotiations might mean the admission of 
 Austria. It is not necessary to follow in detail the 
 course of the extremely involved proceedings of 
 the various conferences which agitated Germany 
 from September, 1851, to April, 1853. Whilst 
 endeavouring to secure the treaty with the 
 Zollverein as a whole, Austria was secretly pre- 
 paring the way for the formation of a union to 
 include herself and the South German states, in 
 the event of Prussia refusing to give way and 
 breaking up the Zollverein. 1 The Prussian states- 
 men, on the other hand, as we have seen, were 
 preparing for this and planning a new union in the 
 north. Neither side was anxious to take the 
 decisive step ; but the current ran strongly against 
 Prussia, partly because of the distrust inspired by 
 her unyielding attitude, and partly owing to the 
 
 1 The conferences between Austria and the Zollverein states began 
 in January, 1852, at Vienna. Prussia and the Thuringian states were 
 not represented ; the public negotiations were in regard to the 
 Zollverein treaty with Austria, but at the same time there were 
 private conferences for the formation of a union without Prussia 
 (Zimmermann, i. p. 371).
 
 THE AUSTRIAN PROBLEM 31 
 
 superior statesmanship of Schwarzenberg, until the 
 death of that statesman in April, 1852 ; after that 
 date the action of Prussia became more decided. 
 At the first conference of all the states of the 
 Union at Berlin in the same month, Manteuffel, 
 the Prussian Minister President, declared uncom- 
 promisingly the determination of his state to settle 
 the question of the new constitution of the 
 Zollverein before making any treaty with Austria. 
 In May the Prussian Ministry published a note, 
 in which it asserted that Prussia had not sought 
 in the Zollverein any financial or political advan- 
 tage, but simply the promotion of the economic 
 progress of Germany, and expressed its willingness 
 to negotiate with Austria for an extension of 
 that system, but repeated that it was absolutely 
 necessary to determine the area and policy of the 
 Zollverein before any useful action could be taken in 
 that direction. It condemned strongly the methods 
 of the southern states in entering into secret rela- 
 tions with Austria, and lamented the bad impression 
 which the sight of the internal discord of Germany 
 must make on foreign nations. But neither the 
 southern states nor Austria were convinced of the 
 sincerity of the Prussian declarations, and as they 
 persisted in their policy, the Prussian Government 
 thought itself compelled to play its last card by its 
 announcement of September, 1852, that it con- 
 sidered the general negotiations for the renewal of 
 the Zollverein at an end, and henceforward would 
 only discuss treaties with separate states. But by
 
 32 THE BEGINNINGS OF PROTECTION 
 
 this time both parties were prepared to give way. 
 On the one side, Prussia was not anxious to carry 
 out its threat, and was beginning to realise that 
 its obstinacy had been carried too far ; whatever 
 her statesmen might say, they could not fail to 
 recognise the political advantages which the 
 Zollverein had given them, and they could not 
 afford to run the risk of a union between Austria 
 and the southern states. Further, it was doubtful 
 whether Hanover was prepared to go the whole 
 way with Prussia, who was more dependent than 
 she cared to admit on the action of that state. On 
 the other hand, Von Beust and Von den Pfordten, 
 the Ministers of Saxony and Bavaria and the 
 leaders of the policy of the south, had become 
 aware that the commercial and industrial classes 
 of their states were doubtful as to the advantages 
 to be gained by union with Austria alone, and 
 were not prepared to sacrifice the economic benefits 
 of the Zollverein for the sake of the political aims 
 of the Governments. The conferences with Austria 
 had been by no means satisfactory ; the attempts 
 to find a basis of agreement for the rival interests 
 had so far failed. A more conciliatory attitude 
 was adopted on all sides, and Prussia entered into 
 direct relations with Austria without waiting for 
 the settlement of the problem of the Zollverein. 
 Progress then became rapid, and in February, 1853, 
 a treaty between Prussia and Austria was signed 
 for twelve years. The entrance of Austria to the 
 Zollverein was postponed, but it was agreed that
 
 THE AUSTRO-PRUSSIAN TREATY 33 
 
 in 1860 a joint commission should be appointed 
 to consider plans for her complete admission. 
 Meanwhile, the two contracting parties undertook 
 reciprocal favoured treatment of each other. Many 
 commodities, chiefly raw and semi-manufactured 
 goods and manufactures of small value, were to 
 pass between the two contracting states free from 
 any duty ; and the duties on such articles as cotton 
 yarn and goods, chemicals, iron and metal goods 
 of all kinds except machinery, glass, agricultural 
 produce, linen yarn, woollen and silk goods, and 
 many other manufactured commodities were re- 
 duced 25 per cent. The terms of the treaty were 
 to extend to all states in customs union with 
 Prussia, and the Italian possessions of Austria. 1 
 
 The treaty was a compromise favourable to 
 Austria, for it was the kind of arrangement usually 
 made to prepare the way for a complete union. 
 But Prussia had gained time, and she had secured 
 the renewal of the Zollverein ; therefore the treaty 
 on the whole gave general satisfaction in Germany. 2 
 In the following April the Zollverein was renewed 
 by a series of treaties which made various modifi- 
 cations and rearrangements, but in the main 
 continued the old conditions, and Hanover was 
 
 1 In the treaty there was a clause which hampered Germany for 
 some time. By Art. iv., if one of the two contracting parties reduced 
 the duty on a commodity coming from a third state, not in receipt of 
 favoured treatment at the date of the treaty, then the other party could 
 impose a duty equivalent to the reduction on all goods of that kind 
 coming from the state which had made that reduction. 
 
 2 Weber, p. 335. 
 
 D
 
 34 THE BEGINNINGS OF PROTECTION 
 
 included. The years from 1853 to 1860 have been 
 described as the period of the stagnation of the 
 Zollverein. The protectionist movement was satis- 
 fied for a time ; l the treaty with Austria did not 
 greatly develop trade between the two countries, 2 
 but there was a considerable growth of German 
 industry ; and the temporary defeat of Prussia 
 seemed to put an end to any danger of the adop- 
 tion of the policy of Free Trade which that state 
 was supposed to represent. The mutual distrust 
 inspired by the conflict left its effects, and in spite 
 of numerous attempts at the annual conferences 
 from various sides, no serious changes were made 
 in the policy or administration of the Zollverein. 
 But by 1860 the political and economic conditions 
 had alike changed ; it was necessary for Prussia to 
 take decisive action if Austria was to be kept out 
 of the Zollverein. The new commercial policy of 
 the western states rendered a reconsideration of 
 Germany's own policy inevitable, and furnished 
 Prussia with her most effective weapon against 
 her rival. 
 
 1 Schippel, p. 138. 
 
 2 The export of raw materials from Austria to the territories of the 
 Zollverein increased somewhat ; the export of manufactured goods 
 remained almost stationary. The increased exports from the Zollverein 
 to Austria were chiefly cotton and woollen yarn, iron and metal goods.
 
 CHAPTER III 
 
 THE SECOND CRISIS AND THE 
 COMMERCIAL TREATIES 
 
 THE years 1861 to 1864 are filled by the second 
 great crisis in the history of the Zollverein, and in 
 many respects the phenomena of the former crisis 
 were repeated. Economic and political considera- 
 tions were again involved, and political aims to a 
 large extent again determined commercial policy. 
 
 The treaty with Austria had provided for the 
 commencement, about the year 1860, of negotiations 
 for the admission of that state to the Zollverein. 
 But in order that there might be any real prospect 
 of those negotiations being brought to a successful 
 issue, it was necessary on the one side that the 
 finances of the Austrian Empire should be brought 
 into order, so that when the time for negotiations 
 came she might have a free hand, and that her 
 protective policy should be to some extent modified ; 
 and on the other side, that the Zollverein should 
 not follow a policy so liberal as to frighten Austria 
 away. 1 None of these conditions were realised ; 
 for the war of 1859 and the loss of Lombardy had 
 
 1 Lotz, i. p. 10. 
 35
 
 36 THE COMMERCIAL TREATIES 
 
 again brought Austrian finances into disorder, and, 
 moreover, between 1853 and 1862, the protectionist 
 party had regained strength, and practically none 
 of the reforms contemplated in the treaty of 1853 
 with the Zollverein had been carried out. 1 
 
 From a purely economic point of view the Zoll- 
 verein, in its endeavour to secure a large market 
 for its agricultural and industrial products, might 
 adopt either one of two policies. It might adopt 
 the plan put forward long before by Brack, of 
 forming a large area with Austria with Free Trade 
 within and a strong policy of Protection against 
 all outside. In this way a large home market 
 would be secured and a self-sufficing economic 
 state created. Or alternatively, the Zollverein 
 might adopt a more liberal tariff policy, and estab- 
 lish closer commercial relations with the western 
 states of Europe. 
 
 The first of these alternatives was supported by 
 the high Protectionists in the Zollverein that is, 
 by a considerable number of the manufacturers, 
 especially in the iron industries, and by some of the 
 South German states, particularly Bavaria and 
 Wiirttemberg, which had always advocated union 
 with Austria, and represented to some extent in 
 politics that " Greater Germany " party whose ideal 
 was the establishment of a German Empire which 
 should include all the possessions of Austria, even 
 though many of them were inhabited by peoples 
 not of German stock. There were great difficulties 
 
 1 Weber, p. 399.
 
 THE FREE TRADE MOVEMENT 37 
 
 in the way of the realisation of this ideal, and the 
 Austrian Government seems about 1860 to have 
 lost much of its earlier interest in the matter ; in 
 1861 it admitted that for the time the obstacles 
 were almost insuperable. 1 The second alternative 
 was supported by the Free Traders, or rather by 
 those classes who desired the lessened restriction 
 of foreign trade, and by the anti- Austrian poli- 
 ticians of Prussia. 
 
 In the late fifties there was something approach- 
 ing to a real agitation for Free Trade in Northern 
 Germany. It found its theoretical expression in 
 the writings of Prince-Smith, to whose energy and 
 influence was due the foundation of the German 
 Economic Congress, which gathered together after 
 1858 all the reforming forces. There was an 
 admitted need for the amendment of the tariff; 
 no readjustment of the specific duties had been 
 made to bring them into a more satisfactory rela- 
 tion to values. But the reformers desired to go 
 further than this ; they wished the amendments to 
 be made deliberately in the direction of greater 
 freedom of trade. Much of their political strength 
 continued to depend on the support given to their 
 ideas by the landowners, who wanted cheaper 
 machinery, and also the extension of the English 
 market for their grain. Germany was still an 
 overwhelmingly agricultural country at the be- 
 ginning of the second half of the century two- 
 thirds of her population were engaged in agricul- 
 
 1 Ibid., p. 383.
 
 38 THE COMMERCIAL TREATIES 
 
 ture, 1 and the proportion declined only slowly up 
 to 1870 ; much grain was exported from the north, 
 especially to Great Britain. 2 The Free Trade 
 movement took its rise therefore in the agricul- 
 tural eastern provinces of Prussia, but it was sup- 
 ported also by the weavers, who wanted cheap 
 English yarn, by the middle class and small officials, 
 to whom the cheapness of many commodities was 
 a matter of very great importance, and by the 
 commercial classes and the seaports. On the other 
 side, many of the manufacturers were beginning 
 to feel that they were strong enough to do without 
 much of the protection they had hitherto enjoyed ; 
 some of them were already largely exporting (for 
 example, one-quarter of the produce of the woollen 
 industry was sent abroad), and they were anxious 
 to get rid of anything which in any way hampered 
 their relations with foreign markets. 3 Political 
 circumstances in Prussia itself were changing ; the 
 moderate Liberals were becoming predominant in 
 the Parliament, and though vigorously opposing 
 them on the question of the reorganisation of the 
 army, the Government was quite ready to use 
 their support for its anti- Austrian programme, and 
 was therefore favourably inclined towards a com- 
 mercial policy which commended itself to them, 
 and would repel Austria. 4 It found its opportunity 
 
 1 Voigt, in Handels- und Machtpolitik, vol. i, p. 141. 
 
 2 The average value of the surplus of grain exported over that im- 
 ported was estimated for 1860-4 at 35 mill. mks. (Lotz, i. p. 11). 
 
 3 Weber, 389. In 1859 manufactured goods amounted, so far as 
 values were concerned, to 4 of the total export (Lotz, i. p. 52). 
 
 4 Cf. Lotz, i. pp. 28-30.
 
 THE FRENCH TREATY SYSTEM 39 
 
 i 
 
 in the necessity of dealing with the situation 
 
 ^ 
 
 created by the change which had come over the 
 economic policy of the states of western Europe, 
 and by the altered attitude of France. 
 
 It has already been remarked that the trade 
 relations between the Zollverein and France under 
 the Monarchy of July had been greatly strained. 
 A long commercial struggle had now been going 
 on for nearly twenty years. 1 After the failure 
 of negotiations in 1839, the July Monarchy had 
 imposed very high duties on German goods ; the 
 Zollverein had replied in 1843 with retaliatory 
 duties increases on gloves, brandy, etc. and most 
 of these were still in force. Negotiations up to 
 1851 had failed, and fresh attempts after 1853 had 
 been equally unsuccessful. In 1860 Napoleon III., 
 by his own personal will and in spite of strong and 
 general opposition in France, had broken with 
 French traditional policy and made a commercial 
 treaty with Great Britain, which " ranks with the 
 treaty which founded the Zollverein, as perhaps 
 the most important international event of the 
 century in the sphere of economics."' By the 
 treaty France undertook to impose on an agreed 
 number of British products no duties higher than 
 30 per cent., and after October, 1864, 24 per cent., 
 
 1 Zimmermann, i. pp. 161-2., 263-5, 393-5. 
 
 2 Weber, 368. It is interesting to notice the failure of this his- 
 torian's prophecy in the following sentence, written in 1871. "The 
 impetus which this treaty gave to the customs policy of all European 
 countries is still far from ended, is rather becoming stronger, and in 
 all probability will end only by a complete change of the whole 
 customs legislation."
 
 40 THE COMMERCIAL TREATIES 
 
 ad valorem ; and Great Britain, on her side, under- 
 took to abandon some duties and to reduce those 
 on French wines. And further, both sides bound 
 themselves to reciprocal "most favoured nation" 
 treatment, that is to say, any tariff advantage 
 granted by one of the contracting parties to any 
 other state was, ipso facto, to extend to the other 
 contracting party also. 1 The British treaty in- 
 augurated a series which covered Western Europe 
 like a net. Treaties were made by France with 
 Belgium, Italy, Holland, Switzerland, Sweden, 
 Norway, and other countries, and of these, the 
 Belgian treaty, with its reciprocal reductions and 
 provision for mutual " most favoured nation " treat- 
 ment, became the model for all the others. The 
 net result was that France had one general or 
 "autonomous" tariff, which applied to all countries 
 with which special arrangements had not been 
 made ; and a treaty or " conventional " tariff, with 
 rates of duty settled by treaty with any one country 
 and then extended to all other treaty countries by 
 the action of the " most favoured nation " clause. 
 Most of the nations which entered into the system 
 were influenced partly by the desire not to let 
 
 1 "English industry had long reached a point where it had no 
 further need of protection against foreign competition ; in fact, the 
 existing protection was rather a burden. Already it was necessary for 
 it to fight in the great world markets with similar products of the 
 great industrial states, and it could therefore easily face their com- 
 petition in its own country, where all the conditions were favourable 
 to it. It was to be anticipated that this impulse would drive other 
 states to a reform of their strict customs systems, and in this the 
 English industry would assuredly find its benefit. The justice of this 
 calculation has since then been completely established " (Weber, p. 370).
 
 FRANCO-GERMAN RELATIONS 41 
 
 Great Britain secure greater advantages in France 
 than they themselves enjoyed, and partly by the 
 anxiety to do something to compensate for the loss 
 of part of the American market, owing to the 
 United States' high protective tariff of 1861. 
 
 It became absolutely necessary for the Zollverein 
 to take action. Great Britain generalised all the 
 reductions which she had made in the French 
 treaty, she extended them to the products of all 
 countries ; but France only gave reductions to the 
 treaty states. Consequently the British and Belgian 
 manufacturers enjoyed an immense advantage over 
 the Germans, 1 and the trade of Germany with 
 France was at the best only small, for, whilst it 
 imported from that country goods to the value of 
 154,000,000 francs, it sent her goods worth only 
 82,000,000 francs. 2 The German manufacturers 
 hoped that by a treaty they would secure a greatly 
 developed market in France for their iron and 
 steel, textiles, leather goods, etc., many of which 
 were prohibited by the French " autonomous " as 
 distinct from the "conventional" or treaty tariff. 
 France, on the other hand, communicated early in 
 1861 her willingness to negotiate with Prussia, 
 which was entrusted with the diplomatic representa- 
 tion of the Zollverein, and Prussia readily accepted 
 the invitation. 
 
 1 e.g. " Edged tools from treaty states paid a duty into France 
 of 18 francs per 100 kilo., but from the Zollverein 160 francs ; the 
 duties on paper were respectively 10 and 160 francs, on iron tools 12 
 and 60 francs " (Schippel, p. 171). 
 
 2 Lotz, i. p. 37.
 
 42 THE COMMERCIAL TREATIES 
 
 It was clear, however, that the treaty proposed 
 must have much wider effects than the mere de- 
 velopment of the trade with France. It must 
 involve a readjustment of the whole Zollverein 
 tariff, and to that there was no particular opposi- 
 tion ; in fact, the work of reform had commenced 
 already in March, 1861, the transit duties were 
 abolished, and also a considerable number of the 
 export duties. But of far greater importance was 
 the probable influence of the contemplated treaty 
 on the relations to Austria. The Prussian states- 
 men realised at once that the grant of reduction 
 of duties to France, and the establishment of 
 " most favoured nation " terms with that country 
 would render impossible the continuance of the 
 special relations, under the treaty of 1853, with 
 Austria, and would put an end to the idea of a 
 union between Austria and the Zollverein. 1 Free 
 Trade was to be the most potent weapon employed 
 by Prussia in her effort to exclude Austria from 
 the future German Empire. 2 The other states of 
 the Zollverein realised this, and at once a struggle 
 began. 
 
 It was, in fact, a repetition of the events of ten 
 years before. The time for the renewal of the 
 Zollverein was drawing near, and, just as on the 
 previous occasion, Prussia had made a treaty with 
 Hanover and insisted on its acceptance as a condition 
 of the renewal of the union, whilst the southern 
 states had striven to make the admission of Austria 
 
 1 Weber, p. 373. 2 Schippel, p. 172.
 
 CONFLICT OVER THE FRENCH TREATY 43 
 
 the basis of negotiation, so now Prussia pushed on 
 the completion of the treaty with France in order 
 to repel Austria. And again she insisted that the 
 new treaty should be accepted by the other states 
 if the Zollverein were to be continued. The treaty 
 between Prussia and France was hastened ad- 
 mittedly for political reasons, 1 and was completed 
 on 29th March, 1862, though the actual signing 
 did not take place till the following August, after 
 approval had been given by the Prussian Parliament. 
 It was communicated immediately to the other 
 Governments for their acceptance, and was speedily 
 rejected by Wiirttemberg, Hanover, Nassau, and 
 Hesse-Darmstadt ; Saxony alone, abandoning her 
 old policy, now threw herself on the Prussian side. 
 The attitude of the opposition was undoubtedly 
 influenced by the proposal put forward in July by 
 Austria for a complete union with the Zollverein, 
 the preliminary condition, of course, being the 
 postponement of any arrangement with France till 
 after that event. To this Prussia would not accede, 
 declaring herself bound, for her own part, to carry 
 out the treaty. The southern states attempted, at 
 the end of 1862, to open direct negotiations with 
 France, but were rejected. 2 Meanwhile conferences 
 on the renewal of the Zollverein were going on, 
 but the difficulties were great. In November, 
 1862, the Prussian Government had declared 
 definitely that it took the rejection of the French 
 
 1 Weber, p. 386. 
 
 3 Schippel, p. 175, quoting Bismarck's speech on 26th December, 
 1862.
 
 44 THE COMMERCIAL TREATIES 
 
 treaty by the southern states to mean their intention 
 not to continue the Zollverein. After the confer- 
 ences of the first half of 1863 on the Austrian 
 question and the renewal of the Zollverein had 
 produced no satisfactory result, the Bavarian 
 Government suggested the formation of a separate 
 union from which Prussia and her allies should be 
 excluded, and which should come to terms with 
 Austria on the basis of the treaty of 1853. But 
 it soon became apparent that only Bavaria and 
 Wurttemberg were prepared to go so far, and even 
 in those states the Governments were not sure of 
 the support of the whole of their population. After 
 further complicated discussions, in which both sides 
 attempted to justify themselves before public 
 opinion, but the Prussian Government was handi- 
 capped by the impossibility of stating its real aims, 
 Prussia, on the 17th December, 1863, gave formal 
 notice of the termination of the Zollverein. The 
 other states now yielded, particularly as Austria 
 was now less inclined to push her proposals. The 
 conferences were renewed in February, 1864, and 
 at the same time Prussia began negotiations for a 
 simple treaty with Austria. After some delay, on 
 the llth April, 1865, a treaty, containing not much 
 more than the guarantee of simple " most favoured 
 nation " treatment, was made with Austria, and in 
 May, after the acceptance in the previous year by 
 the southern states of the French treaty, the Zoll- 
 verein was formally renewed. 1 In the same year 
 
 1 Its practical renewal dates from October in the previous year.
 
 CHANGES IN THE TARIFF 45 
 
 treaties similiar to the one with Austria were made 
 with Belgium, Great Britain (including her colonial 
 possessions), and Italy, and the treaty with France, 
 so long under discussion, at last came into force. 
 The Zollverein had followed the example of the 
 last-named country in its adoption of the system 
 of " autonomous " and " conventional " tariffs. 
 
 The series of treaties thus completed brought of 
 necessity sweeping changes in the customs tariff 
 of the Zollverein. Already, whilst the negotiations 
 with France were in progress, but without particular 
 reference to them, the transit duties had been abol- 
 ished, and all the parties to the treaties now bound 
 themselves to maintain this policy for the future. 
 Further, there had been a growing inclination to 
 abandon the idea of helping those industries for 
 which the raw materials were produced at home 
 by prohibiting or limiting the export of the latter. 
 In no case was the method very effective, and in 
 some instances, such as the leather and woollen 
 industries, it could be shown to be harmful. 1 Most 
 export duties were now abolished ; some remained, 
 but were reduced, as, for example, those on materials 
 requisite for paper-making. All the contracting 
 parties reserved to themselves the right to prohibit 
 exports, but under strong French pressure the 
 Zollverein agreed not to make use of this power in 
 regard to coal. 
 
 Much more important was the reduction of 
 duties on imports, and this [presented the greatest 
 
 1 Lotz, i.^p. 43.
 
 46 THE COMMERCIAL TREATIES 
 
 difficulties. For the insertion in most of the treaties 
 of the " most favoured nation " clause meant that 
 any reduction granted by the Zollverein to one 
 power would have to be extended to all the others. 
 So the Zollverein in granting reductions to France 
 had to consider, not simply their effect on the 
 imports from that country, but how far the neces- 
 sary extension to other lands, for instance, Great 
 Britain and Belgium, would encourage the attack 
 by their manufacturers on the German home 
 market. The reductions made under these con- 
 ditions represented a deliberate policy of Free 
 Trade, in that they were inspired by the desire not 
 only to promote trade relations with the contract- 
 ing states, but also to improve the tariff by the 
 removal of anomalies, and by abolishing protection 
 wherever it seemed no longer required. So the 
 tariff was disencumbered of duties which had no 
 protective or financial results (as that on zinc, of 
 which the Zollverein exported none and imported 
 much) ; the duties introduced for retaliatory pur- 
 poses (usually without effect) and no longer im- 
 portant as the surtaxes on French goods imposed 
 in 1842 and the duty on Russian tallow were 
 abolished ; and all the raw and semi-manufactured 
 materials of industry were admitted free. 1 
 
 On none of these things was there much differ- 
 ence of opinion, but the case was different in regard 
 to manufactured commodities ; some of the in- 
 dustries, such as the iron trades and the cotton 
 
 1 Lotz, i. pp. 42-4.
 
 REDUCED DUTIES ON MANUFACTURES 47 
 
 spinners, still clung to Protection, and had strongly 
 opposed the treaties for that reason. But their 
 resistance was overcome, and a great number of 
 reductions were made the treaty with France 
 alone had provided for 161 changes in the tariff, 
 mostly in regard to manufactured goods. Thus 
 the duty on cotton goods was reduced 40-80 per 
 cent., on silk 50 per cent., on silk goods 45 per 
 cent., on pig-iron 25 per cent., on leather 60 per 
 cent., on leather goods 50 per cent., on sewing 
 needles 80 per cent., on woollen cloth 60-80 per 
 cent., on fine iron goods 80 per cent., on pressed 
 glass 33 per cent. 1 These changes, however, were 
 not made on any definite plan the tariff had 
 never yet undergone a complete and systematic 
 revision ; that might have followed, but the 
 rapidity of the subsequent movement towards 
 Free Trade rendered any rearrangement of the 
 tariff unnecessary, by almost destroying it. 
 
 1 Weber, pp. 441-3.
 
 CHAPTER IV 
 
 THE ZOLLVEREIN AFTER THE 
 TREATIES THE COMPLETION OF 
 FREE TRADE AND THE REACTION 
 
 IT is a striking testimony to the strength of the 
 Zollverein and its hold upon Germany that during 
 the war of 1866, when the constituent states were 
 fighting each other, the joint customs administra- 
 tion went on without interruption. 1 After the 
 speedy termination of the struggle and the destruc- 
 tion of all prospect of Austrian predominance in 
 Germany, there came a reform of the constitution 
 of the Zollverein by the treaty of 1867 between 
 the North German Confederation on the one side, 
 and Bavaria, Wiirttemberg, Baden, and Hesse on 
 the other. 2 The system of a union of independent 
 states, each possessing the right to veto any pro- 
 posal, was replaced by an organisation in which 
 matters were decided by a majority of votes a 
 change generally felt to be necessary on account of 
 
 1 Weber, pp. 462-3. 
 
 2 It should be noted that Hanover, Electoral Hesse, Nassau, and 
 Frankfurt, hitherto independent states of the Zollverein, had become 
 part of the Prussian Kingdom ; and the Zollverein area was extended 
 by the inclusion of Schleswig-Holstein. also added to Prussia. 
 
 48 '
 
 FORMATION OF THE EMPIRE 49 
 
 the innumerable difficulties and delays which the 
 old method had called forth. The Zollverein, 
 thus reconstituted, now included all the German 
 states except Hamburg and Bremen. The Cus- 
 toms Union Council (Zollbundesrath) consisted of 
 fifty-eight members, of whom Prussia had seven- 
 teen, and represented the old general conference ; 
 but to it was added a Customs Parliament (Zoll- 
 parlement) composed of members of the North 
 German Parliament and representatives of the 
 South German states. 1 The position was some- 
 what peculiar, for many of the states were largely 
 dependent on the customs revenue, and this was 
 controlled by the Customs Parliament. Con- 
 sequently, while each separate state could fix its 
 expenditure at whatever it pleased, it could not 
 control the chief part of its revenue a fact which 
 gave great impetus to the movement for complete 
 union. 
 
 In 1871 the Franco-German War, and the pat- 
 riotic enthusiasm it evoked, brought the establish- 
 ment of the Empire, and at last political as well as 
 economic union was attained. 2 In the Empire, 
 legislation concerning customs and trade was to be 
 a matter for the Imperial Parliament ; the proceeds 
 of the customs duties were to go to the imperial 
 exchequer, and not to be divided between the 
 state exchequers as before ; the duties were to be 
 
 1 Weber, p. 467. 
 
 s There were some slight modifications to this Hamburg and 
 Bremen were in the empire, but not in the Customs Union ; Luxemburg 
 is still in the Union, but not in the Empire.
 
 50 THE ZOLLVEREIN AFTER THE TREATIES 
 
 collected by officials of the separate states, but 
 under the control of the Emperor as executive 
 official of the Empire. The new machinery speedily 
 showed itself to be effective, and the old wearisome 
 negotiations between the states on every proposal 
 for a change of economic policy were at an end. 1 
 
 The wars of 1866 and 1871 necessarily made 
 considerable changes in the commercial relations of 
 Germany to Austria and France. Austria was 
 inclined to a less strongly protectionist policy, 
 partly because her statesmen, in the reorganisation 
 of the empire, were compelled to pay more atten- 
 tion to the interests of Hungary, which was mainly 
 agrarian, exported grain and other agricultural 
 produce, and was distinctly sympathetic to freer 
 trade. In the treaty of 1868 between Austria and 
 the Zollverein there were reductions made on both 
 sides ; by Austria on manufactured goods, by Ger- 
 many on wine and iron. 2 In the case of France, 
 there were fears that she might refuse to renew 
 the treaty with Germany whilst continuing her 
 arrangements with other powers ; and it was also 
 likely that, should Thiers remain in power, she 
 would adopt a strongly protective policy. All 
 that could be obtained was secured in the Treaty 
 of Frankfurt in May, 1871, but it was little more 
 than the guarantee of perpetual " most favoured 
 nation " treatment ; it did not secure a permanent 
 set of low duties as the previous treaty had done. 
 Other treaties of the same kind as this were made 
 
 1 Zimmermann, ii. pp. 71, 72, 2 Lotz, i. 86-8,
 
 THE ADMISSION OF ALSACE-LORRAINE 51 
 
 in March, 1868, with Spain and her possessions in 
 Cuba, Porto Rico, and the Philippines ; and in the 
 following year with the moderately protective 
 Switzerland, with Mexico and Japan. 
 
 The Franco-German War had one other most 
 important economic effect. The acquisition of 
 Alsace-Lorraine greatly increased the competition 
 which German spinners and textile manufacturers 
 had to meet, without bringing any corresponding 
 development of the home market. In Germany 
 in 1868 there were 3,000,000 cotton spindles and 
 37,000 weaving looms, whilst in the same year 
 there were in Alsace-Lorraine 2,131,000 cotton 
 spindles and 48,536 looms. 1 There was great dis- 
 cussion and uncertainty in Germany as to the 
 policy to be adopted in regard to the new imperial 
 lands ; but finally it was found necessary to admit 
 them completely into the Union, and the prosperity 
 which followed immediately after the war made 
 the new competition less felt than it would other- 
 wise have been. 2 
 
 The policy pursued by the Zollverein after 1866 
 was in the direction of Free Trade, and under the 
 guidance of Delbruck the movement progressed 
 with great rapidity. In 1868 the reductions made 
 in the treaty with Austria were generalised ; some 
 duties were abolished, and there were reductions 
 on certain kinds of cotton goods, linen yarn, pig- 
 iron, unwrought steel, drugs, fine leather goods, 
 and other commodities. 3 Then came the further 
 
 1 Zimmermann, ii. p. 81. 2 Ibid., pp. 81-5. 3 Schippel, p. 185.
 
 52 THE ZOLLVEREIN AFTER THE TREATIES 
 
 reform in 1870, which simplified the tariff, reduced 
 still further the duties on iron and steel, and freed 
 altogether a number of articles, particularly chemi- 
 cals. Finally, in 1873 there were still more changes, 
 and the completion of the general policy of the 
 reduction or entire abandonment of protective 
 tariffs, and the adoption of tariffs for revenue 
 purposes only. 1 The changes thus made were not 
 to come entirely into force before the 1st January, 
 1877, but by that time the duties on iron, except 
 on fine goods, were completely gone, as on most 
 other things. Only a small group of highly 
 finished commodities remained liable to duties ; 
 the German Empire had become very nearly a 
 free-trading state. 
 
 As the duties on iron form about the best illus- 
 tration of the line of movement, it may be useful 
 to set them out here. 
 
 COMMODITY 
 Pig-iron .... 
 Bar-Iron .... 
 
 1839 l8 4S l8 ^5 iS68 1870 1873 1877 
 2 1-50 1 0-50 
 6-18 9-18 5-7 5-7 3-50-5 2 
 
 Iron Plates . 
 
 9-24 18-24 7-15 7-15 5-7 2 
 
 
 
 Coarse Cast-Iron 
 Goods .... 
 
 6 6 2-40 2-40 2'40 2 
 
 
 
 Coarse Iron Goods . 
 
 36 36 8-16 8-16 8 5 
 
 
 
 Fine Iron Goods . . 
 
 60-300 60-300 24-60 24-60 24-60 24-60 ! 
 
 24-6 
 
 (Marks per 100 kilog.) 
 
 The establishment of this policy was the result 
 of mingled economic and political forces. The 
 landowners of the eastern provinces were still 
 
 1 Schippel, p. 186, remarks that the tariff legislation of these five 
 years was altogether in the spirit of the financial reforms of Gladstone 
 and Peel.
 
 PRACTICAL COMPLETION OF FREE TRADE 53 
 
 free traders, and so in a more moderate way were 
 the commercial class and many of the manufac- 
 turers. 1 The opposition came, as always, from the 
 heavy iron and spinning industries, championed 
 chiefly by the southern states. The Free Trade 
 movement, which was so strong that Government 
 proposals to protect petroleum and raise the duty 
 on tobacco for financial reasons were rejected, 2 
 found its political advantage in the fact that there 
 was at the time no compact Conservative party, 
 and that Bismarck was relying for support in his 
 schemes for the organisation of the empire on the 
 moderate Liberals. Unwilling to accept many 
 items in their political programme, he disarmed 
 their hostility by the adoption of their economic 
 policy ; but he left commercial matters largely 
 to Delbriick and Camphausen. 3 
 
 The practical completion of the Free Trade 
 policy by the cessation of the iron duties was 
 followed by an immediate and sharp reaction. The 
 representatives of the iron and cotton industries 
 had never ceased their agitation against the reduc- 
 tion of the tariff, and in conjunction with the manu- 
 facturers of chemicals, sugar, linen, and leather, 
 they had formed the Central Union, which com- 
 menced to work for a return to Protection. They 
 were aided by the conditions of German industry 
 after 1872, but still more by the changes which 
 
 1 Lotz, i. pp. 91, 92. 2 Zimmermann, ii. pp. 219, 220. 
 
 3 Zimmermann (ii. p. 230) complains that the whole policy at this 
 time was a slavish imitation of the action of Great Britain, without 
 any regard to the difference in geographical and economic conditions.
 
 54 THE ZOLLVEREIN AFTER THE TREATIES 
 
 were coming over German agriculture and by the 
 financial needs of the Empire. 
 
 In the history of German trade after 1871 the 
 dominant fact is the payment of the war indemnity 
 of nearly six milliard francs (including interest) by 
 France ; much of it was paid in bills of exchange, 
 but a great amount in gold. The results were 
 a great increase of imports, whilst exports remained 
 almost stationary ; a very rapid rise in prices, as 
 a result of the great influx of gold ; and consider- 
 able impetus to industry from the high prices and 
 also from the expenditure by the Government on 
 railways and public works. There followed the 
 usual results excessive development of works, 
 over-capitalisation, and over-production. In June, 
 1870, there were in Prussia 410 joint-stock com- 
 panies with a total capital of three milliard marks ; 
 by the end of 1874 the number had increased 
 to 2,267, with a capital of seven and one-third 
 milliards. 1 But already in 1873 the crash had com- 
 menced ; it was widespread and general, not merely 
 in Germany, but outside. There followed a rapid 
 fall in prices and general depression ; and for a time 
 the low level of prices in Germany kept serious 
 foreign competition away. Then, however, the 
 situation gradually improved ; markets became 
 steadier, and prices began to rise. But just then 
 Great Britain entered upon a period of depression; 
 agricultural difficulties, due to bad harvests, affected 
 the whole country; there was a drop in the home 
 
 1 Blum, p. 158, quoting Max Wirth's Geschichte der Handelskrisen.
 
 THE REACTION 55 
 
 demand for iron and textile goods, and the British 
 manufacturers, who were over-producing as a result 
 of the impetus given by the unusually high prices 
 of 1872 and 1873, now sent large quantities of 
 goods abroad at extremely low prices, that is 
 to say, they "dumped." This counteracted the 
 tendency of the German market towards a rise in 
 prices, and seriously hindered the recovery of the 
 German manufactures ; hence came the renewed 
 demand for Protection, strongest in the case of the 
 textile and iron industries. 1 
 
 Moreover, a very important change had come 
 over the opinions of the landowners. With the 
 development of means of transport and the 
 growth of the American railways, the Russian 
 and even American competition in the supply of 
 grain to the European markets was beginning to be 
 severely felt; the German landowners were not 
 only ceasing to be exporters, but were severely 
 threatened even in the home market. Further, the 
 movement of population to the towns had com- 
 menced in Germany, and the more attractive 
 conditions offered by industrial employment were 
 beginning to deprive the landowners of their 
 labourers. They had ceased to have any further 
 interest in the promotion of Free Trade ; in fact, 
 they were themselves beginning to desire some 
 measure of protection. And even some of those 
 observers who believed that it would be a mistake 
 
 1 Dietzel, in Quarterly Journal of Economics, May, 1903. Cf. Lotz, 
 i. pp. 122-37.
 
 56 THE ZOLLVEREIN AFTER THE TREATIES 
 
 to attempt to shut out the foreign and cheaper 
 supplies of foodstufts, were yet, like Conrad, willing 
 to establish a moderate amount of protection for 
 grain, by a scale of duties limited in duration and 
 gradually diminishing, to enable the agriculturists 
 to transfer their attention to other branches of 
 production. 1 
 
 How far this joint protectionist movement of 
 agriculture and industry would have been success- 
 ful, if left to itself, is doubtful ; the determining 
 factor in the situation was the condition of the 
 imperial finances. The expenditure of the empire 
 was increasing rapidly, and to Bismarck it seemed 
 impossible to continue to raise the revenue required 
 by direct taxation, which was becoming extremely 
 burdensome. It was felt that a rearrangement of 
 the imperial finances was absolutely necessary, both 
 on economic and political grounds, and Bismarck 
 resolved that his best policy was to have recourse 
 to indirect taxation in the form of customs duties, 
 and to substitute the proceeds of these for the 
 contributions to the imperial exchequer from the 
 separate states contributions which they raised 
 by direct taxes. The demands on the states were 
 steadily rising ; in 1874 they were 51,400,000 
 marks, whilst by 1878-9 they had risen to over 
 70,000,000 marks. The Chancellor was much in- 
 fluenced by these considerations, and as a member 
 of the landowning class he was not insensible 
 to its demands ; the position of affairs in home 
 
 1 Dietzel, pp. 386, 387.
 
 BISMARCK'S NEW POLICY 57 
 
 politics had changed, and he could afford to break 
 with the Liberals. In October, 1878, 204 members 
 (i.e. a majority) of the Reichstag signed a declara- 
 tion in favour of the reconsideration of fiscal policy. 1 
 And another fact which had considerable weight 
 with the Chancellor was the growth of Protection 
 in the neighbouring countries, particularly in 
 France in the tariff' of 1878. 2 The policy which 
 Bismarck now adopted had three objects in view. 
 First, he desired to establish (to use his own words) 
 "a customs system which secures to the entire 
 home production a preference before foreign pro- 
 duction in the home market, whilst keeping within 
 the limits imposed by financial interests." Secondly, 
 there was to be a reform of the railway system and 
 railway rates, to promote the transport of German 
 goods, and to put an end to the preference given on 
 many of the railways to foreign products ; he wished 
 to obtain an imperial railway system, and when that 
 proved impracticable, he resolved that the Prussian 
 railways, at least, should become the property of the 
 
 1 Blum (p. 310) quotes from the Circular : " In view of the com- 
 mercial policy of most of the countries bordering on Germany, with 
 the knowledge of the absence of a German customs tariff and the evil 
 effect of this on national well-being, and on account of the continuance 
 of the crisis in German industry and agriculture (the signatories) 
 believe a reform of the tariff, based on the result of careful investiga- 
 tions and expert balancing of interests, to be absolutely necessary. 
 . . . Although holding diverse views as to commercial policy, the 
 signatories are agreed on this fundamental point that the difficult 
 problems of German commercial policy cannot simply be solved by 
 phrases about Free Trade and Protection, but that it is much more 
 necessary to reconcile the real and supposed conflicts of interests by the 
 exercise of a scientific, patriotic, and reasonable spirit." 
 
 2 Lotz, i. pp. 146-9.
 
 .58 THE ZOLLVEREIN AFTER THE TREATIES 
 
 state. And thirdly, he was anxious for the re- 
 arrangement of the imperial finances. 1 
 
 The argument for the new policy was set out in 
 a letter addressed by the Chancellor on 15th 
 December, 1878, to a committee appointed by the 
 Bundesrath to consider the revision of the tariff. 
 The financial object of tariff reform, according to 
 this memorandum, was to be the reduction of 
 direct and the increase of indirect taxation ; and 
 the Chancellor calculated that if the future import 
 duties were to average 5 per cent, ad valorem, the 
 increased revenue would amount to about seventy 
 million marks, or almost exactly the amount which 
 in the year 1878-9 was contributed by the separate 
 states to the imperial exchequer. To secure this 
 result it was necessary to return to the principle of 
 the liability to taxation of all foreign products 
 crossing the frontier, with the exception of those 
 materials for industry which Germany either did 
 not produce at all, or produced only to an inade- 
 quate amount. This proposal the Chancellor pro- 
 ceeded to justify on the ground of the economic 
 interests of the nation. " I leave undecided the 
 question whether complete mutual freedom of 
 international commerce, such as is contemplated by 
 the theory of Free Trade, would not serve the 
 interests of Germany. But as long as most of 
 the countries with which our trade is carried on 
 surround themselves with customs barriers, which 
 there is still a growing tendency to multiply, it 
 
 1 Blum, pp. 305, 306 ; cf. Dawson, pp. 47-54.
 
 BISMARCK'S ARGUMENT FOR PROTECTION 59 
 
 does not seem to me justifiable, or to the economic 
 interest of the nation, that we should allow our- 
 selves to be restricted in the satisfaction of our 
 financial wants by the apprehension that German 
 products will thereby be but slightly preferred to 
 foreign ones." Protective duties for particular 
 industries he thought likely to cause difficulty and 
 arouse hostility, but a customs system protecting 
 the whole home production would "in no way 
 appear partial, because its effects would be more 
 equally spread over all the productive circles of the 
 land than is the case with a system of protective 
 duties for isolated branches of industry. The 
 minority of the population, which does not produce 
 at all, but exclusively consumes, will apparently be 
 injured by a customs system favouring the entire 
 national production. Yet if by means of such a 
 system the aggregate sum of the values produced 
 in the country increase, and thus the national 
 wealth be on the whole enhanced, the non-produc- 
 ing parts of the population and especially the 
 state and communal officials who are dependent 
 upon a fixed money income will eventually be 
 benefited." He therefore proposed the maintenance 
 of the existing duties and their possible increase, 
 and the introduction of new duties ; and he held 
 that, except in cases where the foreign commodity 
 was not produced in Germany and was indispens- 
 able, the greater part, if not the whole, of the 
 import duty would be borne by the foreigner. 
 And in any case a small duty of from 5 to 10 per
 
 60 THE ZOLLVEREIN AFTER THE TREATIES 
 
 cent, would only be one of the forces affecting 
 prices ; it would probably not do the consumer 
 any harm, and would do the home producer some 
 good. In regard to agriculture, the Ministry, in 
 the memorandum which accompanied its definite 
 proposals, declared that the duties were so small 
 that they could not be regarded as protective to 
 any considerable extent, and would not diminish, 
 and still less exclude, the import of foreign grain ; 
 but they would check the swamping of the German 
 market by the surplus products of other lands, and 
 make German agriculture better able to hold its 
 own, even if the general price of grain should fall. 
 Even granted that the result of the new duties 
 be an increase in the price of the necessaries of 
 life, the Government asserted that this would be 
 corrected ultimately by the increase of home pro- 
 duction and by the greater demand for labour and 
 consequent rise of wages. 1 
 
 The Chancellor was supported by the iron and 
 textile industries and their allies, and by the land- 
 owners and the agrarian party generally. He was 
 opposed by the exporters, who feared retaliation 
 (though this opposition was somewhat weakened 
 by the growing tariffs of foreign powers), by the 
 two great seaports, which dreaded the dislocation 
 of their trade, and by the municipalities, which, on 
 the great Municipal Day at Berlin, where seventy- 
 two town councils were represented, protested 
 strongly against any policy likely to cause an in- 
 
 1 See passages quoted in Schippel, pp. 230-2.
 
 THE NEW TARIFF 6l 
 
 crease in the price of food. 1 The National Liberals 
 led the opposition, but they were a declining party, 
 and they had no hold on the workmen ; the Socialist 
 movement was growing rapidly, but its leaders 
 seem to have been disinclined to take any vigorous 
 action. Thus in 1876, the Socialist Congress at 
 Gotha declared that "the Socialists of Germany 
 are indifferent to the controversy raging in the 
 proprietary classes as to Protection and Free Trade ; 
 the problem is a practical one, and must be so 
 considered in each particular case." And some of 
 the Socialist leaders were apparently inclined to 
 take the line that a protective tariff might increase 
 the demand for labour in the home market, and 
 consequently bring some benefit to the workmen, 
 though, on the other hand, they disapproved of 
 proposals which tended to raise the price of food. 2 
 In spite of a considerable amount of opposition, 
 the tariff proposals were carried, 3 not, however, 
 before the agrarian party, which held the political 
 balance, had forced the Government to increase 
 considerably the duties originally proposed on 
 agricultural produce. The tariff ultimately adopted 
 dealt with forty-three groups of commodities, and 
 retained the system of specific duties, that is to 
 say, duties levied on a given quantity of each 
 commodity, and not changing with the changes in 
 
 1 Blum,, p. 330. 
 
 2 For a sketch of the Socialist attitude towards the problems of 
 tariff policy, see Schippel, pp. 323-52. 
 
 3 The details of the controversy may be read in Zimmermann, ii. 
 pp. 271-300 ; and Lotz, i. pp. 163-74.
 
 62 THE ZOLLVEREIN AFTER THE TREATIES 
 
 value of that quantity. In fact, the whole tariff 
 system was inelastic, defective, and unscientific ; 
 in particular it did not take sufficient account 
 of the complications of industry, and lacked 
 adaptability. 1 The new policy was based on the 
 principle of moderate protection for agriculture 
 and industry alike. The British protective system, 
 up to 1846, had been maintained chiefly for the 
 sake of agriculture ; the German protective system 
 from 1848 to 1860 had been dictated by the interests 
 of manufacturers ; now an effort was to be made 
 to harmonise the two, and to give a fair measure 
 of protection to all. And at this point it will be 
 convenient to examine the attitude of the German 
 economists towards national fiscal policy up to the 
 establishment of the new tariff. 
 
 1 Schumacher, Verhandlungen, pp, 157, 158.
 
 CHAPTER V 
 THE ATTITUDE OF THE ECONOMISTS 
 
 AT the outset of a survey of the movement of 
 economic thought in Germany in the last century, 
 it is necessary to remind ourselves of two very 
 important influences which have dominated the 
 whole of German political thought during that 
 period. The first of these is the idea of the 
 paternal state an idea based on the historical fact 
 that the Prussian State is the creation of a series 
 of strong rulers, such as the Great Elector, 
 Frederick William L, and Frederick II., working 
 by means of a powerful and highly centralised 
 bureaucracy. For centuries the nation looked for 
 impetus and initiative in all departments of national 
 life to the monarchs, and on the whole it rarely 
 looked in vain. The second great influence is that 
 of the desire for national unity a desire dis- 
 appointed at the War of Liberation, but ever 
 growing in strength, attempting to realise itself 
 in the abortive movements of 1848-9, and at last 
 triumphant in 1870. The effect of these two ideas 
 has been a general sympathy on the part of all 
 German writers on economics and politics towards 
 
 63
 
 64 THE ATTITUDE OF THE ECONOMISTS 
 
 State action, and an inability amongst economists 
 to keep their discussions free from political con- 
 siderations. 
 
 Most of the German economists of the early 
 years of the nineteenth century were followers and 
 interpreters of Adam Smith, and the most im- 
 portant representatives of this school were Rau, 
 whose Lehrbuch was published between 1826 and 
 1832, and Nebenius, the official of Baden, who, it 
 will be remembered, played a considerable part 
 in the foundation of the German Zollverein. l But 
 as early as 1809 a note of revolt against the 
 doctrines of Adam Smith was sounded by Adam 
 Muller, whose Elemente der Staatskunst was pub- 
 lished in that year. His criticism of Adam Smith 
 is based chiefly on his own conception of the State 
 as representing the " totality of national life." Too 
 much regard, he held, is paid by Adam Smith to 
 the individual and to the immediate production 
 of exchange values ; and he complains that the 
 collective interests of the community, the main- 
 tenance of collective production in the future, and 
 the social well-being of the workers are almost 
 entirely ignored, and that Adam Smith neglects 
 to point out " the necessary counterpoise and com- 
 pletion of the division of labour," namely, the prin- 
 ciple of the "national combination of labour." 
 For Great Britain Adam Smith's individualistic 
 economics might be adequate, and probably were ; 
 for Germany and the continental states generally 
 
 1 See p. 7,
 
 FRIEDRICH LIST 65 
 
 a different theory of economic action and of the 
 relation of the State to commerce and industry 
 was absolutely necessary. 
 
 Much more important and much more influen- 
 tial was the work of Friedrich List (1789-1846), 
 who published his Rationale System der Politischen 
 Oekonomie in 1841 a book which owed its wide- 
 reaching success partly to its power of argument 
 and abundance of historical illustration, and partly 
 to its fervid patriotism and its appeal to that 
 growing desire for national unity which animated 
 the vast majority of the German people. It is less 
 an economic argument than a great political appeal, 
 and its title gives the key to its contents. Like 
 Muller, List lays great emphasis on the distinc- 
 tion between "private economy" and "national 
 economy." * National unity is the first essential of 
 individual well-being, and "private economic in- 
 terests, like all others, must be subordinated to the 
 maintenance, completion, and strengthening of a 
 nationality." Like Muller again, he emphasises 
 the fact that it is not to the production of wealth 
 alone that the economic policy of the nation 
 should be directed, but to the creation of many- 
 sided productive powers, and the harmony and 
 balance of the three branches of national economic 
 
 1 List, National System of Political Economy (translated by Lloyd), 
 chap. xiv. e ' The foreign trade of a nation must not be estimated in the 
 way in which individual merchants judge it, solely and only according 
 to the theory of values (i.e. by regarding merely the gain at any 
 particular moment of some material advantage) ; the nation is bound 
 to keep steadily in view all those conditions on which its present and 
 future existence, prosperity, and power depend" (chap. xii.). 
 F
 
 66 THE ATTITUDE OF THE ECONOMISTS 
 
 action agriculture, manufacture, commerce. In 
 this latter idea of the balance of the three depart- 
 ments of economic activity we may detect traces 
 of the influence of one of the most remarkable 
 works of Fichte, whose Geschlossene Handelsstaat, 
 published in 1800, sets forth a scheme of a self- 
 contained socialistic state, in which perhaps the 
 most important task of the Government is to 
 maintain the balance between the producers of 
 food and raw material, the producers of manu- 
 factured goods and the merchants, and to prevent 
 the predominance of any one group over the 
 others ; from this ideal state foreign trade must be 
 excluded, because it is certain to tend to destroy 
 such a balance. But whilst he desired to maintain 
 agriculture, List also held most strongly that in- 
 dustrial development is essential to any community 
 which desires to attain to the highest possible level 
 of civilisation. 1 To enable industries to grow up, 
 protection by tariffs and all possible forms of 
 governmental action is necessary until such time 
 as the manufactures are strong enough to stand 
 
 1 c ' Manufactories and manufactures are the mothers and children of 
 municipal liberty, of intelligence, of the arts and sciences, of internal 
 and external commerce, of navigation and improvements in transport, 
 of civilisation and political power. They are the chief means of 
 liberating agriculture from its chains, and of elevating it to a com- 
 mercial character and to a degree of art and science, by which the 
 rents, farming profits, and wages are increased, and greater value is 
 given to landed property. The popular school has attributed this 
 civilising power to foreign trade. ... If, however, trade in the 
 manufactures of far distant lands exercises admittedly so beneficial an 
 influence on our agricultural industry, how much more beneficial must 
 the influence be of those manufactures which are bound up with us 
 locally, commercially, and politically" (List, chap. xii.).
 
 THE HISTORICAL SCHOOL 67 
 
 alone and to contend effectually with foreign com- 
 petition. This is the " infant industries " argument 
 for Protection ; but it will be noticed that even 
 List did not contemplate the maintenance of Pro- 
 tection as a permanent policy the ultimate ideal 
 for each state is (in his doctrine) that by these 
 " educational tariffs " it should at last become 
 strong enough to cast off trade restrictions. 1 But 
 in spite of the increase of prosperity and growth 
 of industrial activity in Germany since the estab- 
 lishment of the Customs Union, Protection could 
 reasonably, at the date of List's book, be thought 
 necessary to enable the rising industries to develop 
 in face of the overwhelming industrial power of 
 Great Britain. 
 
 Two years after the publication of List's great 
 book, there appeared the first work of the school 
 which was to exert the most potent influence on 
 German economic thought for the remainder of 
 the nineteenth century the historical school. In 
 1843 Roscher published his Grundriss, and this 
 was followed in 1848 by Hildebrand's Die 
 Nationaloekonomie der Gregenwart und Zukunft, 
 and in 1853 by the book of Karl Knies entitled 
 Die Politische Oekonomie von Standpunkte der 
 geschichtlicJien Methode. These various works 
 formulated the general principles on which the 
 new school has worked, and the principles have 
 been applied since that time by an ever-increasing 
 army of students and investigators, who have 
 
 1 See below, p. 72.
 
 68 THE ATTITUDE OF THE ECONOMISTS 
 
 devoted themselves chiefly to historical inquiry 
 and the collection of the facts of economic history, 
 and to the deduction from the results so obtained 
 of principles which may serve as a guide for the 
 economic action of communities, and particularly 
 of their own country. 
 
 The historical school has on the whole always 
 thrown its weight on the side of Protection, at 
 least for Germany. It does not regard either Free 
 Trade or Protection as an ideal, except in so far as 
 universal Free Trade is a far-off goal, desirable, 
 but only to be reached when the whole political 
 character of the world is changed. Both Free 
 Trade and Protection have their uses in the different 
 stages of national development. " The fundamental 
 propositions," set forth by Knies and adopted by 
 all the historical school, " are that the economic 
 constitution of society at any epoch on the one 
 hand, and on the other the contemporary theoretic 
 conception of economic science, are results of a 
 definite historical development ; that they are both 
 in vital connection with the whole social organism 
 of the period, having grown up along with it and 
 under the same conditions of time, place, and 
 nationality ; that the economic system must there- 
 fore be regarded as passing through a series of 
 phases correlative with the successive stages of 
 civilisation, and can at no point of this movement 
 be considered to have attained an entirely definite 
 form ; that no more the present than any previous 
 economic organisation of society is to be regarded
 
 SCHMOLLER'S " MERCANTILE SYSTEM" 69 
 
 as absolutely good and right, but only as a phase 
 in a continual historical evolution ; and that in 
 like manner the now prevalent economic doctrine 
 is not to be viewed as complete and final, but only 
 as representing a certain stage in the unfolding or 
 progressive manifestation of the truth." 1 Given 
 the particular conditions of Germany, most of the 
 writers of the historical school have held that their 
 country was at the time of the Bismarckian tariff 
 legislation of the late seventies in the stage where 
 protection and vigorous State action in regard to 
 commerce and industry were necessary, and their 
 general views are best represented by the greatest 
 of living economic historians, Professor Gustav 
 Schmoller. In his Mercantile System, published 
 in 1884, Professor Schmoller has given a clear 
 exposition of this theory, though in an elaborate 
 historical setting. He traces the development 
 (with special reference to Germany) of the economic 
 unit from the village through the town and the 
 territory to the state ; " political organisms and 
 economic organisms are by no means necessarily 
 conterminous ; and yet the great and brilliant 
 achievements of history, both political and economic, 
 are wont to be accomplished at times when economic 
 organisation has rested on the same foundation as 
 political power and order." 5 Like Miiller and 
 List, and like all the members of the historical 
 school, he emphasises the moral element, and the 
 
 1 Ingram, History of Political Economy, p. 203. 
 
 2 Schmoller, The Mercantile System (translated by VV. J. Ashley).
 
 70 THE ATTITUDE OF THE ECONOMISTS 
 
 need for the consideration of the general interest 
 of society. " All economic and political life rests 
 upon psychical mass movements, mass sentiments, 
 and mass conceptions, gravitating around certain 
 centres." 3 "The idea that economic life has ever 
 been a process mainly dependent on individual 
 action an idea based on the impression that it is 
 concerned merely with methods of satisfying in- 
 dividual needs is mistaken with regard to all 
 stages of human civilisation, and in some respects 
 it is more mistaken the further we go back." 2 So 
 the municipal economic policy of the Middle Ages, 
 in spite of its local partiality and prejudices, was 
 fully justified so long as the towns were the most 
 important forces on the side of civilisation and 
 economic progress. Later the place of the towns 
 was taken by the territories, striving to make them- 
 selves into self-contained and self-conscious eco- 
 nomic unites. " What to each in its time gave riches 
 and superiority, first to Milan, Venice, Florence, and 
 Genoa, then later to Spain and Portugal, and now 
 to Holland, France, and England, and to some 
 extent to Denmark and Sweden, was a state policy 
 in economic matters, as superior to the territorial 
 as that had been to the municipal. ... It was not 
 only a question of state armies, fleets, and civil 
 services ; it was a question rather of unifying 
 systems of finance and economy which should 
 encompass the forces of millions and whole countries 
 and give unity to their social life." 3 And this is 
 
 1 Loc. cit.y p. 61. 2 Loc. cit., pp. 3-4. 3 Loc. cit., pp. 48-9.
 
 THE TRUE VIEW OF PROTECTION 71 
 
 the true conception of mercantilism ; it is, in fact, 
 a great policy of national construction, " state 
 making and national economy making at the same 
 time. . . . The essence of the system lies not in 
 some doctrine of money or of a balance of trade ; 
 not in tariff barriers, protective duties, or navigation 
 laws, but in something far greater : namely, in the 
 total transformation of society and its organisation, 
 as well as of the state and its institutions, in the 
 replacing of a local and territorial economic policy 
 by that of the national state." 1 And so to Pro- 
 fessor Schmoller the practice and theory of the 
 European states in the first half of the nineteenth 
 century, as expounded by List, had a truer relation 
 to their actual economic conditions than had the 
 theories of Adam Smith. 2 
 
 But this doctrine of Protection is a very relative 
 one ; it all depends on the particular condition 
 of a country at a given time. The policy of Bis- 
 marck in his tariff legislation may, on this reason- 
 ing, have been a sound one for Germany twenty- 
 five years ago, when it was necessary to take all 
 possible steps to consolidate the Empire and pro- 
 mote its economic development. It is defensible 
 on precisely the same principles as those which led 
 Adam Smith to defend the old Navigation Acts ; 
 but this very fact would condemn merely pro- 
 tective tariffs as a permanent policy. There is 
 a higher stage of development, when the infant 
 industries have become adult and are able to fight 
 
 1 LOG. cit., pp. 50-1. 2 Loc. cit., p. 60.
 
 72 THE ATTITUDE OF THE ECONOMISTS 
 
 their own way in the world. To give them per- 
 manent protection is to keep them in perpetual 
 tutelage. List himself wrote that " a nation which 
 has already attained manufacturing supremacy can 
 only protect its own manufacturers against retro- 
 gression and indolence by the free importation 
 of the means of subsistence and raw materials 
 and by the competition of foreign manufactured 
 goods." 1 England, he argued, had by 1841 reached 
 the highest stage of development, and for her Free 
 Trade was the right economic policy. 2 So also 
 
 1 List, loc. cit., chap. xv. The previous passage is interesting : " Eng- 
 land will then give up the idea that she is designed to monopolise 
 the manufacturing power of the whole world. She will no longer 
 require that France, Germany, and North America should sacrifice 
 their own manufactures in consideration of the concession by England 
 of permitting the import, duty free, of agricultural products and raw 
 material. She will recognise the legitimacy of protective systems 
 in those nations, although she will herself more and more favour Free 
 Trade," for^the reason given above. He adds that England will cease 
 to urge foreign nations to become Free Traders ; " she will herself 
 permit competition without regard to the foreign systems of pro- 
 tection." 
 
 * "Finally, history teaches us how nations which have been 
 endowed by nature with all resources which are requisite for the 
 attainment of the highest grade of wealth and power, may and must 
 without on that account forfeiting the end in view modify their 
 systems according to the measure of their own progress : in the first 
 stage, adopting Free Trade with more advanced nations as a means of 
 raising themselves from a state of barbarism, and of making advances in 
 agriculture ; in the second stage, promoting the growth of manufac- 
 tures, fisheries, navigation, and foreign trade by means of commercial 
 restrictions ; and in the last stage, after reaching the highest degree of 
 wealth and power, by gradually reverting to the principle of Free 
 Trade and of unrestricted competition in the home as well as in foreign 
 markets, that so their agriculturists, manufacturers, and merchants 
 may be preserved from indolence and stimulated to retain the supre- 
 macy which they have acquired " (chap. x.). He adds that Great 
 Britain alone appeared (in his time) to have reached this final stage.
 
 GERMAN ECONOMISTS AND STATE ACTION 73 
 
 Professor Schmoller writes : " That age could begin 
 to think and act in the spirit of Free Trade which 
 had left so far behind it the toilsome work of 
 national development that it regarded its best 
 results as matters of course " ; l and most of the 
 other members of the German historical school 
 of the present day seem to regard German industries 
 as having reached the stage in which they no 
 longer have need of what List called " educational 
 tariffs " (Erziehungszolle). 2 Where they do defend 
 the maintenance of the tariffs against the importa- 
 tion of manufactured commodities, they do so, as 
 we shall see later, on entirely different grounds. 
 
 The German historical school has taken up also 
 an altogether different attitude towards State action 
 from that adopted by the older English economists. 
 They allow a very large sphere of action to the 
 State, and the term applied to so many of them 
 " Socialists of the Chair " means that they go 
 a considerable way towards that form of socialism 
 which in its origin is associated with the name 
 of Ferdinand Lassalle. As a philosophic doctrine, 
 however, it is much older than that writer. Fichte 
 had opposed to the " security " theory of the State 
 the proposition that " it is the duty of the State to 
 give each man that which is his due, then to estab- 
 lish him in the actual possession of his property, 
 
 1 Schmoller, loc. cit., pp. 61-2. 
 
 2 Cf. Schacht, " Inhalt und Kritik des Zolltarifentwurfs " in 
 Schmoller's Jahrbuch, 1902 ; and Wagner, Agrar- und Industriestaat, 
 2nd ed., p. 223.
 
 74 THE ATTITUDE OF THE ECONOMISTS 
 
 and then to safeguard him therein." 1 Many of the 
 followers of Hegel, whose philosophic teaching 
 tended "to glorify existing institutions, to see 
 in Church and State the objective embodiment 
 of the Absolute Idea," 2 had regarded the Prussian 
 State as the instrument appointed to bring about 
 the social reformation. The term " state social- 
 ism " was adopted in Germany to indicate the 
 antithesis to revolutionary socialism, and to mark 
 a policy of reform, not by the destruction, but 
 by the utilisation of the existing state organisation. 
 So in Professor Wagner's articles on " Finanz- 
 politik und Staatsozialismus," published in 1887, 
 it is asserted that "the chief aim of the State at 
 present in taxation and every other form of its 
 activity ought to be to alter the national distribu- 
 tion of wealth to the advantage of the working 
 class. All politics must become social politics ; 
 the State must turn workman's friend." 3 
 
 This does not mean merely the protection of the 
 worker by factory legislation and his relief in time 
 of poverty by the Poor Law system ; it includes 
 the ownership of railways and other industrial 
 enterprises by the State, the undertaking by the 
 State of whatever enterprises are desirable, but 
 cannot be, or are not likely to be, undertaken by 
 private individuals or companies, and the establish- 
 ment of State-aided compulsory insurances against 
 
 1 Fichte, Der Geschlossene Handeltsatuat , bk. i. chap. i. 
 8 Russell, German Social Democracy, p. 2. 
 3 Rae, Contemporary Socialism, p. 387.
 
 GERMAN RAILWAY POLICY 75 
 
 sickness and accident, and State systems of old-age 
 pensions. This state socialism found its expression 
 in the social legislation of Prince Bismarck, which 
 was inspired partly by a genuine interest in social 
 reform, and partly by a desire (not in the least 
 successful) to outbid the Social Democrats for 
 popular favour. 1 
 
 A most important and beneficial influence was 
 exercised on the industrial development of Germany 
 by the new railway policy. The older State action 
 in this matter had taken the form of subventions 
 to private companies, and the purchase or direct 
 construction of railways to only a limited extent. 
 In 1875 eight lines were owned, and eight others 
 were managed by the Government, and thirty 
 were privately owned and managed. The con- 
 stitution of the Empire provided for the imperial 
 control and supervision of railways, the building 
 by the Government of railways " considered neces- 
 sary for the defence of Germany or for the purpose 
 of general commerce," and the settlement of railway 
 rates. An Imperial Railway Board was set up in 
 1873, and Bismarck secured the passage through 
 the Prussian Parliament of a law enabling the 
 Government to transfer the railways of that state 
 to the empire. This was intended to show an 
 example, but the smaller states would not take the 
 same line ; and consequently, with the exception 
 of those in Alsace and Lorraine, the railways re- 
 
 1 For a detailed description of this policy, see Dawson, Bismarck 
 and State Socialism.
 
 76 THE ATTITUDE OF THE ECONOMISTS 
 
 mained the property of the several states. The 
 Prussian Government then set to work to buy up 
 the lines in its own territory ; between 1879 and 
 1882 about six thousand miles were bought, and 
 the process was continued, until, in 1902, the 
 Prussian State railways were over nineteen thou- 
 sand miles in extent. In the Empire, as a whole, 
 the state Governments between them owned in 
 1900 railways over twenty-eight thousand miles in 
 length. 1 Not only has this policy of State owner- 
 ship been financially extremely beneficial, but it 
 has enabled the Governments to establish a scien- 
 tific and coherent system of railway rates, which 
 promotes, instead of hampering, trade. 
 
 The Chancellor's policy of social reform was 
 exemplified by the Sickness Insurance Law of 
 1883, with its complement the Accident Insurance 
 Laws of 1884 and 1885, and the Old Age and 
 Infirmity Insurance Law of 1889 (now replaced 
 by the enactment of 1899) ; these applied to the 
 working-class population of the whole Empire, and 
 there could be no contracting-out. Under the 
 Sickness and Accident Laws, every manual worker 
 and every person whose salary is below a certain 
 amount must insure in some fund ; usually he 
 pays two-thirds and his employer one-third of the 
 weekly contribution, and in return he receives free 
 medical treatment and sick -pay during illness. 
 The Old Age Insurance system, which includes 
 provision for permanent incapacity arising from 
 
 1 The Statesman's Year-book, 1903, p. 674.
 
 COMPULSORY INSURANCE 77 
 
 ill-health, follows the same general lines ; it is 
 compulsory on all persons in receipt of incomes of 
 less than 100 a year, with certain small excep- 
 tions, and is optional for a large number of other 
 persons. l The obligation to insure begins at sixteen 
 years of age ; employer and employed pay an equal 
 share of the premium ; the pension, to which the 
 State gives a subsidy of 2 10s. per annum, can 
 first be claimed at the age of seventy, or in the 
 case of permanent disablement by ill-health, after 
 five years' insurance. 2 The schemes have hardly 
 yet passed out of the experimental stage it is not 
 yet twenty years since they came into force, but 
 there can be no question that they have con- 
 stituted the most serious and most successful 
 attempt yet made to deal with the problem. 
 
 1 It was estimated at the occupation census of 1895 that over 
 12,000,000 persons were liable to insurance under this law (Board of 
 Trade Report, p. 15 n.). 
 
 2 For full details on the whole subject, see the Board of Trade 
 Report, 1899, and especially Brooks' Compulsory Insurance Report of 
 the United States Commissioner of Labour.
 
 CHAPTER VI 
 
 GERMAN COMMERCIAL POLICY 
 TO 1894 
 
 FOR some years after the adoption of the new 
 tariff in 1880, German foreign trade remained 
 almost stationary in value, and even declined a 
 little. The following table shows the movement 
 of imports and exports (exclusive of the precious 
 metals) of Germany for the period 1880-91 in 
 million marks : l 
 
 Year. Import. Export. 
 
 1880 .... 2,819 ... 2,893 
 
 1881 .... 2,962 ... 2,975 
 
 1882 .... 3,128 ... 3,188 
 
 1883 . . . . 3,263 ... 3,270 
 
 1884 . . . . 3,260 ... 3,203 
 
 1885 . . . . 2,937 ... 2,859 
 
 1886 . . . . 2,877 ... 2,984 
 
 1887 .... 3,111 ... 3,134 
 
 1888 . . . . 3,271 ... 3,204 
 
 1889 .... 3,990 ... 3,165 
 
 1890 .... 4,146 ... 3,327 
 
 1891 .... 4,151 ... 3,176 
 
 It will be observed that for the five years 1880 
 to 1884, the average value of imports was 3,086 
 
 1 Statistisches Jahrbuchfur das Deutsche Reich, 1892, p. 38. 
 78
 
 FOREIGN TRADE AND CUSTOMS REVENUE 79 
 
 million marks, whilst the average for the next four 
 years was 3,049 million marks, or about two 
 million pounds a year less ; the average of exports 
 was for 1880 to 1884, 3,106 millions, and for 1885 
 to 1888, 3,045 millions, or about three million 
 pounds less. After 1888 the figures are not alto- 
 gether comparable, because of the inclusion of 
 Hamburg and Bremen, which, though long under 
 negotiation, had been delayed by the return to 
 Protection. 1 It will be noticed further that after 
 1888 there was a sharp rise in imports, whilst 
 exports remained at about the same level, and the 
 excess of imports over exports became very large. 
 
 For the imperial exchequer the effects of the 
 new customs system seem to have been altogether 
 satisfactory. In 1877-8 the net revenue from the 
 customs was 103 '7 million marks, or 2 '4 marks per 
 head of population ; by 1883-4 the amount had 
 risen to 189*7 million, or 4*2 marks per head ; and 
 in 1889-90 a total was reached of 357*7 million, 
 or 7*3 marks per head. The contribution to the 
 imperial exchequer from the separate states, which 
 had reached 70 million marks in 1878-9, sank 
 rapidly until in the year 1882-3 the customs 
 revenue not only supplied an amount equal to the 
 old contributions, but provided a surplus which 
 could be distributed amongst the states ; and in 
 1884-5 nearly 41 million marks were available for 
 this purpose. 8 
 
 After 1880 the most noticeable feature in the 
 
 1 Zimmermann, ii. p. 98. 2 Blum, p. 306.
 
 80 GERMAN COMMERCIAL POLICY TO 1894 
 
 history of the German tariff is the increase of the 
 duties on agricultural products, coincident with 
 the growth of the political power of the agrarian 
 party. It is true that there were some slight 
 increases in the duties on manufactured commodi- 
 ties, but these were not very important, and against 
 them must be set some small reductions. 1 The 
 agrarians complained of growing competition, and 
 urged the necessity of protecting the food supply 
 of the empire against the dangers of war ; and 
 they secured increases, of which the more important 
 are shown in the following table : 
 
 DUTY PER 100 KILO. 
 
 Commodity. 1879. 1881. 1885. 1888. 
 
 Wheat . . 1 mk. ... ... 3 mk. ... 5 mk. 
 
 Rye . 1 ... ... 3 ... 5 
 
 Barley . . -5 ... ... l ... 2j 
 
 Flour . . 2 ... 3mk. ... 7 ... 10| 
 
 Meat of all kinds 12 ... ... 20 ... 
 
 As regards Germany's foreign trade, the ex- 
 porters had feared at the time of the establishment 
 of the new protective tariff that they might be 
 hampered by retaliation on the part of foreign 
 nations. Fortunately their fears in this direction 
 were not realised, since the Government of Prince 
 Bismarck was able, in most cases, either to make 
 new treaties, or to secure the maintenance of the 
 existing treaty relations. Political influence enabled 
 Germany between 1880 and 1888 to establish, with 
 such Eastern Powers as China, Japan, Corea, Siam, 
 and also with Servia and Roumania, treaties which 
 1 Lotz, i. 177.
 
 FOREIGN COMMERCIAL RELATIONS 81 
 
 bound those Powers to reduce some of their exist- 
 ing duties, or, at least, not to increase those duties 
 on German products, without imposing any corre- 
 sponding obligation on Germany herself. Of 
 another kind were the treaties with Italy, Spain, 
 Greece, Switzerland, in which the reductions of 
 duties were mutual, although on the German side 
 they were not, except in the case of Switzerland, 
 very important. With the great states, such as 
 Austria - Hungary, Belgium, the Netherlands, 
 France, Sweden, and Norway, all that could 
 be obtained was a continuance of " most favoured 
 nation " treatment, whose importance for Germany 
 was enhanced by the fact that France had made 
 treaties with the other countries, which gave her 
 certain reductions of duties, and that under the 
 " most favoured nation " clause Germany enjoyed 
 the same advantages. In Great Britain, under 
 the treaty of 1865, Germany continued to re- 
 ceive the same favourable treatment a privilege 
 which was extended to her also in the British 
 Colonies. 1 With Russia and the United States 
 the condition of affairs was by no means so satis- 
 factory, for both those nations were particularly 
 interested in the export of agricultural produce, 
 and therefore came into sharp conflict with 
 Germany over the new tariff, which they not 
 unnaturally regarded as directed specially against 
 themselves. Russia had always refused to bind 
 herself by treaties, even of the simplest kind, 
 
 1 Ibid.., ii. pp. 60-3,
 
 82 GERMAN COMMERCIAL POLICY TO 1894 
 
 and from 1877 onwards her tariff wall was steadily 
 rising a fact which was not without influence on 
 the movement of the German tariff between 1880 
 and 1890. Germany's relations with the United 
 States had long been based on reciprocal "most 
 favoured nation " treatment, but this had been of 
 little value ; the situation was now very strained, 
 and the German policy in regard to agricultural 
 products must be counted as one of the strong 
 motives for the high protective policy adopted in 
 America by the McKinley Tariff. 
 
 On the whole Prince Bismarck was disinclined 
 to the old policy of conventional tariffs ; he seems 
 to have been opposed to anything which would 
 bind the hands of the Government in its defence 
 of the commercial interests of the country. He 
 adhered, with certain slight exceptions, to the 
 simple system of the autonomous tariff; but by 
 1890 a considerable change had come over the 
 political conditions of Germany, marked by the 
 dismissal of Prince Bismarck and the appointment 
 of General Caprivi as his successor. In home 
 affairs the chief features of the new system were 
 the abandonment of anti-socialist legislation and 
 the attempt towards a " labour policy," illustrated 
 by the international conference at Berlin ; in par- 
 liamentary politics the important development was 
 the rise of the Centre or Catholic party. 1 In 
 
 1 In 1887 the National Liberals were the largest party in the Reich- 
 stag with 99 members, the Centre came next with 98, and the Conserva- 
 tives next with 80; at the election of 1890 106 members of the Centre were 
 returned and 73 Conservatives, while the National Liberals fell to 42.
 
 MOVEMENT OF FOOD PRICES 83 
 
 foreign policy, the independent attitude was 
 abandoned, and the most striking example was 
 furnished by the Anglo-German arrangement with 
 regard to East Africa, under which Great Britain 
 was given a free hand there and in Zanzibar, in 
 exchange for the surrender of Heligoland to 
 Germany. Commercial policy was now to be 
 modified in the same way as the result of a 
 number of converging influences. 
 
 The question of the food supply had suddenly 
 become serious. The following table shows the 
 movement of wholesale prices for wheat and rye 
 per 100 kilog. at Berlin, for the period 1880 to 
 1891 i 1 
 
 Year. Wheat. Rye. 
 
 1880 . . .218 mks. ... 188 mks. 
 
 1881 . . .219 ... 195 
 
 1882 . . . 204 ... 152 
 
 1883 . . . 186 ... 145 
 
 1884 . . .162 ... 143 
 
 1885 . . . 161 ... 141 
 
 1886 . . .151 ... 131 
 
 1887 . . .164 ... 121 
 
 1888 . . .172 ... 134 
 
 1889 188 ... 156 
 
 1890 . . .195 ... 170 
 
 1891 . . .224 ... 211 
 
 It will be observed that, as a result of a number 
 of causes, the agricultural duties did not prevent 
 a continued fall in prices until 1886, but after that 
 year there was an upward movement which became 
 extremely sharp with the failure of harvests in 1890 
 and 1891. This was particularly the case in regard 
 
 1 Bade, pp. 27-8.
 
 84 GERMAN COMMERCIAL POLICY TO 189* 
 
 to rye, which is the chief bread-stuff for a very 
 large part of the German population. In 1891 the 
 Russian Government found itself compelled, in 
 view of the acute economic distress in Russia, to 
 prohibit the export of wheat and rye and other 
 agricultural produce. At the same time, the diffi- 
 culties of the German exporters were increased by 
 the adoption of the McKinley Tariff in the United 
 States and by the marked movement towards 
 higher protection all over Europe. Most of the 
 nations with which Germany had treaties either 
 gave notice of their termination, or were inclined 
 to do so, and France was also about to renounce 
 the treaties which she had made with various 
 countries, and by which Germany had profited. 
 
 It had become necessary for Germany to re- 
 adjust her policy. It was believed to be clearly 
 impossible for her to continue in the old way and 
 to make no effort to influence the tariffs of her 
 neighbours. It was therefore decided to endeavour 
 to continue the existing reciprocity arrangements, 
 but to elaborate them into a new series of treaties, 
 which should return to the old principle of re- 
 ciprocal reductions of duties. The agrarian party 
 clung to the protection of the autonomous tariff, 
 and were opposed to any modifications ; but under 
 the prevailing circumstances they were not unwilling 
 to see a temporary reduction of the duties. What 
 they did object to was anything which would 
 establish those reductions for any considerable 
 number of years. On the other hand, the growth
 
 RETURN TO THE TREATY SYSTEM 85 
 
 of industry not only rendered a large and cheap 
 food supply desirable, but made it necessary that 
 everything possible should be done to secure a large 
 and assured foreign market for German manu- 
 factured articles. The latter was the dominant 
 consideration, but if German manufacturers were 
 to export freely, foreigners must be allowed to have 
 easier access to the German market. 
 
 "The conclusion of new international treaties 
 with simple ' most favoured nation ' treatment, 
 without the settlement of tariffs, would indeed 
 give Germany the possibility of securing an in- 
 ternal market for its own manufactures by means 
 of an arbitrary protective tariff, but would provide 
 not the slightest guarantee for the maintenance of 
 that foreign market which is so essential for our 
 export trade. In face of the world competition 
 of the economically developed states, becoming 
 ever fiercer with the rapid increase of production 
 and its aids, permanent intercourse between them 
 is conceivable only in the form of a reasonable 
 exchange of commodities, and this presupposes 
 again a deliberate reciprocal limitation of free 
 action in regard to tariffs. Under the present 
 commercial conditions, Germany cannot count on 
 the maintenance of its export, unless by such limita- 
 tions on its own side it secures to other nations 
 the possibility of paying for its goods, wholly or in 
 part, by their own products." l 
 
 The home producers, both agricultural and 
 
 1 Government Memorandum, quoted in Lotz, i. p. 87.
 
 86 GERMAN COMMERCIAL POLICY TO 1894 
 
 industrial, must consent to some sacrifices, for "con- 
 cessions at the hands of agricultural nations, such 
 as Austria-Hungary, Italy, and Russia, were to be 
 obtained only by the reduction of certain duties 
 on agricultural commodities ; concessions at the 
 hands of manufacturing nations, like Belgium and 
 Switzerland, by the reduction of certain German 
 duties on manufactured products." 1 The manu- 
 facturers as a whole supported the new policy, 
 since they were anxious for the growth of the 
 export trade, and did not fear foreign competition 
 in the home markets so much as formerly ; the 
 working classes also gave their support to it, and 
 the opposition was in the main confined to the 
 agrarians, who were called on to make the chief 
 sacrifices, and were unwilling to do so for any 
 length of time. 
 
 The new policy was inaugurated in December, 
 1891, by the commercial treaty with the Austro- 
 Hungarian Empire, which for some time had been 
 desirous of entering into closer relations with 
 Germany, since the latter country was its most 
 important market, taking on an average over one- 
 half of the total Austro-Hungarian exports. 2 But 
 at the same time, only about 10 per cent, of the 
 German exports went to Austria-Hungary, and 
 her imports from that country were only about 
 14 per cent, of the whole, so that for the purposes 
 of negotiations Germany was in much the stronger 
 position. Hungary was particularly interested in 
 
 1 DietzeL, pp 367-8. 2 Wuttke, p. 415.
 
 TARIFF CHANGES 87 
 
 the reduction of the German agrarian duties, 
 and in Austria itself there was a reaction against 
 the protective policy of recent years. Following 
 the treaty with Austria came others with Italy, 
 Belgium, and at the beginning of 1892 with 
 Switzerland. They were all to remain in force till 
 the 31st of December, 1903, and unless then re- 
 nounced were to continue indefinitely, but were to 
 be terminable at one year's notice from either side. 
 The bases of all these treaties were the same 
 reciprocal "most favoured nation" treatment and 
 reduction of duties. The most important changes 
 on the German side were in the case of the agri- 
 cultural duties, which were reduced below the level 
 of 1888, but in no case to the rate of 1885 ; thus 
 the duties on wheat and rye were lowered from 
 5 to 3^ marks per 100 kilog., on barley from 2J 
 to 2, on flour from 10^ to 7J, and on meat from 20 
 to 15. In manufactured articles moderate reduc- 
 tions were made in the import duties on joinery, 
 glass, and earthenware, some iron goods, textiles, 
 paper, leather manufactures, and others. In all, it 
 was estimated that the articles affected by these 
 reductions and by some abolitions of unimportant 
 duties had been imported from the four countries 
 concerned to the amount of 260 million marks on 
 an average for the years 1888 to 1890. 1 On the 
 other side there were general reductions of duties 
 on German manufactured goods ; and in a number 
 of cases where reductions were not made, the con- 
 
 1 Lotz, ii. p. 83.
 
 88 GERMAN COMMERCIAL POLICY TO 1894 
 
 trading states bound themselves not to make an 
 increase. The German exporters were by no means 
 satisfied, for they had hoped to obtain greater 
 reductions of hostile tariffs, and they overlooked 
 the fact that they had, at any rate, prevented any 
 further advances for a considerable period. They 
 were, however, willing to accept the treaties, and 
 though the agrarians made a strong opposition on 
 certain points, they were not powerful enough to 
 secure the rejection of the Government policy. 
 
 Then, however, agricultural conditions changed, 
 and there was a fall in prices, due partly to im- 
 proved harvests at home, and partly to the increase 
 of imports to Germany from the United States 
 and Roumania. The following table shows the 
 movements of prices from 1891 to 1894 : l 
 
 QUOTATIONS PER 100 KILOG. 
 
 1891. 1892. 1893. 1894. 
 
 Wheat (at Cologne) 23-2 mks. 19'2 mks. 16-4 mks. 14-1 mks. 
 
 Flour 31-0 26-2 22-1 19'2 
 
 %e 22-2 19-1 15-2 12'7 
 
 Barley (at Mannheim) 18-7 l6'8 17'7 15-3 
 
 The result was that the Government had much 
 more difficulty in carrying the second series of 
 commercial treaties in the latter part of 1893 with 
 Servia, Spain, and especially Roumania. The last- 
 named country was coming to be one of the most 
 important sources of Germany's food supply, par- 
 ticularly during the conflict with Russia. In 1889 
 5 per cent, of the German supply of wheat came 
 
 1 Dietzel, p. 369.
 
 RUSSO-GERMAN COMMERCIAL RELATIONS 89 
 
 from Roumania, but in 1893 the amount had risen 
 to 20 '4 per cent., and to an even higher point in 
 the case of rye. 1 The agrarian party were therefore 
 strongly hostile to anything which would encourage 
 the increase of the quantities imported from Rou- 
 mania, whilst, on the other hand, the manufacturers, 
 who sent, it was estimated, 100 million marks worth 
 of goods per annum to that country, wanted a treaty 
 which would still further develop their market. 
 The new treaties, although supported by the whole 
 force of the manufacturers, were confirmed by the 
 Reichstag only after a most strenuous opposition 
 from the agrarians. The conflict reached its height 
 over the treaty with Russia, which was in some 
 ways the most important of all. It has already 
 been remarked that the commercial relations be- 
 tween that country and Germany had for some 
 time been distinctly strained, but the trade between 
 the two was, nevertheless, very considerable. In 1 890 
 Russia imported from Germany goods to the value 
 of 10,300,000 30 per cent, being for manufactured 
 goods and exported to her goods to the value 
 of 27,000,000 95 per cent, of these latter being 
 foodstuffs, raw materials, and unfinished goods. 2 
 In 1891 Russia sent into Germany more than one- 
 half (53 per cent.) of the latter 's total import of 
 cereals, and this quantity taken by Germany 
 amounted to about one-sixth of the total Russian 
 export of cereals. Germany sent to Russia iron 
 
 1 Lotz, ii. p. 110. 
 
 2 Wuttke, p. 419, and British Foreign Office Report, p. 41.
 
 90 GERMAN COMMERCIAL POLICY TO 1894 
 
 and steel goods, chemicals used in manufactures, 
 coal and coke, porcelain and cement, and a very 
 large quantity of flour. Moreover, she had a large 
 transit trade, for a considerable proportion of the 
 Russian supplies of raw cotton and wool came to 
 her through Germany. 
 
 Germany had two grounds of complaint against 
 Russia. The highly prohibitive tariff, which, after 
 eight increases of duties between 1881 and 1891, 
 culminated in the last year in a new general scheme 
 of duties and reached the highest point in Russian 
 protective policy since 1850, affected all nations 
 equally ; but the discrimination against land-borne 
 in favour of sea-borne goods hindered the com- 
 petition of Germany with Great Britain in the 
 supply of coal and iron, and in the carrying trade. 
 Russia had hitherto stood apart from the treaty 
 system, in her unwillingness to bind her customs 
 tariff for any definite time, but now she was not 
 disinclined to modify her policy, particularly as the 
 treaties already made by Germany put her in an 
 extremely difficult position. Those treaties had 
 given reductions of duties on agricultural produce 
 to other nations, and thereby they enjoyed a 
 distinct advantage over Russia. After the con- 
 clusion of the first series of treaties, Russian corn 
 paid a duty 43 per cent, higher than that imposed 
 on the products of the favoured nations Austria- 
 Hungary, Italy, Switzerland, Belgium, in the 
 treaties, 1 and the United States, Argentina, Servia, 
 
 1 British Foreign Office Report, p. 42.
 
 RUSSO-GERMAN NEGOTIATIONS 91 
 
 Bulgaria, and Turkey, under the "most favoured 
 nation " clause. Roumania was also about to be 
 included. 
 
 Negotiations between the two Powers had com- 
 menced towards the end of 1891, by Russia pro- 
 posing that Germany should grant her the terms 
 of the conventional tariff in regard to most agri- 
 cultural products, together with free entry for a 
 number of raw materials, and offering in return to 
 make some concessions, but not on metals, textiles, 
 chemicals, or sugar. The German Government 
 replied that the proposals were inacceptable, since 
 they secured to Russia reductions on 80 per cent, 
 of her exports, and gave practically nothing in 
 return ; it suggested, therefore, that Russia should 
 remove the obstacles to commercial intercourse on 
 the frontier by simplifying the customs regulations, 
 equalise the duties on sea- and land-borne goods, 
 and reduce the duties on about four-fifths of the 
 tariff groups of commodities. Negotiations were 
 continued after the control of Russian commercial 
 policy had passed into the hands of M. Witte, 
 who proposed to establish a minimum and maxi- 
 mum tariff the minimum to be a slightly modified 
 version of the tariff of 1891, for the benefit of 
 those states which gave Russia "most favoured 
 nation" treatment, and the maximum to be the 
 same tariff increased in various cases and against 
 various countries. In October, 1892, Russia offered 
 to admit German goods under the minimum tariff, 
 and to abolish the preferential treatment of sea-
 
 92 GERMAN COMMERCIAL POLICY TO 1894 
 
 borne trade ; and in March of the following year 
 the German Government replied with its final 
 proposals. It offered the conventional tariff terms 
 in return for considerable reductions on the Russian 
 minimum tariff, and the promotion of trade by 
 the rearrangement of the customs regulations. On 
 the refusal of the Russian Government to consider 
 these proposals and the failure of an attempt at 
 a conference of experts, the actual tariff war began. 
 From August 1st, 1893, German goods imported 
 into Russia became subject to the maximum tariff, 
 which imposed on them surtaxes amounting to at 
 least 30 per cent, on manufactured goods and 
 20 per cent, on semi-manufactured articles. In 
 the same month Germany replied by imposing sur- 
 taxes of 50 per cent, on all Russian goods liable 
 to customs duties one result being that the duty 
 was about 115 per cent, higher on Russian bread 
 stuffs than on those imported from America, 
 Hungary, Roumania, and Argentina. In return, 
 the Russian Government again increased the tariff 
 against German produce by 50 per cent., and 
 raised the shipping dues against German vessels. 
 It extended these measures to Finland ; and the 
 German Government consequently applied the 50 
 per cent, surtaxes to goods imported from that 
 Duchy also. All these various increases had been 
 made by the 16th of August, but the strain on 
 both sides was very much too severe ; early in 
 September fresh negotiations were opened, and on 
 October 16th the first conference was held at Berlin.
 
 THE TARIFF WAR 93 
 
 "The statistics published by the German Govern- 
 ment show that after the outbreak of the tariff 
 war, the German export trade to Russia had 
 been partially paralysed. The export of locomo- 
 tives ceased ; the export of wrought iron was one- 
 third of the average in the preceding year, and of 
 cement less than one -half. And in addition to 
 the losses of the German exporters and manufac- 
 turers, it became apparent that a large number 
 of Germans lived by the import and handling of 
 Russian products, and they were, of course, severely 
 affected. The railways, which are State property, 
 were run, on certain branches, at a loss. German 
 ships were practically excluded from Russian ports, 
 and the German coast towns, interested in the 
 carrying trade, were heavy sufferers. . . . With the 
 approach of winter the situation became worse, as 
 the Baltic ports were closed by the ice. The large 
 trade in extra-European goods, which had been 
 carried on through Germany, was crippled. The 
 transit of raw cotton through Germany for the 
 Russian market was, in 1893, only one-half what 
 it had been in the preceding year. And in addition 
 to the economical losses, a grave danger was im- 
 minent. There is ample proof that the tariff 
 war, as it proceeded, was regarded by both re- 
 sponsible parties as likely to lead to a state of 
 things dangerous for the peace of Europe." 1 On 
 the other side, Russia was suffering from the injury 
 inflicted on her agricultural exports, particularly 
 
 1 Report, p. 46.
 
 94 GERMAN COMMERCIAL POLICY TO 1894 
 
 after the good harvest of 1893. The following 
 table shows the movement of imports and exports 
 between the two countries for the years 1890 to 
 1894 inclusive. It will be remembered that the 
 acute struggle was in the latter half of 1893, and 
 in the first two months of 1894. 
 
 RUSSIAN EXPORTS TO GERMANY. 
 
 Mill. Roubles. 
 
 1890 . . .178 
 
 1891 . . .193 
 
 1892 . . .138 
 
 1893 . . .133 
 
 1894 . . 148 
 
 GERMAN EXPORTS TO RUSSIA. 
 
 Mill. Marks. 
 54 
 58 
 38 
 35 
 54 
 
 Both sides were now anxious to come to terms, 
 and political motives combined with economic 
 interests to bring about this result. Russia desired 
 a treaty with Germany as a first step in a series of 
 such treaties, and Germany was anxious to do 
 something to counterbalance the growing Russo- 
 French alliance. The outcome of this less hostile 
 disposition on both sides was the treaty signed 
 on February 10th, 1894. The German Govern- 
 ment declared that German trade, commerce, and 
 shipping were profoundly interested in the reduc- 
 tion of the Russian duties, and that, on the other 
 hand, the freer importation of Russian grain would 
 not seriously affect the German agricultural in- 
 terests, since the really dangerous menace was 
 from the United States, Roumania, and other 
 countries which already enjoyed treaty privileges. 
 The agrarian party fiercely resisted the treaty, but 
 it was carried after a hard struggle.
 
 THE TREATY OF 1894 
 
 95 
 
 It was a compromise. Russia received "most 
 favoured nation " treatment, which gave her the 
 benefit of the lower grain duties ; she also secured 
 the abolition of duties on some of her products, 
 such as flax, oil-seed, and wool, and an advantage 
 over the United States in the duty on oil. Ger- 
 many, for her part, obtained a reduction of duties 
 on 120 articles as, for instance, 20 per cent, on 
 leather goods, 17 to 20 per cent, on un wrought 
 iron, 18 per cent, on iron machinery, 17 to 20 per 
 cent, on pottery, 17 per cent, on paper, 12 to 30 
 per cent, on woollen tissues. Both parties bound 
 themselves for ten years not to increase the duties 
 on certain specified goods. The treaty also pro- 
 vided that Russia should abandon the distinction 
 between sea-borne and land-borne goods, whilst 
 Germany undertook that Russian goods should 
 not be subject to higher rates than domestic goods 
 for carriage on the Prussian State railways. The 
 following table show the movement of trade 
 between the two countries since 1893. 1 
 
 1 These are the figures given in the Statistisches Jahrbuchfiir das 
 Deutsche Reich, 1902, pp. 174-6, but the Russian returns give an alto- 
 gether different set of figures. They are quoted in the Foreign Office 
 Report, p. 50, and may be set out here as showing the difficulty of 
 obtaining accurate trade statistics. (The value of the rouble has 
 fluctuated between 2*. 0|rf. and 2*. 2d.) 
 
 RUSSIAN EXPORTS TO GERMANY. 
 
 RUSSIAN IMPORTS FROM GERMANY. 
 
 Mill. Roubles. 
 
 Mill. Roubles. 
 
 1893 
 
 
 
 
 132 
 
 101 
 
 1894 
 
 
 
 
 148 
 
 143 
 
 1895 
 
 
 
 
 1T9 
 
 176 
 
 1896 
 
 
 
 
 185 
 
 190 
 
 1897 
 
 
 
 
 175 
 
 180 
 
 1898 
 
 
 
 
 179 
 
 202 
 
 1899 
 
 
 
 
 164 
 
 231 
 
 1900 
 
 
 
 
 188 
 
 215
 
 96 GERMAN COMMERCIAL POLICY TO 1894 
 
 GERMAN IMPORTS FROM RUSSIA. 
 
 Mill. Marks. 
 353-4 
 
 1893 
 1894 
 1895 
 1896 
 1897 
 1898 
 
 1899 
 1900 
 1901 
 1902 
 
 543-9 
 568-8 
 634-7 
 708-3 
 736-6 
 715-9 
 729-5 
 729-5 
 773-6 
 
 GERMAN EXPORTS TO RUSSIA. 
 
 Mill. Marks. 
 184-6 
 194-8 
 220-9 
 364-1 
 372-0 
 440-5 
 437-3 
 359-1 
 345-9 
 372-1 
 
 Thus Germany had returned to the system of 
 the "autonomous" and "conventional" tariffs ; the 
 former applied against all those countries which 
 had not made with her a commercial treaty pro- 
 viding for reciprocal reductions of duties, and the 
 latter containing all the lower rates of duty estab- 
 blished by treaties and generalised to treaty powers 
 by the force of the " most favoured nation " clause. 
 But it is important to note that the system adopted 
 differed from that now employed by France ; there 
 the Government can increase the minimum (" con- 
 ventional") as well as the maximum ("autono- 
 mous") rates at any time, whilst the German 
 Government, in its treaties, bound itself not to 
 increase the tariff rates for a term of years. 
 
 The Russian treaty seems to have been satis- 
 factory in its effect, but this was by no means the 
 case with all the others, and in particular the settle- 
 ment of Germany's commercial relations with the 
 Austro-Hungarian Empire was not followed by 
 results equal to the expectations of the German
 
 EFFECT OF THE TREATIES 97 
 
 exporters. They had hoped for a great expansion 
 of the Austrian market, but their export of textile 
 manufactures actually declined for some time. 1 
 There was an increase in respect of metals, but 
 exports as a whole were almost stationary ; they 
 were valued at 420 million marks in 1893, 436 
 million in 1895, 477 million in 1896, 435 million in 
 1897, 466 million in 1899, 511 million in 1900. 
 Imports, on the other hand, from Austria rose 
 rapidly ; they were 580 million marks in 1893, 
 after a decline in 1895 they rose to 600 million in 
 1897, and to 730 million in 1899. The Austrian 
 Empire sent chiefly agricultural produce to 
 Germany, and the general effect of the treaty 
 seems to have been to increase the competition 
 which the German agrarians had to meet, without 
 securing any considerable increase of market for 
 the manufacturers. 2 The negotiations with Spain 
 brought Germany into yet another tariff war. In 
 1893 a treaty had been signed between the two 
 countries, which was accepted by the German 
 Parliament, but rejected by the Spanish. There- 
 upon the German Government withdrew the 
 " most favoured nation " treatment of Spanish 
 goods, and subjected them to the autonomous 
 tariff; the Spanish Government did the same for 
 German goods. Germany, in her turn, imposed 
 a surtax of 100 per cent, on all commodities 
 
 1 The average import of textiles into Austria-Hungary from 
 Germany from 1892-4 was 33 '8 million kronen; 1897-9, 30 '8 
 million kronen (Wuttke, p. 439). 
 
 2 Wuttke, p. 458. 
 
 H
 
 98 GERMAN COMMERCIAL POLICY TO 1894 
 
 coming from Spain. Spain then proposed in 1896 
 that both sides should make use simply of the lowest 
 rates of the autonomous tariff terms which Ger- 
 many accepted. But inasmuch as France, England, 
 Switzerland, and other countries enjoyed in Spanish 
 markets preferences over Germany, the Govern- 
 ment of the last-named country soon became 
 anxious to obtain more satisfactory terms, and at 
 the time of the purchase of the Caroline Islands, 
 in the beginning of 1899, a fresh treaty was signed, 
 securing reciprocal " most favoured nation " treat- 
 ment. 1 
 
 A word must be said as to the commercial rela- 
 tions of Germany to two other countries, Great 
 Britain and the United States. Ever since the 
 treaty of 1865, Germany had enjoyed the advan- 
 tages of the " most favoured nation " clause in 
 Great Britain and in all its colonial possessions. 
 In 1897 the Canadian Government granted a 
 reduction of duties on British goods alone, and 
 Germany immediately protested against this on 
 the ground that it violated the terms of the treaty 
 of 1865. The British Government, therefore, gave 
 a year's notice of the renunciation of the treaty, 
 but suggested that it would be willing to undertake 
 negotiations for a fresh arrangement. Germany 
 then decided to continue the treaty so far as con- 
 cerned Great Britain and those of her colonies 
 which did not discriminate between British and 
 German goods ; but against Canada she applied 
 
 1 Zimmennann, ii. pp. 308, 309.
 
 RELATIONS WITH THE UNITED STATES 99 
 
 her autonomous tariff. This arrangement has been 
 renewed from time to time, but so far no new 
 treaty has been made. With the United States 
 German relations had almost always been far from 
 satisfactory. By the Saratoga Convention, signed 
 in 1891, Germany abandoned many of the restric- 
 tions on the import of American meat, and gave 
 the United States a right to participate in certain 
 reductions of duties, whilst she received in return 
 " most favoured nation " treatment for her sugar 
 products. But this was not of much use to her, 
 since the United States subsequently imposed 
 surtaxes upon all bounty-fed sugar, and in spite of 
 all its efforts the German Government could not 
 secure preferential treatment. 1 
 
 1 A few other treaties were made towards the end of the century, 
 the chief being the agreement with Japan in 1896.
 
 CHAPTER VII 
 
 THE REVIVAL OF THE 
 PROTECTIONIST MOVEMENT, AND 
 THE NEW TARIFF 
 
 COUNT CAPRIVI had succeeded in carrying the 
 commercial treaties, but he had incurred the fierce 
 hostility of the agrarians, and soon after the con- 
 clusion of the Russian treaty they were strong 
 enough to secure his overthrow and his replace- 
 ment by Prince Hohenlohe. The period from the 
 latter 's succession to office until the close of the 
 century was characterised chiefly by the revival of 
 the protectionist agitation, particularly amongst 
 the agrarians. But before noticing the causes of 
 this agitation and its results, it will be well to 
 review some of the features of the industrial 
 development of Germany since the foundation of 
 the Empire. 1 
 
 The population of the Empire increased from 
 41 millions in 1871 to 56 millions in 1900, and is 
 continuing to increase to the extent of some 
 850,000 persons a year. 2 The imports in 1872 for 
 
 1 For a brief and fairly reliable sketch, see Veritas, The German 
 Empire of To-day. 
 
 2 Cf. Troeltsch, pp. 10-11. 
 
 100
 
 GERMAN INDUSTRIAL DEVELOPMENT 101 
 
 home consumption were estimated at 163,000,000, 
 and in 1902 at about 290,000,000. The exports 
 of domestic produce were valued in 1872 at 
 116,000,000, and in 1902 at 240,000,000. The 
 production of coal averaged 32 million tons a 
 year for the period 1870-4, and 97 million tons 
 for the period 1896-1900. In the former period 
 the average quantity of pig-iron produced was 
 1'8 million tons, and in the latter period 7'4 million 
 tons ; in 1902 it was 8*3 million tons. The pro- 
 duction of steel averaged 1*1 million tons for the 
 period 1881-5, and 5 '5 million tons for the 
 period 1896-1900 ; in 1902 it was 7*6 million tons. 
 The German merchant navy (vessels of 17^ tons 
 and upwards) increased from 982,000 tons in 1870 
 to 2,093,000 tons in 1901. The annual tonnage 
 of vessels built rose from 32,600 in 1878 (the 
 first year for which figures are available) to 101,900 
 in 1901. In all the scientific industries, particu- 
 larly in the production of chemicals, dyes, and 
 colours, there has been a very marked advance 
 aided by an educational system which is un- 
 doubtedly superior on the technical and scientific 
 sides to anything to be found elsewhere, and by 
 an enlightened policy on the part of the manu- 
 facturers, such as that described in the case 
 of the chemical trades by Professor Dewar in 
 his presidential address to the British Associa- 
 tion at Belfast in 1902. Much aid has been 
 given to the industrial development of the coun- 
 try by a well-conceived railway transport policy,
 
 102 REVIVAL OF THE PROTECTIONIST MOVEMENT 
 
 rendered easy by the State ownership of rail- 
 ways. 
 
 It is important to observe also that the indus- 
 trialisation of Germany is marked by the same 
 general features as the economic history of 
 England after the industrial revolution. There is 
 the same rapid growth of the towns (an increase as 
 astonishing as that of the American cities), 1 and 
 the same decline in the agricultural population, 
 which in 1870 was about one-half, and in 1900 
 about one-third of the whole, having fallen both 
 relatively and actually. But agriculture still re- 
 mains the chief occupation ; according to the 
 census of 1895, llf million persons were employed 
 in agriculture and kindred occupations, about 
 9 millions in industry, and about 3 millions in com- 
 merce and transport. 2 
 
 At the same time, and as a natural consequence, 
 there has been a constant increase of dependence 
 on the foreign food supplies. 3 The following table 
 shows the increase in the surplus of the amount of 
 grain, meal, and flour imported into Germany over 
 the amount exported : 
 
 1881-1885 .... 39-1 million cwt. 
 
 1886-1890 .... 42-8 
 
 1891-1895 .... 70-1 
 
 1896-1900 . . . . 103-1 
 
 1 Cf. Shaw, Municipal Government in Continental Europe, chap. v. 
 
 2 Troeltsch,, p. 25. 
 
 3 Cf. Voigt, " Deutschland und die Weltmarkt' (in Handels- und 
 Machtpolltik), pp. 154-79.
 
 IMPORTS AND EXPORTS 103 
 
 The prices of agricultural produce have, on the 
 whole, steadily fallen ; but there still remains a con- 
 siderable difference between the various parts of 
 the Empire, largely because of the distance in many 
 cases of the markets from the place of production, 
 and the difficulties of transport, in spite of the 
 growth of German railways. 1 The following table 
 shows some of these differences in 1902 : 
 
 Wheat per 1,000 kg. Rye per 1,000 kg. 
 
 Berlin . . 163-1 mks. ... 144-2 mks. 
 
 Danzig. . 162-4 ... 139'4 
 
 Mannheim . 174-0 ... 150-3 
 
 Munich . 183-3 ... 151'9 
 
 Thirdly, imports greatly exceed exports. In the 
 Free Trade period, from 1872 to 1879, the average 
 annual imports were valued at 190,000,000, and 
 the exports at 130,000,000; and although the 
 latter were admittedly under-estimated, there yet 
 remained a considerable excess of imports over 
 exports. After 1879 the statistics were improved, 
 and at first the new protectionist system acted as 
 a drag. The import trade declined for a time, and 
 in 1880 exports were slightly in excess of imports. 
 From then till 1888 the two were in practical 
 equilibrium, but after 1888 and the inclusion of 
 the Hanse towns, the turn came, and the following 
 table shows the " special trade " of Germany since 
 1893, in million marks : 
 
 1 Troeltsch, pp. 29 and 30. 
 
 2 Statitstischeti Jahrbuch, 1902, pp. 164-6.
 
 104 REVIVAL OF THE PROTECTIONIST MOVEMENT 
 
 Year. 
 
 Imports for 
 Home 
 Consumption. 
 
 Exports for 
 German Home 
 Produce. 
 
 Excess of 
 Imports over 
 Exports. 
 
 1893 . 
 
 . 4,134 
 
 3,245 
 
 889 
 
 1894 . 
 
 . 4,285 
 
 3,051 
 
 1,234 
 
 1895 . 
 
 . 4,246 
 
 3,424 
 
 822 
 
 1896 . 
 
 . 4,558 
 
 3,754 ... 
 
 804 
 
 1897 . 
 
 . 4,865 
 
 3,786 
 
 1,079 
 
 1898 . 
 
 . 5,440 
 
 4,010 
 
 1,430 
 
 1899 - 
 
 . 5,784 
 
 4,368 
 
 1,416 
 
 1900 . 
 
 . 6,043 
 
 4,753 
 
 1,290 
 
 1901 . 
 
 . 5,710 
 
 4,513 
 
 1,197 
 
 1902 . 
 
 . 5,806 
 
 4,813 
 
 993 
 
 During the same period there has been a marked 
 increase in the import of manufactured articles. 
 The following table gives the figures for the ten 
 years from 1893 to 1902 in million marks : 
 
 Year. 
 1893 
 1894 
 1895 
 1896 
 1897 
 1898 
 1899 
 1900 
 1901 
 1902 
 
 Million Marks. 
 
 901 
 
 835 
 
 925 
 
 939 
 
 966 
 1,015 
 1,148 
 1,200 
 1,064 
 1,103 
 
 Average 1893-1897 = 913-2 
 
 Average 1898-1902=1,106-0 
 
 It should be added that German industry has 
 been characterised more than that of any other 
 country, with the exception of the United States, 
 by the rise of trusts, or by their practical equivalent 
 in economic effect, the Kartels, which now number 
 over four hundred, and, though strongest in the coal 
 
 1 Statistisches Jahrbuch, 1902, p. 96.
 
 THE KARTELS 105 
 
 and iron industries, are gradually extending them- 
 selves over the whole range of German industry. 
 " They are combinations for maintaining prices 
 (and more or less for the joint marketing of the 
 produce) by a number of concerns which retain 
 their own independence as producers. 1 And these 
 Kartels have notoriously sought to relieve the 
 German market in times of depression by sending 
 abroad below the domestic price. . . . The Kartels 
 have, however, advanced considerably beyond the 
 point of lower foreign prices ; they have devised a 
 plan whereby export is assisted and encouraged by 
 the grant of bonuses by the several syndicates to 
 their members and customers. This plan appears 
 to have been first introduced in 1891, and it would 
 seem to have been more systematically established 
 in 1897. In the period of expanding trade which 
 soon followed it was quite unnecessary, but in 1901 
 the reaction again came." 2 Finally, it must be 
 pointed out that neither the tariff nor the Kartels 
 (though it is one of the commonest claims of the 
 latter and of the American trusts that they can 
 regulate industry and give it a more equable course) 
 have been able to guard Germany against recurring 
 periods of acute depression, such as that through 
 which the country passed between 1901 and 1903. 
 
 1 It is in this respect that the Kartels chiefly differ from the 
 American trusts. 
 
 2 W. J. Ashley, The Tariff Problem, pp. 120-1. For a detailed 
 description of the organisation and working of the Kartels, see Raffalo- 
 vich, Trusts, Cartels et Syndicats, and the Consular Report for the 
 Frankfurt District, 1903.
 
 106 REVIVAL OF THE PROTECTIONIST MOVEMENT 
 
 It has already been remarked that the closing 
 years of the nineteenth century witnessed the 
 revival of protectionist movements, arising chiefly 
 amongst the agrarians. We have observed that 
 after 1891 there was a somewhat rapid decline 
 in the price of agricultural produce, particularly 
 grain. This was due hi part to the effects of the 
 treaties, which opened the German market more 
 than before to foreign grain, and partly to the good 
 harvests. The agricultural party ascribed the fall 
 solely to the tariffs, and until 1896-7 their great 
 cry was the fall of prices ; x but then a turn came, 
 and the following table shows the movement of 
 prices from 1894 to 1897 : 2 
 
 QUOTATIONS PER 100 KG. 
 
 1894. 1895. 1896. 1897. 
 
 Wheat (at Cologne) 14-1 mks. 14-7 inks. 16.2 mks. 18-4 inks. 
 Flour 19-2 20-2 21-4 23'9 
 
 Rye 12-7 12-6 13-0 13-8 
 
 Barley (at Mannheim) 15-3 15-7 16-1 16-7 
 
 After 1896 they raised the new cry of " Leute- 
 not," declaring that the rapid development of 
 industry was denuding the land of labourers, and 
 that the agricultural interest was suffering from 
 low prices because of the reciprocity treaties made 
 for the sake of the industrial exporters, and at 
 the same time was hampered by the withdrawal of 
 labourers from the rural districts, which increased 
 the agricultural cost of production. The agrarian 
 party therefore denounced the " export orgy," and 
 
 1 Lotz, ii. p. 134. 2 Dietzel, p. 369.
 
 RECONSIDERATION OF POLICY 107 
 
 the policy which furthered the exportation of 
 manufactured articles by the importation of agri- 
 cultural produce. They put forward a demand 
 for duties protecting all branches of agriculture 
 grain, cattle, garden products, etc. * 
 
 Moreover, the time for the renewal of the treaties 
 was approaching, and it became necessary for the 
 Government to prepare for negotiations. It pro- 
 posed to do so by the adoption of a new tariff 
 which should contain higher rates of duty, and 
 should also be much more specialised and detailed 
 than the tariff of 1879. It believed that the higher 
 the rates of the tariff, the better the terms which 
 could be' forced from foreign nations, and also that 
 it was desirable to specialise the tariff rates in 
 order to enable reductions to be made on any one 
 article, without this involving reductions on a 
 number of others. 2 The basis of the scheme was 
 to be the simultaneous protection both of agri- 
 culture and manufactures ; but the strong agrarian 
 
 1 Dietzel, pp. 370-3 ; cf. Lotz, ii. p. 137. 
 
 2 "It frequently happens that another nation lays stress on securing 
 a reduction of rates on certain specialties, and is disposed to pay for 
 this concession with one equally advantageous to us. But if now the 
 Customs Act be made up too summarily, and these specialties are 
 bunched together with many other articles under one head, we must 
 lower the rate on the whole group for the sake of one article. The 
 result of that would be that third nations, having the advantage of 
 ' most favoured nation ' clauses, would profit by the reduction of the 
 duties on the other commodities included in the same group, without 
 having to pay an equivalent of their own therefor. The more 
 specialised the Customs Act, the more compensation material there 
 would be for treaties ; and the more general, the less there would 
 be " (Dietzel, p. 376, summarising the argument of the Imperial 
 Minister of the Interior).
 
 108 REVIVAL OF THE PROTECTIONIST MOVEMENT 
 
 movement, which had been going on since 1893 
 and found its representation in the Bund der 
 Landwirte, directed the new policy mainly in the 
 interests of the large landowners. The result was 
 the Bill of 1901, which dealt with 946 groups of 
 commodities. There was a long and fierce parlia- 
 mentary battle, and the new tariff was not carried 
 till December, 1902 ; it is, however, not to come 
 into force until such a time as the Government 
 shall appoint. 
 
 The principle of the new tariff is the increased 
 protection of agriculture and industry alike, but 
 the primary object is the improvement of agri- 
 culture ; and for that purpose minimum duties, 
 very considerably higher than the old tariff rates, 
 are established for the chief kinds of grain. The 
 differences are shown in the following table : 
 
 OLD DUTIES. 
 
 
 
 NEW 
 
 DUTIES. 
 
 
 
 (per ton). 
 
 
 
 
 (per ton). 
 
 Autonomous 
 Tariff. 
 
 Treaty 
 Tariff. 
 
 Maximum. 
 
 Minimum. 
 
 
 
 
 s. d. 
 
 
 
 s. d. 
 
 
 
 s. d. 
 
 
 
 s. 
 
 d. 
 
 Wheat 
 
 2 
 
 10 
 
 I 
 
 15 
 
 
 
 3 
 
 5 
 
 
 
 2 
 
 15 
 
 
 
 Rye . 
 
 2 
 
 10 
 
 1 
 
 15 
 
 
 
 3 
 
 
 
 
 
 2 
 
 10 
 
 
 
 Barley 
 
 1 
 
 2 6 
 
 1 
 
 
 
 
 
 2 
 
 
 
 
 
 1 
 
 10 
 
 
 
 Oats . 
 
 2 
 
 
 
 1 
 
 8 
 
 
 
 3 
 
 
 
 
 
 2 
 
 10 
 
 
 
 The minimum duties represent the point below 
 which the duty may not be lowered in any com- 
 mercial treaties which the Government may make. 
 " These four duties form 7 per cent, of our total 
 import. If, however, we consider these four duties 
 in relation only to imports liable to duties as
 
 THE NEW TARIFF 109 
 
 must be done, since we can consider only these 
 articles which can be used for concessions they 
 form one-seventh of the import ; and if we exclude 
 further all colonial produce liable to duty and 
 some other articles which are of no use in negotia- 
 tions with the treaty states . . . we perceive how 
 much is lost to us, so far as negotiations are con- 
 cerned, by the fixing of the minimum tariff for 
 grain." 1 There are increases on other agricultural 
 produce, but no minimum is fixed for these. 
 
 As regards the duties on manufactured goods, 
 the principles of the new tariff are (1) "the main- 
 tenance of the existing exemption of raw materials 
 so far as these are not produced at all in Germany, 
 or are only produced in insufficient quantity or 
 inferior quality " ; (2) taxation on semi-manufac- 
 tured goods intended to be worked up for export, 
 only to such an extent as not to interfere with the 
 export trade ; (3) increase of taxation on manu- 
 factured goods. 2 Thus raw materials, or materials 
 only in the first stage of manufacture, are to be 
 admitted free ; for example, raw silk and once- 
 twisted silk are exempt from duty, the duty on 
 silk yarn is reduced by nearly two-thirds, the duties 
 on woollen and cotton yarn and cotton thread 
 either remain at the old level or are reduced ; but 
 rates on twice-twisted silk, which represents the 
 employment of more labour, are increased 42 per 
 cent. On woollen and half- woollen goods there is 
 
 1 Schacht, in Schmoller's Jahrbuch, 1902,, part ii. p. 342. 
 * Schacht, p. 309.
 
 110 REVIVAL OF THE PROTECTIONIST MOVEMENT 
 
 an increase of from 15 to 30 per cent., on cotton 
 manufactures from 57 to 80 per cent., on leather 
 goods 50 to 100 per cent. The rates on all kinds 
 of iron are advanced considerably, as also on tools 
 and all manner of machinery, with an elaborate 
 reclassification. Of the tariff as a whole Dr. 
 Schacht points out that its main tendencies are 
 towards the increase of taxation on agricultural 
 produce generally, and also towards the raising 
 of the cost of half-finished goods. There is also 
 a higher taxation of many manufactured goods, on 
 the assumption that the greater the labour expended 
 on a particular commodity, the higher should it be 
 taxed. These principles, he adds, are due to a 
 complete misunderstanding of the productive power 
 of Germany ; the tariff proposals will promote the 
 production of grain and of half-finished goods, but 
 will harm the small farming and manufactures. 
 Yet these latter are the most important factor 
 in the economic life of Germany to-day. The 
 main economic problem is the question of popula- 
 tion, and work can be provided for the rapidly 
 increasing numbers not by the "extensive" in- 
 dustries of grain-growing and the manufacture of 
 half-finished goods, but by the "intensive" indus- 
 tries of small farming and the manufacture of 
 finished goods. It is essential, then, that nothing 
 should be done to hamper German industry in any 
 way ; " we dare not adopt a policy which makes 
 competition more difficult for us by increasing the 
 cost of raw and semi-manufactured materials, and
 
 CRITICISM OF THE TARIFF 111 
 
 reduces our labourers' strength by raising the price 
 of the necessaries of life. But that is the policy of 
 the tariff, and thereby it not only misunderstands 
 the real foundations of German economic life, but 
 lays a direct burden upon the lower classes." 1 And 
 Professor Schmoller, whilst not agreeing in all 
 points with his contributor, adds that he shares the 
 opinion of Dr. Schacht that the officials entrusted 
 with the preparation of the tariff are much too 
 protectionist, and far too much inclined to consider 
 every new duty as a sign of progress ; and he 
 agrees also that those interests which are well 
 organised and best represented have exercised far 
 too great an influence in the shaping of the tariff. 2 
 He thinks, however, that a moderate protection 
 for agriculture, and even a slight increase of some 
 of the agricultural duties, is desirable, and he hopes 
 that the tariff, in spite of defects, may, in the 
 hands of a skilful diplomacy, offer adequate oppor- 
 tunities for negotiations with foreign Powers. 
 
 The tariff so established is to be the autonomous 
 scale of duties, but the treaties are still unsettled, 
 and the German Government finds itself sur- 
 rounded with difficulties both at home and abroad. 
 It is clear that after its surrender to the great land- 
 owners by the grant of minimum duties, the min- 
 istry will have to seek most of its " compensation 
 material " in the unfixed agricultural duties and in 
 the duties on manufactured goods. Reductions 
 on merely industrial products would naturally not 
 
 1 Schacht, p. 351. 2 Footnote to Schacht, p. 353.
 
 112 REVIVAL OF THE PROTECTIONIST MOVEMENT 
 
 be acceptable to any country except Belgium, and 
 high all-round protection to agriculture would ren- 
 der it impossible to make many treaties, since 
 Switzerland, Hungary, Russia, and France are all 
 interested in reductions on the various kinds of 
 agricultural produce. But the smaller agricultur- 
 ists, the " Nebenagrarien," are certain to resent 
 reductions in duty only on those agricultural pro- 
 ducts, chiefly connected with cattle-rearing and 
 dairy-farming, in which they are interested, and 
 already their alliance with the " Hauptagrarien," 
 the grain producers, is breaking up. On the other 
 hand, the manufacturers are opposed to the main- 
 tenance of high agrarian duties, since that will 
 interfere with the negotiations for the reduction of 
 foreign tariffs on their productions, and at the same 
 time they will resist any decrease of German 
 duties on manufactured goods. The working 
 classes, under the lead of the Socialists, though 
 apparently still indifferent to the general question 
 of Protection and Free Trade, are strongly opposed 
 to the increased agricultural duties, as tending to 
 raise the price of food. Moreover, foreign nations, 
 particularly Austria, Russia, and Switzerland, have 
 prepared for the negotiations by devising new 
 tariffs with increased rates of duty. 
 
 The German Government may, and probably 
 will, succeed in some measure in overcoming these 
 difficulties as it did in 1892-4, but its task is one 
 of the utmost difficulty, and after prolonged diplo- 
 matic discussions the issue is still uncertain.
 
 CHAPTER VIII 
 
 RECENT ECONOMIC DISCUSSION IN 
 GERMANY 
 
 IN the long controversy which raged during the 
 preparation of the tariff and the passage of the law 
 through the Reichstag, it was natural that the 
 economists should play a very conspicuous part, 
 and they may be divided into three main groups. 
 The thoroughgoing Protectionists are chiefly so 
 in the interest of agriculture ; they approach the 
 subject from different standpoints, but they are 
 represented chiefly by Professor Adoph Wagner. 
 Then there is what may be called the Middle 
 School, led by Professor Schmoller ; and finally 
 there is the small Free Trade group, whose most 
 conspicuous member is Professor Brentano of 
 Munich. 
 
 The agrarian group are all in favour of increased 
 duties on agricultural produce in order to help the 
 landowners and farmers, whose lamentations, as we 
 have seen, are similar to those with which we are 
 familiar in Great Britain. But it is important 
 to observe that scarcely any amongst them care 
 to base their arguments solely on the economic
 
 114 RECENT ECONOMIC DISCUSSION IX GERMANY 
 
 distress of the agrarian interests. They all advance 
 other considerations, and their general position is 
 summed up in a sentence of their chief economic 
 representative, Professor Wagner: "An adequate 
 protection for agriculture, higher than the present, 
 would be in the general interest of the whole com- 
 munity, even if by its means the industrial develop- 
 ment of the state and possibly also the growth of 
 population should be not entirely stopped, but 
 certainly slackened, in the all-round interests of 
 the workers and of the economic organisation 
 of Germany. The maintenance of a capable 
 German agriculture means the maintenance of 
 the German people now and for the future." l The 
 argument on which this conclusion is based is elabo- 
 rated in Professor Wagner's book entitled Agrar- 
 und Industriestaat, and an attempt must be made 
 here to indicate its chief propositions. There is 
 a group of extreme agricultural Protectionists, but 
 apparently they find it convenient to accept 
 Wagner's arguments, at least for the present. 
 Professor Wagner views with the greatest anxiety 
 what he regards as the excessive industrialisa- 
 tion of Germany, and his views on this matter 
 are shared by many others, such as Professor 
 Oldenburg and Professor Pohle (Frankfort). 2 The 
 maintenance of the industrial state requires three 
 things : (1) that other countries are willing and 
 
 1 Wagner, Agrar- und Industriestaat, 2nd ed., pp. 1, 2. 
 
 2 See the Report of Professor Pohle, and the speech of Professor 
 Oldenburg in the Verhandlungen des Vereins fur Socialpolitik, vol. 
 xcviii. pp. 183 aeq. and 230 seq.
 
 "AGRAR- UNO INDUSTRIESTAAT" 115 
 
 able to supply agricultural products, both as food 
 and raw materials, cheaply ; (2) that these supplies 
 can be safely conveyed to the industrial state ; and 
 (3) that the manufactured goods of that state can 
 be assured of an adequate market in the countries 
 which supply the food and raw material. 1 And in 
 regard to all three of these necessary conditions 
 there are considerable dangers now threatening. 
 In the first place, several countries, hitherto content 
 to remain in the agricultural stage of development, 
 are turning their attention to industry; thus not 
 merely is the United States (on which Great 
 Britain has so long depended for the greater part 
 of its food supply) becoming preponderatingly 
 industrial, but Russia, Canada, Australia, Italy, 
 and Roumania are all striving to make themselves 
 into industrial communities. And this means not 
 only that they will sooner or later consume most 
 of their own supplies of raw material (it is, for 
 example, inevitable that the United States should 
 itself ultimately make use of the greater part of its 
 production of raw cotton), but that further, as these 
 states become more industrial their population 
 will greatly increase, and they will make greater 
 demands on their own food supplies. They will 
 thus tend to use for their own purposes most of 
 their production of food and raw material ; they 
 will have less to export, and the older industrial 
 states, which have based their organisation entirely 
 on the assumption that these supplies are per- 
 
 1 Wagner, loc. cit., pp. 143 seq.
 
 116 RECENT ECONOMIC DISCUSSION IN GERMANY 
 
 manent, will find themselves hopelessly crippled. 
 Secondly, even if the supply continue, it will 
 always be liable to be cut in time of war. To 
 guard against this as much as possible, the in- 
 dustrial nations find themselves bound to incur 
 ever-increasing expenditures on naval armaments, 
 and a growing burden of taxation. 1 Thus between 
 1898-9 and 1903-4, the expenditure on the German 
 navy advanced from six million pounds to ten and 
 a half million pounds, and the British expenditure 
 from twenty-four million to thirty-five million. 
 And thirdly, even though the supplies of food and 
 raw material continue quite unchecked, the growth 
 of industrial competition on the one hand, and the 
 attempt of various nations to supply their own 
 industrial wants on the other hand, must make 
 it ever more difficult for a manufacturing nation 
 to dispose of its manufactured goods abroad, except 
 by constantly cutting down its prices. These 
 general propositions Professor Wagner supports 
 by an elaborate examination of the sources of 
 the German supply of food and raw material, 
 illustrating its growing dependence on foreign 
 countries ; and by a most detailed investigation 
 of the movement during the last forty years of 
 the British export industry, which, he holds, is 
 tending to become almost stationary, or at any 
 rate to expand only at the cost of very great efforts. 
 
 1 Cf. the strong advocacy of a powerful German navy by a group of 
 economists in Handel- und Machtpolitik (ed. Schmoller, Sering, and 
 Wagner).
 
 THE DANGERS AND THE REMEDY 117 
 
 He regards the whole foundation of the industrial 
 state in the form which it has taken in Great 
 Britain, and which it seems likely to assume in 
 Germany, as altogether unsound. So also Professor 
 Pohle writes : " The rule of the system of industry 
 for export cannot long endure. That system, as 
 Roscher already recognised, contained an element 
 truly of temporary brilliancy, but of permanent 
 outward and inward peril. It is an idle dream 
 to believe that the economic future of Germany 
 can be permanently based on the production of 
 industrial commodities for foreign nations." 1 
 
 The remedy is to make Germany as independent 
 as possible of foreign nations. Not that foreign 
 trade is to be cut off, but attention is to be paid 
 more to the balance between the manufacturing 
 and agricultural interests of Germany. 2 Produc- 
 tion for the home market must be the primary 
 consideration ; the condition of agriculture must 
 be improved before the decline has gone so far as 
 to be irremediable, the agricultural population 
 recruited, and the rush to the towns checked. This 
 may mean a slackening in the rate of the increase 
 of the population, but that would not be un- 
 welcome. The best way to attain these ends is to 
 give agriculture the stimulus of greater protection. 
 " It is not to be denied that, like all the great 
 things which a nation needs armaments, civil 
 administration, justice, a system of education, 
 
 1 Pohle, p. 10. 
 
 a Wagner, loc. cit., pp. 42 and 43.
 
 118 RECENT ECONOMIC DISCUSSION IN GERMANY 
 
 arrangements for the care of the economic interests 
 of the community, etc. so also the maintenance of 
 the permanent economic and numerical strength 
 of the nation in an adequate and sturdy agrarian 
 population requires sacrifices. But we believe these 
 sacrifices, in this case as in the others we have 
 named, are necessary for that higher object which 
 we have in view." 1 And Professor Wagner, whilst 
 recognising that the increased duties which he 
 advocates on the import of agricultural produce 
 might, and very possibly would, mean an increase 
 in the cost of living to the lower classes of the 
 community, yet thinks that compensation could be 
 given for this by employing the proceeds of the 
 new duties in further State grants to the various 
 pension funds. Other economists, sharing the same 
 general opinions, take the same line in regard to 
 the union of tariff legislation and social reform ; 
 "it appears to be beyond dispute that increased 
 duties on grain would result in higher prices for 
 bread, and therefore the working-class population, 
 amongst whom the expenditure on foodstuffs may 
 amount to 75 per cent, of their income (whilst in 
 the case of the most prosperous class the amount 
 may fall to 20 per cent.) must in every case, as 
 Sering claims, receive an equivalent compensation 
 by the extension of social legislation and the reform 
 of the imperial taxes with more attention to social 
 needs (im sozialen Sinne}"' 
 
 1 Wagner, loc. cit., p. 36. 
 
 2 Von Halle, Volks- und Seewirtschaft, p. 11.
 
 THE CRITICISM OF WAGNER 119 
 
 We may take the criticism of these last points 
 first. As Professor Lotz has pointed out, 1 Wagner 
 has failed to demonstrate that higher protective 
 duties are the sole means of improving agri- 
 culture and stopping the decline of the agricul- 
 tural population. The fact that in spite of their 
 present protection the German landowners are in 
 a bad way, is partly at least to be ascribed to their 
 own defects, to their lack of enterprise, their want 
 of money, and consequent disinclination and in- 
 ability to make improvements. The value of 
 agriculture to the national life is, no doubt, con- 
 siderable ; but it would be extremely hard to 
 demonstrate that a reduction in the number of 
 industrial workers and an increase in the number 
 of the peasantry and rural labourers would tend to 
 raise the general level of civilisation in the com- 
 munity. So Conrad writes : " There can be no 
 doubt that an increase of the well-being at home 
 and the remunerative employment of the growing 
 population with which we have to deal, can only 
 be expected from industry and commerce. And, 
 consequently, it is beyond dispute that our tariff 
 policy must have in view chiefly their interests." 2 
 And, as Lotz has again pointed out, while it is 
 desirable to lessen the pressure upon the towns 
 and to remove large masses of the people from 
 conditions which do not make for physical efficiency, 
 there are ways of doing this without taking them 
 
 1 Verhandlungen des Vereins fur Socialpolitifc, vol. xcviii. p. 121 seq. 
 
 2 Conrad, Jahrbucher, February, 1902, p. 189.
 
 120 RECENT ECONOMIC DISCUSSION IN GERMANY 
 
 back to agriculture. It is certain that the develop- 
 ment of means of transport and transit will, before 
 very long, enable Great Britain and Germany to 
 carry out, if they choose to do so, great schemes 
 of industrial redistribution which will spread the 
 workers over larger districts, and put an end to 
 much of that density of population in limited 
 areas, which is at present one of the most painful 
 characteristics of our industrial societies. 1 As to 
 the growth of population, it is argued by Wagner's 
 opponents that for Germany, situated as she is, and 
 compelled to be a great military power, it is essen j 
 tial to have as large a population as possible, and 
 that such a population can be maintained only by 
 persisting in the policy which she has so success- 
 fully followed, the policy of industrialism ; and 
 Wagner's reply, that the strength of a population 
 does not depend so much on its numbers as on its 
 efficiency, hardly meets the case. In regard to the 
 corn duties, Wagner does not carry even all the 
 protectionist economists with him ; Schmoller is 
 not particularly favourable to any increase (unless 
 it does not unduly raise the cost of living to the 
 workers), whilst Conrad is decidedly hostile. The 
 latter is in favour only of the raising of the duties 
 on cattle and cattle products (which is practically 
 prevented by the new tariff proposals) ; apparently 
 he thinks that the grain duties have even harmed 
 the landowners, by rendering them less alive to 
 
 ] On this point cf. Wells, Anticipations, chap, i., and Mr. W. L. 
 Magdens's pamphlet on Industrial Redistribution.
 
 FOOD PRICES AND THE TARIFF 121 
 
 the need of improvement in their methods. 1 More- 
 over, there is not wanting evidence that the agrarian 
 protective duties have affected the cost of living in 
 Germany disadvantageously. The following table 
 shows the comparative prices in England and 
 Prussia of wheat 2 per 1,000 kg. : 
 
 1871- 1875- 1881- 1886- 1891- 1896- 
 1875 1880 1885 1890 1895 1900 
 
 England . . 246-4 206-8 180-4 142-8 128-2 134-3 
 Prussia . . 235-2 211-2 189'0 173-9 165-5 l60'9 
 
 Prussia more or less 
 
 than England . -11-2 +4-4 +8-6+31-1 +37'3 +26'6 
 
 In Westphalia, which is mainly industrial, the 
 prices were in comparison with England, in 1871-5 
 the same, 1876-80 15'6 marks more, 1881-5 17'2 
 marks more, 1886-90 40'8 marks more, 1891-5 
 45-2 marks more, 1896-1900 30'1 marks more. 3 
 
 It will be seen that since the introduction of the 
 tariff policy established by Bismarck, the Prussian 
 prices have become much higher than the English. 
 And on the question of food prices in general a 
 recent writer remarks that "there is in Germany 
 no longer anything said about the great cheapness 
 of food " (as compared with other countries). 
 
 1 Conrad, "Die Stellung der Landwirtschaftlichen Zolle" (Verein 
 filr Socialpolitik, vol. xc.). Cf. Von Halle, Volks- und Seewirthschaft , 
 
 pp. 10-13 : " If they regard a higher duty on grain as a panacea . . . 
 the result for the agricultural classes of East Germany will be as fatal 
 as the clinging to an out-of-date economic system was, fifty years 
 earlier, to the planters of the southern states of the American Union ; 
 for the whole state, it would, in view of the geographical position 
 of Germany and international relations, be even more fatal." 
 
 2 Conrad, loc. cit., p. 125. 
 
 3 Conrad, Jahrbiicher, February, 1902, p. 161.
 
 122 RECENT ECONOMIC DISCUSSION IN GERMANY 
 
 " Whilst Germany had up to the seventies cheaper 
 food than France and England, to-day in the 
 south-west of Germany it is not only dearer than 
 in Free Trade England, but sometimes even dearer 
 than in France, though that country has a higher 
 tariff on wheat than Germany, and much dearer 
 than in America." 1 
 
 The arguments as to the bases of the industrial 
 state are more serious, but on the whole not more 
 convincing. After all, it is possible to take too 
 long a view, and to carry speculation too far. It 
 may be perfectly true that a time will come when 
 the whole food supply of the world will be con- 
 sumed by the countries that produce it, that is to 
 say, that unless some of the now chiefly industrial 
 states return in some degree to agriculture the 
 supply of bread-stuffs will not keep pace with the 
 world's demand. But this prospect will scarcely 
 seem very near to those who have been told so 
 much of the unlimited resources of Canada, who 
 remember the almost untouched possibilities of 
 Argentina and Uruguay and other South American 
 states, of Egypt and Northern Africa, of Russia 
 and Siberia (under an intelligent economic policy), 
 and of Asia Minor. Similarly, in regard to the 
 exhaustion of raw material, it is, of course, probable 
 that ultimately the United States will consume all 
 its own cotton (though it is worth noting that Cobden 
 had the same fear seventy years ago). But there 
 
 1 Weile, Der Einfluss der Deutschen Schutzzollpolitik aufdie Entwicke- 
 lung der Industrie und Handwerkschaft, p. 22.
 
 MARKETS FOR MANUFACTURED GOODS 123 
 
 are great possibilities of the production of cotton 
 in other lands, as yet almost undeveloped, as, for 
 example, in British West Africa. It must be a 
 very long time before the alarming condition of 
 things which Professor Wagner foresees is realised, 
 and, in any case, that condition can only come 
 about very gradually, and as it conies there will be 
 a gradual transference back to agriculture of the 
 labour for which industry cannot provide employ- 
 ment. 1 As to the question of markets for manu- 
 factured products, there is no evidence that they 
 are declining. As a matter of fact, they are in- 
 creasing even in protected countries. If we take 
 Germany itself, the growth of her export trade 
 means a corresponding growth in her import trade, 
 and this increase is not merely of imports of food 
 and raw materials, but it is in manufactured goods 
 also. As civilisation advances with the develop- 
 ment of the industrial state, the standard of life 
 rises, the wants of the community increase, com- 
 modities which were once luxuries come to be 
 regarded as necessaries, and, in spite of tariffs, they 
 are imported from abroad. Wagner recognises 
 that this will always be the case to a con- 
 siderable extent, but seems hardly to realise 
 how considerable that extent is. The following 
 table sets out the recent movement of the im- 
 
 1 Cf., for the above criticism of Wagner and for further discussion 
 of the problem, Dietzel, "The German Tariif Controversy," in the 
 Q. J. Economics, May, 1903, especially pp. 405 seq. ; and Brentano, 
 Dei Schrecken des uberwiegenden Industriestaats.
 
 124 RECENT ECONOMIC DISCUSSION IN GERMANY 
 
 port of manufactured goods into some protected 
 countries : l 
 
 Country. Average 1892-1896. Average 1897-1901. 
 
 Germany . . 891 '4 mill. mks. ... 1,078-6 mill. mks. 
 
 France . . 585-8 frs. ... 714-0 frs. 
 
 Switzerland . 273-6 ... 347'7 
 
 Italy . . . 255-0 lire ... 312-7 lire 
 
 Austria-Hungary 398-2 kr. ... 456-0 kr. 
 
 Holland . . 287'8 gulden ... 362-4 gulden 
 
 1891-1895. 1896-1900. 
 
 Russia . . 105-7 mill, roubles ... 1 66 -4 mill, roubles 
 
 " Why should the result in the future be any 
 different ? Why should the decline of our export 
 industries, taken as a whole, set in, in case Russia, 
 Canada, Central and South America, Eastern Asia, 
 Cape Colony, and Australia should develop manu- 
 factures at some future time ? If to-day a more 
 extensive division of labour is taking place within 
 the industrial realm, and a comprehensive inter- 
 change of products between countries like England, 
 France, and Germany (that is, lands, all of which 
 lie in the temperate zone, all on about the same 
 plane of social and economic development), is it 
 not probable that such a division of labour and such 
 intercourse will not only continue, but extend even 
 further, when it includes not only the industrial 
 states of to-day on the one side, but Russia and 
 others on the other side ? For between the former 
 and the latter there is a much greater diversity of 
 natural as well as social conditions than exists 
 
 1 Statistical Abstract for the Principal and Other Foreign Countries, 
 1903, pp. 65-71.
 
 THE THEORY OF INTERNATIONAL TRADE 125 
 
 between England, France, and Germany." 1 And 
 the number of countries which can ever become 
 largely industrial is comparatively limited (few 
 have resources of the right kind), and in the others 
 the market for manufactured goods will always be 
 very large. It is true that competition in those 
 markets will become more and more keen, but this 
 simply means that no one country is likely to have 
 in the future such a complete industrial predomin- 
 ance as Great Britain used to enjoy. 
 
 There is one other point in Professor Wagner's 
 argument which should be noted. The English 
 theory of international trade as expounded by 
 Torrens, Ricardo, and Mill has never had much 
 influence amongst continental economists, and 
 Wagner attacks it on the ground that the greatest 
 relative advantage, which it presupposes as the 
 reason why a country should devote itself to the 
 production of a particular commodity or group 
 of commodities, may work extremely badly for the 
 community as a whole. It may mean that a coun- 
 try will find itself limited to the production of 
 one thing alone, and hence will lose all the advan- 
 tages which come from the possession of diverse 
 industries and a variety of technical skill ; or it 
 may mean that a country will be compelled to 
 devote itself more and more to the production 
 of commodities in which its advantage over its 
 competitors is of the worse kind, namely, cheapness 
 arising not from efficiency of method or abundance 
 
 1 Dietzel, loc. cit. } p. 403,
 
 126 RECENT ECONOMIC DISCUSSION IN GERMANY 
 
 of materials, but from ill-paid and sweated labour. 1 
 As to the first of these alternatives, it can only be 
 said that there is no evidence in any industrial coun- 
 try of any such process taking place ; but on the 
 contrary, new industries requiring great technical 
 skill are rising in all industrial communities. The 
 second point will be familiar to English readers 
 in Mr. and Mrs. Webb's work on Industrial 
 Democracy. They will remember that in appen- 
 dix ii. of that work this argument against Free 
 Trade that it may, according to that pure theory 
 of international trade which has been adopted by 
 British economists, lead to the dependence of this 
 country on sweated and ill-paid industries is elab- 
 orately stated ; but they will remember also the 
 authors' strong argument that no system of pro- 
 tection would remedy this, but that safeguards 
 against it must be sought elsewhere. 2 The admitted 
 
 1 Wagner, loc. cit., pp. 32 seq. ; cf. Pohle, p. 218. " In regard to 
 a great part of this industry (the manufacture of clothing) we are 
 entitled to say that Germany's ruling position in the world-market can 
 be maintained only at the expense of the workers' standard of living. 
 Of the conditions of work which prevail in that industry we may fairly 
 use the English expression that wages are only enough to keep 
 1 body and soul together,' and that the hours of labour are as many as 
 the hours of the day. In a great part of these branches of industry 
 home employment is still predominant. The miserable condition of 
 the home workers of the Erzgebirge, the Fichtelgebirge, the Thurin- 
 gian Forest, and other German hill districts, is well known ; and 
 all these work largely, if not chiefly, for export. There are still worse 
 conditions ruling among the home industries of the towns, and particu- 
 larly in the different branches of the clothing trade " (Pohle, p. 218). 
 
 2 " But though the existence of parasitic trades knocks the bottom 
 out of the argument for laisser faire, it adds no weight to the case for 
 a protective tariff. . . . The advocate of a protective tariff aims at 
 excluding imports ; the opponent of ' sweating/ on the other hand
 
 THE MIDDLE SCHOOL 127 
 
 truth of the facts alleged only implies the necessity 
 of State action to put an end to the conditions 
 which render " parasitic industries " possible ; it 
 is difficult to see how any policy, which aims 
 simply at restraining the growth of industry and at 
 stimulating the development of agriculture, would 
 be likely to remedy the evil. 
 
 We pass now to the Middle School, which, in 
 the main, follows the lead of Professor Schmoller. 
 With the general attitude of that group towards 
 Free Trade and Protection we are already fami- 
 liar ; l to them " the tariff problem admits of only 
 relative solution " all depends on the particular 
 conditions of time and place. They are not hostile 
 to Free Trade, but they believe it to be only one 
 of various policies to be applied according to cir- 
 cumstances. Neither are they Protectionists ; in 
 
 sees with regret the rapid growth of particular exports, which imply 
 the extension within the country of its most highly subsidised or most 
 parasitic industries. Hence, whatever ingenious arguments may be 
 found in favour of a protective tariff, such a remedy fails altogether to 
 cope with this particular evil. If the expansion of the industries 
 which England pursues to the greatest economic advantage say, for 
 instance, coal mining and shipbuilding, textile manufacture and 
 machine-making is being checked, this is not because coal and ships, 
 textiles and machinery are being imported into England from abroad, 
 but because other less advantageous industries within England itself, 
 by reason of being favoured with some kind of bounty, have secured 
 the use of some of the nation's brains and capital, and some of its 
 export trade. ... In short, the absolute exclusion by each country 
 of the imports competing with its own products would not, any more 
 than Free Trade itself, prevent the expansion within the country 
 of those industries which afforded to its wage-earners the worst con- 
 ditions of employment" (Webb, Industrial Democracy, ed. 1897, ii. 
 pp. 865-6). 
 
 1 See above, Chapter V.
 
 128 RECENT ECONOMIC DISCUSSION IN GERMANY 
 
 fact, their advocacy of the use of tariffs for the 
 purposes of promoting international exchange is in- 
 compatible with protectionist ideals. Professor 
 Schmoller holds that for the purposes of negotia- 
 tion agrarian and industrial duties are alike neces- 
 sary, and believing that agriculture is suffering, 
 he would encourage cattle-rearing by duties on 
 foreign cattle and meat, but would support duties 
 on bread-stuffs only when they do not raise the 
 price of bread unduly whatever that may mean. 
 But to him the tariff is important chiefly as a 
 weapon. " I believe that we may draw this lesson 
 from history, that all protective movements are 
 closely connected with national sentiment, strivings 
 after international authority, efforts towards the 
 balance of power, and therefore will continue to 
 exist so long as amongst the fully developed states 
 there are others striving after economic develop- 
 ment, and so long as the peoples for economic 
 purposes have need of every weapon which stands 
 ready for their use." 1 He points out that the 
 increases of the tariff in the eighties were used 
 by Bismarck in this way, and that the Bismarckian 
 idea has now been taken up again. But the nego- 
 tiation tariff is not to be a high protective tariff; 
 it is supported by him only in order to give Ger- 
 many a better position in commercial negotiations. 
 Schmoller holds that the " neo-mercantilism " of 
 the present day has arisen out of the nationalist 
 
 1 Verhandlungen des Vereins fur Socialpolitik , 1902, p. 265. The 
 following quotations are from Schmoller's speech, pp. 264-71.
 
 THE TARIFF AS A WEAPON 129 
 
 movements, and is based not on List's theory of 
 " educational tariffs " (i.e. the infant industries 
 doctrine), but on the desire to possess an "inter- 
 national weapon " (Machtmittel). " The new period 
 of Protection, this neo-mercantilism, has come, not 
 because the theorists and statesmen were incapable 
 of understanding the lofty arguments of Free 
 Trade, not because everywhere some monopolists 
 and large manufacturers control the Government, 
 but out of natural nationalist tendencies, particu- 
 larly in those countries with the most liberal and 
 democratic constitutions. It is based not alone 
 or even chiefly on the doctrine of ' educational 
 tariffs,' but arises out of an instinctive, rather than 
 reasoned, motive that the tariffs are an inter- 
 national weapon which, skilfully employed, can be 
 of the utmost use." A strong tariff is particularly 
 needed to enable Germany to fight the extreme 
 protectionist policy of Russia and the United States. 
 These views are shared by a very considerable 
 number of the younger German economists, the 
 most distinguished, perhaps, being Dr. Schuhmac- 
 her, head of the great Commercial High School at 
 Cologne. 1 
 
 But this policy of tariffs to be employed as 
 a means of fighting other nations which pursue a 
 policy of exclusion has certain serious dangers. 
 We have seen that the application of the policy 
 against France under the Monarchy of July, 
 
 1 See his long report in the Verhandlungen des Vereins fur Social- 
 politik, 1902. 
 K
 
 130 RECENT ECONOMIC DISCUSSION IN GERMANY 
 
 against Spain and other powers, has not always 
 produced satisfactory results. The increase of the 
 agricultural duties by Bismarck in the eighties did 
 nothing to promote exchange with Russia for a 
 number of years in fact, by the admission of the 
 German Government itself, German trade with 
 Russia declined steadily between 1880 and 1890 ; 
 the conflict with Russia in the nineties was short 
 and sharp, and, on the whole, in that case the 
 policy was justified, but the risks run were very 
 great. Moreover, these tariffs for negotiation are 
 like armaments ; when one country increases them, 
 others do the same. As soon as the proposals for 
 the new German tariff were published, Austria and 
 Switzerland proceeded to revise and increase their 
 tariffs, in order to be ready to fight Germany. 
 And further, when protective duties are once 
 granted, whatever the original purpose may have 
 been, a vested interest in their maintenance is 
 created, and the producers so protected are sure 
 to oppose any proposal to reduce the duties in the 
 effort to bribe foreign powers. So, as we have 
 seen, the agrarian interest in Germany has fiercely 
 opposed any treaty reductions of the grain duties. 
 Schmoller himself recognises that " admittedly this 
 neo-mercantilism frequently overlooks the fact that 
 these weapons may as often be used unskilfully 
 and mistakenly, as rightly. The agitation of the 
 interested classes commonly fails to see that ex- 
 cessive protection as a whole does more harm than 
 good. So Russia, the United States, and France
 
 THE TARIFF AND ECONOMIC REFORM 131 
 
 have fallen into a high protective system, and 
 sometimes into a commercial policy which, though 
 it aims at international power, is of a worse kind, 
 and hinders the economic development of these 
 countries instead of promoting it." And elsewhere 
 (as has been pointed out), Schmoller writes in 
 regard to the new tariff that the officials who 
 planned it were much too favourable to Protection 
 pure and simple, and that those interested groups, 
 which were well organised and skilfully led, exer- 
 cised far too great an influence upon it. 1 
 
 Another moderate view is that of Professor 
 Conrad, of Halle. He thinks that industrial pro- 
 tection has gone far enough, but he would protect 
 agriculture so far as that policy does not involve 
 the depression of the standard of living for the 
 working classes. He would retain the existing 
 duties on foodstuffs for the present, because of 
 the critical condition of German agriculture, but 
 the only duties he would increase are those which 
 would encourage the development of special 
 branches, such as cattle-rearing and dairy-farming. 
 Professor Sering, of Berlin, favours the increase of 
 the agricultural duties only because he thinks that 
 they will help agriculture over a transition period 
 in which radical changes must be made, if the con- 
 dition of the eastern provinces is not to be a serious 
 social menace to Germany. He will support the 
 heightened grain duties only if they are to be 
 regarded as part of a social programme which shall 
 
 1 Schmoller's Jahrbuch, 1902, part ii. p. 353.
 
 132 RECENT ECONOMIC DISCUSSION IN GERMANY 
 
 include the reduction of duties on such com- 
 modities as coffee, petroleum, etc., the gradual 
 prohibition of the invasion of the eastern provinces 
 by the cheaper Slav labour, and the transformation 
 (by a national system of land purchase) of the large 
 estates of the eastern provinces of Prussia into 
 peasant holdings. Unless these steps are taken to 
 maintain the peasantry, in whom he believes the 
 strength of Germany to lie, he will oppose the new 
 duties. 1 
 
 It will have been noticed that none of the 
 economists quoted are inclined to defend increased 
 duties on manufactured goods ; the Free Trade 
 school naturally demands their abolition, not at 
 once, but gradually. It recognises fully that 
 educational tariffs may be of use to a country in 
 some periods of its economic development it is 
 prepared to defend their application in the past ; 
 but it is opposed to " maintenance tariffs " 
 (Erhaltungszolle). 2 Such tariffs not only hinder 
 the territorial division of labour, which has 
 the same effect on production as labour-saving 
 machinery ; they not only prevent or delay a 
 reduction in the national cost of production and 
 the attainment of "a greater total product from 
 a given expenditure of labour, and a higher national 
 dividend than before," 3 but they also strengthen 
 the industrial combinations, and enable them to 
 
 1 Verhandlungen des Vereinsfiir Socialpolitik, 1902, pp. 244-7. 
 
 2 Brentano, Das Freihandelsargument , p. 15. 
 
 3 Dietzel.
 
 THE FREE TRADE ARGUMENT 133 
 
 maintain artificial prices in the home market by 
 eliminating competition from outside. This party 
 accepts entirely the industrialisation of Germany, 
 and believes that in the present stage of that 
 country's development "the real protection of 
 national labour is Free Trade." 1 The material 
 progress of Germany depends on the extension 
 of her manufactures and the completion of the 
 division of labour between the industrial com- 
 munities of the world. The agricultural duties 
 are to be condemned, since they not only increase 
 the cost of food by limiting the supply from 
 countries where it is produced more cheaply than 
 in Germany, but also by limiting imports reduce 
 the market for German exports, which are chiefly 
 manufactured goods, and so in two ways hamper 
 the growth of industry. 2 They also point to the 
 experience of Germany as an illustration of the 
 fact that duties once imposed are much more 
 likely to increase than to decrease. Some of their 
 criticisms of Wagner and his allies have already 
 been indicated ; and it is unnecessary to state their 
 more general argument, since it follows the lines 
 of ordinary English economic thought. 
 
 On the whole, then, so far as German economists 
 in the past have been advocates of Protection, their 
 arguments have been based largely on the political 
 need of securing the development of German 
 economic strength as a basis for political power. 
 To-day that condition has been realised, and the 
 
 1 Brentauo. 2 Ibid.., pp. 16, 17.
 
 134 RECENT ECONOMIC DISCUSSION IN GERMANY 
 
 argument for Protection is shifted on to another 
 ground ; it is alleged that the development has 
 been too one-sided, and that the comparative 
 neglect of agriculture has become a source of 
 weakness to the Empire. Yet for more than 
 twenty years agriculture has received a large 
 measure of protection, and one is forced to believe 
 that if, in spite of that, it has not held its ground, 
 the reasons are to be sought in causes over which 
 tariffs have little control. As to the other argu- 
 ment for Protection the need for negotiation 
 tariffs no economist has shown that the result 
 could not be obtained in another way ; if they are 
 to be used at all, a system of occasional duties- 
 such as that established by the recent Sugar Con- 
 vention and employed in the United States under 
 the McKinley Tariff 1 would be preferable to the 
 imposition of a general tariff on manufactured goods, 
 which might, or might not, be reduced. Tariffs for 
 negotiation are at best, as even their defenders 
 in Germany readily admit, a dangerous weapon ; 
 the policy can only be successful where the country 
 making use of them is not dependent on supplies 
 drawn from the country against which they are 
 employed, whilst the latter is so dependent upon 
 the former. And, finally, it must be borne in 
 mind that tariffs are, after all, only the crudest 
 form of Protection, and are not necessarily the 
 only or most efficient means of promoting the 
 economic well-being of a nation ; and the safest 
 
 1 See pp. 255-6.
 
 CONCLUSION 135 
 
 lesson to draw from the experience of Germany 
 is the simple fact that changes in tariff policy 
 have been only one, and commonly not the most 
 important, amongst the many causes of her eco- 
 nomic progress.
 
 A BRIEF BIBLIOGRAPHY 
 
 WEBER, W. Der Deutsche Zollverein. 1871. 
 
 ZIMMERMANN, A. Gesckichte der Preussisch-Deutschen Handels- 
 
 politik. 1891. (I.) 
 ZIMMERMANN, A. Die Handelspolitik des Deutschen Reiches, 1871- 
 
 1900. 1901. (II.) 
 
 SCHIPPEL, MAX. Grundziige der Handelspolitik. 1902. 
 LOTZ, W. Die Ideen der Deutschen Handelspolitik, 1860-91. 
 
 1892. (I.) 
 LOTZ, W. "Die Handelspolitik des Deutschen Reiches, 1890- 
 
 1900 " (in Beitr'dge zur Neuesten Handelspolitik Deutchslands, 
 
 voi. iii. 1901). (II.) 
 
 Foreign Office Report on Tariff Wars. (Cd. 1938. 1904.) 
 POSCHINGER, H. Bismarck als Volkswirth. 1889-90. 
 WUTTKE, R. " Der deutsch-oesterreich-ungarische Handels- 
 
 vertrag vom 6 Dezember, 1891." (In Verhandlungen des 
 
 Vereins fur Socialpolitik, 1902). 
 
 BLUM, H. Das Deutsche Reich zur Zeit Bismarcks. 1893. 
 VON HALLE, E. Folks- und See-Wirthschaft. 1903. 
 DAWSON, W. H. Bismarck and State Socialism. 1891. 
 "VERITAS." German Empire of To-day. 1902. 
 POGSON, G. A. Germany and its Trade. 1903. 
 Statistisches Jahrbuchfiir das Deutsche Reich. 
 
 LIST, F. System of National Economy (trans, by Lloyd. 1885). 
 SCHMOLLER, G. The Mercantile System (trans, by W. J. Ashley. 
 
 1896). 
 SCHMOLLER, WAGNER, and SEEING (Editors). Handels- und Macht- 
 
 politik. 2 vols. 1900. 
 
 137
 
 138 A BRIEF BIBLIOGRAPHY 
 
 WAGNER, A. Agrar- und Industriestaat. 2nd edition. 1902. 
 
 POHLE, L. Deutschland am Scheidewege. 1902. 
 
 TROELTSCH, W. Ueber die Neuesten Ver'dnderungen im Deutschen 
 
 Wirtschaftsleben. 1899. 
 
 BRENT ANO, L. Das Freihandelsargument. 1901. 
 BRENTANO, L. Die Schrecken des iiberrviegenden Industriestaats. 
 
 1901. 
 DIETZEL, H. "The German Tariff Controversy" (Quart. J. 
 
 Econ., May, 1903). 
 GOTHEIN, G. Die Wirkung der Handelsvertr'dge (in publications of 
 
 the Berlin Volkswirthschaftliche Gesellschaft, 1895). 
 CONRAD, J. " Die Stellung der Laadwirthschaftlichen Zolle " 
 
 (Vereinfiir Socialpolitik, vol. xc.). 
 CONRAD, J. "Die Agrarzolle in der Zolltarifvorlage " (in Jahr- 
 
 bucher fur National'okonomie und Statistik, February, 1902). 
 DADE, H. "Die Agrarzolle " (in Beitr'dge zur Neuesten Handels- 
 
 Politik Deutschlands, vol. ii., 1901). 
 SCHACHT, H. "Inhalt und Kritik des Zolltarifentwurfs " (in 
 
 Schmoller's Jahrbuch, 1902). 
 Verhandlungen des Vereins fur Socialpolitik. Vol. xcviii.
 
 PART II 
 THE UNITED STATES
 
 CHAPTER I 
 
 THE ORIGINS OF AMERICAN 
 COMMERCIAL POLICY 
 
 THE economic relations between the states of the 
 American Union at the end of the War of 
 Independence resemble closely the condition of 
 affairs in the Germanic Confederation after the 
 Congress of Vienna. The separate colonies had 
 been allowed by Great Britain to impose customs 
 duties for revenue purposes, and had also been 
 influenced somewhat by protectionist ideas ; l and 
 although after 1776 this latter motive seems to 
 have lost its force, the customs duties continued 
 to be levied by each state against all others, in- 
 cluding even its fellow-members of the Union. 
 Yet the feeling in favour of freedom of trade was 
 sufficiently strong partly as the result of reaction 
 against the restrictive policy of Great Britain 
 to restrain the new Confederation from imposing 
 any tariff laws between 1776 and 178 1. 2 There 
 were practically no manufactures to protect ; the 
 colonies were almost entirely engaged in agri- 
 
 1 Stanwood, i. p. 25, quotes from the preambles to the Revenue 
 Acts of various colonies. Cf. Hill, pp. 14-15. 
 * Hill, pp. 39-40. 
 
 141
 
 142 ORIGINS OF AMERICAN COMMERCIAL POLICY 
 
 cultural pursuits or in the carrying trade ; and 
 although there was a certain amount of iron pro- 
 duced, yet "in the main, the colonies made only 
 such manufactures as could not be imported." 1 
 When from 1782 onwards a change came over 
 American policy, and tariff legislation began, the 
 determining forces seem to have been chiefly 
 political the necessity of raising money for the 
 purposes of government, and the desire to be able 
 to meet and resist the commercial legislation of 
 the European Powers, and particularly the high 
 tariff and Navigation Acts of Great Britain. 2 
 These considerations drove the states rapidly in 
 the direction of commercial as well as political 
 union, 3 and after some years of uncertainty, owing 
 to the unwillingness of some members of the 
 Union to surrender their liberty of economic 
 action, the Constitution of 1787 settled that 
 " Congress shall have power to lay and collect 
 taxes, duties, imposts, and excises, to pay the 
 debts and provide for the common defence and 
 
 1 Taussig, p. 10. 
 
 2 "At first the rates were low and the articles taxed few, being 
 generally luxuries or commodities the importation of which was 
 thought harmful. In this category slaves, rum, spirits and wine, tea, 
 coffee, and sugar held important places. The southern states did not 
 go beyond these purely revenue measures. In all the northern states 
 rates were advanced and other articles were added to the list, until in 
 1785 and 1786 the tariff schedules were generally extensive and taxes 
 were imposed for both revenue and protective purposes, or, to use a 
 phrase of more recent times, for revenue with incidental protection. 
 In some of the states, indeed, protection was the principal end 
 sought." Hill, p. 43. 
 
 J The German states followed the opposite direction between 1833 
 and 1871.
 
 THE FIRST TARIFF ACT 143 
 
 general welfare of the United States ; but all 
 duties, imposts, and excises shall be uniform 
 throughout the United States ; ... to regulate 
 commerce with foreign nations, and among the 
 several States, and with the Indian tribes ; . . . 
 to make all laws which shall be necessary and 
 proper for carrying into execution the foregoing 
 powers." 1 
 
 The first use made by Congress of the authority 
 so conferred appeared in the Tariff Act of 1789. 
 It was a combination of specific and ad valorem 
 duties, and was to continue in force for seven 
 years. Specific duties a fixed tax on a given 
 amount of each commodity were imposed on 
 thirty-six articles, the chief being spirits (8-10 
 cents per gallon), tea (6-20 cents per lb.), sugar, 
 salt, molasses, cordage, steel (56 cents per cwt.), 
 and nails ; and there were ad valorem duties of 
 15 per cent, on carriages, 10 per cent, on glass, 
 china, earthenware, lace, and some others, 7J per 
 cent, on paper, gloves, leather, buttons, clothing, 
 hats, and metal wares, and 5 per cent, on all other 
 imports except seventeen raw materials (such as 
 saltpetre, wool, cotton, hides, fur, dye-stuffs), which 
 were admitted free. 2 Drawbacks of the full duty 
 less 1 per cent, were granted for all commodities 
 re-exported within twelve months ; and finally, to 
 stimulate the American carrying trade, a discount 
 of 10 per cent, was given on all goods imported 
 
 1 Art. i. sec. 8. See text in Bryce, Amer. Commonwealth, i. p. 700. 
 
 2 Stanwood, i. pp. 58-60.
 
 144 ORIGINS OF AMERICAN COMMERCIAL POLICY 
 
 in vessels owned entirely by American citizens. 
 Though the duties thus imposed were, on the 
 whole, quite moderate, it is by no means certain 
 that the legislation was inspired solely by financial 
 needs. 1 It is true that these were considerable, 
 and in face of the widespread dislike to direct 
 taxation and to excises could only be satisfied 
 by recourse to customs duties ; but it is also 
 clear that in the minds of many of its supporters 
 the Act had a protective purpose, and for that 
 very reason it called forth a good deal of opposi- 
 tion, particularly from the Southern States. It was 
 a policy of Protection, chiefly for manufactures, 
 modified partly by the inexperience of the legis- 
 lators 2 and partly by regard to considerations of 
 revenue. 3 In the very next year, after Hamilton, 
 the Secretary of the Treasury, had failed to secure 
 
 1 ' ' It has often been said that the first Tariff Act, that of 1789, was 
 a protective measure, and that in the debate on it the protective policy 
 appeared full grown. But such considerations had little to do with 
 the Act ; and the discussions on Protection by no means indicate what 
 was the real centre of interest. ... Its main object was to secure 
 revenue. " Taussig, pp. 14-15. 
 
 2 Channing, United States, p. 139. 
 
 3 For the evidence that protective considerations did weigh with 
 the promoters of the measure, see Hill, pp. 108 seq., and the account 
 of the debates given by Stanwood, i. pp. 39 seq. Mayo-Smith and 
 Seligman, p. 6, agree with Taussig, and remark that " it is erroneous 
 to speak of any protectionist movement at this period " ; but this 
 seems to be based on the idea that the authors of the tariff did not 
 regard average duties of 8 per cent, ad valorem as protective a 
 supposition which is not proved, and is in direct conflict with the 
 preamble to the Act, which asserts that " it is necessary for the 
 support of the Government, . . . and the encouragement and pro- 
 tection of manufactures, that duties be laid,' 5 etc. Dewey (p. 84) 
 holds that the evidence as to the consciously protective character of 
 the tariff is conclusive.
 
 HAMILTON'S REPORT 145 
 
 an Excise Act, the tariff was increased all round 
 to meet the growing financial needs of the Union ; 
 the specific duty on steel was advanced from 56 
 to 75 cents per cwt., and many articles previously 
 in the 5 per cent, ad valorem list were now made 
 subject to 7J per cent, and 10 per cent. In the 
 following year an excise on spirits (somewhat lower 
 than the customs duty) was established ; but it 
 was always unpopular and difficult to collect, and 
 in 1802 was finally abandoned. 
 
 In 1790 Congress had directed the Secretary to 
 the Treasury to prepare and report plans " for the 
 encouragement and promotion of such manufac- 
 tories as will tend to render the United States 
 independent of other nations for essential, particu- 
 larly for military, supplies." Hamilton replied in 
 December, 1791, with a " Report on Manufactures," 
 which remains still one of the most elaborate 
 general arguments for Protection, and contains 
 most of the ideas which multitudes of writers 
 have since elaborated. 1 There is the argument from 
 the desirability of national self-sufficiency. "Every 
 nation . . . ought to endeavour to possess within 
 itself all the essentials of national supply. These 
 comprise the means of subsistence, habitation, 
 clothing, and defence. The possession of these is 
 necessary to the perfection of the body politic, to 
 the safety as well as to the welfare of society. 
 The want of either is the want of an important 
 organ of political life and motion ; and in the 
 
 1 Full text in Taussig, State Papers and Speeches on the Tariff. 
 L
 
 146 ORIGINS OF AMERICAN COMMERCIAL POLICY 
 
 various crises which await a state it must severely 
 feel the effects of any such deficiency." There is 
 the advocacy of the home market, though primarily 
 in the interests of the agricultural producers ; the 
 restrictive policy of European Powers, and the 
 fluctuations of their crops, make the foreign market 
 too unreliable for the American farmer ; it is there- 
 fore desirable to create for his produce the largest 
 possible demand at home, and this can best be 
 done by promoting "manufacturing establishments." 
 " This idea of an extensive domestic market for the 
 surplus produce of the soil is of the first conse- 
 quence. It is of all things that which most effec- 
 tually conduces to a flourishing state of agriculture." 
 But the firm establishment of the necessary manu- 
 factures in the face of foreign competition is a task 
 of great difficulty, and so we naturally come to the 
 famous " infant industries " argument. " Whatever 
 room there may be for an expectation that the in- 
 dustry of a people, under the direction of private 
 interest, will, upon equal terms, find out the most 
 beneficial employment for itself, there is none for 
 a reliance that it will struggle against the force of 
 unequal terms, or will of itself surmount all the 
 adventitious barriers to a successful competition 
 which may have been erected either by the advan- 
 tages naturally acquired from practice and previous 
 possession of the ground, or by those which may 
 have sprung from positive regulation and an arti- 
 ficial policy " this last phrase doubtless a reference 
 to Great Britain. Finally, Hamilton argues that
 
 FURTHER TARIFF LEGISLATION 147 
 
 any increase of prices arising from Protection will 
 soon be more than counterbalanced by the increase 
 of production, and resulting cheapness, which it 
 will call forth ; and he urges the essential harmony 
 of the industrial and agricultural interests, since 
 the farmers may have to pay more for a time for 
 manufactured goods, but will find the value of 
 their farms enhanced by the growth of the demand 
 for agricultural produce, both food and raw material. 
 As definite proposals he recommends the grant of 
 bounties, the free admission of raw materials (or 
 the payment of drawbacks), and general protection 
 against all manufactured articles which can be pro- 
 duced in the country. 
 
 From 1790 onwards there were constant altera- 
 tions in the tariff between 1792 and 1816 there 
 were some twenty-five Tariff Acts passed, all 
 modifying the customs duties in one way or 
 another. But Hamilton's Report, and the ideas 
 it embodied, do not seem to have exercised any 
 special influence on the legislation of this period ; 
 the motives were always financial. 1 Up to 1808 
 there were increases of duties on various commodi- 
 ties ; some specific duties were replaced by duties 
 ad valorem ; and some articles (chiefly those useful 
 for military purposes) were added to the free list. 
 Alone in the duty imposed in 1804 on window 
 glass " was any concession made to the protective 
 
 1 " With two or three exceptions, they had no other motive than to 
 adjust the revenue to the needs of the Treasury " (Stanwood, i. p. 111). 
 Cf. Taussig, p. 16,
 
 148 ORIGINS OF AMERICAN COMMERCIAL POLICY 
 
 policy." 1 But whilst this was the policy of Con- 
 gress, it is evident that the feeling in favour of 
 Protection was growing in the country at large. It 
 was held back by the general prosperity of American 
 trade during the Napoleonic wars until the United 
 States became involved in the European complica- 
 tions after the year 1807 ; until that time the 
 American export and carrying trade had reaped 
 great benefit from British difficulties. The follow- 
 ing table shows the movement of the foreign 
 trade of the United States from 1791 to 1807 (in 
 million dollars) : 2 
 
 Gross Exports. 
 
 19-0 
 20-7 
 26-1 
 33-0 
 48-0 
 67-0 
 56-8 
 61-5 
 78-6 
 71-0 
 94-0 
 72-0 
 55-8 
 77-7 
 95-5 
 101-5 
 108-3 
 
 The most striking column here is that of re- 
 exports, which represents the growth of the carry- 
 
 1 Stanwood, i. p. 115. 2 Taussig, p. 12. 
 
 Financial years 
 ending Sept. 30. 
 
 Gross Imports. 
 
 Re-exports. 
 
 1791 
 
 . 29-2 
 
 5 
 
 1792 
 
 31-5 
 
 1-7 
 
 1793 
 
 31-1 
 
 2-1 
 
 1794 
 
 . 34-6 
 
 6-5 
 
 1795 
 
 . 69-7 
 
 8-5 
 
 1796 
 
 81-4 
 
 26-3 
 
 1797 
 
 . 75-4 
 
 27-0 
 
 1798 
 
 . 68-5 
 
 33-0 
 
 1799 
 
 . 79-0 
 
 45-5 
 
 1800 
 
 . 91-2 
 
 39-1 
 
 1801 
 
 . 111-3 
 
 46-6 
 
 1802 
 
 . 76-3 
 
 35-7 
 
 1803 
 
 . 64-7 
 
 13-6 
 
 1804 
 
 85-0 
 
 36-2 
 
 1805 
 
 . 120-6 
 
 53-2 
 
 1806 
 
 . 129-4 
 
 60-3 
 
 1807 
 
 . 138-5 
 
 59-6
 
 EFFECTS OF THE NAPOLEONIC WARS 149 
 
 ing trade of the United States, and the commercial 
 importance of the war to that country is most 
 markedly illustrated by a comparison of the figures 
 for 1802 and 1803, the years of the Treaty of 
 Amiens, with those which immediately precede and 
 follow them. 
 
 But with 1808 a change came. In November, 
 1806, Napoleon had replied to the British blockade 
 of the French coast by the Berlin Decree, which 
 declared the British Islands blockaded, and forbade 
 all trade in British goods. Great Britain answered 
 by proclaiming the continental coasting trade at 
 least for ports under French control closed to 
 neutrals, and at the end of 1807 ordered "the 
 condemnation of any American vessel seized while 
 on a voyage to any European port closed to British 
 vessels, unless such vessel had first touched at a 
 British port. Napoleon, on his part, in the Milan 
 Decree (December 17th, 1807) declared that any 
 ship which had obeyed the above order was good 
 prize if seized in any port under his control. At 
 this time, Napoleon was the virtual master of all 
 the continental ports except those of Sweden, 
 Norway, and Turkey, and the British were supreme 
 on the ocean. These orders and decrees, therefore, 
 provided for the speedy annihilation of American 
 shipping, and this seems to have been the object of 
 the last British Order in Council, if one may judge 
 from a perusal of Mr. Perceval's correspondence on 
 the subject. The official reason as stated was a 
 desire to compel the United States to retaliate
 
 150 ORIGINS OF AMERICAN COMMERCIAL POLICY 
 
 upon the French Government." 1 But it was not 
 to be expected that the United States would quietly 
 submit to this treatment. On December 23rd, 1807, 
 Congress passed the Embargo Act, which pro- 
 hibited American vessels from leaving for foreign 
 ports, and foreign vessels from taking any cargo 
 except that already on board. The vigorous 
 enforcement of these orders on both sides for 
 although in March, 1809, the Embargo Act was 
 repealed, it was replaced by the establishment of 
 Non-Intercourse with France, Great Britain, their 
 allies and colonies was one of the chief causes of 
 the Anglo-American War of 1812. 
 
 With the political effects of these various regula- 
 tions we are not concerned ; but they were of great 
 importance for the economic development of the 
 United States. The following table shows the 
 movement of American foreign trade (in million 
 dollars) from the issue of the Embargo at the 
 beginning of 1808 to the end of the war. 2 It 
 should be noted that at the commencement of the 
 war of 1812 the United States import duties were 
 doubled. 
 
 Year. 
 (1807 
 
 Gross Imports. 
 . 138-5 
 
 Re-exports. 
 59-6 
 
 Gross Exports. 
 108-3) 
 
 1808 
 
 57-0 
 
 13-0 
 
 20-4 
 
 1809 
 
 . 59-4 
 
 20-8 
 
 52-2 
 
 1810 
 
 85-4 
 
 24-4 
 
 66-7 
 
 1811 
 
 53-4 
 
 16-0 
 
 61-3 
 
 1812 
 
 . 77-0 
 
 8-5 
 
 38-5 
 
 1813 
 
 22-0 
 
 2-8 
 
 27-9 
 
 1814 
 
 13-0 
 
 1 
 
 6-9 
 
 Charming, 
 
 United States, pp. 
 
 177-8. 
 
 2 Taussig, p. 12.
 
 GROWTH OF AMERICAN INDUSTRY 151 
 
 So by 1814 American foreign trade had practi- 
 cally ceased to exist. The war was equivalent in 
 its effects to a policy of Protection amounting to 
 prohibition, and American manufactures, left in 
 secure possession of the home market, entered 
 upon a course of rapid expansion. Especially was 
 that the case with the production of woollen goods, 
 which increased in value from four million dollars 
 in 1810 to nineteen million in 1815; 1 and with 
 cotton spinning, which it is estimated employed 
 4,500 spindles in 1805, 87,000 in 1810, and 130,000 
 in 1815. 2 There were the beginnings of cotton 
 weaving, and the growth of the manufacture of 
 iron, glass, and pottery. 3 It was during these years 
 that the factory system began (but only began) to 
 replace domestic industry in the United States : 
 "the manufacture of cotton and wool passed rapidly 
 from the household to the mill ; but the methods 
 of domestic and neighbourhood industry continued 
 to predominate, even in those industries, down to 
 and including the decade between 1820 and 1830." 4 
 
 Just at the close of 1814 a treaty of peace was 
 signed by Great Britain and the United States, 
 and this was followed in 1815 by a commercial 
 agreement, intended at first for four years, but 
 
 1 "A loose, though significant guess" (Taussig, p. 40 n.). 
 
 2 Taussig, p. 28, from Woodbury's Report of 1836. 
 
 3 " See what has been, only by the short operation of the Embargo 
 and Non-intercourse Act, done in America ! . . . We have here before 
 us the seeds of a great event nothing less than the complete and 
 absolute independence of America upon English manufactures " 
 (William Cobbett, quoted in Bolles, ii. p. 289). 
 
 4 Twelfth Census of the United States, vii. p. liii.
 
 152 ORIGINS OF AMERICAN COMMERCIAL POLICY 
 
 prolonged in 1818 for another ten years ; by it 
 the contracting parties bound themselves not to 
 impose discriminating duties on each other's pro- 
 ducts. 1 The first result of the cessation of 
 hostilities was a swift rise of imports ; from 
 $13,000,000 in 1814 they rose to $113,000,000 
 in 1815 (with only six months of peace), and 
 $147,000,000 in 1816. This last was the highest 
 figure yet recorded, and moreover, as re-exports 
 were comparatively small, "the value of net im- 
 ports was almost double that of any year pre- 
 ceding the war." 2 The phenomena of Continental 
 Europe at this time were repeated in the United 
 States ; the barriers erected during the long war 
 were removed, and both found themselves exposed 
 to a sweeping invasion of British manufactured 
 goods, which severely threatened the very exist- 
 ence of some at least of the industries which had 
 grown up under the shelter of the system of 
 prohibition. In the United States the manu- 
 facturers of cottons, woollens, and chemicals 
 thought themselves particularly imperilled, and 
 in 1815 President Madison called Congress to 
 their help. " Under circumstances giving a power- 
 ful impulse to manufacturing industry," he wrote, 3 
 "it has made among us a progress and exhibited 
 an efficiency which justify a belief that with a 
 protection not more than is due to the enter- 
 prising citizens whose interests are now at stake, 
 
 1 Charming, United States, p. 198. 2 Stanwood, i. p. 131. 
 
 3 Seventh Annual Message, 1815.
 
 THE COMMENCEMENT OF PROTECTION 153 
 
 it will become at an early day not only safe against 
 occasional competitions from abroad, but a source 
 of domestic wealth and even of external commerce. 
 In selecting the branches more especially entitled 
 to the public patronage, a preference is obviously 
 claimed by such as will relieve the United States 
 from a dependence on foreign supplies, ever subject 
 to casual failures, for articles necessary for the 
 public defence or connected with the primary 
 wants of individuals. It will be an additional 
 recommendation of particular manufactures where 
 the materials for them are extensively drawn from 
 our agriculture, and consequently impart and 
 insure to that great fund of national prosperity 
 and independence an encouragement which cannot 
 fail to be rewarded." 
 
 The result was the tariff of 1816, which com- 
 menced a series of enactments which for about 
 twenty years became more and more protectionist. 
 But the first steps were quite moderate. The 
 original scheme was to reduce the war duties 
 29 per cent. that is, to leave the permanent 
 duties 42 per cent, higher than before the war 
 of 1812 ; but the proposals were considerably 
 modified in their passage through Congress owing 
 to the opposition of the shipping interest and the 
 rivalry of the various groups of states which sought 
 protection for their industries. 1 So the proposed 
 
 1 "The difficulty is illustrated most clearly by the objections of 
 Northern members to a protecting duty on sugar and of Southern 
 members to giving protection to cotton manufactures. On the question 
 of protection to iron the North and the South united against the 
 Middle States" (Stanwood,, i. p. 157).
 
 154 ORIGINS OF AMERICAN COMMERCIAL POLICY 
 
 duty of $1.25 per cwt. on bar-iron was reduced 
 by the House of Representatives to 45 cents ; the 
 proposed duty on sugar was cut down consider- 
 ably ; instead of the desired rate of 33^ per cent, 
 the cotton manufactures obtained only 25 per cent, 
 for three years and 20 per cent, after the expiration 
 of that term. 1 That protectionist motives exercised 
 a strong influence over the tariff discussions there 
 can be no doubt, but they had not yet obtained a 
 complete control over the minds of the legislators. 2 
 The new tariff was a combination of specific and 
 ad valorem duties. 
 
 The new customs laws seem to have had little 
 effect, so far at least as the iron and cotton indus- 
 tries were concerned. The imports of bar -iron 
 rose from 12,293 tons in 1816 to 21,160 tons in 
 1817, and, after a temporary decline, to 22,459 tons 
 in 1820, whilst the home production fell rapidly 
 
 1 In connection with cottons the system of the "minimum valuation" 
 was adopted; i.e. it was directed that all cotton, cloths, etc., "the 
 original cost of which at the place imported shall be less than 25 cents 
 per sq. yard, shall be taken and deemed to have cost 25 cents per 
 sq. yard, and shall be charged with duty accordingly. " Taussig writes 
 (p. 30) : " After 1818 the use of the power-loom, and the fall in the 
 price of raw cotton, combined greatly to reduce the prices of cotton 
 goods. The price of coarse cottons fell to 19 cents in 1819, 13 cents 
 in 1826, and 8^ cents in 1829. The minimum duty became propor- 
 tionately heavier as the price decreased, and in a few years after its 
 enactment, had become prohibitive of the importation of the coarser 
 kinds of cotton cloths." 
 
 2 Taussig (pp. 18-19) seems to think that the new duties (averaging 
 20 per cent.) were the outcome chiefly of financial needs. Dewey 
 (p. 162) holds that " Protection was adopted as a fundamental basis 
 of the fiscal system and revenue was subordinated to industrial needs." 
 He adds, however, that there was little opposition, because the country 
 was confronted by a real crisis.
 
 ECONOMIC CRISIS 155 
 
 in part doubtless because of the technical defects 
 of the manufactures. Similarly in the cotton 
 manufacture " the tariff of 1816 was not protective 
 so far as those establishments were concerned 
 which had not the most efficient machinery. This 
 is almost equivalent to saying that it was protective 
 in relation to but one factory in the country." 1 The 
 help given to the makers of woollens by the duties 
 was also only slight ; and the three industries soon 
 began to invoke again the aid of Congress. In 
 1818 they secured an increase in the duty on bar- 
 iron, and a prolongation of the 25 per cent, on 
 cottons until 1826 ; but apart from these increases, 
 the protectionist movement for some time made 
 little progress. This was due in part to the atti- 
 tude of the Southern States, where agriculture 
 was prosperous owing to the world-wide demand 
 for their cotton and tobacco ; they believed that 
 protection for manufactures, which were practically 
 impossible under the climatic conditions of the 
 South and with slave labour, would be inimical to 
 their interests. Moreover, in politics it was the 
 "era of good feeling" there were no organised 
 political parties to seek in the advocacy of Protec- 
 tion an election cry. But in 1818-19 there came 
 an economic crisis ; the prices of the agricultural 
 staples of the United States, hitherto high, fell 
 rapidly, thus imitating the prices of manufactured 
 goods, which had declined sharply when the con- 
 
 1 Stanwood, i. p. 173. Cf. for the effect of the various duties, 
 Taussig, pp. 34-5, 40-1, 50-1.
 
 156 ORIGINS OF AMERICAN COMMERCIAL POLICY 
 
 elusion of the war had removed the restrictions on 
 imports. This fall in agricultural prices to some 
 extent benefited the manufacturers, but did not 
 moderate their demand for Protection ; and the 
 agriculturists, especially in the North, became 
 more favourable to it in their desire in view 
 of European legislation to develop the home 
 market. 1 Thus one important effect of the crisis 
 was to revive and strengthen the agitation in favour 
 of more protection, just as the crisis of 1873 and 
 the following years in Germany prepared the way 
 for Bismarck's tariff legislation. In 1819 the Con- 
 gressional Committee on Manufactures, under the 
 stimulus of the commercial trouble of that year, 2 
 brought forward proposals for a complete revision 
 of all the tariff rates, with large increases all round, 
 partly to provide revenue to meet a growing deficit 
 in the national accounts, and partly to extend the 
 protection already given to manufactured goods. 
 There was a prolonged conflict, and in April it was 
 carried through the House of Representatives only 
 to be summarily rejected by a majority of one vote 
 in the Senate. 
 
 From 1820 to 1824 there was some agitation 
 throughout the Union in favour of tariff changes, 
 but practically no attempt was made to give ex- 
 
 1 Taussig, pp. 19-24. 
 
 2 " Its causes were complex : in part the inability of the manufac- 
 turing industries to recover a stable footing after the abnormal growth 
 occasioned by the embargo and the war, and in part a spirit of specula- 
 tion developed by several years of rapid commercial expansion and bad 
 banking" (Dewey, p. 166).
 
 THE ACT OF 1824 157 
 
 pression to it in the legislature until the new Con- 
 gress, to meet at the end of 1823, had been elected. 
 The effect of the census of 1820, which determined 
 the apportionment of seats in the House of Repre- 
 sentatives, 1 had been to increase the representation 
 of the Middle States New York, Pennsylvania, 
 Ohio, Kentucky, Tennessee which were strongly 
 protectionist. President Monroe invited the new 
 Congress to " a review of the tariff for the purpose 
 of affording such additional protection to those 
 articles which we are prepared to manufacture, or 
 which are more immediately connected with the 
 defence and independence of the country." The 
 response to this appeal was the Tariff Act of 1824, 
 of which "it may be said without reservation that the 
 sole object was the protection of manufactures " ; 2 
 the financial position of the Government made 
 it unnecessary to consider revenue. It increased 
 the duties on iron, lead, wool, hemp though not 
 so much as those interested had desired ; on cotton 
 and woollen goods the ad valorem duties were 
 raised from 25 to 33^ per cent., but the additional 
 protection to woollens was discounted by the 
 doubling of the duty on raw wool. Strong oppo- 
 
 1 ' ( Representatives and direct taxes shall be apportioned among the 
 several States which may be included within this Union, according to 
 their respective numbers. . . . The actual enumeration shall be made 
 within three years after the first meeting of the Congress of the United 
 States, and within every subsequent term of ten years. . . . The 
 number of Representatives shall not exceed one for every thirty 
 thousand " (Original form of art. i. sec. 2 of the Constitution, given 
 in Bryce, Amer. Comm., i. p. 697). 
 
 2 Stanwood, i. p. 202.
 
 sition came from the commercial classes of New 
 England to the tariff as a whole ; from the ship- 
 builders to the increases on hemp (for cordage), 
 flax, and iron ; from the manufacturers there to the 
 increases on molasses (for rum) and raw wool. But 
 New England was not solid in its resistance to the 
 new tariff, for it had itself growing manufactures 
 of cotton and woollen goods ; and hence its vote 
 was divided. 1 The South was united ; it exported 
 cotton largely, and feared retaliation, particularly 
 from Great Britain. The Middle and Western 
 States, whose interests were chiefly agricultural, 
 threw their whole weight on the side of the new 
 proposals, partly in their desire for the development 
 of the home market, and partly to obtain protec- 
 tion for their hemp, wool, and flax. 2 The combina- 
 tion of these states and the manufacturers of New 
 England carried the Act of 1824, but only by a 
 small majority. 
 
 Two other points about the proposals of that 
 year are noticeable. A clause providing for the 
 imposition of a surtax equivalent in amount to the 
 bounty paid by a foreign country on any goods 
 imported into the United States was rejected, on 
 the ground that it would be a breach of the Com- 
 
 1 In the division on the Bill of 1819, 19 New England representatives 
 voted for it, 18 against ; New York, New Jersey, Pennsylvania, and 
 Delaware gave 55 votes for, 1 against ; the South, 8 for, 63 against ; 
 Ohio, Illinois, and Indiana, 8 for, none against (Stanwood, i. pp. 192-3). 
 In 1824 the South voted against the proposed tariff, the Middle and 
 Western States for ; of the New England States, Rhode Island and 
 Connecticut for, the rest against (Taussig, pp. 74-5). 
 
 2 Taussig, pp. 70-5.
 
 THE CONSTITUTIONAL QUESTION 159 
 
 mercial Treaty of 1815 with Great Britain, which 
 guaranteed that no unfavourably discriminating 
 duties should be imposed by the United States on 
 commodities coming from that country. And 
 much more important than this was the question 
 whether the levying of import duties for protective 
 purposes was constitutionally within the power of 
 Congress or not ; the matter was raised only tenta- 
 tively, and was not much discussed, but it was 
 subsequently to form the subject of very consider- 
 able controversy. 1 
 
 1 Stanwood, pp. 220-5.
 
 CHAPTER II 
 
 THE GROWTH OF PROTECTION, AND 
 THE COMPROMISE OF 1833 
 
 FOR a short time after the passing of the Tariff 
 Act of 1824 the manufacturers seem to have been 
 satisfied ; but in the latter part of 1826 a demand 
 for a greater amount of protection made its appear- 
 ance amongst the producers of woollen goods. 
 Their complaint was to the effect that the British 
 duties on raw wool had been reduced, that wages 
 in Great Britain were lower, and therefore the 
 Americans could not effectively compete with the 
 British manufacturers, and were in a very de- 
 pressed state. 1 They did not ask for a reduction 
 of the duty on raw wool probably believing that 
 the agricultural states would not listen to such a 
 proposal but for an increase in the duties on 
 woollen goods. The Woollens Bill of 1827, which 
 was introduced to meet their demands, passed the 
 House of Representatives, only to be immediately 
 wrecked in the Senate ; but the woollen manu- 
 facturers had revived the whole protectionist move- 
 ment. A widespread campaign had commenced, 
 
 1 Stanwood, i. pp. 253-4, 277- 
 160
 
 THE TARIFF AND PARTY POLITICS l6l 
 
 and the advocates of Protection found skilful and 
 influential exponents of their views in Matthew 
 Carey, and Niles, whose Weekly Register became 
 their storehouse of facts and arguments. After 
 the Woollens Bill had been introduced, the Free 
 Trade party realised the necessity of vigorous 
 action, and began a counter-campaign. But unlike 
 previous controversies on the tariff question, the 
 economic discussion was now to become inex- 
 tricably involved with party politics ; and American 
 tariff legislation entered upon a new stage. The 
 " era of good feeling " was at an end ; political 
 parties were at last taking shape again, and round 
 Andrew Jackson there was being formed a party 
 which represented a break with all the traditions 
 of the past. 1 
 
 The outcome of the protectionist agitation was 
 the Tariff Act of 1828, under which " the experi- 
 ment of protecting was now to be carried to the 
 highest point it ever reached." 2 That Act, destined 
 to be known as the "Act of Abominations," was 
 passed at a time when men's thoughts were con- 
 centrated on the approaching presidential campaign, 
 and the determination of the Jackson party to 
 secure the election of their chief. The supporters 
 of the retiring President, Adams, whose leader was 
 Henry Clay, were definitely in favour of Protec- 
 tion ; the Jackson party was divided the Southern 
 members, who were united in their support of 
 Jackson, being in favour of a considerable re- 
 
 1 Wilson, pp. 12-21. Bolles, ii. p. 407. 
 
 M
 
 162 THE GROWTH OF PROTECTION 
 
 duction of duties, whilst the Middle States, whose 
 votes would turn the election, were almost as 
 strongly protectionist. The outcome of this 
 peculiar position was an extraordinary series of 
 party complications and political manoeuvres, in 
 which Jackson's supporters were led with astonish- 
 ing skill by Martin van Buren. A Tariff Bill was 
 framed, greatly increasing duties on manufactured 
 goods and raw materials alike ; and ultimately it 
 was passed by a curious combination. The South 
 voted solidly against it, so did two-thirds of the 
 New England members ; the vote of the Western 
 and Middle States, combined with the protectionist 
 vote from New England, carried it. 1 But the 
 votes of the members were determined in the 
 main by party considerations ; many excessively 
 high duties had been inserted in the Bill by the 
 votes of Southern members desirous of making 
 it so unpopular that it could not pass ; yet though 
 they voted against it at the last it was carried 
 largely by the votes of people with whom they 
 were politically allied, who were not anxious for 
 Protection, but meant to capture the vote of the 
 Middle States for their presidential candidate. 2 
 In this they were successful ; at the election of 
 November, 1828, Jackson was returned by an 
 overwhelming majority. 
 
 The increases made by the new tariff in the 
 
 1 Taussig, p. 98. 
 
 2 The complicated story of these mauoeuvres can be read in Stan- 
 wood, i. chap. viii.
 
 THE "ACT OF ABOMINATIONS" 163 
 
 customs duties were very considerable. The duties 
 on hemp were raised from $35 to $45 a ton, though 
 good hemp could scarcely be grown in the country ; 
 on molasses from 5 to 7j cents a gallon, whilst 
 drawbacks to the manufacturers of rum were 
 refused ; on pig-iron from 56 to 62J cents per 
 cwt. ; on hammered bar-iron from 90 to 112 cents 
 per cwt, and on rolled bar-iron from $30 to $37 
 a ton. 1 But the chief developments had regard 
 to woollens. It is admitted that the difficulties 
 of the American manufacturers of woollen goods 
 in meeting British competition were due in large 
 measure to their technical deficiencies and the 
 preference of the American consumers for the 
 better quality goods from Great Britain ; 2 but 
 they secured in 1828 increased specific duties on 
 woollen goods, though to nothing like the extent 
 which they had desired. On the other hand, the 
 old ad valorem duty on raw wool was replaced 
 by a specific duty of 4 cents a pound, with the 
 addition of an ad valorem rate which ultimately 
 was to reach the height of 50 per cent. This 
 particular clause seems to have been designed to 
 secure the support of the agricultural states, and 
 at the same time to damage the Tariff Act by 
 making it unpopular with the manufacturers. 
 
 The passage of the Tariff Act of 1828 led 
 immediately to one of the most fateful political 
 conflicts in the history of the United States. We 
 have seen that the Southern States were strongly 
 
 1 Taussig, pp. 88-9, 93, 2 Stanwood, i. p. 280.
 
 164 THE GROWTH OF PROTECTION 
 
 opposed to Protection, and they were offended 
 also by the appropriation of federal surplus revenues 
 to the construction of public works, particularly 
 roads and canals, almost entirely in the North, 
 which with its growing manufactures was in 
 urgent need of the development of its means 
 of communication. 1 At the time when the new 
 tariff proposals were being discussed in 1827, the 
 inhabitants of South Carolina (always the leader 
 of the South in action) had protested against the 
 protective duties on the ground that "the duties 
 laid by Congress, of whatever description, are 
 levied in great part on articles purchased by 
 Southern industry and consumed by the South ; 
 but these duties are expended almost exclusively 
 for the benefit of other sections of the Union. . . . 
 All that is taken from us is disposed of elsewhere. 
 We are benefited in the South by those expendi- 
 tures in no way that we can perceive and feel. 
 All that we pay is accumulated in defending and 
 improving distant sections of the Union, and the 
 prosperity of the North is built upon the im- 
 poverishment of the South." 2 The Southern States 
 had every claim for special consideration ; in 1829 
 out of a total export valued at about $56,000,000, 
 $34,000,000 represented the cotton, rice, and 
 tobacco exported from the South. 3 The exports 
 
 1 Jackson was opposed to this policy, but was overruled by Congress 
 (Wilson, p. 39). 2 Quoted in Stanwood, i. p. 261. 
 
 3 Wilson, p. 50. "The contribution of the South appears still 
 more striking if it be compared with the total value of agricultural 
 exports, which was a little under $44,000,000."
 
 THE FREE TRADERS AND REVENUE DUTIES 165 
 
 of raw cotton were $26,575,000, as against 
 $1,258,000 worth of cotton goods. South Carolina 
 was fourth amongst the exporting states of the 
 Union. In the tariff of 1828 protection for 
 manufactures had reached its highest point ; but 
 the scheme then adopted was so thoroughly bad 
 that all were agreed on the necessity of some 
 changes ; and for some time therefore, though its 
 leaders were preparing their plans, the South did 
 not think it necessary to take decisive action. 
 
 The first changes were made in 1830. The 
 duties were reduced on tea by 50 per cent., on 
 coffee by 60 per cent, (and after 1831 by 80 per 
 cent.), and on cocoa by 50 per cent., whilst the 
 duty on molasses was put back to the old level, 
 and the system of drawbacks renewed. But these 
 were not all the changes required ; the agitation 
 of the Free Trade party continued, though it is 
 important to notice that they did not ask for a 
 complete abolition of duties in fact, they were will- 
 ing on financial grounds to retain somewhat heavy 
 rates. In the Petition to the Senate, from the 
 Free Trade Convention at Philadelphia in 1831, 
 it is stated that " the people prefer, in time of 
 peace, duties raised on the importation of foreign 
 merchandise to any internal tax, direct or indirect. 
 Whether for good or for evil, that system affords 
 an encouragement to domestic manufactures not 
 less efficient for being incidental. Duties on im- 
 ports, amounting on an average to about 20 per 
 cent, of the value, appear necessary to the support
 
 166 THE GROWTH OF PROTECTION 
 
 of Government" 1 The petitioners condemn the 
 high duties of 1828, even after the changes of 
 1830, because without giving real help to the 
 protected trades they hamper all the others. 
 They point out that in the existing conditions 
 of American industry manufacturers must have 
 recourse to foreign supplies they give as an 
 instance iron goods, with growing imports in spite 
 of increased duties 2 and they complain that the 
 duties greatly increase the cost of materials to 
 manufacturers, especially the shipbuilders. The 
 same petition also presents what is probably the 
 best short statement of the Southern objections 
 to the protective legislation: "The Southern States 
 have always confined themselves almost exclusively 
 to the cultivation of the rich products of their 
 climate. This is the only advantage they enjoy, 
 and they owe it to nature. As they make but 
 few, they consume a much greater proportion of 
 manufactured articles imported from other states 
 or other countries. That system, therefore, that 
 enhances beyond measure the price of those objects 
 of necessary consumption operates most unequally 
 and unjustly upon them. They are forbidden to 
 
 1 Text in Taussig, State Papers. The Petition, which is an elaborate 
 statement of the practical argument for Free Trade, was written by 
 Albert Gallatin. 
 
 2 The Petition gives the following figures of imports : 
 
 Rolled Iron. Hammered Iron. Manufactures of Iron. 
 
 1817-1820 . . 2,237 tons ... 16,887 tons ... Not ascertained. 
 
 1821-1824 . . 4,212 ... 23,162 ... $2,600,000 
 
 1825-1827 . . 5,400 ... 22,650 ... $3,630,000 
 
 1828-1830 . . 6,450 ... 31,000 ... $3,660,000
 
 THE SOUTHERN PROTEST 16? 
 
 supply themselves on the cheapest terms consistent 
 with the revenue necessary for the exigencies of 
 Government. As the greatest consumers, they 
 must not only pay a greater share of the duties 
 requisite to defray the necessary national expen- 
 diture, but they are compelled to pay the enhanced 
 price occasioned by the protecting system. That 
 system cannot be extended to them. They find 
 in it no indemnity, no compensation for the injury 
 which it inflicts upon them. They have not, they 
 cannot, in self-defence erect manufacturing estab- 
 lishments. The nature of their population for- 
 bids it." 1 
 
 Moderate men in the Northern States were 
 anxious to make some concession to the South, 
 and the feeling in favour of a reduction of duties 
 was strengthened by the condition of the public 
 
 1 Readers of De Tocqueville's La Democratic en Amerique will 
 remember his description (17th ed., vol. ii. chap. x. pp. 320-5) of the 
 contrast presented to the traveller down the Ohio River by the two 
 banks, and his prophecy of a great conflict as the inevitable outcome 
 of the difference between the economic and social organisation of 
 North and South. With the opinion of the petitioners, quoted above, 
 may be contrasted the belief of Hamilton, in his Report on Manu- 
 factures (Taussig, State Papers, p. 59), that "ideas of a contrariety 
 of interests between the northern and southern regions of the Union 
 are in the main as unfounded as they are mischievous. The diversity 
 of circumstances on which such contrariety is usually predicated 
 authorises a directly contrary conclusion." Forty years later De 
 Tocqueville agreed with this : " Je vois bien dans les differentes 
 parties de 1' Union des interets differents, mais je n'en decouvre pas 
 qui soient contraires les uns aux autres" (loc. cit., p. 369). But he 
 anticipated conflict owing to the dissatisfaction of the South at seeing 
 itself outpaced in prosperity and political power by the North, and 
 the difference of temperament arising from the difference of economic 
 conditions.
 
 168 THE GROWTH OF PROTECTION 
 
 finances. The customs receipts had been suffi- 
 ciently large to allow of the paying off of the 
 National Debt with great rapidity. Between Jan- 
 uary 1st, 1828, and January 1st, 1832, the amount 
 was reduced from $67,475,000 to $24,322,000, and 
 the interest payable had fallen by one-half. Mean- 
 while the receipts from customs were rising ; conse- 
 quently, with the Congress which met in December, 
 1831, there began a revision of the tariff, and the 
 new Act was adopted in June, 1832. 1 The duties 
 on flax and hemp were reduced slightly, as were 
 also those on pig and bar iron. But the chief 
 changes were in the case of wool and woollens ; 
 the cheaper kinds of raw wool were admitted free, 
 on the others the duties were considerably reduced ; 
 on cheap woollen goods the ad valorem duty was 
 reduced to 5 per cent., on worsted goods from 25 
 to 10 per cent. ; on other qualities they were 
 nominally increased but practically reduced, owing 
 to the abolition of the system of minimums. 2 The 
 number of absolutely free articles was increased 
 from 49 to 180 ; tea and coffee imported in Ameri- 
 can vessels were to be free. " In fact, the protec- 
 
 1 A Report of the Congressional Committee which prepared the 
 scheme contains an elaborate discussion of the relative merits of specific 
 and ad valorem duties, and declares in favour of the latter on the 
 grounds that they affect all quab'ties of a commodity equally^ as specific 
 duties do not unless very elaborately detailed ; and that they enable the 
 proportion of taxation intended by the legislature to be maintained in 
 spite of fluctuations of values. These advantages outweigh the dis- 
 advantage of the encouragement given to false declarations of value 
 (Bolles, ii. pp. 415-16). For a fuller discussion of this question, see 
 pp. 236-8. 
 
 2 Stanwood, i. p. 384.
 
 THE SOUTHERN LINE OF RESISTANCE 169 
 
 live system was put back, in the main, to where it 
 had been in 1824. The result was to clear the 
 tariff of the excrescences which had grown on it 
 in 1828, and to put it in a form in which the 
 protectionists could advocate its permanent reten- 
 tion." 1 But this very fact drove the Southern 
 States into open revolt ; so long as there was a 
 chance, by ordinary legislative means, of over- 
 throwing Protection, they were disinclined to have 
 recourse to other weapons, but they interpreted 
 the action of Congress in 1832 as meaning the 
 permanent incorporation of Protection in the fiscal 
 policy of the Union. 
 
 The line which the leaders of the South, es- 
 pecially Calhoun and Hayne, would take had 
 already been revealed ; it was the adoption of a 
 particular view as to the manner in which the Con- 
 stitution should be interpreted. There were two 
 possibilities ; the Federal Government might be 
 comparatively weak, and confined to the exercise 
 of powers based on a strict and narrow interpreta- 
 tion of the actual terms of the Constitution, whilst 
 the separate states enjoyed extensive rights and 
 powers that is to say, there could be a league of 
 states, not a Union ; or the Federal Government 
 might continually increase in authority, and the 
 terms of the Constitution might be liberally inter- 
 preted at the cost of a constant diminution of the 
 powers of the various members of the Union. 
 Economic and political considerations alike deter- 
 
 1 Taussig, p. 105.
 
 170 THE GROWTH OF PROTECTION 
 
 mined the Southern States to adopt the former 
 view. Under their climatic conditions, and with 
 slave-labour, there could be no considerable growth 
 of manufactures, and it was quite certain that the 
 South would be outpaced in population and wealth 
 by the North, and still more by the Middle States. 
 That would mean the political predominance of the 
 North, and it seemed that the result would be 
 the maintenance of the protective policy to which 
 the South was so strenuously opposed it might 
 also mean the overthrow of slavery. The leaders 
 of the South argued in the tariff controversies 
 from 1827 to 1832, as we have seen, that the policy 
 of Protection benefited one portion of the Union 
 at the expense of another ; and as they could not 
 prevent the passage of the Tariff Acts, they main- 
 tained that the Acts themselves were unconstitu- 
 tional, whatever the courts might say. They argued 
 that customs duties for protective purposes were 
 not within the terms of that clause of the Consti- 
 tution which authorised Congress "to lay and 
 collect taxes, duties, imposts, and excises, to pay 
 the debts and provide for the general defence and 
 welfare of the United States " ; or that even if 
 they were so included, or could be, by an applica- 
 tion of the doctrine of "implied powers," the 
 duties actually levied violated the rule that "all 
 duties, imposts, and excises shall be uniform 
 throughout the United States," since they bore 
 more heavily upon the South than upon the 
 North. But if the obnoxious tariff laws were
 
 THE DOCTRINE OF NULLIFICATION " 171 
 
 passed, and maintained by the courts, what was to 
 be done ? In a famous debate in regard to public 
 land, in 1830, Hayne, of South Carolina, had 
 argued that "the Constitution of the Union was 
 a compact between the states ; that to make the 
 Federal Government the sole judge, through its 
 judiciary, of the extent of its own powers, was to 
 leave the states utterly without guarantee of the 
 rights reserved to them, and might result in 
 destroying the federal character of the Government 
 altogether ; and that if the states could not defend 
 themselves in cases where the unconstitutionally 
 of acts of the Federal Government seemed to 
 them deliberate and palpable, the government 
 might be consolidated to a point of intolerable 
 tyranny." 1 
 
 Authority for the action now taken in 1833 
 was found in the resolutions passed by Virginia 
 and Kentucky at the time of their entry into 
 the Union, to the effect that "in case of a de- 
 liberate, palpable, and dangerous exercise of other 
 powers, not granted by the said compact, the 
 states, who are members thereof, have the right, 
 and are in duty bound, to interpose, for arresting 
 the progress of the evil, and for maintaining within 
 their respective limits the authorities, rights, and 
 liberties appertaining to them." 1 The practical 
 application of this doctrine was the method of 
 "nullification." On November 24th, 1832, a State 
 Convention in South Carolina declared the Tariff 
 
 1 Wilson, pp. 43-4. 2 Ibid., p. 45.
 
 172 THE GROWTH OF PROTECTION 
 
 Acts of 1828 and 1832 null and void within that 
 state, and announced that, in the event of the 
 Federal Government attempting to enforce the 
 law, South Carolina would deem it necessary to 
 withdraw from the Union. Jackson, originally 
 elected with Southern support, had now been re- 
 elected by an overwhelming majority, and whatever 
 his personal views on the tariff question itself may 
 have been, he would have nothing to do with 
 nullification, which he declared to be " incompati- 
 ble with the existence of the Union, contradicted 
 expressly by the letter of the Constitution, unauthor- 
 ised by its spirit, inconsistent with every principle 
 on which it was founded, and destructive of the 
 great object for which it was formed." l In January, 
 1833, a Bill was introduced into Congress, known 
 as the Force Bill, authorising the President to use 
 the Federal military and naval forces to enforce the 
 tariff, wherever the collectors might encounter 
 obstacles. But neither side was anxious to push 
 the matter to extremes. Not all the Southern 
 States were prepared to follow South Carolina, and 
 the Free Traders of the North cared more for the 
 maintenance of the Constitution than for the over- 
 throw of the tariff. On the other hand, the politi- 
 cal leaders of the Protectionists recognised the 
 necessity of yielding to some extent. In February 
 Clay introduced his Compromise Bill. By it all 
 duties in excess of 20 per cent, ad valorem were to 
 be reduced by one-tenth of the excess in each 
 
 1 Wilson, p. 61.
 
 THE COMPROMISE OF 1833 173 
 
 alternate year up to 1839, and after that by a 
 greater amount, so that the whole excess should 
 be abolished by 1842 ; a number of duties were to 
 be entirely abolished in 1833, and many more in 
 1842. 1 The result would be that by 1842 the free 
 list would be much enlarged, and duties brought 
 to a uniform level of 20 per cent, ad valorem. 
 This amounted to " giving manufacturers ten years' 
 notice to prepare for the final abandonment of the 
 principle of Protection " ; 2 but it is more than 
 probable that Clay and his friends did not antici- 
 pate any such event they hoped that something 
 would happen to enable the notice to be cancelled. 
 The compromise was readily accepted by Calhoun 
 on behalf of the South, and became law on 
 March 2nd, 1833. On March llth, South Caro- 
 lina repealed the nullification ordinance, but also 
 declared the Force Bill void. 
 
 As a temporary political expedient, Clay's com- 
 promise was successful in that it put an end to the 
 crisis, but it did not settle the real question at 
 issue. The Federal Government had asserted its 
 right to enforce the Federal law even against the 
 will of the individual states ; but South Carolina 
 still adhered to its doctrine of nullification. Practi- 
 cally, the South was victorious ; it had compelled 
 the North to repeal the obnoxious tariff, though 
 the Force Bill remained on the statute book as a 
 statement of the powers of the Federal Govern- 
 
 1 Stanwood, i. pp. 307-8. 
 
 2 Bolles, ii. p. 425.
 
 174 THE GROWTH OF PROTECTION 
 
 ment. The problem was put aside for a time, 
 but it was to return a generation later to be solved 
 only by war. 1 
 
 1 For the details of the conflict and the constitutional argument, 
 see Wilson, pp. 23-65 ; Stanwood, i. chaps, ix. and x. ; Johnston, 
 History of American Politics, chaps, xi. to xiv. ; and cf. Bryce, American 
 Commonwealth, chaps, xxxi. to xxxv.
 
 CHAPTER III 
 
 COMPROMISE, PROTECTION, AND RE- 
 ACTIONECONOMIC DEVELOPMENT 
 OF THE UNITED STATES TO 1860 
 
 FOR eight years the Tariff Act established by the 
 Compromise Act of 1833 remained untouched ; 
 and consequently during all that period the United 
 States were moving steadily in the direction of the 
 removal of restrictions upon foreign trade. The 
 first four years, from the passage of the Act till 
 towards the end of 1836, were a time of general 
 prosperity, but unfortunately they were also coin- 
 cident with the beginnings of financial disorder, 
 resulting not from economic causes, but from the 
 extraordinary policy of the Government. 1 The 
 chief example of the reckless financial methods of 
 the administration of President Jackson (1829-37) 
 was the attack upon the United States Bank. 
 That institution had been originally established in 
 1791 with a charter for twenty years, but from the 
 first there had been considerable doubts as to the 
 
 1 The year 1833 " marks the change, for some time impending, 
 from rational and conservative, to reckless and destructive, finance, 
 and from comparative prudence on the part of the business community 
 to wild speculation " (Stan wood, ii. p. 1). 
 
 175
 
 176 DEVELOPMENT OF THE UNITED STATES 
 
 constitutionality of the proceeding. The result 
 was that the charter was allowed to lapse in 1811 ; 
 but the bank had proved so useful that it was 
 renewed in 1816. The Treasury had subscribed 
 one-fifth of the bank's capital, and the President 
 nominated one-fifth of its directors ; it was the 
 depository of the Federal revenues, its notes were 
 legal tender for all payments to the United States 
 Government, and it was bound to redeem its notes 
 in specie on demand. From the first, the new 
 Democratic party were hostile to the bank, partly 
 because, with their theory as to the interpretation 
 of the Constitution, they held the bank charter to 
 be unconstitutional, in spite of a decision of the 
 Supreme Court to the contrary effect in 1819 ; 
 partly because they thought that its privileges con- 
 stituted an " un-American monopoly " ; and partly 
 because they supposed it to exercise great political 
 influence in the interest of their opponents. There 
 seems to have been little basis for their charges in 
 regard to this last matter, or for the further charges 
 of mismanagement, but Jackson resolved to over- 
 throw the bank, and when Congress passed an Act 
 renewing the charter it encountered a Presidential 
 veto, which the majority was not strong enough to 
 override. Clay endeavoured to make the bank 
 question the principal issue at the Presidential 
 election in November, 1832, with disastrous results ; 
 the triumphant return of Jackson only strengthened 
 his determination to destroy the bank. In Septem- 
 ber, 1833, having at last secured a Secretary of the
 
 DANGEROUS FINANCIAL LEGISLATION 177 
 
 Treasury who was ready to help him, Jackson pro- 
 ceeded to withdraw the Government deposits from 
 the bank, and not to replace them. The Federal 
 revenues were henceforth to be deposited in certain 
 selected state banks (i.e. banks under state charters), 
 which were not chosen always for their financial 
 soundness, but in some cases at least for their use- 
 fulness for party purposes. 1 
 
 In the years 1833 to 1836 there was a great rise 
 of imports, but in spite of this the reduction of 
 duties had brought a diminished customs revenue. 
 However, the sales of public land in these years 
 were so great as to give the Treasury a huge sur- 
 plus, and in 1836 the National Debt was extin- 
 guished. 2 If the sales of public land were to go 
 on, a continued surplus might be expected. The 
 obvious course would have been to reduce taxa- 
 tion, but no one was willing to touch the Com- 
 promise of 1833, which had already come to possess 
 an almost sacred character. Consequently it was 
 decided, on the proposal of Calhoun, that on and 
 after January 31st, 1837, all the surplus funds 
 remaining in the Treasury above $5,000,000 
 should be distributed between the various states, 
 with the proviso, however, that money so distri- 
 buted could be recalled by the Federal Govern- 
 ment if necessary a course never adopted, and in 
 fact impossible. Three such distributions were 
 
 1 Wilson, p. 88. Dewey (p. 209) apparently thinks that the charges 
 against Jackson for favouritism in this matter are exaggerated ; "the 
 interests of the Government were well safeguarded." 
 
 2 Stanwood, i. p. 284. 
 
 N
 
 178 DEVELOPMENT OF THE UNITED STATES 
 
 made in 1837, amounting to $37,000,000; after 
 that there was no longer a surplus, but a deficit. 
 
 In the same period there was an extraordinary 
 increase in the number of banks of issue (from 
 329 in 1829 to 788 in 1837), 1 stimulated by the 
 new deposit system of the Federal Government, 
 the growth of speculation, particularly in land, 
 and the development of industry. The states 
 exercised no control over the new banks, and 
 allowed them, even when they possessed scarcely 
 any capital, to issue notes freely. The country 
 was flooded with paper money in all stages of 
 depreciation, and prices rose rapidly. To protect 
 itself as much as possible, the Treasury in July, 
 1836, issued a circular requiring all payments for 
 public lands to be made in cash. This increased 
 the difficulties of the money market, already very 
 great and complicated by the calling in of loans 
 by English creditors ; 2 and by the beginning of 
 1837 commercial credit was badly shaken. Food 
 prices rose rapidly, 3 and then a sudden fall in the 
 price of cotton, following on the over-production 
 resulting from the rapid rise in prices between 
 1833 and 1835, brought a general crash. All the 
 banks in the country ceased payments in specie. 4 
 
 With all this the tariff had nothing to do, for 
 the reductions of duties under the Act of 1833 
 
 1 Dewey, p. 225. 2 Ibid., p. 230. 
 
 3 Between 1834 and 1837 flour rose from $5 to $11 a barrel, and 
 corn from 53 cents to $1.16 a bushel ; early in 1837 there were bread 
 riots in New York (Wilson, p. 93). 
 
 4 Stanwood, ii. p. 8.
 
 COMMERCIAL CRISIS 179 
 
 were not to be considerable until about 1840. 1 
 The financial distress was due simply to the 
 confusion into which the policy of the Jackson 
 Administration and the growth of speculation, 
 stimulated by the great sales of public lands and 
 excessive credit to purchasers, had thrown the 
 credit system of the country ; consequently there 
 seems to have been no proposal made in any 
 quarter for an alteration of the tariff or a return 
 to a greater measure of protection. After the 
 crisis there was the inevitable period of stagnation 
 commercial recovery was very slow ; and the 
 general depression may have been, and probably 
 was, increased by the knowledge of the manu- 
 facturers that under the Act of 1833 the pace 
 of the reduction of duties was now to quicken. 
 But, nevertheless, the efforts towards a change in 
 the Tariff Act were very slight, and met with 
 little support. Two financial reforms only were 
 made. In 1838 the State of New York began 
 the policy of permitting the establishment of any 
 bank without need of a special charter, on con- 
 dition of its promoters depositing with the State 
 Treasury securities to the amount represented by 
 
 1 Even Stanwood, who is strongly protectionist in sympathy, 
 writes : ' ' No candid student of history will hold that the Tariff 
 Act of 1833 had even a slight direct influence, by an injurious 
 effect upon domestic manufacture, in bringing on the crisis. The 
 evidence is necessarily of a negative character, but it is conclusive. 
 The fact that manufacturers were flourishing up to the time when 
 the financial storm burst, as all authorities deemed that they were, 
 is all-sufficing" (Stanwood, ii. p. 8). The connection of this and the 
 following crisis with the tariff appears to have been a later invention 
 of Henry Carey.
 
 180 DEVELOPMENT OF THE UNITED STATES 
 
 its issue of notes. And in 1840 the Independent 
 Treasury Act was passed, under which the Treasury 
 was itself to keep all the proceeds of the public 
 revenue in its own hands (not making use of the 
 banks) and to make and receive payments only 
 in specie. 1 
 
 By the election of November, 1840, the Demo- 
 crats were utterly discredited, in spite of some diplo- 
 matic successes of Van Buren, who had succeeded 
 Jackson as President in 1837. The main defect 
 of his administration had been his steadfast ad- 
 herence to the financial policy of his predecessor, 
 and his failure to devise any satisfactory measures 
 for dealing with the commercial situation. The 
 new political parties had now been definitely 
 formed ; on the one side were the Democrats, 
 led by the President himself and Benton, with 
 their advocacy of a conservative interpretation of 
 the Constitution and their consequent opposition 
 to the expenditure of Federal moneys on internal 
 improvements, to Protection, and to the National 
 Bank ; and on the other side were the Whigs, as 
 the Republican party of Clay and ex-President 
 Adams was called since 1834, representing many 
 diverse elements, but agreed upon a wide interpre- 
 tation of the Constitution and protective legisla- 
 tion. Already there were signs of the difficulties 
 to be caused later by the anti-slavery party a 
 more serious menace to the Democrats than to 
 the Whigs, since the former were dependent for 
 
 1 Dewey, pp. 235-7.
 
 FAILURE OF THE WHIG PROGRAMME 181 
 
 much of their political strength on the South. 1 
 The Whigs, not so much because of their new 
 policy as because of the discredit into which the 
 Democrats had fallen, were able to carry the 
 election of Harrison, a successful soldier, as 
 President in November, 1840, and immediately 
 upon his taking office they prepared to commence 
 financial legislation. They proposed to repeal the 
 Independent Treasury Act, to re-establish the 
 National Bank, to amend the tariff in order to 
 meet the large Treasury deficit, and also to dis- 
 tribute amongst the states the proceeds of the 
 sales of public lands, so that these would not 
 henceforth be reckoned as a source of Federal 
 revenue. But scarcely had these proposals been 
 put forward when the President died, and was 
 succeeded by Vice-President Tyler. The new 
 President was not a Whig at all, but a discon- 
 tented Democrat, who had been adopted by the 
 Whigs as one of their candidates only in order 
 to detach a certain number of votes from their 
 opponents and to attempt to secure doubtful 
 states. He was by no means in sympathy with 
 their proposals, and immediately vetoed a Bill 
 establishing a new National Bank. The Distribu- 
 tion Bill was carried only after some difficulties 
 with the President and subject to the proviso 
 (which in fact reduced it to impotence) that the 
 distribution should be suspended if at any time 
 
 1 Wilson, pp. 112-14. Cf. Johnston, American Politics, chaps, 
 xiii. and xiv.
 
 182 DEVELOPMENT OF THE UNITED STATES 
 
 it became necessary for revenue purposes to levy 
 customs duties of more than 20 per cent. As a 
 hasty expedient to provide money, a temporary 
 Tariff Act was passed in September, 1841, laying 
 a duty of 20 per cent, on all merchandise previously 
 paying less, or free ; there were, however, certain 
 exceptions to this general rule, and the proposal 
 to tax tea and coffee was rejected. 1 
 
 By the end of 1841, the financial situation was 
 worse than ever. In spite of large issues of 
 Treasury notes, there was a heavy deficit, and 
 there seemed every likelihood that the final re- 
 missions of duty, now about to take place under 
 the Act of 1833, would still further increase the 
 difficulties of the Treasury. This fact, coupled 
 with the general uncertainty, probably seriously 
 hindered the manufacturers ; and the commercial 
 troubles had again become acute. In 1841 fifty- 
 five banks had stopped payment; in January, 1842, 
 six states, including Pennsylvania and Maryland, 
 were unable to meet their obligations ; and by the 
 end of April twenty -six more banks were sus- 
 pended. 2 It was absolutely necessary for some 
 action to be taken, and after another temporary 
 measure had been passed to prolong certain duties, 
 Congress adopted in August, 1842, the new Tariff 
 Act, which was carried only after much diffi- 
 
 1 One of the earliest acts of the new Whig administration was the 
 repeal of the Independent Treasury Act in 1841. The Act was 
 restored in 1846, and has remained in force since (Dewey, pp. 239, 
 252-5). 
 
 2 Stauwood, ii. p. 18.
 
 TARIFF ACT OF 1842 183 
 
 culty, and by means of complicated parliamentary 
 manoeuvres. It was passed by the Whigs and was 
 therefore decidedly protectionist, 1 and was much 
 more elaborately detailed than any of its pre- 
 decessors. It was based on the Tariff Act of 
 1832, and in comparison with that it increased 
 the duties on cotton manufactures, on glass, and 
 on the cheapest wools, whilst it reduced the duties 
 on woollens, wool, leather, and some other com- 
 modities. But in contrast to the position of 
 the duties in 1841, which under the Compromise 
 Act were drawing close to an all-round rate of 
 20 per cent., the Act of 1842 marks a distinct 
 return towards Protection. The average duty 
 was to be about 30 per cent., though on manu- 
 factured goods it was a good deal higher. There 
 can, on the whole, be little doubt that the new 
 Act had a distinctly beneficent effect, 2 mainly 
 because it gave the manufacturers certainty as 
 
 1 " It marks the last triumph of the protectionist policy before the 
 Civil War " (Mayo-Smith and Seligman, p. 9). 
 
 2 Stanwood becomes enthusiastic oil the point. " The final plunge 
 to the 20 per cent. max. rate of the compromise tariff was bringing 
 the industries dependent upon protection to a standstill ; and all 
 business suffered in the stagnation of employment, in the cessation 
 of the movement of money and goods, which are as the circulation 
 of the blood in the body of commerce. The adoption of any improved 
 tariff would have removed one cause of the existing evil the un- 
 certainty as to the future. The enactment of a tariff which promised 
 prosperity and health to the starved manufacturers removed all causes, 
 and actually restored the prosperity which it promised. There is no 
 other enactment affecting the duties on imports, the effect of which 
 is so clear, so indisputable as there was never another which worked 
 so indisputably " (pp. 36-7). 
 
 Taussig is more moderate, but agrees that, in the manner indicated 
 above, the tariff did have a decidedly good effect on the commercial 
 and industrial situation.
 
 184 DEVELOPMENT OF THE -UNITED STATES 
 
 to the conditions under which their industries 
 were to be carried on, and helped to improve 
 matters in the iron and cotton industries, which 
 contributed an impetus to all the rest. It is at 
 any rate certain that in 1842 there began a revival 
 of trade and commerce, and although such a 
 revival must assuredly have taken place in any 
 case, it is probable that it was quickened by the 
 increased protection afforded by the new tariff. 
 And from the point of view of revenue the new 
 customs duties were quite satisfactory ; in the year 
 ending June 30th, 1844, and onwards, the Treasury 
 found itself again in possession of a surplus. 
 
 But the tariff was not destined to remain long 
 untouched. The Presidential election of November, 
 1844, resulted in the triumph of the Democrats, 
 represented by Polk. 1 The new President was 
 opposed to the whole protectionist system, though 
 his colleague in the campaign, the Democratic 
 candidate for the Vice-Presidency, was a Protec- 
 tionist, and so was able to secure Pennsylvania 
 for his party. In his first message to Congress, 
 President Polk recognised the right of that body to 
 levy customs duties, but advocated the limitation 
 of the exercise of this power to revenue duties 
 only. In December, 1845, his Secretary of the 
 Treasury, Walker, presented to Congress a lengthy 
 report on the tariff, which was simply an elaborate 
 
 1 The defeat of the Whigs was due in part at least to the abstension 
 of the an ti-slavery party, who threw away their votes on an independent 
 candidate of their own.
 
 WALKER'S REPORT 185 
 
 argument for Free Trade. 1 After expressing doubts 
 as to the constitutional validity of protective duties, 
 the Secretary proceeds to argue against them on 
 economic grounds ; and some passages from the 
 Report may be quoted as illustrating his general 
 line of argument. He wrote : 
 
 "At least two-thirds of the taxes imposed by 
 the present tariff are paid not into the Treasury, 
 but to the protected classes. The revenue from 
 imports last year exceeded twenty-seven millions 
 of dollars. This in itself is a heavy tax ; but the 
 whole tax imposed upon the people by the present 
 tariff is not less than eighty-one millions of dollars 
 of which twenty-seven millions are paid to the 
 Government upon the imports and fifty -four 
 millions to the protected classes in enhanced 
 prices of similar domestic articles. 
 
 " The occasional fall in prices of some articles 
 after a tariff is no proof that this was the effect 
 of the tariff; because from improved machinery, 
 diminished prices of the raw material, or other 
 causes, prices may fall even after a tariff, but they 
 would hi such cases have fallen even more but 
 for the tariff. The truest comparison is between 
 the present price of the same article at home and 
 abroad ; and to the extent that the price is lower 
 in the foreign market than in our own, the duty, 
 if equal to the difference, must to that extent 
 enhance the price, and in the same ratio with the 
 lower duty. 
 
 1 Full text ill Taussig, State Papers.
 
 186 DEVELOPMENT OF THE UNITED STATES 
 
 "An appeal has been made to the poor by 
 the friends of protection, on the ground that it 
 augments the wages of labour. In reply it is 
 contended that the wages of labour have not 
 augmented since the tariff of 1842, and that in 
 some cases they have diminished. 1 ... A pro- 
 tective tariff is a question regarding the enhance- 
 ment of the profits of capital. That is its object, 
 and not to augment the wages of labour, which 
 would reduce those profits. It is a question of 
 percentage, and is to decide whether money vested 
 in our manufactures shall by special legislation 
 yield a profit of 10, 20, or 30 per cent., or whether 
 it shall remain satisfied with a dividend equal to 
 that accruing from the same capital invested in 
 agriculture, commerce, or navigation. 
 
 "The tariff is thus a double benefit to the 
 manufacturer and a double loss to the farmer and 
 planter a benefit to the former in nearly a 
 monopoly of the home market and in enhanced 
 prices of his fabrics ; and a loss to the latter in the 
 payment of those high prices and a total or partial 
 exclusion from the foreign market. The true 
 question is whether the farmer and planter shall 
 to a great extent supply our people with cheap 
 manufactures purchased abroad with their agricul- 
 tural products, or whether this exchange shall be 
 forbidden by high duties on such manufactures, 
 and their supply thrown as a monopoly, at large 
 
 1 There seems to be no adequate evidence for this statement of the 
 Secretary.
 
 TARIFF ACT OF 1846 187 
 
 prices, by high tariffs, into the hands of our own 
 manufacturers. 
 
 " Let our commerce be as free as our political 
 institutions. Let us, with revenue duties only, 
 open our ports to all the world ; and nation after 
 nation will soon follow our example. If we reduce 
 our tariff the party opposed to the corn laws of 
 England would soon prevail and admit all our 
 agricultural products at all times freely into her 
 ports in exchange for her exports. And if England 
 would now repeal her duties upon our wheat, flour, 
 Indian corn, and other agricultural products, our 
 own restrictive system would certainly be doomed 
 to overthrow." * 
 
 Proceeding from these principles, the Secretary 
 advocated duties for revenue purposes only, with 
 the imposition of maximum rates on luxuries, the 
 abolition of all minimums and all specific duties, 
 and the substitution of ad valorem rates. 
 
 The result of this policy of the President and 
 his advisers was the Tariff Act of 1846, adopted 
 after only a short, though at times exciting, parlia- 
 mentary struggle. All minimums and specific 
 duties were abolished, and commodities were 
 divided into a number of classes with duties rang- 
 ing from 5 per cent, to 40 per cent., and in the 
 
 1 Bolles (ii. pp. 449-50) speaks of the British manufacturers 
 "having zealously laboured for Folk's election, and contributed 
 munificently to that end." He alleges that large sums of money were 
 subscribed in England and expended on behalf of Folk's candidature in 
 the United States. Elsewhere (p. 452) he speaks of the tariff of 1846 
 as "sponsored by the English nation." No satisfactory evidence for 
 these statements is offered.
 
 188 DEVELOPMENT OF THE UNITED STATES 
 
 one case of brandy and spirits to 100 per cent. ; 
 there was also a class of free articles, the chief 
 being tea, coffee, and iron and copper ore. Manu- 
 factures of iron and other metals, wool, and 
 woollens paid 30 per cent., as did manufactures of 
 leather and glass ; cotton goods paid 25 per cent. 
 On the whole, the duties were considerably lower 
 than under the Act of 1842. 
 
 The new tariff remained in force for eleven 
 years with practically no alterations, and during 
 that period the United States experienced a very 
 rapid economic development. Population increased 
 from 17,069,000 to 31,433,321 between 1840 and 
 I860. 1 By 1850 the factory system was firmly 
 developed, 2 but the population was still over- 
 whelmingly agricultural ; in 1850, when the first 
 reliable census of the United States was taken, 
 only 12*5 per cent, of the population were living 
 in urban areas of more than eight thousand inhabi- 
 tants. 3 The quantity of corn grown rose from 
 592 million bushels in 1850 to 839 million bushels 
 
 1 Allowance must be made for increases of territory (e.g. in Texas 
 and Mexico) between these dates. Between 1846 and 1857 the United 
 States received more than three million immigrants (Stanwood, ii. p. 87). 
 In each of the five years after 1849 the annual number was over 
 350,000. 
 
 2 " It was not until about 1840 that the factory method of manu- 
 facture extended itself widely to miscellaneous industries, and began 
 rapidly to force from the markets the handmade products with which 
 every community had hitherto chiefly supplied itself. It seems probable 
 that until about the year 1850, the bulk of general manufacturing done 
 in the United States was carried on in the shop and the household, by 
 the labour of the family or individual proprietors, with apprentice 
 assistance" (Twelfth Census, vii. p. liii.). 
 
 3 As against 33 '1 in 1900.
 
 INDUSTRIAL DEVELOPMENT 189 
 
 in 1860, but so far the production was almost 
 entirely for the home market. The total value of 
 the manufactured products of the United States 
 was estimated in 1850 at 1,019 million dollars, and 
 in 1860 at 1,886 million. 1 A great stimulus had 
 been given by the discovery of a number of new 
 processes which came into general use from about 
 1845 onward. The year 1838 had witnessed the 
 invention of Nasmyth's steam-hammer, and about 
 1840 anthracite coal began to be used for the pro- 
 duction of iron ; in 1841 the power-loom for carpet- 
 weaving was invented, and some years earlier the 
 knitting-frame had been first worked by machinery. 
 The amount of pig-iron manufactured by the an- 
 thracite process was estimated in 1844 at 65,000 
 gross tons, and in 1856 at 394,000 nett tons. 2 The 
 quantity of steel rails manufactured rose from 
 24,000 tons in 1849 to 184,000 in 1856. 3 The 
 value of the American production of iron was esti- 
 mated in 1850 at 60 million dollars, whilst imports 
 amounted to only 16 million. 4 The number of 
 cotton spindles employed in the United States 
 was reckoned at 2,112,000 in 1840 and rose to 
 3,634,000 in 1850, and to 5,236,000 in 1860 ; whilst 
 the value of the cotton goods exported averaged 
 4 million dollars between 1844 and 1849, and 
 had doubled by 1859. 5 The woollen manufacturers 
 
 1 Twelfth Census, vol. vii. p. xlvii. 2 Taussig, p. 132. 
 
 3 Taussig, p. 134. 4 Bolles, ii. p. 457. 
 
 5 Taussig, pp. 141-2. Stanwood admits (ii. p. 90) that "the 
 new tariff caused little injury to the cotton manufactures . . . the 
 importation of cotton goods in 1846 was valued at $13,000,000 ; in 
 1855 it was only $15,500,000,"
 
 190 DEVELOPMENT OF THE UNITED STATES 
 
 were hampered by the duty of 30 per cent, on raw 
 wool, and there was little advance in the production 
 of woollens of the best quality ; but in the coarser 
 goods there was distinct progress, and the census 
 figures give the value of the products of the 
 woollen manufacture as 20 million dollars in 1840. 
 43-5 million in 1850, and 61 -9 million in I860. 1 
 
 The foreign trade of the United States increased 
 enormously. The following table gives the figures 
 for imports and exports of merchandise from 1847 
 to 1857, when another alteration in the tariff was 
 made : 
 
 Year. Imports. Exports. 
 
 $<fc 
 -p 
 
 1847 . 122,424,349 ... 156,741,598 
 
 1848 . 148,638,644 ... 138,190,515 
 
 1849 . 141,206,199 ... 140,351,172 
 
 1850 . 173,509,526 ... 144,375,726 
 
 1851 . 210,771,429 ... 188,915,259 
 
 1852 . 207,440,398 ... 166,984,231 
 
 1853 . 263,777,265 ... 203,489,282 
 
 1854 . 297,623,039 ... 236,959,560 
 
 1855 . 257,808,708 ... 218,909,503 
 
 1856 . 310,432,310 ... 281,219,423 
 
 1857 . 348,428,342 ... 293,823,760 
 
 It will be observed that there was a very large 
 excess of imports over exports, but this was 
 counterbalanced by the great export of gold after 
 the discovery of the Californian mines. In 1848 
 
 1 Taussig, p. 146. Against this must be set Stanwood's assertion 
 (ii. p. 92) that " the new tariff practically ruined the woollen industry, 
 which had revived and become fairly flourishing under the protection it 
 received under the Act of 1842.'' Bolles (ii. pp. 456-7) shares this 
 view, but both writers admit that one of the chief difficulties of the 
 woollen manufacturers was the high duties imposed on raw wool,
 
 EFFECTS OF THE TARIFF 191 
 
 the gold produced in the United States was valued 
 at 10 million dollars ; it rose to 40 millions in the 
 following year, and then steadily to 64 millions in 
 1853. The customs revenue, which under the 
 tariff of 1842 had reached 27^ million dollars, 
 rose, in spite of the lower rates of duty, to 64 
 millions in 1856. 
 
 Contemporary with this great economic develop- 
 ment at once a cause and a result of it there 
 was a rapid growth of means of transport. In 
 1840 there were 2,818 miles of railway in the 
 United States ; in 1850, 9,021 ; and in 1860, 
 30,635. l The net tonnage of vessels registered in 
 the United States for over-sea trade was 900,000 
 in 1840 and 2,546,000 in 1860; the tonnage of 
 other vessels, including those on the lakes and 
 rivers, increased from 1,241,000 in the former year 
 to 2,753,000 in the latter. 2 
 
 It is entirely impossible to form any estimate 
 of the influence of the tariff of 1846 upon the 
 economic development thus briefly indicated ; 
 opinions on the subject differ with the general 
 attitude of the writers towards the whole question 
 of Protection and Free Trade. The critics of the 
 tariff legislation of 1846 cannot profess that it 
 did more than slightly retard the industrial pro- 
 gress of the United States ; whilst its warmest 
 supporters do not pretend that it did much to 
 hasten the development. In fact, its effect in 
 
 1 Conner, p. 46. 
 
 2 Board of Trade Blue Book on British and Foreign Industry, 1903, 
 p. 376.
 
 192 DEVELOPMENT OF THE UNITED STATES 
 
 either direction was probably only small ; the 
 United States were just commencing to exploit 
 their great resources, and the movement as a 
 whole was sufficiently strong (whatever might be 
 the case with isolated industries) to be practically 
 unaffected by tariff enactments. 1 
 
 1 (( The wonderful revolution which was taking place in commerce 
 and in history makes it impossible to generalise from this experience 
 as to the effect of import duties upon economic development ; very 
 likely prosperity would have followed under any system of revenue 
 laws " (Dewey, p. 257). Cf. Taussig, pp. 116-22.
 
 CHAPTER IV 
 
 DURING the eleven years after the passage of the 
 Act of 1846, suggestions were made from time to 
 time, particularly by the Whig Presidents, Taylor 
 and Fillmore, for a revision of the tariff in order 
 to increase the protection given to manufacturers ; 
 but their recommendations remained unheeded, 
 and when a change was at last made it was in the 
 opposite direction. The Democratic successor of 
 Fillmore, Pierce, repeatedly urged the reduction 
 of the tariff duties on the ground that the 
 Treasury was in possession of a surplus. But 
 partly because of the party confusion caused by 
 the breaking up of the Democrats and the forma- 
 tion of the new Republican party, composed of 
 the old Whigs and some of the Democrats, and 
 partly because of the concentration of public 
 interest on the slavery question, nothing was done 
 until 1857. In that year an Act was passed, pro- 
 viding for a reduction of about 25 per cent, all 
 
 round on the duties levied by the Act of 1846 ; 
 
 o 193
 
 194 WAR TAXATION AND ITS RETENTION 
 
 the highest protective duty henceforward was to 
 be 24 per cent, (except in a few special cases), and 
 the general level was lower than in any period 
 since 1816. 1 The free list was extended, particu- 
 larly for raw materials and the cheaper kinds of 
 wool. The Act appears to have attracted very 
 little public attention ; no one was specially hostile 
 to it, and the woollen manufacturers were anxious 
 to secure the cheapening of their raw materials. 2 
 But it was somewhat unfortunate for the supporters 
 of Free Trade that the passage of the Act, which 
 reduced the duties to the lowest point they had 
 reached for almost half a century, should have 
 been followed almost immediately by a consider- 
 able financial crisis. There is no evidence that this 
 was connected in any way with the tariff legisla- 
 tion, though some writers have alleged that the 
 effect of the reductions of 1846 were now first felt, 
 because had the old protective policy been main- 
 tained the crisis of 1857 would have been greatly 
 mitigated. 3 The disasters of 1857 were of a 
 
 1 Mayo-Smith and Seligman, p. 10. The two highest rates were 
 reduced from 100 per cent, and 40 per cent, to 30 per cent, each ; the 
 30 per cent, duties to 24 per cent. ; the 25 per cent, to 19 per cent. ; 
 the 20 per cent, to 15 per cent. ; and so on. 
 
 2 Speaking of the woollen manufactures, Stanwood (ii. p. 109) has 
 a curious phrase : ' ' The situation previously existing was intolerable. 
 ... In the prevailing state of public opinion made up of active 
 hostility to Protection in the southern half of the country, and of in- 
 difference in the northern half, where the slavery question absorbed 
 popular interest and left room for the consideration of no other busi- 
 ness questions they were hopeless of obtaining even a hearing upon 
 the merits of the tariff controversy. They therefore asked for and 
 ultimately secured such a measure of protection as was afforded by 
 cheaper raw material." 
 
 3 So J. G, Blaine, quoted by Dewey, p. 264,
 
 COMMERCIAL CRISIS 195 
 
 familiar kind ; they were the result of the over-con- 
 fidence arising from a long period of prosperity, 
 from the consequent growth of speculation, the 
 over-development of railways followed by a de- 
 cline in the value of railway stock, and from over- 
 importation ; and they were intensified by an 
 unsatisfactory banking system and the excessive 
 issue of unsecured paper money. The crisis came 
 suddenly ; it affected the merchants and bankers 
 rather than the manufacturers ; and there is 
 nothing to show that it seriously hindered, even 
 for a time, the industrial progress of the country. 
 There was an abrupt fall in imports from 348 
 million dollars in the year 1856-7 to 263 million 
 dollars in 1857-8, and the customs revenue de- 
 clined from 64 million dollars to 42 million. The 
 result was that the Treasury found itself again 
 faced with a deficit, which continued for some 
 time, and which it could not entirely meet even 
 by means of loans. 
 
 The financial needs of the Government revived 
 the protectionist movement, but action was delayed 
 for a time by the complications of party politics. 
 At the election of November, 1856, the Democratic 
 candidate, Buchanan, had been elected to the 
 presidency, and the Democratic party was openly 
 opposed to Protection. The new Republican party 
 was for a time uncertain ; it contained a number 
 of ex-Democrats, and it was unsafe at first to 
 alienate these by a public advocacy of Protection, 
 whilst, on the other side, only such definite advocacy
 
 196 WAR TAXATION AND ITS RETENTION 
 
 could secure the support of the great State of 
 Pennsylvania and some other Middle States, 
 whose action would probably be decisive at the 
 next election. But by 1860 the advocates of the 
 extension of the slave power had become so identi- 
 fied with the Free Traders, and the Republican 
 party was so well united, that its leaders thought 
 it safe to avow that " while providing revenue for 
 the support of the general Government by duties 
 upon imports, sound policy requires such an adjust- 
 ment of these imposts as to encourage the develop- 
 ment of the industrial interests of the whole 
 country ; and we commend that policy of national 
 exchanges which secures to the working men 
 liberal wages, to agriculture remunerating prices, 
 to mechanics and manufacturers an adequate re- 
 ward for their skill, labor, and enterprise, and to the 
 nation commercial prosperity and independence." 
 The Republicans controlled the House of Represen- 
 tatives which met in December, 1859, and therefore 
 Morrill introduced in March of the following year 
 the Tariff Act which has since been known by his 
 name. In theory it was an Act for revenue pur- 
 poses only and to meet the growing deficits, which 
 totalled 50 million dollars for the years 1858-60 ; 
 and it professed to restore duties to the rates of 
 1846. It encountered considerable difficulties, par- 
 ticularly in the Senate, where there was a Demo- 
 cratic majority, and the way only became clear for 
 it when at the end of 1860 the secession of the 
 Southern States, which followed closely on the
 
 THE WAR TARIFF 197 
 
 election of Lincoln to the presidency, had with- 
 drawn a number of Democratic Senators, and 
 given the control of that House also to the 
 Republicans. The new Act, as finally approved 
 on March 2nd, 1861, did in fact put the duties 
 above the level of 1846, chiefly by substituting 
 specific for ad valorem duties, especially in the case 
 of iron and wool, where an attempt was made to 
 capture the vote of Pennsylvania and the West. 
 Manufacturers, as a whole, cared little about the 
 Bill. 1 
 
 But the new tariff was short-lived ; the Civil 
 War commenced, and Congress found itself com- 
 pelled to enter on a course of extraordinary finan- 
 cial legislation in order to meet the tremendous 
 expenditure which the struggle involved. In 
 August and December, 1861, duties were imposed 
 on many articles hitherto free, and the rates on a 
 number of commodities, such as tea, coffee, sugar, 
 hemp, hides, rubber, silk, spices, and a few others, 
 were largely increased. In the following year 
 financial needs compelled Congress to have recourse 
 to internal taxation, and the imposition of specific 
 duties on home manufactures, such as iron and 
 steel, paper and leather, and ad valorem duties on 
 most others ; a general income tax was also es- 
 tablished. Partly in order to raise further supplies 
 of money, and partly to compensate the manufac- 
 
 1 Mr. Morrill is reported to have said later that the tariff of 1861 
 " was not asked for, and but coldly welcomed, by manufacturers, who 
 always and justly fear instability" (Taussig, p. 160).
 
 198 WAR TAXATION AND ITS RETENTION 
 
 turers for the burdens which the new internal 
 taxes imposed upon them, the Customs Act of 
 July, 1862, again increased duties generally, raising 
 them to an average of 37 per cent. 1 The free list 
 established by the Morrill Tariff of 1861 was cut 
 down by nearly one-half. But this was not the 
 end ; after some small additions, the culmination 
 was reached in the Act of June, 1864, which was 
 accompanied by an Internal Revenue Act, creating 
 twenty-two new kinds of taxes "a system of 
 taxation more comprehensive, more burdensome, 
 and more confused than it has ever been the lot of 
 any other civilised community to bear " 2 and the 
 issue of a huge loan. The Customs Act raised 
 the average duty to 47 per cent., and enumerated 
 1,450 separate articles ; it increased the customs 
 revenue from 108 million dollars in 1863-4 to 
 209 million in 1864-5. The difficulties arising 
 from the heavy burden of taxation were increased 
 enormously by the rapid rise of prices, due in part 
 to the depreciation of the inconvertible paper 
 currency, which reached its lowest point in the last 
 six months of 1864, when the average gold price of 
 100 dollars in currency was only about 43 dollars. 
 Average prices rose 117 per cent, between 1860 and 
 1865, and money wages rose only 43 per cent. 3 
 
 1 Mayo-Smith and Seligman, p. 12. " If we bleed manufactures 
 we must see to it that the proper tonic is administered at the same 
 time" (Morrill, quoted by Taussig, p. 162). The duties on imports 
 were required to be paid in specie, whilst internal taxes were paid in 
 the rapidly depreciating currency of the United States (Holies, iii. 
 p. 186). 
 
 - Mayo-Smith and Seligrnan, p. 13. 3 Dewey, pp. 293-4.
 
 EFFECT UPON COMMERCIAL POLICY 199 
 
 Unfortunately the manufacturers desirous of 
 protection found their opportunity in the diffi- 
 culties of the Government. It is true that they 
 could reasonably claim some compensation for the 
 heavy burdens laid upon them by the system of in- 
 ternal taxation which had been adopted, but they 
 went much further than this. 1 They secured an 
 almost unlimited protection, and their action and 
 the general effect of the war tariff on the United 
 States, are thus described by two of the ablest 
 economists of that country : " The tariff of 1864 
 is the real war tariff, and the basis of the present 
 tariff. While the main reasons of its passage were 
 without doubt the need of increased revenue for 
 the Government and the desire to compensate the 
 various interests for the burdens imposed on them 
 by the internal revenue, it is undeniable that its 
 final shape was largely owing to the endeavours 
 of the protected manufacturers to gain each for 
 himself the greatest possible advantage irrespective 
 of the other's interests. Above all, the habits 
 engendered during this period of comprehensive 
 protection to everything led to a crystallisation 
 of the sentiment in favour of national exclusion 
 and isolation. The commercial policy of the 
 United States for many decades was moulded 
 by the feelings and habits generated during this 
 period of the Civil War. Henceforth the move- 
 ment in favour of high protection, which still in 
 
 1 "The Bill (of 1864) is full of examples of their prowess" 
 (Stanwood, ii. p. 129).
 
 200 WAR TAXATION AND ITS RETENTION 
 
 great part dominates the American people, was 
 to become the leading feature in the commercial 
 and political life of the country. What was in 
 its origin a mere temporary expedient called forth 
 by the exigencies of a great military struggle was 
 to become a permanent institution." l 
 
 For a number of years after the close of the 
 Civil War the tariff policy of the United States 
 remained absolutely unchanged in its general char- 
 acter. The effects of the war had been bad enough 
 in the North, but they were far worse in the 
 South. In the states which had remained loyal 
 to the Federal Government there had been indeed 
 a terribly heavy burden of taxation, but to some 
 extent compensation had been found for this in 
 the growth of manufactures, under the high duties 
 required to meet the expenses of the war. But 
 on the contrary, the Southern States, dependent 
 on the sale of their produce in foreign markets, 
 had found their export trade destroyed by the 
 rigorous blockading of their ports by the Federal 
 Navy, and had practically no manufactures capable 
 of development ; moreover, as they had but a 
 small population and were compelled to maintain 
 vast armies, there had been little labour left avail- 
 able for agriculture or industry. This, coupled 
 with a system of taxation even more oppressive 
 than that employed in the North, had brought 
 the South almost to complete economic ruin. 
 Now, after the war was ended, the newly con- 
 
 1 Mayo-Smith arid Seligmau, pp. 13-14.
 
 FINANCIAL RECONSTRUCTION 201 
 
 firmed Union found itself confronted with an 
 extremely heavy debt (2,760 million dollars), and 
 a greatly depreciated currency (owing to the large 
 amounts of inconvertible paper money issued by 
 both sides during the conflict) ; the great ravages 
 caused by military operations, particularly in the 
 South, had to be made good ; and the old slave 
 states had the difficult problem of replacing slave 
 by free labour, at a time when they were financially 
 least able to do so. 
 
 The most urgent task was financial reorganisa- 
 tion, but it was undertaken only gradually, and 
 in a one-sided manner ; the tariff remained for 
 some years untouched in most respects. For the 
 delay, three reasons may be assigned. 1 There was 
 first the concentration of the attention of Congress 
 on the problem of reconstruction. The President, 
 Andrew Johnson, was inclined to follow in the 
 treatment of the Southern States the liberal policy 
 of his predecessor, Lincoln. But he possessed 
 neither the power nor the judgment of Lincoln ; 
 and, moreover, he was a Southerner, and though 
 a strenuous supporter of the Union, inclined to 
 hold the doctrine of state rights. The triumphant 
 Republican party of the North would have nothing 
 to do with the President's conciliatory policy ; it 
 meant to use its power to the utmost, and adopted 
 the theory that it could do what it liked in the 
 reconstruction of the Southern States, and could, 
 so far as they were concerned, suspend the Federal 
 
 1 Ibid., pp. 14-15.
 
 202 WAR TAXATION AND ITS RETENTION 
 
 Constitution indefinitely. With the policy and 
 methods actually adopted by Congress we are 
 not concerned here. It is necessary only to point 
 out that it was not until the beginning of 1871 
 that all the states of the Union were once more 
 represented in Congress, and that during the 
 four years of Johnson's Presidency (1865-9) there 
 was an incessant conflict between the President 
 and the legislature, which absorbed the energies 
 of both parties. 1 The second reason was the 
 desire to get rid as quickly as possible of the 
 internal taxes, always peculiarly repugnant to 
 Americans, and especially the income tax. These 
 constituted burdens which were severely felt by 
 everyone, and felt directly ; they undoubtedly 
 hampered industry in every conceivable way. It 
 was therefore decided to remove them as quickly 
 as possible, and by a series of Acts between 1867 
 and 1872 all were swept away except the excise 
 on beer and spirits, and duties on matches, patent 
 medicines, and a few other commodities. The 
 heavy import duties had been imposed, professedly 
 at least, in part to compensate the manufacturers 
 for the burden of the internal taxes, and, therefore, 
 theoretically either the war surtaxes on imports 
 should have been abolished at the same time as 
 the internal war taxes, or if financial considerations 
 made that impossible, there should have been a 
 simultaneous partial reduction of both classes. But 
 the desire to get rid of the internal taxes was too 
 
 1 See Wilson, pp. 254-72.
 
 PROTECTION A PERMANENT POLICY 203 
 
 strong ; it therefore became necessary to maintain 
 the import duties at a high level in order to meet 
 the heavy cost of government, to prepare the way 
 for the resumption of specie payments, and to 
 reduce the debt as rapidly as possible. This reten- 
 tion of duties at the high level coincided with the 
 desires of the manufacturers, who flourished (or 
 thought they flourished) as a result of the protec- 
 tion afforded them, and could urge with justice 
 that there were a number of industries which had 
 been called into existence by the high tariff and 
 the war, and must collapse if protection were 
 withdrawn. The country seems to have made 
 up its mind without much difficulty that for a 
 time at least the extreme protective system must 
 be maintained, and even in some cases increased. 1 
 
 In 1867 a Bill was introduced, prepared by a 
 newly appointed Special Commissioner of the 
 Revenue, and supported by the Secretary of the 
 Treasury, which proposed to reduce duties on raw 
 material lumber, dyes, coal, flax, and others, and 
 to reduce slightly duties on manufactured goods. 
 
 1 "The whole industry of the country gradually adapted itself to 
 the existence of the high tariff, and the people soon became convinced 
 of the advantages of a policy of commercial stability. . . . Just as 
 the country had accommodated itself to the so-called Free Trade 
 policy of the period 1846-57, so now again the tendency seemed to be 
 averse to any sudden change '' (Mayo-Smith and Seligman, p. 16). 
 "The country at large, and especially those parts of it in which the 
 protected industries were concentrated, began to look on the existing 
 state of things as permanent. The extreme protective system, which 
 had been at first a temporary expedient for aiding in the struggle for 
 the Union, adopted hastily and without any thought of deliberation, 
 gradually became accepted as a permanent institution " (Taussig, p. 174).
 
 204 WAR TAXATION AND ITS RETENTION 
 
 The Bill secured a majority in both Houses of 
 the Legislature, but it did not pass, owing to the 
 failure to secure the two-thirds majority in the 
 House of Representatives necessary to overcome 
 certain technical difficulties. The attempt to reduce 
 duties had then failed, and no further effort was 
 made until 1870, whilst, on the contrary, two Acts 
 were passed with the opposite effect. The first 
 of these was the Woollens Act of 1867. During 
 the war there had been a considerable development 
 of the manufacture of woollen goods, owing 
 partly to the practical cessation of the manu- 
 facture of cottons, and partly to the great demand 
 for clothing for the Federal troops. With the 
 return of peace, these abnormal conditions passed 
 away, and the woollen manufacturers found them- 
 selves in face of a crisis. They began therefore, 
 as early as 1865, to bring pressure upon the 
 Government ; and they were skilful enough to 
 make it appear that the growers of wool were 
 in agreement with them. They succeeded in ob- 
 taining in the new Woollens Act an extension of 
 the so-called " compensation system," which had 
 been adopted for the first time in the Morrill Tariff 
 of 1861. 1 The plan then adopted was simply 
 this : there was a specific duty imposed on wool ; 
 it was therefore thought necessary to give the 
 manufacturers, in addition to the ad valorem duty 
 which was intended to afford them protection, a 
 specific duty to compensate them for the duty on 
 
 1 Taussig, pp. 195 seq.
 
 THE WOOLLENS ACT 205 
 
 raw wool, and the consequent increase in price of 
 their raw material. 1 The duties so imposed under 
 the Morrill Act had, like all others, been increased 
 during the war, and the manufacturers now asked 
 for and obtained a still further advance of nearly 
 100 per cent, in the actual amount of the duties, 
 though this was to some extent concealed by an 
 elaborate reclassification. The manufacturers got 
 more than the amount of the compensation which 
 they might perhaps have justly claimed ; they 
 benefited by the Woollens Act more than the 
 growers of wool, yet it did not yield them any- 
 thing like the results which they expected. " The 
 Wool and Woollens Act of 1867 was designed 
 expressly to make possible the production at a 
 profit of goods from the wool fibre. It did not 
 effect that object, nor did it accomplish that which 
 was equally its object, the growing of wool at a 
 profit. On the contrary, wool declined in price and 
 the manufacture of wool was greatly depressed. 
 ... It is not possible to doubt that the price of 
 woollen and worsted goods must be enhanced so 
 long as a duty is laid upon wools which are not 
 produced in this country and which are yet neces- 
 sary for mixing with the domestic wool. This is 
 but to state a fact, and not to pronounce a judg- 
 
 1 Thus the duty on the cheaper wool was 3 cents per Ib., and it 
 was estimated that four Ibs. of wool were required for each Ib. of 
 cloth ; therefore the compensating duty imposed on each Ib. of cloth 
 imported was 12 cents (the idea being that this put the manufacturer 
 in the same position over against foreign competition as if he received 
 the wool duty free), and 25 per cent, ad valorem for actual protection.
 
 206 WAR TAXATION AND ITS RETENTION 
 
 ment upon the expediency of the system. It is a 
 consequence of the enhanced price that the con- 
 sumption of woollen goods has never had, and 
 cannot have, an expansion like that which has 
 taken place in cotton, in sugar, in iron, and in many 
 other articles. Wool and woollens are always the 
 strongest arguments of the Free Trader, and the 
 most difficult to answer." 1 
 
 Similar advances were made by the Copper Act 
 of 1869. The duty on copper ore before the war 
 had been only 5 per cent, ad valorem, and on 
 copper bars and ingots only 2 1- cents per Ib. ; but 
 in the late sixties the copper mines of the Lake 
 Superior district were producing so largely that 
 the price of copper fell rapidly, and the mine 
 owners began an agitation for the increase of 
 the import duties. Early in 1869 the duty on 
 copper ore was made specific, and increased to 
 somewhere between 25 per cent, and 30 per cent. 
 ad valorem, whilst the duty on copper bars was 
 doubled. The Bill was veteod by the President, 
 but was passed in spite of him, and incidentally 
 had the effect of closing a number of smelting- 
 works at Boston and Baltimore, which had been 
 engaged in the smelting of imported ores. At 
 the same time, the price of home-produced copper 
 in the United States was raised. 2 Some other 
 increases of duty were the substitution of specific 
 for ad valorem duties on steel rails in 1870 a 
 change which made the duty heavier as prices fell 
 
 1 Stauwood, ii. p. 169. 2 Taussig, pp. 220-1.
 
 MOVEMENT TOWARDS TARIFF REFORM 207 
 
 after about 1873 ; on marble also by the Act of 
 1870 ; on nickel, for which the rates were doubled 
 in the same year ; and even on such an important 
 raw material as flax. 
 
 Yet gradually the necessity for some changes in 
 the opposite direction was making itself felt, and the 
 impression in favour of reform was strengthened by 
 the persistent advocacy of the Commissioner of 
 Revenue, Mr. Wells. In 1870 the first step was 
 taken, but the reductions then made were confined 
 almost entirely to the non-protected commodities. 
 That is to say, the duties on such revenue articles 
 as tea, coffee, cocoa, sugar, spices, and wines were 
 lowered ; there was also an addition to the free list 
 of 130 articles, chiefly raw materials and foodstuffs. 1 
 The only really protective duty reduced was that 
 on pig-iron, by about 22 per cent., and as we have 
 seen, some duties on flax, marble, nickel, and steel 
 rails were increased. The net effect was a partial 
 mitigation of the tariff, but an increase of the 
 financial dependence of the Federal Government 
 on the strictly protective duties as a source of 
 revenue. The feeling in favour of tariff reform 
 steadily increased, especially amongst the farmers, 
 who were dissatisfied with the manner in which 
 Congress seemed to regard only the interests of 
 the manufacturers, and were forming in the West 
 the political association of the "Patrons of Hus- 
 bandry," or " Grangers." The movement was 
 aided by the condition of the finances ; the Ex- 
 
 1 Stanwood, ii. p. 173.
 
 208 WAR TAXATION AND ITS RETENTION 
 
 chequer revenue from customs rose from 194J 
 million dollars in 1869-70 to over 216 million in 
 1871-2, and the surplus revenue exceeded the 
 amount required for the Sinking Fund. The Pro- 
 tectionists in Congress came to the conclusion that 
 it was desirable to give way to some extent, and 
 they resolved to continue the policy of 1870. 
 They accepted a Bill introduced in the Senate in 
 1872, which made a reduction of 10 per cent, on 
 cotton, wool, woollens, metals, paper, glass, and 
 leather manufactures, 1 and also lowered the duties 
 on coal and steel. But they added to this a reduc- 
 tion of the customs and excises on whisky and 
 tobacco, and the abolition of the duties on tea and 
 coffee. 2 Whilst apparently a concession to Free 
 Trade, the new Act really strengthened the position 
 of Protection ; its authors had gratified the general 
 desire for a reduction of taxation, but they had 
 done this particularly in regard to internal duties 
 and what may be called " breakfast-table taxes " ; 
 and consequently, as in 1870, they had made the 
 country still more dependent for Federal revenue 
 upon the purely protective duties. They believed 
 quite correctly that should it become necessary to 
 raise more revenue, it would be easier for them 
 to increase the protective duties than for the Free 
 Traders to re-establish revenue taxes. 3 The accur- 
 
 1 A method known as the " horizontal " reduction of duties. 
 
 2 Mayo-Smith and Seligman, p. 19. * Cf. Taussig, pp. 184-9. 
 
 3 ' ' The removal of the tea and coffee duties in 1872 served to fix 
 for a long time the character of our legislation on the revenue articles 
 of which they are the type. Step by step, in the various Tariff Acts
 
 RENEWED COMMERCIAL DIFFICULTIES 209 
 
 acy of their calculations was soon to be proved. 
 In 1873 there were grave commercial difficulties in 
 the United States part of the almost universal 
 crisis of that year. 1 Imports, which had risen 
 rapidly from 1870 onwards, fell rapidly, and so did 
 the customs revenue in consequence. The follow- 
 ing table gives the figures of American foreign 
 trade from 1870 to 1875 (in million dollars) : 2 
 
 Years ending 
 
 June 30. Exports. Imports. 
 
 1870 . . 393 ... 436 
 
 1871 . . 443 ... 520 
 
 1872 . . 444 ... 627 
 
 1873 . . 522 ... 642 
 
 1874 . . 586 ... 567 
 
 1875 . . 513 ... 533 
 
 (It was not until 1868 that the American returns 
 of foreign trade were put on a really satisfactory 
 basis, as a result of the efforts of Mr. Wells and 
 General Walker, the well-known American econo- 
 mist. 8 ) The fall in the customs revenue gave the 
 
 passed since the war, all the non-protective duties have been swept 
 away. By far the most important recent legislation in this direction 
 was the removal of the duties on sugar in the Act of 1890, a change 
 which, like the removal of the tea and coffee duties in 1872, emphasised 
 the determination of the Protectionists to give up the simplest and surest 
 sources of revenue rather than yield an abatement of the protective 
 duties" (Taussig, pp. 188-9). 
 
 1 "In the United States the phenomena antecedent to the crisis 
 were enumerated at the time to be, ' a rise of prices, great prosperity, 
 large profits, high wages, and strikes for higher ; large importations, a 
 railway mania, expanded credit, over-trading, over-building, and high 
 living.' The crisis began on the 17th of September, 1873, by the 
 failure of a comparatively unimportant railway company." By the 29th 
 twenty banking houses failed (Wells, Recent Industrial Changes, p. 5). 
 
 2 Mayo-Smith and Seligman, p. 46. 
 
 3 See Worthington Ford's article on "Financial Tariff Com- 
 parisons" in the Political Science Quarterly, vol. xiii. No. 2, 
 
 P
 
 210 WAR TAXATION AND ITS RETENTION 
 
 Republicans their opportunity, 1 and their action 
 was hastened by the fact that their long tenure 
 of absolute power was coming to an end. The 
 country had been growing more and more dis- 
 satisfied with the unsatisfactory results of General 
 Grant's second Presidency, and the Republicans 
 were discredited by a number of legislative and 
 administrative scandals. 2 It was clear that the 
 new Congress would have a strong Democratic 
 majority in the House of Representatives, and 
 the Republicans resolved to make the most of the 
 short time left to them. In February, 1875, they 
 carried an Act which repealed the " horizontal " 
 reduction made in 1872, and increased the duty 
 on molasses, sugar, tobacco, and spirits. The Act 
 passed without very great difficulty, though the 
 President and his Secretary of the Treasury were 
 both in favour of the re-establishment of the 
 revenue duties on tea and coffee. The result, 
 then, was simply a return to the high war rates 
 with such additions as had been made in 1867, 
 1869, and 1870. In criticism of the proceeding 
 it is only necessary to quote the judgment of the 
 most recent historian, himself a strong advocate 
 of the principle of Protection. Of the Republi- 
 cans he writes : " When they were forced to give 
 up the control of the lower House of Congress, 
 and thus to surrender the power to initiate revenue 
 
 1 They could point to the fact that the customs revenue, as a result 
 of the legislation of 1872,, had fallen from 216 million dollars in 
 1871-2 to 163 million in 1872-3. 
 
 2 Wilson, pp. 281-3.
 
 THE REPUBLICANS AND THE TARIFF 211 
 
 legislation, they signalised their last day of un- 
 limited authority by restoring the duties levied for 
 purposes of protection to the giddy height they 
 had attained when war's terrible greed of money 
 insured a favourable response to every request 
 manufacturers might make for higher rates. . . . 
 As a political move the passage of the Act seems 
 ill-judged. ... It divided men into two parties 
 of extremists, at a time when moderate counsels 
 would have produced a reasonable tariff system 
 that might have stood unchanged for several years. 
 At almost every succeeding period of Congressional 
 or Presidential election until 1896 the tariff was 
 an issue in the canvass, to the great disturbance 
 and distress of business, and during the short 
 period of fourteen years, from 1883 to 1897, there 
 were four complete revisions of the tariff. It 
 would not be fair to lay all the uncertainty and 
 anxiety which the agitation produced to the charge 
 of the Republicans in the forty-second Congress. 
 But it is certain that they had more regard for the 
 interests of the moment than a statesmanlike fore- 
 sight of the consequences of their eager grasp at 
 a vanishing opportunity." l 
 
 1 Stanwood, ii. p. 191.
 
 CHAFTER V 
 
 POLITICAL PARTIES AND THE 
 
 TARIFF ECONOMIC PROGRESS OF 
 
 THE UNITED STATES TO 1890 
 
 THE Act of 1875 was followed by a lull in tariff 
 legislation which lasted, in spite of one or two 
 attempts at renewed activity, for eight years. 
 Towards the end of that period the country had 
 recovered from the acute commercial depression 
 which had followed the disasters of 1873 ; the 
 Government found itself able to resume specie pay- 
 ments in 1879 ; the Southern States were rapidly 
 adjusting themselves to their new economic condi- 
 tions ; manufactures had greatly increased, if not so 
 rapidly as during the war period, yet to an extent 
 altogether satisfactory when the retarding effect 
 of the commercial disorders is taken into account. 1 
 Foreign trade was flourishing; as the following table 
 
 1 The census estimates of the value of the manufactured products 
 of the United States are : 1860, 1,885 million dollars ; 1870, 4,332 
 million dollars ; 1880, 5,369 million dollars. It should be noted, how- 
 ever, that the increase between 1860 and 1870 was somewhat less, and 
 the increase between 1870 and 1880 somewhat more, than appears from 
 these figures ; since the valuation was based in 1860 on a gold currency, 
 and in 1870 on a very unsatisfactory paper currency. The estimates 
 themselves are by no means complete, but they are fairly indicative 
 of the progress made. 
 
 212
 
 AMERICAN FOREIGN TRADE 213 
 
 shows, exports reached their highest point in 1881 
 (the advance being chiefly in agricultural produce, 
 partly as a result of the extension of the trans- 
 continental railway system of the United States), 
 whilst imports made a great upward bound in the 
 early eighties, and the increase of customs revenue 
 gave the Treasury a surplus in 1881. The figures 
 are million dollars. 1 
 
 Year. 
 1876 
 
 Imports. 
 461 
 
 Exports. 
 540 
 
 Exports of 
 Agricultural 
 Produce. 
 456 
 
 1877 
 
 451 
 
 602 
 
 460 
 
 1878 
 
 437 
 
 695 
 
 536 
 
 1879 
 
 446 
 
 710 
 
 546 
 
 1880 
 
 668 
 
 836 
 
 686 
 
 1881 
 
 643 
 
 902 
 
 730 
 
 1882 
 
 725 
 
 751 
 
 552 
 
 The Democratic party had persistently advocated 
 a reduction of the customs duties, and the establish- 
 ment of a tariff for revenue purposes only ; and 
 now that in 1880 and 1881, with the rise of the 
 customs revenue from 215 million dollars in 1878-9 
 to 386 million in 1879-80, the Treasury found 
 itself again in possession of a surplus, 2 it seemed 
 to the Republicans, who still retained power, but 
 saw signs of their approaching fall, 3 desirable to 
 
 1 The table is taken from Mayo-Smith and Seligman, pp, 46. 8. 
 
 * The debt was reduced from 2,046 million dollars in 1870 to 1,723 
 million in 1880 ; in the two years 1878-80 the reduction was 100 
 millions. 
 
 3 They had lost at Congressional elections, and they had nearly 
 lost the Presidential election of 1876. In 1880 they did better, but 
 it now seemed likely that they would lose their hold on the Executive 
 Government.
 
 214 POLITICAL PARTIES AND THE TARIFF 
 
 make some concessions to the popular feeling in 
 favour of a reduction of Federal revenue and a 
 mitigation of the high protective duties. Accord- 
 ingly, in 1882 a commission was appointed "to 
 take into consideration and to thoroughly investi- 
 gate all the various questions relating to the agri- 
 cultural, commercial, mercantile, manufacturing, 
 mining, and industrial interests of the United 
 States, so far as the same may be necessary to 
 the establishment of a judicious tariff, or a revision 
 of the existing tariff, upon a scale of justice to all 
 interests." 1 The composition of the commission 
 did not encourage any hope of reform in the 
 direction of Free Trade ; 2 its members, or some 
 of them at least, seem to have interpreted their 
 instructions to mean simply that they were to 
 make such modifications of the existing duties 
 as would be likely to remove some part of the 
 public hostility without in fact affecting the pro- 
 tective character of the tariff. The commission, 
 however, admitted in its report " that a substantial 
 reduction of tariff duties was demanded, not by 
 a mere indiscriminate popular clamour, but by the 
 best conservative opinion of the country, including 
 that which has in former times been most strenuous 
 for the preservation of our national industrial de- 
 
 1 Quoted in Stanwood, ii. p. 203. 
 
 2 " Four of the commissioners were themselves personally or 
 officially interested in industries classed as protected. All the com- 
 missioners, without exception, were favourable to the principle of 
 Protection" (Stanwood, ii. p. 204). The chairman was the Secretary 
 of the most energetic protectionist association in the country, the 
 National Association of Wool Manufacturers.
 
 THE TARIFF ACT OF 1893 215 
 
 fences." By the end of the year the committee 
 felt itself able to report, and legislation was com- 
 menced on the lines which it indicated. The new 
 Tariff Act became law in March, 1883, after the 
 House of Representatives, with its strong pro- 
 tectionist majority (including a number of Demo- 
 crats), had made considerable alterations in the 
 bill as passed by the Senate, where it was first 
 introduced. 2 It was therefore not approved by all 
 the Republicans, but those who disapproved would 
 not vote against it. 
 
 In a number of cases duties were reduced. In 
 the case of raw wool, hitherto subject to a com- 
 bined specific and ad valorem duty, the ad valorem 
 portion was remitted the effect being a real re- 
 duction on carpet wools, which were not produced in 
 the United States at all ; a small reduction of little 
 importance on the better kinds of ordinary wools ; 
 and the maintenance of a practically prohibitive 
 rate on the inferior grades. As a consequence 
 of this reduction of duty on the imported raw 
 material, the " compensating " specific part of the 
 duty on woollen goods was likewise diminished 
 somewhat more than proportionately ; but in the 
 case of the finer qualities of goods this remission 
 was counterbalanced by an increase in the ad 
 valorem rates. On the cheap kinds of cotton goods, 
 the decrease of duty was 50 per cent., but these 
 
 1 Quoted in Dewey, p. 421. 
 
 2 The passage of the Bill was accompanied, and promoted, by the 
 usual complicated parliamentary manoeuvres and manipulation of rules 
 (Stanwood,, ii. pp. 207-18).
 
 216 POLITICAL PARTIES AND THE TARIFF 
 
 were hardly imported into the United States at 
 all ; silks were largely imported, so the ad valorem 
 rate was lowered only some 16 per cent. On pig- 
 iron the duty was lowered very slightly, from $7 
 to $6.72 a ton ; on steel rails, on the other hand, 
 the reduction was 40 per cent, (from $28 to $17 
 a ton), though a fall of prices between 1881 
 and 1887 deprived this change of much of 
 its force. Other reductions of varying degrees 
 of importance were on marble, nickel, and 
 copper. 1 
 
 None of these changes were of sufficient value 
 to secure a favourable reception of the new tariff 
 by the advocates of freer trade, whilst other altera- 
 tions were of a nature to arouse their hostility. 
 There were a number of distinct advances in the 
 customs rates, and, as was perhaps to be expected, 
 the chief advantage was reaped by the woollen 
 manufacturers. Thus the duty on dress goods, 
 which have never been manufactured in any large 
 proportion in the United States, was increased, in 
 spite of the fact that the tax on imported wool 
 was at the same time lowered ; the ad valorem 
 duty on the higher valued kinds of fine cloths 
 was also raised. On the best grades of cotton 
 goods, such as embroideries and hosiery, there 
 was a rise of about 14 per cent. The duties on 
 various steel manufactures (chiefly machinery 
 parts, such as rods and shafts) were also in- 
 creased, as were those on quicksilver and a 
 
 1 Taussig, pp. 239-49.
 
 THE POLICY OF CLEVELAND 217 
 
 number of manufactures of brass, pewter, tin, 
 and lead. 1 
 
 The changes were then, on the whole, of no 
 great effect in any direction. 2 The average duties 
 were in 1882-3 42*45 per cent, and in 1883-4 
 41 '61 per cent. Practically nothing was changed, 
 and so far the protectionist party might count the 
 new tariff as yet another addition to their long 
 list of victories. Some attempts were made in 
 1884 and 1886 to renew the tariff discussion, and 
 reduce duties, but without success, partly owing to 
 the fact that people were tiring of the constant 
 changes, and partly because the Democratic party 
 was by no means unanimous on the subject. A 
 revolt of some of its members defeated the Morri- 
 son Bill of 1884. Consequently, in spite of the 
 fact that the Democratic victory in the election of 
 President Cleveland in November, 1884, gave that 
 party for the first time since Buchanan left office 
 the control of the Executive Government, nothing 
 was done during its four years of power. But in 
 December, 1887, the President, in his annual 
 message to Congress, declared uncompromisingly 
 in favour of a very considerable reduction of duties. 
 
 pp. 233-8. " As a rule duties were advanced on 
 protected articles of which importations continued in considerable 
 volume. The advance was by no means universal . . . but it was 
 made in so large a number of important cases as to give the Act a 
 distinctly protectionist flavour.'' 
 
 2 " Although the changes in the rates of customs duties were 
 numerous, few of them were large enough to work a perceptible altera- 
 tion in the conditions under which either commerce or manufacturing 
 industry was prosecuted " (Stanwood, ii. p. 218).
 
 218 POLITICAL PARTIES AND THE TARIFF 
 
 After referring to the increased cost to the home 
 consumer of all commodities, wherever produced, 
 as a result of Protection, the President continued : 
 " It is not proposed to entirely relieve the country 
 of this taxation. It must be extensively continued 
 as the source of the Government's income ; and in 
 a readjustment of our tariff the interests of Ameri- 
 can labour engaged in manufacture should be care- 
 fully considered, as well as the preservation of our 
 manufactures. It may be called Protection, or by 
 any other name, but relief from the hardships and 
 dangers of our present tariff laws should be devised 
 with especial precaution against imperilling the exis- 
 tence of our manufacturing interests. But this ex- 
 istence should not mean a condition which, without 
 regard to the public welfare as a national exigency, 
 must always insure the realisation of immense 
 profits instead of moderately profitable returns. 
 . . . We are in the midst of centennial celebrations, 
 and with becoming pride we rejoice in American 
 skill and ingenuity, in American energy and enter- 
 prise, and in the wonderful natural advantages and 
 resources developed by a century's national growth. 
 Yet when an attempt is made to justify a scheme 
 which permits a tax to be laid upon every con- 
 sumer in the land for the benefit of our manufac- 
 turers, quite beyond a reasonable demand for 
 governmental regard, it suits the purposes of 
 advocacy to call our manufactures infant indus- 
 tries, still needing the highest and greatest degree 
 of favour and fostering care that can be wrung
 
 THE TARIFF A PARTY ISSUE 219 
 
 from Federal legislation." Already the President 
 called attention to the trusts, and their probable 
 effect on home prices when foreign competition 
 was eliminated ; and he ended by declaring that 
 " it is a condition which confronts us, not a theory. 
 . . . The simple and plain duty which we owe the 
 people is to reduce taxation to the necessary ex- 
 penses of an economical operation of the Govern- 
 ment. . . . These things can and should be done 
 with safety to all our industries, without danger to 
 the opportunity for remunerative labour which our 
 working men need, and with benefit to them 
 and all our people, by cheapening their means of 
 subsistence and increasing the measure of their 
 comforts." 1 
 
 The message established a distinct line of division 
 between political parties ; it committed the Demo- 
 crats finally to Free Trade, and therefore identified 
 the Republicans with Protection ; and it provided 
 a clear and definite issue for the Presidential elec- 
 tion of November, 1888. 2 The two rival policies 
 to be placed before the country were exemplified 
 by two Bills one (the "Mills Bill") introduced 
 and passed in the House of Representatives by a 
 substantial Democratic majority, and the other 
 brought forward in the Senate by the Republicans. 
 
 1 Congressional Record, vol. xix. part i. pp. 10-11. 
 
 2 " From that time on, the tariff question became the chief line of 
 division between the two great political parties" (Mayo-Smith and 
 Seligman, p. 23). It had the effect of " making this question more 
 distinctly a party matter than it had been at any time since the Civil 
 War " (Taussig, p. 253).
 
 220 POLITICAL PARTIES AND THE TARIFF 
 
 The former proposed to abolish the duties on a 
 large number of raw or semi-manufactured materials 
 of industry, such as wool, flax, hemp, jute, tin 
 plates, and on other articles, as salt and soap ; and 
 to reduce the duties on woollens, cotton goods, 
 iron, earthenware, and sugar ; it also substituted 
 ad valorem for specific duties in many cases. It 
 was estimated that the result would be a loss to the 
 revenue of about fifty million dollars. 1 On the 
 other side, the Senate Bill made some reductions 
 and readjustments, but in a large number of cases 
 increased the duties. Neither Bill passed, or was 
 expected to pass ; but the country had a definite 
 choice offered to it, and the elections of Novem- 
 ber, 1888, gave a narrow victory to the Republicans 
 by the return of President Harrison ; and in spite 
 of some disturbing influences, they were entitled 
 to consider this as a decision in their favour on the 
 tariff question. In their election " platform " they 
 had declared that they would "effect all needed 
 reduction of the national revenue by repealing the 
 taxes upon tobacco, which are an annoyance and 
 burden to agriculture, and the tax upon spirits 
 used in the arts and for mechanical purposes, and 
 by such revision of the tariff laws as will tend to 
 check imports of such articles as are produced by 
 our people, the production of which gives employ- 
 ment for labour ; and release from import duties 
 those articles of foreign production, except luxuries, 
 the like of which cannot be produced at home. If 
 
 1 Details in Mayo-Smith and Seligman, pp. 24-5.
 
 INDUSTRIAL PROGRESS 221 
 
 there shall still remain a larger revenue than is 
 requisite for the wants of the Government, we 
 favour the entire repeal of internal taxes, rather 
 than the surrender of any part of our protective 
 system, at the joint behest of the whisky trust 
 and the agents of foreign manufacturers." 1 They 
 now resolved to make full use of their new lease of 
 power, and the result appeared in the McKinley 
 Tariff of 1890. 
 
 It was not possible for them to argue that the 
 country required more Protection the proposed 
 new tariff was the outcome rather of political 
 events than of the economic condition of the 
 United States. By 1890 industry and commerce 
 had recovered from the depression and become 
 free from the difficulties which had more or less 
 hampered them since about 1873, and become 
 acute for the last time in 1885-7 ; and the country 
 was now making a rapid advance on the upward 
 path. Population had increased from 38J millions 
 in 1870 to 621 millions in 1890 ; and the develop- 
 ment was particularly marked in the great agricul- 
 tural states of the Middle and North-West. The 
 total production of grain was estimated in 1870 
 at 761 million bushels (it had gone back some- 
 what during the Civil War period), in 1880 at 
 1,755 million, and in 1890 at 2,122 million. 2 
 Railways had advanced with extraordinary rapidity, 
 particularly in the decade 1880-90 ; in 1870 there 
 
 1 Quoted in Stanwood, ii. p. 238. 
 
 2 Twelfth Census, vol. vi. p. 23,
 
 222 POLITICAL PARTIES AND THE TARIFF 
 
 were 60,000 miles in the United States ; in 1880, 
 93,000 ; and in 1890, 164,000. With this develop- 
 ment there had come a great cheapening of the 
 cost of transport ; the charge for the carriage of 
 a bushel of wheat from Chicago to New York 
 fell from 30 J cents in 1868 to 14|- cents (or 
 rather less than one -half) in 1888. 1 These 
 changes had greatly stimulated agriculture, and 
 rendered possible the growth of the export trade 
 in agricultural products, which from 1875 to 
 1890 averaged about 75 per cent, of the total 
 exports of the United States. 2 Beside grain, the 
 most important product so exported was cotton ; 
 the output of that raw material fluctuates con- 
 siderably, but it rose from an average of 3,325,000 
 bales in 1869-73 to an average of 6,553,000 bales 
 in 1885-9, whilst the export advanced in about 
 the same proportion from 1,040 million pounds 
 in the former to 2,015 million in the latter period. 3 
 The manufacturing industries were increasing with 
 equal or even greater rapidity ; the value of their 
 products was estimated at the census of 1870 at 
 4,232 million dollars, and in 1890 at 9,372 million, 
 and the increase was even greater than it appears 
 in these figures, since the former estimate was 
 based on a depreciated paper currency, and the 
 latter on the gold currency. 4 The average pro- 
 duction of pig-iron for the years 1870-4 was 
 
 1 Conner, p. 47. 
 
 2 Mayo-Smith and Seligman, p. 48. 
 
 3 Ibid., p. 5. 
 
 4 Twelfth Census, vii. pp. xlvii. seq.
 
 AMERICAN SHIPPING 223 
 
 2*2 million tons ; by 1890 the amount was 9*3 
 million. In 1871, 34,100 tons of Bessemer steel 
 rails were manufactured, and in 1872, 84,000 
 tons; in 1890, the total of 1,871,000 tons was 
 reached. 1 The quantity of cotton consumed in 
 the country was 486 million pounds in 1869, and 
 1,060 million in 1889. The consumption of wool 
 was increasing, and required the whole of the 
 home production, together with a growing import, 
 but the manufacturers were still far from able to 
 cope with the home demand. The industrial pro- 
 gress was no longer confined to the Northern and 
 Middle States ; the South also was begginning to 
 have its share, especially in the case of cotton 
 goods. The one unsatisfactory feature was the 
 condition of American shipping and shipbuilding ; 
 between 1870 and 1890 the tonnage registered 
 for over -sea trade declined from 1,517,000 to 
 947,000, though there was an increase in river and 
 lake shipping. In spite of various Navigation Acts, 
 and partial remissions of duty on goods borne 
 in American vessels, the percentage of the United 
 States' foreign trade carried in native vessels fell 
 from 66-5 in 1860 to 35'6 in 1870 and to 12'3 in 
 1890. 2 So far as the shipbuilders were concerned, 
 there was little doubt that this was due to the 
 impossibility of obtaining, under the existing 
 tariff conditions, material sufficiently cheap to 
 enable them to compete with Great Britain, where 
 
 1 Taussig, p. 416. 
 
 2 Mayo-Smith and Seligman, p. 57.
 
 224 POLITICAL PARTIES AND THE TARIFF 
 
 also wages were lower. The figures for the total 
 foreign trade up to 1883 have already been given ; 
 the following table carries them up to 1890 : 
 
 Year. Imports. Exports. 
 
 1883 . . 723 ... 824 
 
 1884 . . 668 ... 741 
 
 1885 . . 573 ... 742 
 
 1886 . . 635 ... 680 
 
 1887 . . 692 ... 716 
 
 1888 . . 724 ... 696 
 
 1889 . .745 ... 742 
 
 1890 789 858
 
 CHAPTER VI 
 
 IT was clearly difficult for the advocates of Protec- 
 tion to urge the " infant industries " doctrine any 
 longer (save in one or two special cases). Perfectly 
 valid as this argument may have been in the early 
 days of the industrial history of the United States, 
 it could not now serve the Republicans as their 
 avowed principle of action, and they found it 
 necessary to provide themselves with another and 
 more defensible theoretical basis for the practice of 
 Protection. They therefore turned to the ideas 
 of the home market and national self-sufficiency ; 
 their policy had, indeed, from the first been in that 
 direction, but was now to become so more definitely. 
 " The world's progress is now dependent upon the 
 development of internal resources, and not of 
 external trade. We need a systematic develop- 
 ment of all those opportunities for labour with 
 which each country has been endowed by nature. 
 We must make a better use of all our natural 
 resources if the world is to advance to a higher 
 industrial state. Progress must come from the 
 
 Q 225
 
 226 THE NEW THEORY OF PROTECTION 
 
 development of large continental states, rich in 
 natural resources." 1 Protection is to be no mere 
 temporary expedient ; it becomes " a consistent 
 endeavour to keep society dynamic and progressive. 
 Protection also ceases to be an isolated exception 
 to the general passive policy which it has been 
 popular to advocate, and becomes a part of a 
 fixed national policy to increase the value of 
 labour with the increase of productive power, and 
 to aid in the spread of knowledge and skill and in 
 the adjustment of a people to its environment." 5 
 This by itself was somewhat too subtle an argu- 
 ment (at least in such a form) for popular use, but 
 it was interpreted by the Republicans at the elec- 
 tion of 1888 as implying the necessity for the 
 protection of the highly paid American workman 
 against the competition of the ill-paid European 
 labour. This was to be done, not by the exclusion 
 of European commodities, but by the imposition 
 of duties which would counterbalance the dis- 
 advantage of the greater cost of production in 
 America, and also give a moderate protection. It 
 would thus protect labour, for it " cut off the privi- 
 lege of the foreigner to come in with cheaper wares 
 and to gain a foothold in the market, if perchance 
 he had gone forward at a little more rapid pace 
 than the American in adapting his manufacture 
 to new conditions. It relieved the home manufac- 
 
 1 Patten , Economic Basis of Protection (first published in 1890), 
 2nd ed., p. 15. 
 
 2 Ibid., pp. 7-8,
 
 THE WAGES ARGUMENT 227 
 
 turer from the necessity of cutting down wages, 
 supposing that he could have reduced them ; and 
 in this respect the tariff was a boon to the working 
 man." This wages argument was not new it 
 had first made its appearance in the thirties, and 
 had been discussed slightly in the debates on the 
 tariff proposals of 1842 and 1846 ; but it appears 
 not to have become prominent until the eighties. 
 Even the Democrats felt it necessary to take some- 
 what the same line. In 1884 they had been careful 
 in their "platform," whilst asserting that reform 
 was urgently required, to add that " the necessary 
 reduction in taxation can and must be effected 
 without depriving American labour of the ability 
 to compete successfully with foreign labour, and 
 without imposing lower rates of duty than will be 
 ample to cover any increased cost of production 
 which may exist in consequence of the higher rate 
 of wages prevailing in this country." 2 And even 
 in 1888, when their demands had much increased, 
 they kept the proviso that the revision must be 
 "with due allowance for the difference between 
 the wages of American and foreign labour." But 
 their attitude was not satisfactory to the electors ; 
 the Republicans pushed the argument for all, and 
 more than all, that it was worth without any 
 regard to the problem of the relative efficiency in 
 
 1 Stanwood, ii. p. 256. 
 
 2 Quoted in Stanwood, ii. p. 222. It is noteworthy that in 1884 the 
 Democrats, like the Free Traders of fifty years before, asserted openly 
 that " taxes collected at the custom house " must continue to be the 
 chief source of Federal revenue,
 
 228 THE NEW THEORY OF PROTECTION 
 
 the long run of well-paid and ill-paid labour, or to 
 the relation of wages to the cost of living and 
 "the campaign of 1888 was won on the 'pauper 
 labour ' argument." l 
 
 The new Tariff Bill of the Republicans was 
 introduced in April, 1890, by Mr. McKinley, the 
 Chairman of the Committee on Ways and Means ; 
 it received the Presidential approval on October 1st, 
 and came into force five days later. Its most novel 
 feature was the extension of Protection to agricul- 
 ture a policy which was inspired largely by the 
 desire on the part of the Republicans to allay the 
 dissatisfaction of the farmers, who believed that 
 they were being exploited in the interests of the 
 manufacturers, and to detach them, if possible, 
 from the Democratic and Free Trade party. Its 
 economic defence was found in the growth of the 
 imports of agricultural produce, which reached the 
 value of $256,000,000 in 1889, and the growing 
 competition of Canada. So the duty on barley 
 was increased from 10 cents to 30 cents a bushel ; 
 on oats from 10 to 15 cents ; on wheat from 20 to 
 25 cents ; on potatoes from 15 to 25 cents ; on hay 
 from $2 to $4 a ton ; whilst eggs and apples, hitherto 
 free, were subjected to duties of 5 cents a dozen 
 and 25 per cent, ad valorem per bushel respectively. 
 The duty on tobacco suitable for cigar wrappers, 
 which could be grown in the United States only 
 in Connecticut and was largely imported from 
 Sumatra, was increased from 75 cents to $2 a 
 
 1 Mayo-Smith and Seligman, p. 23.
 
 PROTECTION FOR AGRICULTURE 229 
 
 pound, "with the additional most important pro- 
 vision that if any portion, no matter how insignifi- 
 cant, of any bale of tobacco imported is suitable 
 for wrapping, the whole should pay the rate of $2 
 a pound." 1 Additional increases were on flax and 
 hemp, neither of which were grown in good qualities 
 in the United States. 2 And finally, the duties on 
 wool were raised considerably ; the rate on clothing 
 wool was advanced only from 10 to 11 cents a 
 pound, and on combing wool only from 10 to 12 
 cents, but on carpet wool the change was much 
 greater. This is wool of a coarse kind, not grown 
 in the United States, but now made subject to a 
 higher duty because it was believed that better 
 qualities were imported as carpet wool, and there- 
 fore paid a smaller duty than they would otherwise 
 do though no satisfactory evidence of this was 
 produced ; an ad valorem rate, of from 32 per cent, 
 to 50 per cent., was now imposed on carpet wool 
 instead of the former specific rate, and represented 
 in fact a substantial increase. 3 
 
 Naturally the manufacturers of woollen goods 
 of all kinds strongly resisted the concessions -made 
 to the growers of wool, and could be pacified only 
 by more consideration for themselves ; and, in 
 fact, the schedules of woollens showed the most 
 
 1 Mayo-Smith and Seligman, p. 32. 
 
 2 " It may be said without qualification that the purpose of the in- 
 crease of duties on agricultural products was political, and that the 
 object was accomplished. The farmers were taken into the Protection 
 partnership" (Stanwood, ii. p. 266). 
 
 3 Taussig, pp. 256-9.
 
 230 THE NEW THEORY OF PROTECTION 
 
 vigorous application of the protective policy. It 
 is true that in the case of the cheapest kinds of 
 woollen goods there was little, if any increase, 
 because whilst the ad valorem part of the duty 
 was slightly raised, the specific " compensating " 
 part was commonly reduced ; but on the better 
 qualities the increase was large, and at the same 
 time the rates were greatly complicated by new 
 classifications and further applications of the prin- 
 ciple of the sliding-scale. 1 To take only a few 
 instances of an increase the duty on ready-made 
 clothing was raised from 40 cents a pound + 35 per 
 cent, ad valorem to 49J cents + 60 per cent., and on 
 Brussels carpets from 30 cents the square yard + 
 30 per cent, ad valorem to 44 cents + 40 per cent., 
 whilst in the case of dress goods the advance 
 made them subject to a duty of nearly 100 per 
 cent. 2 The same policy was pursued with other 
 
 1 The following table gives a simple illustration of this in the case 
 of woollen cloths (Taussig, p. 260) : 
 
 1883. 1890. 
 
 (1) If worth 80 cents or less per Ib. , (1) If worth 30 cents or less per Ib. , 
 
 35 cents per Ib. + 35 per cent. 33 cents per Ib. + 40 per cent. 
 
 (2) If worth more than 80 cents (2) If worth between 30 cents and 
 
 per Ib., 35 cents per Ib. +40 40 cents per Ib., 38 cents 
 
 per cent. per Ib. + 40 per cent. 
 
 (3) If worth more than 40 cents 
 per Ib., 44 cents per Ib. +50 
 per cent. 
 For further illustrations see p. 234-6. 
 
 2 Yet in spite of these high duties, the tariff on wool has greatly 
 hampered the industry in the United States. " The effect of this duty 
 is perceptible, not only upon the price of home-grown wool, which is 
 enhanced by some considerable part of the duty, but also in its cur- 
 tailment of importations of the most desirable varieties of Australian 
 and South American fleeces. For this reason among others and there 
 are several others of importance there has thus far been no serious
 
 IRON AND STEEL 231 
 
 textiles ; there were remissions of duties on the 
 cheaper qualities of cotton, linen, and silk goods, 
 and radical increases on all the better kinds. Some 
 other advances, not on textiles, may also be con- 
 veniently noted here on fine plate-glass from 
 40-45 per cent, to 60 per cent, ad valorem, and on 
 cigars (to compensate the manufactures for the 
 change in the tobacco duties) from $2.50 a pound + 
 25 per cent, to $4.50 + 25 per cent. 
 
 In the case of iron and steel goods, which had 
 once furnished the friends of Protection with their 
 most effective arguments, the situation was alto- 
 gether different. The American production of 
 pig-iron and Bessemer steel rails exceeded the 
 British in 1889 for the first time, and so did the 
 output of coal. The American manufacturers 
 were in control of the home market ; they no 
 longer feared foreign competition, and were quite 
 willing to allow some reductions which probably 
 would benefit only those consumers on the Eastern 
 coast to whom transport by water from Europe 
 was as cheap or cheaper than transport by rail 
 from distant parts of the United States. The 
 duty on steel rails was lowered to $13.44 a ton, 1 
 and there were decreases on the inferior qualities 
 of boiler iron and steel ingots. But, on the other 
 hand, the manufacturers in the East, especially 
 
 attempts to develop an American export trade in woollen goods. The 
 one possible exception to this rule is in the case of carpets " (S. N. D. 
 North, in Annuls of the American Academy, vol. xxiii. No. 1, January, 
 1904). 
 
 1 " It left the duty still at a prohibitory rate " (Taussig, p. 272).
 
 232 THE NEW THEORY OF PROTECTION 
 
 near the coast, could secure no remissions on pig- 
 iron or iron ore, which they obtained largely from 
 Cuba and Spain. On a number of other metal 
 manufactures (brass, copper, lead) there were re- 
 ductions. A concession was made to the shipping 
 industry by extensive grants of drawbacks on all 
 materials "which may be necessary for the con- 
 struction and equipment of vessels built in the 
 United States for foreign account and ownership, 
 or for the purpose of being employed in the 
 foreign trade, including the trade between the 
 Atlantic and Pacific ports of the United States. 1 
 The one great change was in the case of tin plates, 
 which were scarcely manufactured at all in the 
 United States, but were imported in enormous 
 quantities (with an average value of 20 million 
 dollars in the years 1888-90), owing in part to 
 the growth of the canning industry. Since 1873 
 attempts had been made to develop the manu- 
 facture in America, but without success, for the 
 competition of South Wales was too strong. A 
 determined effort was now made by increasing 
 the duty from 1 cent to 2^ cents a pound (about 
 70 per cent, ad valorem), with the proviso that 
 after October, 1897, tin plates should be admitted 
 free unless in any one year the production of tin 
 plates in the United States should equal "one- 
 third the amount of such plates imported and 
 entered for consumption during any fiscal year 
 after the passage of this Act." The idea seems 
 
 1 Section 8.
 
 THE SUGAR DUTIES 233 
 
 to have been that unless there was evident indica- 
 tion, by the end of six years, that the new 
 industry which it was proposed to try to create 
 had really established itself, the attempt should be 
 given up ; the proviso was a concession to the con- 
 sumers of tin plates, who were strongly opposed 
 to the proposed increase of duty, and anticipated 
 serious difficulties for the various canning in- 
 dustries. There can be no question that the 
 higher protection did enable the manufacture to 
 get a start and obtain a firm footing ; in the four 
 years 1887-90 the average value of the imports of 
 tin plates from Great Britain into the United States 
 was 4,279,000, and the quantity manufactured 
 there practically nil ; in the four years 1898-1901 
 the average value of imports from Great Britain 
 was only 807,000, and the average production in 
 the United States was 347,000 tons. 1 
 
 The most revolutionary change made by the 
 new Act had reference to sugar, on which the 
 duty hitherto in force varied from 1^ cents to 
 3^ cents per pound a fairly high rate. The 
 revenue from sugar was very large ; in the five 
 years 1886-90 it averaged about 53 million dollars 
 a year. There had been a number of suggestions 
 for the reduction of duty, and there was even a 
 Bill introduced by the Republicans of the Senate, 
 prior to the election of 1888, which proposed a 
 remission of about 50 per cent. The McKinley 
 
 1 Board of Trade Blue Book on British and Foreign Trade and 
 Industry, p. 132.
 
 234 THE NEW THEORY OF PROTECTION 
 
 Tariff abolished the duty on raw sugar alto- 
 gether, but made refined sugar subject to a rate 
 of \ cent per pound. But in order to help the 
 producers of sugar in the United States, chiefly 
 in Louisiana, the Federal Government undertook 
 to pay a bounty amounting to 2 cents per pound 
 on the best qualities, for the fourteen years to July, 
 1905. At the same time a small surtax was imposed 
 on all bounty-fed sugar coming from other countries. 
 From the Treasury's standpoint the effect of this 
 change was to reduce the customs revenue from 
 sugar from fifty-four million dollars in 1890 to 
 seventy-seven thousand dollars in 1892, whilst at 
 the same time the amount to be paid in bounties 
 was over seven million dollars in 1892, and over 
 twelve million in 1894. 
 
 One other characteristic of the McKinley Act 
 should be noticed, and that is the use which it 
 made of detailed sliding scales with minimum 
 values, instead of simple ad valorem duties. Illus- 
 trations of the system have already been given 
 from time to time ; its further application greatly 
 complicated the Tariff, as the following example 
 shows. The Act of 1883 contented itself with the 
 simple statement that "penknives, pocketknives 
 of all kinds, and razors shall pay 50 per cent, ad 
 valorem" but in the Act of 1890 that direction 
 had grown into the following elaborate statement 
 as to the duties to be levied : " Penknives or 
 pocketknives of all kinds, or parts thereof, and 
 erasers, or parts thereof, wholly or partly manu-
 
 COMPLICATIONS OF THE TARIFF 235 
 
 factured, valued at not more than fifty cents per 
 dozen, twelve cents per dozen ; valued at more 
 than fifty cents per dozen and not exceeding one 
 dollar and fifty cents per dozen, fifty cents per 
 dozen ; valued at more than one dollar and fifty 
 cents per dozen and not exceeding three dollars 
 per dozen, one dollar per dozen ; valued at more 
 than three dollars per dozen, two dollars per dozen ; 
 and in addition thereto on all the above, fifty per 
 centum ad valorem. Razors and razor blades, 
 finished or unfinished, valued at less than four 
 dollars per dozen, one dollar and seventy-five cents 
 per dozen ; and in addition thereto on all the above 
 razors and razor blades, thirty per centum ad 
 valorem.'" 1 Not only does this greatly increase 
 the difficulty of customs administration, but it 
 offers a very strong temptation to under- valuation 
 on the part of importers. 
 
 The complications of the tariff, and some defects 
 in the existing organisation, rendered a rearrange- 
 ment of the customs system desirable, and the 
 task was accomplished by the Customs Adminis- 
 
 1 The following table shows the effect of this change in the amount 
 of the duty (Worthington Ford, in Political Science Quarterly, vol. 
 xiii. No. 2. p. 283). : 
 
 Actual ad val. duty. 
 
 "l883 1890 ^ 
 per cent, per cent. 
 Penknives, etc., valued at not more that 50 cents 
 
 per doz. . 60 ... 74'06 
 
 valued over 50 cents, and not 
 
 exceeding $1.50 per doz. . 50 ... 96 '17 
 valued over $1.50 and not ex- 
 ceeding $3 per doz. . . 50 ... 9474 
 valued over $3 50 86 '95
 
 236 THE NEW THEORY OF PROTECTION 
 
 trative Act of June, 1890, which established the 
 system still in force. Under that Act all goods 
 imported must be accompanied by an invoice con- 
 taining a declaration by the purchaser or manu- 
 facturer with "a full statement of the time when, 
 the place where, and the person from whom the 
 purchase was made, and the actual cost thereof 
 and of all charges thereon " ; and such declaration 
 must have been produced to, and countersigned 
 by, the United States consul or commercial agent 
 at the place where the goods were purchased or 
 manufactured. The invoice must be sworn to by 
 the importer ; the goods are then valued by an 
 " appraiser," and if the duty is ad valorem and the 
 valuation by the appraiser exceeds the valuation 
 on the invoice, double duty is levied on the differ- 
 ence. Appeal lies to a general appraiser, then to 
 Boards of General Appraisers, and then to the 
 Federal Courts. 
 
 This elaborate machinery is almost inseparable 
 from any system of ad valorem duties, and con- 
 sequently most nations have preferred the simpler 
 method of specific duties. The main advantages 
 of ad valorem duties are that the tax always bears 
 the same relation to the value of the commodity 
 on which it is imposed, and is perfectly intelligible 
 even to the non-expert ; the effect of specific 
 duties, on the contrary, can only be determined 
 by a trade specialist, and unless they are frequently 
 changed they are apt to become much heavier or 
 much lighter than was intended at the time of
 
 SPECIFIC AND AD VALOREM DUTIES 237 
 
 their imposition a striking illustration of this from 
 the early history of the German Zollverein has 
 already been given. 1 To prevent such occurrences 
 the tariff must be frequently readjusted, but this 
 involves much labour and a certain amount of 
 uncertainty to foreign traders. 2 Moreover, unless 
 the tariff is extremely detailed (as most continental 
 tariffs are) it is impossible to keep the specific 
 duties from weighing more heavily on the cheaper 
 than on the better qualities of goods. 3 These 
 considerations, as we have seen, induced an 
 American Congressional committee in the thirties 
 to declare strongly in favour of the ad valorem 
 system, and, after various changes, the United 
 States seems definitely to have decided to use 
 ad valorem duties extensively. Yet the fact that 
 most protective nations have not imitated the 
 United States in this respect suggests that there 
 are some very strong objections to its policy. The 
 machinery for collection has to be much more 
 elaborate than when specific rates are employed 
 at every port, however small, there must be a 
 (more or less) competent appraiser. Secondly, it 
 is not easy to secure that the valuations at the 
 various ports are uniform ; complaints on this 
 point were frequent in the United States at one 
 time, and other countries which use the ad 
 valorem method seem to have the same experi- 
 
 1 See p. 6. 
 
 2 Most foreign tariffs, however, are for long terms of years. 
 
 3 An instance is the single British tax on tea, which is the same 
 for all qualities.
 
 238 THE NEW THEORY OF PROTECTION 
 
 ence. Arrangements can, it is true, be made for 
 appeals, but these usually mean much trouble to 
 the importers. Thirdly, the temptation to under- 
 valuation is strong, and fraudulent declarations 
 are encouraged ; the elaborate precautions taken 
 and penalties provided by the Customs Adminis- 
 trative Act in the United States only show how 
 deep-seated this evil may become. On the whole, 
 then, it appears clear that, balancing advantages 
 and disadvantages, specific duties are the most 
 desirable form of duty, and the example of the 
 United States will probably never be widely 
 followed. 1 
 
 1 For an account of another most important part of the McKinley 
 Tariff Act the clauses relating to Reciprocity see Chapter VIII.
 
 CHAPTER VII 
 THE WILSON AND DINGLEY TARIFFS 
 
 THE passage of the McKinley Tariff Act was 
 followed by an immediate and complete reaction. 
 A month after it came into force the election for 
 Congress took place, and resulted in a tremendous 
 defeat for the Republican party. The reaction 
 continued, and the Presidential campaign of Novem- 
 ber, 1892, ended in the return of the Democratic 
 candidate, Cleveland, who represented the anti- 
 protectionist policy. The Western States went 
 almost solidly Democratic ; and the new " farmer's 
 party," the Populists, also detached many votes 
 from the Republicans. The Democrats even 
 secured a small majority in the Senate, and so for 
 the first time since the period before the Civil 
 War, they had complete control of the Federal 
 Government. The causes of the change in public 
 opinion are not very clear ; the new Tariff had not 
 been sufficiently long in force for any definite 
 opinion to be formed as to its effects ; but no one 
 could allege that the issue had not been definitely 
 set before the country. The Democrats in their 
 platform for the Presidential election had declared 
 
 239
 
 240 THE WILSON AND DINGLEY TARIFFS 
 
 that it was " a fundamental principle of the Demo- 
 cratic party that the Federal Government has no 
 power to impose and collect tariff duties, except 
 for revenue purposes only," and denied that there 
 had been any increase of prosperity under the 
 McKinley Tariff. Their candidate himself was 
 more moderate ; in his letter of acceptance of the 
 party nomination, Cleveland wrote : " Reform is 
 still our purpose. Though we oppose the theory 
 that tariff laws may be passed having for their 
 object the granting of discriminating and unfair 
 governmental aid to private ventures, we wage no 
 exterminating war against any American interests. 
 We believe a readjustment can be accomplished, 
 in accordance with the principles we profess, with- 
 out disaster or demolition. We believe that the 
 advantages of freer raw material should be accorded 
 to our manufacturers, and we contemplate a fair 
 and careful distribution of necessary tariff burdens 
 rather than the precipitation of Free Trade." The 
 Republicans in their turn asserted that " the pros- 
 perous condition of our country is largely due to 
 the wise revenue legislation of the Republican 
 Congress," and claimed that the fall in the price of 
 manufactured commodities was in fact due to the 
 tariff. The new President considered his large 
 majority as a mandate of tariff reform, but the 
 hopes which he had formed were doomed to dis- 
 appointment. His task was complicated by two 
 circumstances ; one being the small and uncertain 
 Democratic majority in the Senate, and the other
 
 THE TARIFF OF 1894 241 
 
 the silver question. The problem which the last 
 presents lies outside our subject ; it is necessary 
 here only to state that the Republicans had 
 yielded in 1890 to the demand for the freer coin- 
 age of silver, and that the excessive issues of silver 
 currency under the Silver Purchase Act of that 
 year had produced a rapid fall in prices, and a 
 good deal of commercial confusion. President 
 Cleveland and his advisers thought themselves 
 compelled to propose the repeal of the Purchase 
 Act ; they carried it after a hard struggle, but in 
 so doing they threw confusion into the ranks of 
 their own party, which contained a strong section 
 in favour of "free silver." These difficulties and 
 others weakened the Government seriously, and 
 though it had comparatively little difficulty in 
 carrying its scheme for tariff reform (subse- 
 quently named the Wilson Tariff, after the Chair- 
 man of the Committee of Ways and Means) in 
 the lower House, it was not able to overrule 
 the sweeping amendments made by the Senate 1 
 amendments which gravely modified the pro- 
 posals, and in some cases made them of no effect. 
 
 Nevertheless the Wilson Tariff did make con- 
 siderable changes. One of the most important 
 was in the treatment of woollens, which had been 
 the critical part of the McKinley Act ; raw wool 
 was henceforth to be admitted free, and the elabo- 
 rate duties on woollen manufactures were swept 
 
 1 As sent back by the Senate to the House of Representatives, the 
 Bill contained 684 amendments (Stanwood, ii. p. 340). 
 R
 
 242 THE WILSON AND DINGLEY TARIFFS 
 
 away and replaced by the simple arrangement of 
 ad valorem duties of 50 per cent, on the best 
 goods, 40 per cent, on dress materials, and 25 per 
 cent, on blankets and flannels. Naturally the 
 specific duties, compensatory for the duty on raw 
 wool, were abolished, but though the manufac- 
 turers were caused some trouble by the change, it 
 cannot be said that they were treated unfairly. 
 As regards other textiles, there were large reduc- 
 tions on the cheapest kinds of cotton goods, and 
 smaller ones on the finer qualities ; and here again 
 the tariff was greatly simplified by the abolition of 
 the mixed specific and ad valorem duties. There 
 were small reductions also on silks and linens. The 
 President had intended that all raw materials 
 should be admitted free, and had carried the 
 House of Representatives with him ; the Senate, 
 however, could not be induced to go so far. The 
 chief illustrations of this were furnished by iron 
 ore and coal. The House of Representatives had 
 abolished the duty on both of these commodities ; 
 the Senate was content to reduce the duty in each 
 case from 75 cents to 40 cents a ton. The duty on 
 pig-iron was lowered from $6.72 to $4 a ton, on 
 steel rails from $13.44 to $7.84 a ton, and even 
 on tin plates from 2f cents to 1 cents per pound. 
 The general policy was then to reduce taxation on 
 all commodities which could in any way be regarded 
 as raw materials, and to substitute ad valorem for 
 specific duties as widely as possible. 
 
 One other serious change was in the case of
 
 CHANGES IN THE SUGAR DUTIES 243 
 
 sugar. The clauses affecting that commodity in 
 the McKinley Tariff had caused very considerable 
 dissatisfaction : for one thing, the financial results 
 had been somewhat unsatisfactory, and for another, 
 it was widely believed that the duty on refined 
 sugar and the bounties were largely in the interests 
 of the Sugar Trust one of the earliest of those 
 organisations which now play so great a part in 
 American industrial life. The Democrats now 
 proposed to admit refined sugar as well as raw 
 sugar free, and to abolish the bounty system, but 
 the Senate made many amendments admittedly in 
 the interest, and under the influence, of the Sugar 
 Trust. An ad valorem duty of 40 per cent, was 
 imposed on raw sugar ; refined sugar was made 
 subject to a rate of ^ per cent., and the surtax on 
 bounty-fed sugar, imported into the United States, 
 was retained. The House of Representatives was 
 unable to overrule the Senate, and " on the whole, 
 the refining monopoly, while it lost something, 
 came out of the struggle victorious, and was left 
 in little less secure control over the trade after the 
 Act of 1894 than under the Act of 1890." * 
 
 Altogether the new tariff accomplished little ; 
 none of the high hopes which the Democrats had 
 formed after the Presidential election were realised. 
 The President himself was grievously disappointed ; 
 in order to save something of his policy, he allowed 
 the Act to pass, but he would not give it his signa- 
 ture ; it became law merely because he took no 
 
 1 Taussig, pp. 313-14.
 
 244 THE WILSON AND DINGLEY TARIFFS 
 
 action in the time required by the Constitution. 
 The weakness of the Democrats, the confusion in 
 the party, the disruption caused by the silver 
 question, the conflict between the President and 
 the Senate, and the Treasury difficulties with 
 which the Cleveland Administration failed to cope, 
 brought about a reaction as sharp as that of 
 1890-2, and again placed the Protectionists in 
 power. The Democrats had hoped to establish an 
 income tax, to meet the deficiency resulting from 
 the reduction of duties and to enable them to 
 continue the removal of the customs restrictions, 
 but the Supreme Court now reversed its decision 
 of the Civil War period, and decided the income 
 tax to be unconstitutional. 
 
 But at the election of 1896, the country was not 
 concerned mainly with the question of Protection 
 or Free Trade. The advocates of free silver had 
 grown in force astonishingly, and had completely 
 captured the Democratic party machine ; in their 
 election platform the Democrats declared for " the 
 free and unlimited coinage of both silver and gold 
 at the present legal ratio of 16 to 1, without wait- 
 ing for the aid or consent of any other nation," 1 
 and added that "until the money question is 
 settled we are opposed to any agitation for further 
 changes in our tariff laws, except such as are 
 necessary to meet the deficit in revenue caused by 
 the adverse decision of the Supreme Court on the 
 
 1 A reference to the argument that this would be practicable only 
 as the result of an international agreement.
 
 PRESIDENTIAL ELECTION OF 1896 245 
 
 income tax." To prevent all misconception as to 
 their policy, the Democrats chose as their candi- 
 date the foremost platform representative of free 
 silver, and the Populist party also gave him their 
 support. The Republicans had intended to fight 
 the election mainly on the tariff issue, and had 
 therefore chosen McKinley as their representative. 
 But they were compelled by force of circumstances 
 to drop that question for the time, and to go to 
 the electors chiefly as the opponents of the revolu- 
 tionary monetary proposals of the Democrats. 
 And there can be no question that this was the 
 chief cause of their overwhelming victory ; it is 
 true that they had announced their intention to 
 amend the tariff, but " the tariff gave way to the 
 free coinage issue, and the election ultimately 
 turned upon that almost exclusively." 1 The 
 Democrats were broken up, large numbers of the 
 party in the Eastern States either abstained from 
 taking part in the election or voted for McKinley. 
 The Republican candidate was elected by a very 
 considerable majority, and the Republicans found 
 themselves supreme in the House of Representa- 
 tives, and masters of the Senate by a few votes. 
 The new President could scarcely claim that the 
 nation had given a definite judgment on the tariff 
 problem, and, moreover, he owed his election in 
 part to the votes of those Democrats who could 
 not support the extreme views represented by his 
 opponent. But nevertheless the President and 
 
 1 Stanwood, ii. p. 376.
 
 246 THE WILSON AND DINGLEY TARIFFS 
 
 his advisers made up their minds that they were 
 justified in carrying out tariff changes immediately. 
 The country had experienced a considerable com- 
 mercial crisis in 1893 and the following years, and 
 the Treasury had to meet a large deficit. The 
 facts that the crisis had commenced in 1893, whilst 
 the McKinley Tariff was still in force, and that 
 the deficit was largest in that year and had been 
 growing smaller ever since, 1 had no weight for 
 them ; and the President now invited Congress to 
 provide adequately for the wants of the Treasury, 
 and suggested that the duties imposed for this 
 purpose "should be so levied upon foreign pro- 
 ducts as to preserve the home market so far as 
 possible to our own producers ; to revive and 
 increase manufactures ; to relieve and encourage 
 agriculture ; to increase our domestic and foreign 
 commerce ; to aid and develop mining and build- 
 ing ; and to render to labour in every field of 
 useful occupation the liberal wages and adequate 
 rewards to which skill and industry are justly 
 entitled." The result was the so-called Dingley 
 Act, which became law in July, 1897, after a 
 rapid progress through both Houses of Congress. 
 It imposed duties higher than under any preceding 
 tariff. 
 
 The most important feature of the new tariff 
 was the return to the duties on certain raw 
 materials, especially wool. The import of that 
 
 1 In the financial year 1893-4, the deffcit was 70 million dollars ; 
 in 1894-5, 43 million ; in 1895-6, 25 million ; in 1896-7, 18 million.
 
 THE TARIFF OF 18.97 247 
 
 commodity had tripled between 1893 and 1896, 
 and the supply of woollen manufactures from 
 abroad had also doubled. It was therefore re- 
 solved to reimpose on clothing and combing wool 
 the rates of the tariff of 1890, and on carpet 
 wool graded duties higher than in any other period. 
 The manufacturers were strongly opposed to the 
 change, but political considerations and the desire 
 to do something to counteract the effect of the 
 appeal made by the silver party to the farmers, 
 prevailed with the Executive. Largely for the 
 same reason, a duty of 15 per cent, ad valorem 
 was imposed on hides, which had been free since 
 1872 ; and the rates of 1890 on flax were also 
 restored. 
 
 In regard to textiles, the restoration of the wool 
 duty was followed inevitably by an increase of 
 the protection given to woollen manufactures, and 
 the old principle of a combination of specific com- 
 pensating duties and ad valorem protective duties 
 was again applied, with its great administrative 
 complications and difficulties. 1 On the chief class 
 of woollens imported the protective ad valorem 
 rate was increased, so that it had advanced from 
 25 per cent, in 1875 to 55 per cent, in 1897. On 
 cottons the duty was somewhat lower than in 
 
 1 " It will be observed that under the Act of 1897 on dress goods 
 the customs officers must ascertain first, whether the warp consists 
 ' wholly of cotton or other vegetable material ' ; if so, whether the 
 goods are worth more than 7 cents a yard ; if not, whether they are 
 worth more or less than 70 cents a Ib. All these circumstances affect 
 the rate of duty, and obviously increase the difficulties of administra- 
 tion and the opportunities for evasion " (Taussig, p. 334).
 
 248 THE WILSON AND DINGLEY TARIFFS 
 
 1890, but a good deal higher than in 1894, and 
 here again the combined specific and ad valorem 
 duties were adopted. The same complicated method 
 was applied to silks and linens, with a marked in- 
 crease in the amount of the duties. Raw hides 
 were taxed for the first time. There were advances 
 also in the case of china, earthenware, and glass, 
 by a return to the duties of 1890. In the case 
 of metals, there was little change so far as iron 
 ore, pig-iron, steel rails, and copper were con- 
 cerned ; but the duty on coal was raised from 
 40 cents to 67 cents a ton (which was 8 cents 
 less than in 1890). The rates on certain manu- 
 factures of iron and steel, such as cutlery, and 
 on lead and lead ore were restored to the points 
 of the McKinley Tariff. The duty on tin-plate 
 was increased only slightly, from 1 cents to 
 1^ cents. In the sugar duties the ad valorem 
 duty of 40 per cent, imposed by the Act of 1894 
 on raw sugar was now replaced by a specific duty 
 of about double that amount ; there was also an 
 increase, in fact, on refined sugar, though the 
 Sugar Trust did not secure anything like the 
 advantage for which they had striven. 
 
 From the administrative point of view, the new 
 tariff was even more complicated than its predeces- 
 sors. The elaborate clauses concerning knives, pen- 
 knives, and razors in the McKinley Tariff have 
 already been quoted ; the clause referring to the 
 same commodities in the Act of 1897 will serve 
 to show how the complication had increased :
 
 INCREASED COMPLICATION 249 
 
 " Penknives or pocketknives, clasp knives, prun- 
 ing knives, and budding knives of all kinds, 
 or parts thereof, and erasers or manicure knives, 
 or parts thereof, wholly or partly manufactured, 
 valued at not more than forty cents per dozen, 
 forty per centum ad valorem ; valued at more than 
 forty cents per dozen and not exceeding fifty cents 
 per dozen, one cent per piece and forty per centum 
 ad valorem; valued at more than fifty cents per 
 dozen and not exceeding one dollar and twenty- 
 five cents per dozen, five cents per piece and forty 
 per centum ad valorem ; valued at more than one 
 dollar and twenty-five cents, per dozen and not 
 exceeding three dollars per dozen, ten cents, per 
 piece and forty per centum ad valorem ; valued at 
 more than three dollars per dozen, twenty cents per 
 piece and forty per centum ad valorem ; Provided, 
 That blades, handles, or other parts of either or 
 any of the foregoing articles, imported in any 
 other manner than assembled in finished knives or 
 erasers, shall be subject to no less rate of duty 
 than herein provided for penknives, pocketknives, 
 clasp knives, pruning knives, manicure knives, 
 and erasers valued at more than fifty cents and not 
 more than one dollar and fifty cents per dozen. 
 Razors and razor blades, finished or unfinished, 
 valued at less than one dollar and fifty cents 
 per dozen, fifty cents per dozen and fifteen per 
 centum ad valorem; valued at one dollar and 
 fifty cents per dozen and less than three dol- 
 lars per dozen, one dollar per dozen and fifteen
 
 250 
 
 per centum ad valorem; valued at three dollars 
 per dozen or more, one dollar and seventy-five 
 cents per dozen and twenty per centum ad valorem. 
 Scissors and shears, and blades for the same, finished 
 or unfinished, valued at not more than fifty cents 
 per dozen, fifteen cents per dozen and fifteen per 
 centum ad valorem ; valued at more than fifty cents 
 and not more than one dollar and seventy-five 
 cents per dozen, fifty cents per dozen and fifteen 
 per centum ad valorem ; valued at more than one 
 dollar and seventy-five cents per dozen, seventy- 
 five cents per dozen and twenty-five per centum ad 
 valorem." l As another illustration, the duties on silk 
 piece goods may be quoted. They are as follows : 
 
 SILK PIECE GOODS. per Ib. 
 
 (1) Containing 20 per cent, or less in weight of silk, if in 
 
 the gum . . ... $0.50 
 
 If dyed in the piece . ... .60 
 
 (2) Containing 20 to 30 per cent, in weight of silk, if in 
 
 the gum . . ... .65 
 
 If dyed in the piece . ... .80 
 
 (3) Containing 30 to 45 per cent, in weight of silk, if in 
 
 the gum . . ... .90 
 
 If dyed in the piece . ... 1.10 
 
 (4) Containing 30 per cent, or less in weight of silk, if 
 
 dyed in the thread or yarn, black . . . .75 
 
 Other colour . . . .90 
 
 (5) Containing 30 to 45 per cent, in weight of silk, if 
 
 dyed in the thread or yarn, black . . . 1.10 
 
 Other colour . . . 1.30 
 
 It should be added that the McKinley Tariff in- 
 augurated an elaborate policy of drawbacks, by a 
 
 1 Quoted by Ford in Political Science Quarterly, vol. xiii. No. 2, 
 pp. 284-5. * Taussig, p. 339.
 
 DRAWBACKS 251 
 
 sweeping clause which provided that "where im- 
 ported materials on which duties have been paid, 
 are used in the manufacture of articles manufac- 
 tured or produced in the United States, there shall 
 be allowed on the exportation of such articles a 
 drawback equal in amount to the duties paid on 
 the materials used, less 1 per cent, of such duties." 
 The Dingley Tariff has continued the system, but 
 the "conditions and regulations are cumbersome 
 and often difficult to comply with," l and the sys- 
 tem admittedly hampers the manufacturers for 
 export. 
 
 1 S. N. D. North, in Annals of the American Academy) January, 
 1904, p. 7
 
 CHAPTER VIII 
 
 RECIPROCITY UNDER THE AMERICAN 
 TARIFF CONCLUSION 
 
 IT will have been noticed that hitherto little has 
 been said of the international commercial relations 
 of the United States, and no reference has been 
 made to any treaties similar to those which have 
 played so important a part in continental Europe 
 during the last half-century. The explanation of 
 this fact is that until quite recently the United 
 States have stood almost altogether aloof from 
 such a treaty system, and the slight attempts 
 made from time to time to enter it have been ill- 
 fated. It is true that various agreements made 
 by the United States have contained the "most 
 favoured nation" clause, but the effect of that 
 provision is much more limited than in European 
 treaties, for it has been construed by American 
 legists to apply merely to privileges voluntarily 
 granted by the United States to any country, and 
 not to anything given in return for reciprocal 
 advantages. That is to say, that if the United 
 States, in return for certain remissions of duty on 
 
 American goods made by Germany, give corre- 
 
 252
 
 THE CANADIAN TREATY 253 
 
 spending reductions on certain of their imports 
 from Germany, they are not bound to extend the 
 same reductions to any third nation with whom 
 they may have a treaty containing the "most 
 favoured nation " clause. 1 It is unnecessary to 
 point out that this interpretation practically de- 
 stroys the value of the clause in question, since 
 the privileges granted by the United States with- 
 out return are not likely to be numerous or im- 
 portant ; but it simplifies the making of reciprocity 
 treaties, since it enables the Federal Government 
 to consider simply the effect of the treaty on the 
 trade between the two contracting countries - 
 it escapes the complications arising under the 
 European method. 
 
 The earliest attempts at reciprocity were not 
 very satisfactory ; the proposal for a treaty with 
 the Zollverein in 1844 was rejected by the Senate, 
 and it was not until ten years later that a com- 
 mercial agreement of any kind was actually made. 
 That was with Great Britain for Canada, and it 
 remained in force for twelve years ; it arranged for 
 the admission of a large number of agricultural pro- 
 ducts from either country into the other free of duty ; 
 it also gave certain fishing privileges to American 
 seamen, and provided for mutual freedom of trans- 
 port. It seems to be agreed that on the whole 
 Canada profited rather more than the United 
 States, at least in the latter part of the treaty 
 period, and the United States had by 1866 become 
 
 Mayo-Smith and Seligman, pp. 34-5.
 
 254 RECIPROCITY UNDER AMERICAN TARIFF 
 
 completely dissatisfied. One cause of this was 
 certainly the fact that the Canadian provincial 
 governments increased the duties on manufactured 
 goods to make up for the financial losses sustained 
 by them owing to the reductions on raw materials. 
 In 1866, partly because of this, and partly for 
 political reasons (notably the sympathy of Canada 
 for the Confederates), the United States renounced 
 the treaty. A number of other contemplated 
 agreements with other countries failed. The 
 negotiations with Hawaii in 1855 were abandoned ; 
 treaties prepared by the Executive with Mexico 
 in 1859 and 1883, with Hawaii in 1867, and with 
 Canada in 1874, were rejected by the Senate, and 
 arrangements made in 1884 with Spain, for Cuba 
 and Porto Rico, and with Dominica were aban- 
 doned by the Executive. One treaty alone was 
 made with Hawaii in 1875, but the adoption of 
 that in the United States was determined rather 
 by political than economic considerations ; it was 
 a step on the road to annexation. 
 
 The first definite and general provision for re- 
 ciprocity was made by the McKinley Act of 1890, 
 at the instigation of Elaine, the Secretary of State, 
 who had been the moving spirit in the summoning 
 of the Pan-American Congress which met at 
 Washington in October, 1889. Eighteen countries, 
 including the United States, were represented 
 there, and considerable attention was given to the 
 suggestions for an American Customs Union. It 
 was agreed that a union for customs purposes on
 
 UNITED STATES AND SOUTH AMERICA 255 
 
 the lines of the German Zollverein was altogether 
 impossible for many reasons economic and politi- 
 cal ; and absolute free trade between the various 
 countries was held to be, for the time, out of the 
 question, since most of them were largely de- 
 pendent for their revenues on the customs duties. 
 The committee which reported on the proposals 
 could only urge the making of separate treaties 
 with reciprocal reductions of duty. Even this 
 report did not secure unanimous support ; the 
 representatives of four countries voted against it, 
 and Chili and Argentina especially urged that so 
 long as the United States insisted on the mainten- 
 ance of their high duties reciprocity was impossible. 
 But Elaine was not altogether discouraged, and 
 he thought that commercial agreements, which 
 might extend the United States markets in South 
 America, might be obtained in another way. 1 He 
 put forward his idea when the McKinley Tariff 
 was under discussion, and a clause in that Act, 
 inserted in the Senate, provided that the President 
 should be authorised to impose certain duties on 
 sugar, molasses, coffee, tea, and hides (which were 
 duty free) coming from countries which levied on 
 agricultural or other produce of the United States 
 duties to an extent, in his judgment, " reciprocally 
 
 1 " I do not doubt that in many respects the Tariff Bill pending in 
 the Senate is a just measure, and that most of its provision are in 
 accordance with the wise policy of Protection. But there is not a 
 section or line in the entire Bill that will open the market for another 
 bushel of wheat or another barrel of pork " (Blaine, in letter quoted 
 by Stanwood, ii. 278).
 
 256 RECIPROCITY UNDER AMERICAN TARIFF 
 
 unequal and unreasonable." Taussig has pointed 
 out that this method offers decided economic 
 advantages over that commonly pursued, namely, 
 " the simple remission of duties to a favoured 
 country, duties remaining on goods coming from 
 countries not favoured. Such a remission is likely 
 not to redound to the advantage of the domestic 
 consumer. Unless the favoured country can easily 
 supply the whole market, or other countries are 
 quickly admitted to the lower duties, prices are 
 not affected, and the foreign producer reaps the 
 whole benefit of the remission." 1 Under this 
 clause treaties were made with a large number of 
 the Central American States Brazil, Dominica, 
 Salvador, Nicaragua, Honduras, Guatemala, with 
 Spain for Cuba and Porto Rico, and with Great 
 Britain for most of the West Indian Islands and 
 British Guiana. In most of these cases the 
 United States got a very considerable return for 
 the mere promise to retain the enumerated articles 
 on their free list. Thus Brazil admitted wheat, 
 flour, pork, agricultural and mining machinery, 
 coal, and railway material free, and reduced the 
 duties on a number of other commodities. Cuba 
 made thirty-nine classes of articles free, and gave 
 a reduction of 50 per cent, on seventeen classes 
 and 25 per cent, on fourteen classes. 2 The fact 
 that Germany and Austria-Hungary were largely 
 interested in the export of sugar enabled the 
 American Government to make terms with those 
 
 1 Taussig, p. 279. 2 Osborne, p. 64.
 
 RECIPROCITY UNDER THE DINGLEY ACT 257 
 
 countries also. Germany abandoned the prohibi- 
 tion in force for some years of American meat, 
 and gave the United States the benefit of the 
 conventional tariff on agricultural products ; from 
 Austria-Hungary they secured "most favoured 
 nation " treatment. 1 
 
 These arrangements did not continue long 
 enough to enable any definite opinion to be formed 
 as to their effect on trade, since the reimposition 
 of the customs duties on sugar by the Wilson 
 Tariff of 1894 practically destroyed the system, 
 which was dependent on the general freedom of 
 that commodity. Fresh provision for reciprocity 
 was made by two clauses in the Dingley Act of 
 1897, but not on the lines of 1890. Under section 3 
 of that Act, the President was authorised, in return 
 for concessions by other countries, to reduce by a 
 definite amount the duties on certain articles speci- 
 fied in the clause. The list was a curious one ; it 
 included only argols, brandies, champagne, and 
 other sparkling wines, still wines, and vermouth, 
 pictures, and statuary. Section 4 provided that 
 the President might make treaties (which, how- 
 ever, needed the approval of Congress) with re- 
 ductions on duties up to 20 per cent, on any or 
 every article ; but such treaties must be made 
 within two years after the passing of the Act. 
 This latter clause has been practically inoperative ; 
 some eleven treaties were negotiated under it, 
 
 1 The penal duties provided for by the clause in the Act of 1890 
 were actually applied against Haiti, Venezuela, and Colombia.
 
 258 RECIPROCITY UNDER AMERICAN TARIFF 
 
 mainly affecting Central or South American States 
 and the West Indies, but they all fell through 
 owing to the impossibility of carrying them through 
 the Senate. Action under section 3 could be taken 
 merely by Presidential proclamation without any 
 necessity for Congressional approval, and four such 
 treaties have been made with France in 1898, 
 with Germany, Italy, and Portugal in 1900. 1 In 
 return for the very small concessions indicated 
 above, the United States secured from France the 
 minimum tariff rates on a large number of agricul- 
 tural products, from Germany the full conventional 
 tariff, from Italy low rates on machinery and some 
 raw materials, and from Portugal " most favoured 
 nation " treatment, with fixed rates for agricultural 
 products and machinery generally. It is difficult, 
 if not impossible, to estimate the results of these 
 treaties ; and the very small list of articles on 
 which reductions may be made by Presidential 
 proclamation is a considerable obstacle to any 
 extension of the system at present. 
 
 Recent events in the United States have drawn 
 attention away from the tariff. The last Presi- 
 dential election was fought mainly on the question 
 of the Spanish War and the new foreign policy of 
 the American Commonwealth ; and the Democrats 
 were further handicapped by their adherence to the 
 silver policy, which had caused them disaster four 
 years earlier. The Republican party still proclaims 
 the maintenance of the tariff to be one of its 
 
 1 Osborne, p. 69.
 
 POLITICAL PARTIES AND THE TARIFF 259 
 
 chief objects, but it is willing to extend the system 
 of reciprocity. 
 
 In his message to Congress in 1901, President 
 Roosevelt indicated clearly the policy which he 
 himself was prepared to follow. He wrote : 
 " Reciprocity must be treated as the handmaiden 
 of Protection. Our first duty is to see that the 
 protection granted by the tariff in every case 
 where it is needed is maintained, and that reci- 
 procity be sought for so far as it can safely be 
 done without injury to our home industries. Just 
 how far this is must be determined according to 
 the individual case, remembering always that every 
 application of our tariff policy to meet our shift- 
 ing national needs must be conditioned upon the 
 cardinal fact that the duties must never be re- 
 duced below the point that will cover the differ- 
 ence between the labour cost here and abroad. 
 The well-being of the wage-worker is a prime 
 consideration of our entire policy of economic 
 legislation." The Democrats on their side have 
 been inclined to avoid the direct tariff issue, and 
 to turn their hostility against the trusts. Inci- 
 dentally, this enables them to attack the protective 
 system, which, they claim, fosters the trusts, and 
 by eliminating a certain amount of competition 
 renders it easier for those organisations to secure 
 a monopoly in the home market, and exploit the 
 consumer. 1 Some of the Republicans at least, 
 
 1 Cf. Beardsley, " The Tariff and the Trusts," in Quarterly Journal 
 of Economics, May, 1901.
 
 260 RECIPROCITY UNDER AMERICAN TARIFF 
 
 including the President himself, share this hostility 
 to the trusts, but believe that their evil effects 
 can be removed without tampering with the tariff. 
 They claim that much of the astonishingly rapid 
 progress of the United States in the last few 
 years in manufactures 1 is due to the steady ad- 
 herence to Protection, and they argue that that 
 system does not necessarily, by giving the manu- 
 facturers a practical monopoly, tend to check im- 
 provements in the methods of production, but 
 rather that it encourages them by offering the 
 producers greater security and inviting them to 
 the conquest of the home market. 2 And the 
 
 1 The Census estimate of the value of the manufactured products 
 of the United States was 9,372 million dollars in 1890 and 13,014 
 million in 1900. 
 
 2 "In fact, history shows that either result may ensue. It would 
 seem, for instance, that in France, under the system of absolute 
 prohibition against competing imports which prevailed throughout 
 the first half of this century in fact, up to the great commercial 
 treaty of 1860 not a few manufacturers failed to make use of proved 
 and familiar processes, and were inferior to British rivals. On the 
 other hand, there were industries in France itself which had reached 
 out into foreign markets, thus giving conclusive proof of not being 
 behind the times. In the United States it would doubtless be possible 
 to find examples of the former sort : a benumbing influence has some- 
 times been felt. But these are exceptions. As a rule, if American 
 manufacturers have been unable to meet foreign competition, it has 
 not been because of inert routine. ... In the United States the Free 
 Trader is shown by economic history to be in the wrong on this 
 particular point : if protected industries have continued to need pro- 
 tection, as so often they have, the explanation is not to be found in 
 the retention of antiquated processes. So far as the question of 
 economic method is concerned, here again it is clear no abstract 
 reasoning can suffice : the history of each people and the facts of 
 each case must be investigated, and generalisation from a priori 
 reasoning must be shunned " (Taussig, in " Iron Industry in the 
 United States," in the Quarterly Journal of Economics, August, 1900, 
 pp. 496-7).
 
 AMERICAN INDUSTRIAL PROGRESS 261 
 
 Americans can claim with justice that they show 
 no signs of any enervating influence exercised 
 upon them by Protection ; in the new Schools of 
 Commerce their Universities have preceded the 
 British Universities in their response to new 
 national needs ; in the conduct of business their 
 manufacturers have shown extraordinary energy 
 and ability ; and the policy of taking care of the 
 home market and concentrating attention upon 
 that, in the assurance that foreign trade will then 
 take care of itself, has been in their case most 
 successful. It is impossible to estimate how far 
 this development has been influenced by the 
 economic policy which on the whole has been so 
 consistently followed ; it may fairly be assumed, 
 however, that given the peculiar character of 
 their people and the vast and varied resources 
 of what is not a country but a continent, the 
 United States, once they entered upon the path 
 of industrialism, were certain to advance with a 
 rapidity over which tariffs, whatever their nature, 
 could exercise comparatively little control. But 
 the time now seems to have arrived when Pro- 
 tection has accomplished its work ; and if the 
 principle formulated in the President's message 
 already quoted be followed if Protection is only 
 to be given to industries in which the cost of 
 production is greater in the United States than 
 in other countries then there must be consider- 
 able reductions in the tariff. For the cost of 
 production of most iron and steel goods and of
 
 262 RECIPROCITY UNDER AMERICAN TARIFF 
 
 the cheap kinds of cotton goods (to mention only 
 a few conspicuous instances) is now certainly not 
 higher in the United States than elsewhere. And 
 reciprocity treaties, which the President advocates, 
 as did his predecessor, also mean the lowering of 
 tariff walls. But the most effective popular argu- 
 ment for the withdrawal of a certain amount of 
 industrial protection is the rise of the trusts. 
 These combinations are a necessary outcome of 
 known economic laws and of the special conditions 
 of modern industry ; but without attempting to 
 fight the inevitable, one may fairly recognise that 
 their growth is aided by restrictive tariffs on foreign 
 imports since one of their chief aims is the elimi- 
 nation of competition and the consequent control 
 of prices. 1 And it may be safely asserted that 
 the highly protective policy of the United States 
 under the Dingley Tariff does give the trusts 
 opportunities better than any they enjoy in less 
 protectionist states to obtain virtual monopolies, 
 which enable them to force prices up to the 
 highest rate the market will bear. It is to the 
 growing feeling against what are believed to be 
 abuses of their power that probably we must 
 chiefly look for any considerable movement in the 
 United States against the policy now in force. 
 
 1 The economy of production on a large scale is no doubt a power- 
 ful stimulus to combination, but it may be doubted if this consideration 
 alone would have produced the giant trusts of America.
 
 A BRIEF BIBLIOGRAPHY 
 
 TAUSSIG, F. W. Tariff History of the United States. 5th edition. 
 
 1903. 
 BOLLES, A. S. Financial History of the United States. 3 vols. 
 
 1886. 
 
 DEWEY, D. R. Financial History of the United States. 1903. 
 STANWOOD, E. American Tariff-' Controversies in the Nineteenth 
 
 Century. 2 vols. 1904. 
 
 TAUSSIG, F. W. State Papers and Speeches on the Tariff. 1893. 
 HILL, W. First Stages of the Tariff" Policy (Am. Econ. Ass. 
 
 Vol. viii. No. 6). 1893. 
 Goss, A. D. History of Tariff Administration (Columbia College 
 
 Studies). 
 YOUNG, EDWARD. Special Report on Customs Tariff Legislation 
 
 (House Exec. Docs., 42 Cong., 2nd Session, No. 109). 
 RABBENO, U. The American Commercial Policy. 2nd edition. 
 
 1895. 
 MAYO-SMITH and SELIGMAN. " Commercial Policy of the United 
 
 States, 1860-90 " (in Die Handelspolitik der wichtigern 
 
 Kulturstaaten. Publications of Verein fur Socialpolitik. 
 
 1892). 
 FISK, G. M. "Die Handelspolitik der Vereinigten Staaten, 
 
 1890-1900" (Beitrage Zur Nauesten Handelspolitik Deutsch- 
 
 lando, vol. i. 1900). 
 CONNOR, J. E. " Industrial Causes affecting American Economic 
 
 Policy since the Civil War." 
 
 OSBORNE, J. B. " Reciprocity in the American Tariff System." 
 
 (These last two in Annals of the American Academy of 
 
 Political and Social Science, vol. xxiii. No. 1.) 
 
 263
 
 264- BIBLIOGRAPHY 
 
 BEARDSLEY, C. " The Tariff and the Trusts " (in Quarterly 
 Journal of Economics, vol. xv. No. 3). 
 
 HART, A. B. "Formation of the Union, 1750-1829." 
 
 WILSON, W. "Division and Reunion, 1829-89." 
 
 (These two in the Epochs of American History.} 
 
 BRYCE, J. The American Commonwealth. 3rd edition. 2 vols. 
 1895. 
 
 Twelfth Census of the United States (vols. vii. to xi. " Manu- 
 facturers "). 
 
 WRIGHT, C. D. Industrial Evolution of the United States. 1897. 
 
 NELSON, H. L. The United States and its Trade. 1902.
 
 PART III 
 FRANCE
 
 CHAPTER I 
 
 FRENCH COMMERCIAL POLICY FROM 
 1789 TO 1830 
 
 THE Revolution of 1789 first gave economic unity 
 to France. Until that time internal commerce 
 was hampered by innumerable tolls and feudal 
 dues, by the right of the various provinces to 
 impose customs duties against each other, by the 
 prohibition of the movement of commodities, par- 
 ticularly foodstuffs, from one part of the country 
 to another, and by the diversity of the provincial 
 tariffs upon foreign products. The transit of goods 
 through the country was so costly as to be almost 
 impossible. 1 The Constituent Assembly swept 
 away all these obstacles ; in 1790 it abolished the 
 internal tolls and the provincial tariffs, and it 
 established one common and uniform tariff against 
 foreign countries in 1791. The new duties were 
 fairly moderate ; they ranged from 5 to 15 per 
 cent, (or in a few cases 20 per cent.) on manu- 
 factured articles, and admitted most raw materials 
 free. It is true that there were a number of 
 prohibitions of import, but very few were of any 
 
 1 Levasseur, i. p. 34. 
 267
 
 268 FRENCH COMMERCIAL POLICY 
 
 economic importance ; a and the prohibition of 
 exports, to any considerable extent, only came 
 when war was inevitable, and could be justified 
 as a war measure. 
 
 But this was not the whole of the economic 
 reform made by the Constituent Assembly. It 
 abolished such serfdom as still existed among the 
 rural population, and arranged for the cessation of 
 the remaining feudal dues ; it reformed taxation 
 by making all classes of the community liable ; it 
 suppressed the industrial privileges of the guilds, 
 and threw all trades and professions open to every- 
 one that cared to enter them ; it made an end of 
 trading privileges both at home and abroad ;* and 
 on the whole it gave France the opportunity of 
 the fullest and freest development of her industrial 
 and commercial resources. 3 But in 1792 war broke 
 out, and gradually the tariff policy of France 
 became more and more restrictive. All existing 
 commercial treaties, especially the one made with 
 Great Britain in 1786, were annulled, and the 
 
 1 Ame, i. p. 53. 
 
 2 The privileges enjoyed by the Indian Company were abolished 
 (Levasseur, i. 42). 
 
 3 " Elle avait trouve le cultivateur censitaire, corveable, ou meme 
 en quelques lieux serf, la terre chargee de droits feodaux ; elle fit 1'un 
 et 1'autre libres. Elle avait trouve 1'industrie genee par les maitrises 
 et jurandes, par la multiplicite des impots indirects, par les privileges ; 
 le commerce entrave par les compagnies privilegiees, par les barrieres 
 de douanes ; elle supprima les obstacles et deblaya le carriere devant 
 1'industrie et commerce. La loi du 2-17 Mars 1790 emancipa 1'in- 
 dustrie ; celle du 7 Janvier 1791 constitua la propriete des inventeurs ; 
 celle du 215 Mars 1791 fonda sur un tarif modere et uniforme les 
 relations commerciales de la France avec 1'etranger" (Levasseur, i. 
 p. 46).
 
 ATTACK ON BRITISH TRADE 269 
 
 prohibition of the export of commodities was 
 extended ; and then the National Convention, 
 recognising that Great Britain was its most danger- 
 ous foe, entered on the attempt to cripple her by 
 destroying her foreign trade. In March, 1793, the 
 entry into France of certain commodities coming 
 chiefly from Great Britain was prohibited, and in 
 October of the same year, as that measure did not 
 suffice, the import, sale, and use of all commodities 
 made or manufactured in the United Kingdom or 
 in the British Empire was forbidden under ex- 
 tremely heavy penalties. Yet even this enactment 
 fell very far short of attaining the desired end, 1 
 and the Directory found it necessary to go still 
 further. It ordered that a large number of com- 
 modities, whatever their place of origin, should be 
 reputed to be British produce, and should be liable 
 to be seized as such wherever found. But this ex- 
 treme measure also proved insufficient ; certainly by 
 1802 the customs revenue had fallen to 42 million 
 francs (of which 11 millions were swallowed up by 
 the cost of collection), but an enormous smuggling 
 trade had arisen, and the French Government, in 
 spite of its efforts, could not prevent the constant 
 influx of British goods. 
 
 Under the Consulate, with Napoleon practically 
 holding supreme power, the same policy was 
 pursued, but its further application was delayed 
 for a time by the negotiations which preceded the 
 Treaty of Amiens, and the signature of that 
 
 1 Ame, pp. 36-7.
 
 270 FRENCH COMMERCIAL POLICY 
 
 treaty in March, 1802. Though Napoleon 
 declined to accept the contention of the British 
 ministry that the signature of the treaty of peace 
 restored the commercial relations of the two 
 countries to their position under the agreement of 
 1786, he showed himself willing to make a fresh 
 arrangement, and negotiations commenced, only 
 to be brought to an abrupt end by the renewal of 
 war in May, 1803. After Trafalgar, Napoleon, 
 now become Emperor, began his supreme effort to 
 break Great Britain's industrial and commercial 
 power by isolating her from Continental Europe. 
 The Berlin Decrees of November, 1806, with their 
 sequel, the Milan Decrees of 1807 and 1808, pro- 
 hibited all commercial relations between the 
 countries under Napoleon's control (that is, the 
 greater part of Europe) and Great Britain, an- 
 nounced that that country was in a state of 
 blockade, and declared all vessels which had touched 
 at British ports to be lawful prize. Meanwhile, 
 the French tariffs were steadily rising ; there had 
 been a great increase in the duties on colonial pro- 
 duce in 1806, and in February and August, 1810, 
 they were raised to an extraordinary height. 1 There 
 were advances also on manufactured goods, but in 
 spite of this and the prohibitions, the manufacturers 
 were constantly asking for yet more protection. 2 
 The disorders of the early years of the Revolu- 
 
 1 Thus in 1806 the duty on sugar was 100 francs per 100 kilogs. ; 
 by the end of 1810 it was 400 francs. In the same period the duty on 
 coffee rose from 150 to 400 francs ; on cocoa from 200 to 1,000 francs. 
 
 2 Ame, i. pp. 57, 59, and 61.
 
 GROWTH OF FRENCH INDUSTRY 271 
 
 tion had almost destroyed the good effect of the 
 liberating work of the Constituent Assembly ; up 
 to 1799 trade and commerce in France rather 
 declined than advanced. With the rise to power 
 of Napoleon, who really cared for industrial 
 progress, and with the re-establishment of internal 
 order, conditions began to improve, but the 
 Exhibitions of 1801 and 1802 showed that, despite 
 this improvement, industry had not yet risen again 
 to the level which it had reached before the 
 Revolution. 1 But between 1802 and 1806 there 
 was distinct, if gradual, progress under the foster- 
 ing care of Chaptel, the Minister of the Interior ; 
 and at the Exhibition of 1806 the Government 
 could point to the fairly prosperous condition of 
 French manufactures, particularly of woollen and 
 cotton goods. It could boast also of the increase 
 of coal mining (though this was chiefly in the 
 Belgian provinces), of the commencement of the 
 steel works at Creusot, of the improvement of 
 the highways and canals. The upward movement 
 continued for some years after 1806, and the 
 Napoleonic period may be said to have witnessed 
 the commencement of the industrial revolution in 
 France: it is true that machinery only came in 
 very slowly, and in this respect France lagged far 
 behind Great Britain, chiefly because fuel was 
 dearer and manual labour cheaper than in the 
 latter country ; but, nevertheless, there were many 
 improvements in industrial methods. The output 
 
 1 Levasseur, i. p. 455.
 
 272 FRENCH COMMERCIAL POLICY 
 
 of the smelting works increased from 1,058,000 
 metric cwt. in 1789 to 1,623,000 in 1812, whilst 
 the production of bar-iron rose from 723,000 
 metric cwt. to 1,155,000 in the same period. 
 There was a considerable growth in the textile 
 industries, in spite of the way in which the cotton 
 manufacturers were hampered by the blockade of 
 raw materials ; in the productions of the chemical 
 and tanning industries under the stimulus of new 
 scientific processes ; in the manufacture of glass 
 and porcelain ; and in sugar refining, encouraged 
 by high prices and bounties. Foreign trade in- 
 creased up to 1806, but after that date, with the 
 extension of the "continental system," it rapidly 
 declined. The following table gives the movement 
 of foreign trade in million francs for the whole 
 period of Napoleon's Government of France : 
 
 Year. 
 
 Import. 
 
 Export. 
 
 Total. 
 
 1799 
 
 253 
 
 300 
 
 553 
 
 1800 
 
 323 
 
 272 
 
 595 
 
 1801 
 
 415 
 
 305 
 
 720 
 
 1802 
 
 465 
 
 325 
 
 790 
 
 1803 
 
 430 
 
 347 
 
 777 
 
 1804 
 
 441 
 
 380 
 
 821 
 
 1805 
 
 492 
 
 375 
 
 867 
 
 1806 
 
 477 
 
 456 
 
 933 
 
 1807 
 
 393 
 
 376 
 
 769 
 
 1808 
 
 320 
 
 331 
 
 651 
 
 1809 
 
 288 
 
 332 
 
 620 
 
 1810 
 
 339 
 
 366 
 
 705 
 
 1811 
 
 299 
 
 328 
 
 627 
 
 1812 
 
 308 
 
 419 
 
 727 
 
 1813 
 
 251 
 
 354 
 
 605 
 
 1814 
 
 239 
 
 346 
 
 585 
 
 
 1 Levasseur, i. 
 
 p. 493. 

 
 FAILURE OF NAPOLEON'S POLICY 273 
 
 But there was a reverse side to this. The 
 industrial development was essentially artificial. 
 It was the outcome, not so much of the enterprise 
 of French manufacturers, as of the compulsion laid 
 upon consumers to have recourse to them, and 
 their undisturbed sway in the home market. 
 Except in a few cases there was no considerable 
 improvement in their methods, and "after being 
 kept apart for a quarter of a century from all 
 regular contact with the products of the British 
 manufacturers, we found ourselves at the establish- 
 ment of peace even further behind than before the 
 war ; whilst machinery had gradually developed in 
 England, in France it had made very little pro- 
 gress." 1 Moreover, there was much over-specula- 
 tion in France, followed by extensive monetary 
 difficulties, and the bad harvest of 1811 made 
 things worse. The result was a commercial crisis 
 in the years 1811 to 1813. Napoleon recognised 
 that his attempt to destroy the economic bases 
 of Great Britain's power had failed, and that the 
 "continental system" had resulted only in con- 
 siderable disaster to the French ports. He tried, 
 therefore, in 1813 to improve matters by granting 
 licenses enabling certain goods needed for French 
 manufactures, such as cotton, tobacco, lumber, to 
 be brought in ships so licensed at a duty of only 
 50 per cent., on condition that the same ships took 
 an outward cargo of French products. 2 But it was 
 
 1 Ame, i. p. 67. 
 
 2 ee Pour cette annee (1813) ne pouvant plus esperer la paix de la 
 detresse de PAngleterre, et u'ayant a 1'attendre que des batailles qui
 
 274 FRENCH COMMERCIAL POLICY 
 
 too late to save the situation ; the commercial dis- 
 order and general collapse discredited Napoleon's 
 statesmanship, as the disastrous Russian campaign 
 destroyed his military reputation. 
 
 The Restoration Monarchy was called on to deal 
 with an extremely difficult problem. The economic 
 policy of Napoleon had brought into existence a 
 small but powerful class of iron-masters and textile 
 manufacturers, who were bent on maintaining 
 their monopoly of the French market, and dreaded 
 the threatened invasion of British goods. The 
 landowners were anxious to keep up the high price 
 of grain. In April, 1814, the Comte d'Artois, 
 acting as Lieu tenant- General of the realm, issued 
 an edict greatly reducing the duties on coffee and 
 sugar, and practically abolishing those on raw 
 cotton. The cotton-spinners and merchants hold- 
 ing stocks of colonial produce were at once aroused, 
 and the opponents of the new policy were able to 
 carry all the manufacturers with them. In a 
 petition to the King in 1814, the Chamber of Com- 
 merce of Rouen went so far as to declare that 
 " prohibition is the outcome of political and social 
 rights. From the manufacturer who has made 
 use of all his financial resources in order to establish 
 a factory, down to the workman who finds there 
 the means of existence for himself and his family 
 
 allaient se livrer en Allemagne, voulant de plus rendre aux villes de 
 Bordeaux, de Nantes, du Havre, de Marseilles, quelque activite com- 
 merciale, Napoleon avait accorde une quantite de licenses telle qu'on 
 pouvait considerer comme presque retabli le commerce avec 1'Angle- 
 terre" (Thiers, quoted by Ame, i. p. 48).
 
 THE TARIFF ACT OF 1816 275 
 
 all demand, with perfect reason, the right to be 
 the sole source of supplies for home consumption." 1 
 Though inclined to give up the system of pro- 
 hibition, and convinced that the economic progress 
 of France could only be secured by allowing foreign 
 competition, 2 the new Government was not able to 
 resist the pressure. Absolute prohibition was 
 maintained in a great many cases, and elsewhere 
 high Protection was adopted, and the record of 
 the economic policy of the Restoration Monarchy 
 is simply the story of a Government attempting to 
 hold the balance between the party which favoured 
 commercial liberty and the various well-organised 
 groups representing particular interests, and forced 
 again and again to go much further in the direc- 
 tion of Protection than it desired. The Tariff 
 Act of 1816 made it perfectly clear that for a 
 very long time France would adhere to the com- 
 mercial policy which she had adopted during the 
 war. 3 
 
 It would serve no useful purpose to describe the 
 tariff legislation of the Restoration Monarchy in 
 
 1 Quoted in Ame, i. pp. 68-9. 
 
 2 Saint-Cricq, the Director-General of Customs and the real guide 
 of the economic policy of the Restoration Monarchy, wrote : " Nous 
 aurions moins de progres a faire si une trop longue interruption dans 
 nos relations commerciales n'eut constitue une prohibition a 1'ahri de 
 laquelle on a pu negliger, sans danger, des moyens de perfectionnement 
 qu'une heureuse rivalte n'aurait pas manque de developper." 
 
 3 The Napoleonic Wars exercised the same influence upon sub- 
 sequent commercial policy in France as the Civil War in the United 
 States. In both, cases a system of high Protection was called into 
 existence (though for different reasons) by war, and the interests to 
 which it gave rise, and the manner in which people became accustomed 
 to it by its long duration, secured its continuance in time of peace.
 
 276 FRENCH COMMERCIAL POLICY 
 
 detail ; it will suffice to give some illustrations of 
 the manner in which the policy of Protection was 
 carried out. To take the most conspicuous 
 example: in 1814 it was estimated that iron from 
 abroad could be delivered in France at from 30 to 
 40 per cent, below the French cost of production, 
 and the Government, in order to help their own 
 manufactures, proposed a specific duty on bar-iron 
 of 15 francs (plus 10 per cent. = 16 francs 50 cen- 
 times) per 100 kilo., which was calculated to be 
 about 50 per cent, ad valorem. The manufac- 
 turers were not satisfied they desired prohibi- 
 tion but they accepted the proposal, and in spite 
 of the opposition of the seaports it was carried. 
 The ministry intended it to be merely a temporary 
 measure to offset the disadvantages under which 
 the French iron-masters laboured, and to give 
 them time to improve their works ; and the duties, 
 it was thought, should therefore be gradually 
 reduced. 1 But by 1822 the invasion of British 
 iron, produced by better methods than the Russian 
 and Swedish products with which France had been 
 supplied up to 1814, had greatly reduced prices, 
 and the average had fallen from about 36 francs 
 (duty free) per 100 kilo, in 1814 to 22-23 francs in 
 1822. The French manufacturers asserted that 
 they still could not compete ; and in 1822, in spite 
 of the facts that the imports were falling and that 
 the native industry had admittedly made much 
 progress, the Government was compelled to in- 
 
 1 Brandt, p. 74,
 
 THE CORN LAWS 277 
 
 crease the duty to 24 francs + ^ 26 -4 francs per 
 100 kilo. The net result was a duty on foreign 
 bar-iron of about 120 per cent, ad valorem ; and a 
 little later there was a slight further increase. 1 The 
 imports of British iron fell from 1,463 tons in 1823 
 to 330 tons in 1825. 2 In 1820 there had been 
 increases in the duties on steel and various kinds 
 of steel goods ; and in 1826 there were further 
 advances on iron plates, cast-iron, and wire. 
 
 Another, and even more important, example 
 was furnished by the agricultural duties, to which 
 the various Governments of France had always 
 paid considerable attention. In spite of the 
 advocacy of Turgot, it was not until the French 
 Revolution that the free movement of grain from 
 one part of France to another had been permitted. 3 
 Originally in 1814 it was proposed to prohibit the 
 export of corn and allow its free import, but in 
 September of that year, in order to prevent prices 
 at home from falling too low because the producers 
 were compelled to sell it within the French borders, 
 the whole country was divided into three zones, 
 and export was permitted when the prices there 
 had fallen respectively to 23, 21, and 19 francs per 
 hectolitre. In 1816 this principle was retained, 
 but a small revenue duty on imports was estab- 
 lished. By 1819, however, the reactionary royalist 
 party was rising to power and seeking to establish 
 itself on the agrarian interests ; and it secured a 
 reversal of the policy. The price of corn in that 
 
 1 Ame, i. pp. 145-7. ' Ibid., p. 149 n. 8 Ibid., p. 105.
 
 278 FRENCH COMMERCIAL POLICY 
 
 year was lower than it had been for some time, 
 though not lower than the average for the period 
 1800-14 ;* the farmers feared the growing in- 
 vasion of Russian grain, stimulated by the bounties 
 given by the Government from November, 1816, 
 to September, 1817, to meet the distress caused by 
 the war of the Hundred Days and the second 
 military occupation of France. So in 1819 the 
 three-zone system was continued, but the importa- 
 tion of corn was made subject to a fixed duty, and 
 a surtax varying according to the amount of the 
 fall of home prices below a certain point ; and 
 finally the importation was to be prohibited alto- 
 gether when the prices in the three zones fell to 
 20, 18, and 16 francs per hectolitre. But this did 
 not satisfy the ultra-royalist agrarian party, and in 
 1821, finding themselves in a strong majority in the 
 Chamber, they forced on the ministry a law which 
 raised the limit at which the surtaxes on imports 
 were to commence, divided France into four zones, 
 and raised the points at which prohibition should 
 commence to 24, 22, 20, 18 francs respectively. 2 
 Another concession was made to the agrarians in 
 the case of wool. In 1814 the Government had 
 proposed an export duty of 30 francs per 100 kilo, 
 on the better kinds of washed wools, and 15 francs 
 on the same qualities of unwashed wools whilst 
 imports were to be free, or rather subject only to a 
 
 1 The average price for 1801-14 was 21-34 francs per hectolitre ; 
 in 1816 it was 28 31 francs, and in 1817, 36-16 francs. In 1818 it had 
 fallen to 24-65 francs. 
 
 2 Brandt, pp. 79-82.
 
 GROWTH OF PROTECTION 279 
 
 small weighing-duty ; there was a sharp conflict 
 between the manufacturers of woollens, desiring 
 the free import and prohibited export of wool, and 
 the wool growers, whose wishes were naturally to 
 the contrary effect, but ultimately the Government 
 plan was carried. 1 But by 1820 political conditions 
 had changed ; the export duties on the better kinds 
 of wool were reduced, the prohibition hitherto 
 continued of the export of the common kinds was 
 abolished, and import duties were imposed of 60 
 and 20 francs per 100 kilo, on the finer kinds, and 
 15 and 5 francs on the commoner qualities. After 
 1819 imports declined, but in 1822 the duties on 
 the cheaper wools were again increased ; there 
 were further advances, with a more detailed classi- 
 fication, made for all kinds in the next three 
 years, and completed and confirmed in the Act 
 of 1826. 
 
 These instances may suffice to show the general 
 trend of commercial policy during the Restoration 
 period many other industries could tell the same 
 story. It was a policy of Protection which origin- 
 ally was continued from the Napoleonic era in the 
 interests of the manufacturers, but as the reactionary 
 and agrarian party gained the upper hand in Parlia- 
 ment, the system was generalised, 2 and extended 
 
 1 Ame, i. pp. 76-9. 
 
 2 One of the finest examples of care for native industries is furnished 
 by the Commission of 1820, which asked for the prohibition of dye- 
 stuffs made from woods, so that the French merchant marine might 
 get the extra amount of freight involved in carrying the wood instead 
 of extracts, which represented only 2 or 3 per cent, of the weight of 
 the " matiere premiere " (Ame, i. p. 129).
 
 280 FRENCH COMMERCIAL POLICY 
 
 particularly to serve the purposes of agriculture, 
 though some compensation was offered to manu- 
 facturers in the form of bounties on exports, and 
 drawbacks. The culmination was reached in the 
 Act of 1826, which completed the whole scheme 
 of Protection, and seemed intended to make France 
 almost entirely self-contained. But there are two 
 other points in connection with French commercial 
 policy after 1814 which should be noted. The first 
 of these relates to sugar. Under the law of 1816 
 the colonial possessions of France enjoyed a con- 
 siderable advantage for the sugar which they sent 
 to her, and in 1819 they supplied 34 million kilo, 
 out of a total of 39 millions imported. But they 
 were still not content, and asked for a lower tax 
 on colonial sugar and the prohibition of all other ; 
 the Government would not go so far, but gave the 
 colonies a further preference of 5 to 10 per cent., 
 according as the foreign sugars were or were not 
 imported in French vessels. This almost destroyed 
 the non-colonial imports, but as the colonies still 
 complained, there were further increases on foreign 
 sugars so as to raise the price of the whole supply 
 in the home market, and by July, 1822, the colonial 
 preference was 100 per cent. An incidental effect 
 of the high prices was a stimulus to the beet sugar 
 industry. 1 
 
 The other noteworthy point is the treaties made 
 with the United States in 1822 and Great Britain 
 in 1826. The Restoration Monarchy had com- 
 
 1 Ame, i. p. 130.
 
 FRENCH FOREIGN TRADE 281 
 
 menced with the idea of developing the commercial 
 relations of France with the other Powers by means 
 of general treaties, 1 but in face of the strong pro- 
 tectionist movement this was felt to be impossible, 
 and, in fact, there were sharp conflicts with Prussia, 
 Russia, Sweden, and the Netherlands. In 1820 
 the United States replied to some French tariff 
 changes by increasing the dues payable by French 
 vessels ; France replied in the same way, and also 
 by granting bounties on the importation of cotton 
 in French bottoms. The two parties then, in 
 1822, came to an agreement, which put their ship- 
 ping on equal terms. The same arrangement was 
 made with Great Britain in 1826, with results on 
 the whole disadvantageous to the French carrying 
 trade. 2 
 
 The following table gives the movement of 
 French foreign trade between 1816 and 1830. The 
 figures for the earlier years are for the whole of 
 the imports and exports ; it was not until 1827 
 that the "special trade" (i.e. imports for French 
 consumption and exports of French produce) was 
 distinguished, and really it is only from that year 
 that there are any very reliable statistics. The 
 figures are million francs. 3 
 
 1 In 1814 the Ministry wrote to the Chambers of Commerce : 
 "Nous sommes a la vieille de reprendre avec les peuples qui nous 
 environnent nos anciennes relations. . . . Ne perdez pas de vue que 
 tout est reciproque ici ; que nous n'avons rien a exiger des autres 
 nations ; qu'il ne peut etre question que d'avantages mutuels a 
 negocier et stipuler " (quoted by Levasseur, i. p. 563). 
 
 2 Brandt, pp. 85-6. 
 
 3 Foville, pp. 266 seq.
 
 282 FRENCH COMMERCIAL POLICY 
 
 General Trade. 
 
 Year. 
 
 Imports. 
 
 Exports. 
 
 1816 
 
 . 243 
 
 548 
 
 1817 
 
 . 332 
 
 464 
 
 1818 
 
 . 336 
 
 502 
 
 1819 
 
 . 295 
 
 460 
 
 1820 
 
 . 335 
 
 543 
 
 1821 
 
 399 
 
 405 
 
 1822 
 
 . 426 
 
 385 
 
 1823 
 
 . 362 
 
 391 
 
 1824 
 
 . 455 
 
 441 
 
 1825 
 
 . 534 
 
 667 
 
 1826 
 
 . 565 
 
 561 
 
 1827 
 
 . 566 
 
 602 
 
 1828 
 
 . 608 
 
 610 
 
 1829 
 
 . 616 
 
 608 
 
 1830 
 
 . 638 
 
 573 
 
 Special Trade. 
 Imports. Exports. 
 
 414 ... 507 
 454 ... 511 
 483 ... 505 
 489 ... 453 
 
 Towards the end of this period there came a 
 distinct reaction. There had always been a con- 
 siderable body of opposition to the policy of 
 extreme restriction, and this increased in vigour as 
 manufacturers felt the disadvantages of all-round 
 Protection, and as the interests of particular groups 
 exercised too evident an influence upon legislation. 
 The Ministry of Martignac was conscious of the 
 turn of public feeling, and appointed in 1828 a 
 commission of inquiry, which reported that in the 
 conditions of French industry a policy of " reasoned 
 Protection " was desirable, but that great care 
 should be taken to prevent the aid given to one 
 industry from damaging another. 1 St. Cricq, now 
 Minister of Commerce, prepared a scheme of re- 
 form, but its consideration was prevented by the 
 
 1 Levasseur, i. p. 591.
 
 POWER OF PRIVATE INTERESTS 283 
 
 political confusion which ended in the overthrow of 
 the throne of Charles X. Surveying the economic 
 policy from 1814 to 1830 as a whole, few students 
 will be inclined to dissent from the judgment of 
 Levasseur, that it is not the policy of Protection 
 itself that is to be condemned for it was the 
 outcome of the particular conditions of France 
 and Europe, and of a particular habit of thought 
 but its aggravation and elaboration for twelve 
 years at the dictation of private interests. 1 
 
 1 Levasseur, i. p. 594.
 
 CHAPTER II 
 THE MONARCHY OF JULY 
 
 THE new monarchy set up by the revolution of 
 July, 1830, was not likely to make any radical 
 changes in the now almost traditional economic 
 policy of France. Under the influence of the 
 reaction against the extreme Protection of the last 
 years of the Restoration Monarchy, Louis Philippe 
 and his advisers were themselves prepared to make 
 some amendments to the tariff; but they had 
 been placed in power by the middle classes who 
 desired, above all things, to avoid the disturbance 
 likely to be caused to trade and commerce by the 
 more drastic political changes advocated by the 
 republicans. The Government boasted of its origin ; 
 it accepted the task imposed upon it by its creators ; 
 and it deliberately endeavoured to administer the 
 country in their interests. 1 It is true that the 
 
 1 " La politique que nous soutenions et pratiquions ainsi avait son 
 principal point d'appui dans 1'influence preponderante des classes 
 moyennes : influence reconnue et acceptee dans 1'interet general du 
 pays, et soumise a toutes les epreuves, a toutes les influences de la 
 liberte generale. . . . Les classes moyennes, sans aucun privilege ni 
 limite dans 1'ordre civil, et incessamment ouvertes, dans Pordre politique, 
 au mouvement ascendant de la nation tout entiere, etaient, a nos 
 yeux, les meilleurs organes et les meilleurs gardiens des principes de 
 1789, de 1'ordre social comme du gouvernement eonstitutioimel, de la 
 
 284
 
 SOME SLIGHT REFORMS 285 
 
 franchise was lowered, but in the existing economic 
 conditions of France this meant only the control 
 of the legislature by the middle' class, chiefly in- 
 terested in trade and commerce, and, whilst not 
 unwilling to see the protection given to the land- 
 owners reduced, quite resolved not to allow any 
 tariff changes likely to endanger its own position. 
 Throughout the whole period 1830-48 there were 
 few important modifications of the customs duties 
 though there were considerable changes for the 
 better in the administrative arrangements of the 
 customs service and the Legislature almost always 
 showed itself much less liberal than even the 
 Executive. 
 
 The earliest enactments under the Monarchy of 
 July were concerned chiefly with the transit and 
 entrepot trade. In 1831 and 1832 the restrictions 
 upon the transit of foreign merchandise through 
 France were mitigated, and the system of bonded 
 warehouses rearranged and developed. The 
 Chamber reduced the number of ports at which 
 the Ministry recommended that these warehouses 
 should be permitted, but the main conflict arose 
 over the proposal to authorise the establishment 
 of similar warehouses at certain internal trading 
 centres Paris, Lyons, and Strassburg. They had 
 existed there before, but that did not prevent the 
 seaports from making a determined opposition to 
 
 liberte comme de 1'ordre, des libertes civiles comme de la liberte 
 politique, du progres comme de la stabilite " (Guizot, Memoires, 
 vol viii. pp. 522-3, ed. 1867).
 
 286 THE MONARCHY OF JULY 
 
 the system, since they believed that their own 
 trade would thereby be reduced. However, the 
 Government scheme was carried. 1 
 
 The next reform suggested by the Ministry did 
 not secure even so limited an acceptance. The 
 corn laws were working in a very unsatisfactory 
 manner ; the zones were badly arranged, and the 
 selection of the markets whose average prices were 
 to determine the opening or closing of the ports to 
 foreign grain was open to many objections ; the 
 constant changes and resulting uncertainty ham- 
 pered merchants ; there were great inequalities of 
 price between the various parts of the country ; 
 and although the average home production of corn 
 was slightly higher in 1827-31 than in 1822-6, 
 yet the average price showed a very con- 
 siderable increase. 2 The Government, therefore, 
 proposed that the absolute prohibition (in certain 
 cases) of the import of grain should be abandoned, 
 and replaced by an extension of the sliding scale 
 of duties ; that the country should be divided into 
 two great districts instead of four zones ; that the 
 price of bread instead of corn should be taken as 
 an index ; and that in cases of scarcity the surtax 
 
 1 Ame, i. pp. 181 seq. 
 
 2 The average production of corn was about 57 million hectolitre in 
 1822-6, and 58 million in 1827-31. The following table gives the 
 average prices in francs per hectolitre (Brandt, p. 230) : 
 
 1822 . 15-5 1827 . 18-2 
 
 1823 . 17-6 1828 . 220 
 
 1824 . 162 1829 . 226 
 
 1825 . 15-7 1830 . 224 
 
 1826 158 1831 22-1
 
 FAILURE OF CORN LAW REFORM 287 
 
 on grain imported in foreign vessels should be 
 suspended. But friends and foes alike had come 
 to regard the grain duties as the corner-stone of 
 the whole protective system j 1 the manufacturers 
 made common cause with the agrarians, and only 
 the first of the proposals was adopted. But its 
 application was postponed until 1833 ; by that 
 time prices were falling, as a result of the 
 particularly good harvest of 1832 ; 2 the applica- 
 tion of the law was then adjourned until "the 
 revision of the tariff," and as that event did not 
 take place, the corn laws of the Restoration 
 Monarchy were still in force in I860. 3 
 
 This experience discouraged the Ministry (or 
 rather the various short-lived ministries of the years 
 1830-40) from attempting any more elaborate 
 legislation for some time. A number of schemes 
 were prepared in 1832 for the removal of the 
 prohibitions on certain qualities of cotton thread, 
 on cashmere shawls and Russian leathers, and 
 reductions on silks and cattle ; and in 1834 for the 
 free admission of more qualities of cotton thread, 
 iron cables, and rum, and reduced duties on 
 certain wools and iron bars ; but none of these 
 
 1 ' ' Ma conviction profonde est que le jour ou la Chambre et le 
 gouvernement auront abandonne la protection de 1'industrie agricole, 
 ce jour-la sera la vieille de celui ou ils abandonnerent la protection de 
 tous les produits industriels " (St. Cricq, in debate on the proposed 
 law). 
 
 2 The production of corn rose from 56-4 million hectolitre in 1831 
 to 80-1 million in 1832 ; the average price fell from 21-8 francs in 1832 
 to 15 6 in 1833. 
 
 3 Ame', i. p. 188.
 
 288 THE MONARCHY OF JULY 
 
 came before the Chamber, and the only success 
 was a few unimportant changes made by royal 
 ordinance. The proposals of 1834 are chiefly 
 interesting because made by Thiers, who was then 
 for a brief period Minister of Commerce. As he 
 was destined to exercise later a great influence on 
 French economic policy, it is interesting to note 
 his opinion at this time that "employed as a 
 means of retaliation, the system of restriction is 
 disastrous ; as a means of preference, it is improper 
 (abusif); as an encouragement to an ' exotic ' 
 industry which cannot be brought here, it is 
 powerless and idle. If used to protect a home 
 industry which is likely to succeed, it is good, but 
 only temporarily so ; it ought to come to an end 
 when the industry has completed its education, 
 when it has become an adult." 1 Thiers' successor 
 (and predecessor), Duchatel, held much more 
 radical views, but could accomplish nothing ; he 
 appointed in 1834 a commission to consider how 
 far the maintenance of prohibition was necessary 
 in the case of certain specified commodities 
 (particularly textiles, over which there was a fierce 
 conflict between the spinners and weavers), but the 
 appointment only called forth a great agitation on 
 the part of the threatened interests ; and practically 
 the matter dropped. 
 
 In 1836, however, the Chamber showed a more 
 liberal tendency, partly because of the influence of 
 the wine-growing districts. The duties on some kinds 
 
 1 Quoted in Ame, i. p. 191.
 
 THE ACTS OF 1836 AND 1841 289 
 
 of wrought-iron, coal, and cotton were reduced ; 
 and the prohibitions of the import of some quali- 
 ties of cotton yarn, cashmeres, and Russian leather, 
 and of the export of such commodities as soap, 
 hides, and timber for shipbuilding, were abandoned. 
 Moreover, the free admission of raw materials was 
 allowed on condition that within six months an 
 equivalent amount of goods manufactured from 
 them was exported. The result was that the 
 Protectionists were alarmed, the manufacturers 
 and agrarians again drew together, and a current 
 of legislation in the opposite direction set in, 1 
 though without producing any important changes. 
 Finally, in 1841, there came the last considerable 
 enactment of the July Monarchy. The duty on 
 sewing needles, which had remained at 2 francs 
 per 100 kilo, since 1814, was quadrupled, with the 
 result that whilst the import of British needles 
 (which had an average value of 60-70 francs per 
 100 kilo.) was almost unaffected, the import of 
 the cheap German needles (with an average value 
 of 5-15 francs) collapsed altogether. This brought 
 France into conflict with the Zollverein, but the 
 retaliatory measures adopted by the Germans had 
 little effect. The law of 1836 had reduced the 
 duties on cashmeres about 33 per cent. ; but, on 
 
 1 " Let tarif etait soumis a des oscillations ou les hasards des in- 
 fluences individuelles se manifestaient plus souvent qu'une pensee 
 d'ensemble bien arretee, ce qui fit dire a M. Glaiz-Bizoin : ' La plupart 
 de nos industries re9oivent une protection, non en raison de leur 
 importance, mais en raison de 1'importance des personnes qui les 
 exercent ' " (Ame, i. 206). 
 U
 
 290 THE MONARCHY OF JULY 
 
 the other hand, the duties on flax and hemp pro- 
 ducts were now increased. This was due chiefly to 
 the extremely rapid advance in the imports from 
 Great Britain, where great improvements in pro- 
 duction had been made about 1830. The weaving 
 industry in France was rising, and the imports of 
 foreign linen were falling ; the French manu- 
 facturers therefore desired the free or nearly free 
 admission of linen thread, and higher duties on 
 the manufactured article. The spinners, however, 
 were undoubtedly in difficulties, and they com- 
 bined with the agrarians to demand higher rates 
 on thread ; and they were sufficiently strong to 
 obtain their desire. Finally, the Act made some 
 changes in regard to machinery. The shipbuilders 
 complained that the duties on foreign machinery 
 (especially steam-pumps, which were subject to the 
 highest rates) hampered their industry; and they 
 now secured the free admission of machinery 
 intended for ships to be engaged in foreign trade. 
 But the home manufacturers were given a bounty 
 of 33 per cent, on all such machinery that they 
 made ; and as a further compensation, the duties 
 on other kinds were increased in 1844. On the 
 whole, then, the legislation from 1840 onward 
 (the period of the Ministry of Guizot) did not 
 depart to any notable extent from the old lines. 
 
 But during these years a series of events 
 occurred which were important less in their im- 
 mediate effects than as a foreshadowing of a 
 revolutionary change which was to come later.
 
 COMMERCIAL NEGOTIATIONS WITH BELGIUM 291 
 
 Ever since Belgium had broken away from the 
 kingdom of the Netherlands in 1830-1 attempts 
 had been made by France to establish closer re- 
 lations with the newly independent state. There 
 can be no doubt that Louis Philippe desired, but 
 did not dare, to authorise the acceptance of the 
 crown offered to his son ; l but it is also clear that 
 there was strong opposition from the French 
 manufacturers, who believed that such action 
 would be followed by tariff changes which would 
 expose them to the powerful Belgian competition. 
 After the succession question was settled, pro- 
 posals for a customs union with France were put 
 forward tentatively from Belgium, which had 
 shown extraordinary industrial productivity, was 
 eager for large markets, and believed that the 
 newly formed Zollverein might close Germany 
 against it. But there was little enthusiasm on 
 either side ; the French manufacturers were 
 hostile, and many Belgians feared that commercial 
 union might mean the loss of their newly acquired 
 political independence. The negotiations con- 
 tinued at intervals, but nothing was done until 
 1842, when a treaty was signed which gave 
 Belgium some preferences on iron, coal, and 
 textiles, and secured for France reductions on 
 silk goods, salt, and wine. Probably had the 
 matter been decided by economic considerations 
 alone the French Chamber would not have ratified 
 the treaty, for the manufacturers were uneasy, and 
 
 1 Guizot, Memoires, ii. pp. 424-8.
 
 292 
 
 THE MONARCHY OF JULY 
 
 the value of the Belgian concessions was lessened 
 by their immediate extension to the Zollverein ; 
 but ultimately the treaty, with some modifications, 
 was ratified in 1845 for six years, mainly for 
 political reasons and the desire to counteract any 
 movement of Belgium towards the Zollverein. 1 
 In 1843 also a treaty with mutual reductions was 
 made with Sardinia for four years, and also 
 approved by the Chamber chiefly on political 
 grounds ; and there were a number of other 
 treaties of no great importance, mainly with non- 
 European powers. Guizot had at one time some 
 hopes of securing a treaty with Great Britain, and 
 sounded some of the British ministers on the 
 subject ; but though they were not unfavourably 
 inclined, the scheme was felt to be impracticable ; 
 and political complications prevented a renewal 
 of the proposal. 
 
 At this point it will be convenient to set out the 
 figures of French foreign trade from 1830 to 1848 
 in million francs : 2 
 
 SPECIAL TRADE 
 
 Year. 
 
 1831 .. 
 
 Imports. 
 . 374 
 
 Exports. 
 ... 456 
 
 Year. 
 1840 
 
 1832 . 
 
 . 505 
 
 ... 507 
 
 1841 
 
 1833 . 
 
 . 491 
 
 ... 560 
 
 1842 
 
 1834 . 
 
 . 504 
 
 ... 510 
 
 1843 
 
 1835 . 
 
 . 520 
 
 ... 578 
 
 1844 
 
 1836 . 
 
 . 565 
 
 ... 628 
 
 1845 
 
 1837 . 
 
 . 569 
 
 ... 515 
 
 1846 
 
 1838 . 
 
 . 656 
 
 ... 659 
 
 1847 
 
 1839 . 
 
 . 651 
 
 ... 677 
 
 1848 
 
 Imports. Exports. 
 
 747 .. 
 
 . 695 
 
 804 .. 
 
 . 761 
 
 847 .. 
 
 . 644 
 
 846 ., 
 
 ,. 687 
 
 868 .. 
 
 . 790 
 
 856 ., 
 
 ,. 848 
 
 920 . 
 
 . . 852 
 
 956 . 
 
 ,. 720 
 
 474 . 
 
 .. 690 
 
 Ame, i. pp. 219-27. 2 FovUle, pp. 268-9.
 
 CHARACTER OF THE JULY MONARCHY 293 
 
 (The figures for 1848 show the marked effects 
 of the internal troubles of that year.) 
 
 It will be seen that there had been a very con- 
 siderable upward movement, and that in spite of 
 high Protection the imports after 1840 greatly 
 exceeded exports. The Monarchy of July was 
 not a heroic Government ; it clung too much to 
 its " policy of resistance " ; its views were short 
 and its horizon narrow. But it did give France 
 order for a time long enough to enable the neces- 
 sary changes in industrial organisation to be com- 
 pleted ; it took an intelligent and active part in 
 the promotion and extension of railways, highways, 
 and canals ; it brought the national finances into 
 order ; it passed a good deal of useful legislation ; x 
 and it did very much for primary and secondary 
 education. Its great weakness was that it failed 
 to recognise the social changes arising from the 
 new economic conditions. It ignored the new 
 force the workmen and these turned to socialism. 
 Its faults were due not so much to itself as to the 
 conditions under which it had to work ; and its 
 greatest misfortune was that the merest accident 
 brought about its fall at the time when a movement 
 was in progress which might have enabled the 
 Monarchy of July to carry out the reforms con- 
 templated at the outset of its career. 
 
 During the eighteen years since the accession 
 of Louis Philippe the industries of the country 
 
 1 See the list of enactments given by Guizot in the last chapter 
 (vol. viii.) of his Memoires.
 
 294 THE MONARCHY OF JULY 
 
 had made marked progress. The total consumption 
 of coal in 1830 was 2,494,000 tons, and the home 
 production 1,863,000 ; in 1845 the consumption 
 had risen to 6,343,000, and the production to 
 4,202,000. l The amount of pig-iron produced 
 increased from 224,000 tons in 1831 to 602,000 
 tons in 1847. Textiles showed a similar develop- 
 ment : it is estimated that in 1834 there were 
 1,500,000 cotton spindles employed in France, and 
 in 1844, 3,500,000 ; 2 the value of the wool consumed 
 at home averaged about 16 million francs in the 
 last years of the Bourbons, but had reached 
 30 million francs in 1847 ; in linen and silk there 
 was the same upward movement. In agriculture 
 the yield of corn averaged about 67 million 
 hectolitres for the years 1831-5, and, in spite of 
 a comparatively very poor harvest in 1846, 
 80 million for 1844-8. 3 The quantity of sugar 
 manufactured rose with remarkable rapidity ; it 
 was 6 million kilo, in 1830, and 53 million in 
 1847. 4 
 
 In view of this general progress of French 
 manufactures and agriculture alike, the extreme 
 Protection hitherto employed seemed no longer 
 necessary. A considerable part of the trading 
 community, particularly in Paris and the sea- 
 ports, 5 began to advocate the adoption of a less 
 restrictive policy ; and they were supported by 
 
 1 Foville, p. 208. . 2 Levasseur, ii. p. 125. 
 
 3 Brandt, p. 230. 4 Noel, p. 96. 
 
 6 The lead was taken by Bordeaux.
 
 A FREE TRADE MOVEMENT 295 
 
 the wine-growers and the farmers of the Gironde. 1 
 The new movement received a great stimulus 
 from the success of the English Free Trade 
 agitation, as expounded to the French people in 
 Bastiat's work entitled Cobden et la Ligue ; and 
 soon a Free Trade Association was founded in 
 France, and gave expression to its doctrines in its 
 newspaper, Le Libre ExcJiange, and more scientific- 
 ally in the Journal des Economistes, which had 
 been established in 1841. The manufacturers, and 
 the agriculturists who look their side, in reply 
 formed a counter-association, and issued Le Moni- 
 teur Universcl to present their case to the public. 2 
 The question was eagerly debated, and the Ministry 
 though hampered by the popular suspicion that 
 Guizot was unduly favourable to Great Britain- 
 believed that it could at last take action in the 
 direction which some of its members had long 
 desired. A Bill was prepared, which made a con- 
 siderable number of important reforms in the 
 tariff; but it was still only in the discussion stage 
 when the revolution of February, 1848, brought 
 about the overthrow of the Monarchy of July. 
 
 1 Noel, p. 83. 
 
 2 Am, i. pp. 244-7.
 
 CHAPTER III 
 
 THE SECOND REPUBLIC AND THE 
 
 SECOND EMPIRE 
 THE COMMERCIAL TREATIES 
 
 THE brief career of the Second Republic brought 
 no change in the economic policy of France. In 
 fact, even the Socialists, who at first shared the 
 government with the more moderate Republicans, 
 were inclined to make common cause with the 
 manufacturers and landowners for the defence of 
 the protective system ; l they seem to have believed 
 that its maintenance was necessary for the success 
 of those sweeping economic changes which they 
 were bent on accomplishing under the leadership 
 of Louis Blanc. Their attempts ended in disaster, 
 and intensified the alarm felt by the commercial 
 and industrial classes, already sufficiently harassed 
 by the disorders caused to business by the prolonged 
 political confusion ; and after a sharp struggle the 
 Socialist leaders were ousted from the Government. 
 
 1 " Le suffrage universel ne fut pas plus favorable, tout d'abord, 
 que le suffrage restreint au principe de la liberte commerciale . . . 
 une sorte de reaction violente contre les tendances liberates des 
 derniers jours du regime de Juillet se manifesta parmi les couches que 
 la Revolution venait de faire surgir '' (Noel, pp. 100-1). 
 
 296
 
 SAINTE-BEUVE'S PROPOSALS 297 
 
 The Republicans were free to arrange a new con- 
 stitution ; they decided upon a single Chamber and 
 a President of the Republic both to be elected 
 by universal suffrage. Now the grant of universal 
 suffrage gave the decision into the hands of the 
 peasantry, and the immediate result was the election 
 of Louis Napoleon, partly because his name repre- 
 sented for France internal order and external re- 
 nown. 1 The subsequent transition of Napoleon 
 from President to Emperor presented few diffi- 
 culties. 
 
 The tariff changes made during this period were 
 few. The Constituent Assembly increased the 
 drawbacks given on textiles and a few other goods 
 for a time, in order to help the manufacturers to 
 meet some temporary difficulties. 2 Later the Legis- 
 lative Assembly made shipping agreements with 
 Belgium and some American republics, and renewed 
 the treaty with Sardinia. The tariff question was 
 not directly raised until December, 1850 ; in that 
 month Sainte-Beuve brought forward a series of 
 resolutions which proposed the abolition of the 
 protective duties on food and raw materials, the 
 abandonment of all prohibitions, the reduction of 
 the duties on iron after four years, the establish- 
 ment of maximum duties of from 10 to 20 per 
 cent, on all manufactured goods, and the cessation 
 of all shipping and colonial privileges. The result- 
 ing deficit in the national revenue was to be met 
 
 1 Seignobos, Histoire politique de F Europe contemporaine, p. 152. 
 
 2 Ame, i. p. 256.
 
 298 THE COMMERCIAL TREATIES 
 
 by the imposition of an income tax. 1 The proposals 
 gave rise to an animated debate in 1851, and, 
 although their introduction was ill-timed, the fact 
 that they secured the votes of one-third of the 
 Legislative Assembly 2 showed that there was a 
 considerable Free Trade party in the country. The 
 opposition to them was led by Thiers, who based his 
 case chiefly on the higher cost of production in 
 France than in England, and the vital importance 
 to the French manufacturers of maintaining control 
 of the home market. 3 
 
 But with the establishment of the Empire a 
 change began. Napoleon III. was a close student 
 of English affairs ; he had been much impressed 
 by the reforms of Sir Robert Peel, and was not 
 unwilling to attempt to imitate them in France. 
 At the very outset of his reign the Foreign Minister 
 drew the attention of his colleagues to the fact 
 that the reform movement was not confined to 
 Great Britain ; and the Emperor and his ministers 
 soon resolved on sweeping changes. It would 
 have been extremely difficult to secure the con- 
 currence of the Legislature, so it was determined to 
 make use of the powers conferred on the Executive 
 Government by laws of 181 4 and 1836. The former 
 empowered the Government to suspend the duties 
 on foodstuffs and raw materials in case of emer- 
 gency, subject only to the approval by Parliament 
 
 1 Ame, i. pp. 267-8. 
 
 2 428 votes were given against further consideration of the pro- 
 posals^ 199 for. 
 
 3 Brandt, pp. 112-13.
 
 IMPERIAL REFORMS 299 
 
 of the decrees issued for that purpose ; and the law 
 of 1836 authorised the free admission (by decree) 
 of goods intended to be still further worked up in 
 France. 1 
 
 The task was taken vigorously in hand. 
 Between 1853 and 1855 duties were reduced on 
 coal, pig-iron, iron, steel, wool, dye-woods, cotton, 
 etc. ; under the stimulus of a sharp rise in prices 
 the rates on cattle, meat, wines, and other food- 
 stuffs were lowered, and in 1853 the sliding scale 
 regulating the movement of grain was suspended ; 
 free admission was granted to materials for ship- 
 building ; and the restrictions on foreign shipping 
 were greatly reduced. These various decrees were 
 confirmed by the Legislature in 1856, but not 
 without considerable hesitation. 2 The Govern- 
 ment now went still further, and in June, 1856, 
 it proposed to the Legislature an enactment which 
 abolished all the existing prohibitions, 3 and re- 
 placed them by protective duties ranging from 
 30 per cent, ad valorem to double that amount. 
 At once there was a violent agitation against these 
 very moderate proposals for reform ; the manu- 
 facturing towns Roubaix, Lille, Rouen, Lisieux, 
 Elbceuf were particularly active in their hostility; 4 
 
 1 Devers, pp. 132-3. 2 Ame, i. p. 271. 
 
 3 There were still a considerable number of these, dealing with all 
 kinds of commodities woollen and cotton yarn and cloth, clothing, 
 leather goods, metal goods, refined sugar, chemicals, etc. ; many of 
 them were purely accidental, being remnants of the " continental 
 system." Few could be considered of any real importance to French 
 industry (Ame, i. pp. 287-8). 
 
 4 Ame, i. pp. 273-6.
 
 300 THE COMMERCIAL TREATIES 
 
 and the Government deemed it advisable to with- 
 draw the scheme and to promise not to renew it 
 before 1861. The imperial policy met also with a 
 bad defeat in the case of grain. In 1853, in con- 
 sequence of a sudden rise of price, the sliding scale 
 had been suspended, and as prices continued to 
 rise until 1856, the suspension continued also ; but 
 when, in 1857, a fall commenced and the Govern- 
 ment made no attempt to re-establish the scale, 
 the farmers were aroused, and, in spite of the 
 opposition of ministers the old conditions were 
 restored in 1859. 1 By that time the attention of 
 Napoleon and his advisers was concentrated on 
 the Italian War, and the grave European com- 
 plications which it brought in its train ; and for a 
 time it seemed likely that no further economic 
 reforms would be attempted. In spite of some 
 failures, Napoleon had made considerable breaches 
 in the protective policy of France, and he and his 
 minister, Rouher, could point to the statistics of 
 French foreign trade as evidence of marked 
 national progress under their regime. The move- 
 ment of exports was particularly satisfactory ; the 
 following table gives the figures from 1849 to 1860 
 in million francs : 2 
 
 1 The following are the average prices in francs per hectolitre, 1851 
 to 1859 (Brandt, pp. 230-1) : 
 
 1851 
 
 14-5 
 
 1856 
 
 30-7 
 
 1852 
 
 17-2 
 
 1857 
 
 24-3 
 
 1853 
 
 22-4 
 
 1858 
 
 16-7 
 
 1854 
 
 289 
 
 1859 
 
 167 
 
 1855 
 
 293 
 
 
 
 Foville, pp. 269-70.
 
 POLITICAL POSITION OF NAPOLEON 301 
 
 
 SPECIAL TRADE. 
 
 
 Year. 
 
 Imports. 
 
 Exports. 
 
 1849 - 
 
 724 
 
 938 
 
 1850 . 
 
 791 
 
 1,068 
 
 1851 . 
 
 765 
 
 1,158 
 
 1852 . 
 
 . 989 
 
 1,257 
 
 1853 . 
 
 . 1,196 
 
 1,542 
 
 1854 . 
 
 . 1,292 
 
 1,414 
 
 1855 . 
 
 . 1,594 
 
 1,558 
 
 1856 . 
 
 . 1,990 
 
 1,893 
 
 1857 . 
 
 . 1,873 
 
 1,866 
 
 1858 . 
 
 . 1,561 
 
 1,887 
 
 1859 . 
 
 . 1,641' 
 
 2,266 
 
 I860 . 
 
 . 1,897 
 
 2,267 
 
 Towards the end of 1859 Napoleon's position in 
 international politics had become extremely diffi- 
 cult. France was practically isolated in Europe : 
 the events of the Italian War had made friendly 
 relations with Austria impossible, without creating 
 any particular feeling of gratitude on the part of 
 Italy ; the acquisition of Savoy and Nice had 
 alarmed the European Governments, who habitu- 
 ally over-estimated the political ability and 
 military strength of Napoleon, and made them 
 believe that the Second Empire would endeavour 
 to emulate the deeds of the First ; the relations 
 between France and her ally of the Crimean War 
 were severely strained. The Emperor was anxious 
 to put an end to this isolation, he was desirous of 
 convincing the world that his aims were absolutely 
 pacific, and he readily welcomed the proposals that 
 he should give the best possible evidence of this by 
 making a commercial treaty with Great Britain. 
 The idea was not new, for, as we have seen, it had
 
 302 THE COMMERCIAL TREATIES 
 
 been put forward long before by Guizot, and 
 suggestions in the same direction had been made 
 in 1852; 1 but it was now taken up with energy, 
 at first unofficially by Michael Chevalier, Cobden, 
 and others of their school, and then by the Govern- 
 ments. Ministers on both sides, however, were 
 only gradually convinced of the possibility of the 
 scheme ; 2 and on the French side it was necessary 
 that the negotiations should be carried on in 
 secrecy. It was quite true that tariff changes 
 made in consequence of a treaty, and as part of 
 that treaty, would not need the approval of the 
 French Legislature, and an agreement with Great 
 Britain would therefore be a way of accomplishing 
 some of the tariff reforms which Napoleon III. 
 and some at least of his advisers desired ; but, 
 though there was a not insignificant Free Trade 
 party in France, the Protectionists were much 
 more powerful, and, as they had shown in 1856, 
 could cause the Government much inconvenience 
 even if they could not entirely thwart the scheme. 
 It was not until the negotiations were complete 
 that Napoleon made his views public in a letter to 
 one of his ministers, in which he declared that 
 unless there is a constant increase of exchange 
 trade cannot flourish, that industry not subject to 
 competition remains stationary, and that in the 
 absence of growing industries, agriculture itself 
 
 1 Ame', i. p. 300. 
 
 2 For a detailed account of the negotiations, see Morley, Life of 
 Cobden, chap. xxix.
 
 TREATY WITH GREAT BRITAIN 303 
 
 remains undeveloped. He therefore advocated 
 the abolition of the duties on cotton and wool, 
 gradual reductions on sugar and coffee, the im- 
 provement of means of transit, the abandonment 
 of all prohibitions, and commercial treaties with 
 foreign Powers. There was a great outcry from 
 the protected classes in France, encouraged by the 
 favourable reception given to the Emperor's pro- 
 posals by some of the British manufacturers, chiefly 
 in Lancashire ; but the treaty with Great Britain 
 was signed on January 23rd, 1860. The final 
 reasons on both sides were political. 1 
 
 The treaty did not do much more than indicate 
 the general lines of the arrangements to be made ; 
 the details of duties were left to be settled by 
 subsequent consultations. Both parties guaranteed 
 " most favoured nation " treatment to each other ; 
 both were left absolutely free to extend the same 
 reductions to other Powers if they thought fit, and 
 indeed it was understood from the first that Great 
 Britain would do so ; both reserved the right to 
 impose additional customs duties equivalent to the 
 excise levied on any commodity ; both agreed not 
 to prohibit the export of coal. As to actual reduc- 
 
 1 For the evidence of this on the French side, Morley, loc. cit., pp. 
 720, 725. On the British side Gladstone wrote : " A French panic 
 prevailed as strong as any of the other panics that have done so much 
 discredit to this country. For this panic, the treaty of commerce with 
 France was the only sedative. It was in fact a counter-irritant ; and 
 it aroused the sense of commercial interest to counteract the war 
 passion. It was and is my opinion, that the choice lay between the 
 Cobden Treaty and not the certainty, but the high probability of a 
 war with France " (quoted in Morley, Life of Gladstone, ii. p. 23).
 
 304 THE COMMERCIAL TREATIES 
 
 tions of duties, the British Government undertook 
 to recommend certain abolitions and diminutions 
 to Parliament in Gladstone's forthcoming budget, 
 and France undertook to abolish all prohibitions 
 and to levy instead specific duties not exceeding 
 30 per cent, ad valorem up to October, 1864, and 
 after that 24 per cent. The actual specific duties 
 were to be fixed by joint agreement. The treaty 
 was to hold good for ten years, and could be con- 
 tinued, unless one year's notice of its termination 
 was given by either party, for another ten years. 
 
 The customs changes proposed by the British 
 Ministry were accepted by Parliament Gladstone's 
 budget of 1860 reduced the number of commodities 
 liable to duty from 419 to 48. For France the 
 most important diminutions were on wines : the old 
 duty was slightly more than 5*. 106?. a gallon ; after 
 January 1st, 1861, this was to be replaced by gradu- 
 ated duties ranging from 1 to 2 shillings. The 
 French calculated that on their wines this meant a 
 change from 159 francs per hectolitre to 27 '5 francs. 
 The duty on brandy was reduced 30 per cent. 
 
 On the French side the tariff changes were far 
 more numerous and important. Only the specific 
 duties on iron and coal were fixed by the original 
 treaty ; and in order to obtain guidance for the 
 settlement of the remainder, the French Govern- 
 ment appointed a commission to investigate first 
 the average prices in France of the commodities 
 now to be admitted, and secondly the specific 
 equivalents of the ad valorem duties which should
 
 FRENCH TARIFF CHANGES 305 
 
 be imposed within the limits prescribed by the 
 treaty. The commission took a great amount of 
 evidence of all kinds, and the net result of its 
 deliberations was a report to the effect that whilst 
 mechanically the French industries were in many 
 cases far behind the British, yet they were suffi- 
 ciently well established to meet competition, 
 and probably would be likely to make radical 
 changes in their equipment and organisation only 
 if compelled to do so by that competition. Con- 
 sequently the French Government did not think 
 it advisable to impose duties up to the maximum 
 indicated by the treaty which in many cases 
 would have been practically prohibitive. 1 They 
 reached the 30 per cent, ad valorem limit only 
 for some metal products ; on linen, cotton, and 
 woollen cloths the average was only about 15 per 
 cent. ; on tools 10-12 per cent. ; on cutlery 20 per 
 cent. ; on glasswares 10 per cent. ; on china and 
 earthenware 10 per cent. ; on chemicals 15-10 per 
 cent. 2 This action of the French negotiators did 
 much to remove the reproach made in Great 
 Britain against the original treaty that it was 
 too one-sided, since under it Great Britain was 
 bound to abolish duties whilst France had only 
 to reduce them, and might still leave them at 
 almost a prohibitive height. 
 
 Napoleon and his advisers had hoped from the 
 
 1 Ame, i. pp. 310-15. 
 
 2 An elaborate discussion of all the duties, and the reasons for 
 them, is given by Ame, i. pp. 317-468, 
 
 X
 
 306 THE COMMERCIAL TREATIES 
 
 first that once Great Britain had set the example of 
 a treaty, other nations would not be slow to follow 
 it. The expectation was justified ; and, indeed, 
 the industrial powers had no alternative if they did 
 not wish Great Britain to enjoy marked advantages 
 over them in the French market. Negotiations 
 were immediately set on foot by various Govern- 
 ments, and it was natural that the first completed 
 arrangements should be with Belgium. That 
 country granted to France reductions in the duties 
 on wines, silks, and leather goods ; and in return 
 was given the advantages of the "conventional" 
 tariff established by France for Great Britain, with 
 the addition of some changes in the rates on linen 
 goods and prepared hides. Both contracting parties 
 guaranteed " most favoured nation " treatment to 
 each other. This was, in fact, the general policy 
 pursued by France in all its treaties ; it granted in 
 each case the conventional tariff rates settled by 
 the British treaty, and generally added one or 
 two more reductions on commodities in which the 
 other contracting party was especially interested ; 
 then these additional reductions (which probably 
 would only benefit to any considerable extent the 
 country to which they were first given) were ex- 
 tended to all the contracting Powers under the 
 "most favoured nation" clauses. In return France 
 secured from the Zollverein in 1862 (thus closing 
 a long quarrel) reductions on wines, textiles, 
 and some miscellaneous commodities though the 
 arrangement was not ratified by the various
 
 NEW GENERAL TARIFF 307 
 
 German states until 1865 ; from Italy (1863) small 
 reductions (for the Italian tariff was not very 
 protective) on silks, chemicals, glassware, and pre- 
 pared hides ; from Switzerland (1864) reductions 
 on wines, brandy, glassware, earthenware, chemicals. 
 In 1865 treaties on similar lines were made with 
 Sweden and Norway, the Hanse towns, Spain, 
 and the Netherlands ; in 1866 with Austria ; and 
 in 1867 with Portugal. 1 
 
 Whilst an elaborate conventional tariff was being 
 formed in this way, changes were being made in 
 the general tariff also. In 1860 and the following 
 years, either by legislative enactment or imperial 
 decree, the duties on a great number of raw 
 materials skins, wool, cotton, dye-stuffs, jute, 
 flax, hemp, coal, chemicals, and many others- 
 were either greatly reduced or abolished ; prohibi- 
 tions of exports came practically to an end ; bounties 
 on exports were abandoned ; transit facilities were 
 increased ; and finally, after long deliberation, in 
 1866 the preferential treatment of French vessels 
 in regard to shipping dues and the trade with the 
 Antilles and Algeria, and the surtaxes on goods 
 imported to France not in French vessels or vessels 
 belonging to the producing country, likewise ceased. 
 Finally it should be noted that at the very com- 
 mencement of the reform the French Govern- 
 ment abolished (in 1861) the sliding scale for grain, 
 and replaced it by freedom of export and a very 
 moderate duty on imports. 2 
 
 1 Details in Ame, ii. pp. 1-36. 2 Devers, pp. 139-45.
 
 308 THE COMMERCIAL TREATIES 
 
 Clearly the result of all these changes was an 
 absolute break with all the traditions of French 
 commercial policy; what was the effect on the indus- 
 trial development of France ? It must not be sup- 
 posed that the opponents of the Emperor's action 
 were ever brought to approve it ; the Legislature 
 gave its formal assent to changes made often with- 
 out its knowledge, but the new policy was to the 
 end accepted only reluctantly and with disapproval 
 by the larger part of those classes who exercised 
 political influences. By 1868, when the power of 
 the Emperor had been severely shaken by failures 
 in foreign policy, whilst the effects of the commercial 
 crisis of 1864 had not yet ceased to be felt, and 
 political events in the United States and the 
 Germanic Confederation had harassed trade, and 
 the time for the extension or abandonment of the 
 British treaty was approaching by that year the 
 forces of the friends of Protection had recruited their 
 strength, and a demand was made for an inquiry 
 into the effect of the whole treaty system and the 
 changes which it had brought in its train. The 
 conflict continued for some time, but finally the 
 Ministry gave way, and two commissions were 
 appointed in 1870, only a very few months before 
 the outbreak of the Franco-German War and the 
 collapse of the Empire. 
 
 It is always arguable that the industrial and 
 commercial progress of France between 1860 and 
 1870 might have been greater and more rapid if a 
 higher tariff wall had been maintained ; or that
 
 MOVEMENT OF FRENCH TRADE 309 
 
 progress was certain in any case, and that tariff 
 changes exercised little influence upon it. But 
 this is mere speculation, and all the evidence goes 
 to show that during the period from 1850 to 1860, 
 when moderate reforms were being made, France 
 commenced a rapid advance, which quickened con- 
 siderably with the introduction of more radical 
 changes of policy after 1860. First as to foreign 
 trade. The following table gives the figures from 
 1860 to 1869 in million francs : l 
 
 
 SPECIAL TRADE 
 
 
 Year. 
 
 Imports. 
 
 Exports. 
 
 I860 . 
 
 . 1,897 
 
 2,277 
 
 1861 
 
 . 2,442 
 
 1,926 
 
 1862 
 
 . 2,199 
 
 2,243 
 
 1863 
 
 . 2,426 
 
 2,643 
 
 1864 
 
 . 2,528 
 
 2,924 
 
 1865 
 
 . 2,642 
 
 3,088 
 
 1866 . 
 
 . 2,794 
 
 3,181 
 
 1867 . 
 
 . 3,027 
 
 2,826 
 
 1868 
 
 . 3,304 
 
 2,790 
 
 1869 . 
 
 . 3,153 
 
 3,075 
 
 The figures of French trade with the chief treaty- 
 states are also instructive. In 1857 British exports 
 to France were valued at 11,327,000 ; they de- 
 clined considerably in the next two years, but 
 in 1860 rose to 12,701,000; in the next year 
 they were 17,427,000, and they rose steadily to 
 26,597,000 in 1866 ; after that there was a de- 
 cline, due in part to a general commercial depression. 
 Our imports from France were 11,965,000 in 
 
 1 Foville, pp. 270-1. The figures for the year 1870 show a slight 
 decline owing to the war.
 
 310 THE COMMERCIAL TREATIES 
 
 1857, and in 1860 17,774,000; they reached in 
 1866 37,017,000, and after that declined for a time. 1 
 With the Zollverein French exports remained 
 almost stationary, with the exception of 1866, when 
 there was a drop they were valued at 209 million 
 francs in 1862, and 214 millions in 1868 ; her im- 
 ports, however, rose from 129 millions to 266 
 millions. With Switzerland the exports rose from 
 137 million francs in 1862 to 261 millions in 1868, 
 and the imports from 58 millions to 132 millions. 
 The total trade with Belgium increased from 344 
 millions in 1860 to 611 millions in 1869. 2 
 
 The expectation that industry would receive a 
 great stimulus from the opening of foreign markets 
 and competition at home was amply justified ; and 
 the development was aided by the growth of means 
 of transit and transport. In 1850 there were 3,010 
 kilometres of railways in France ; by 1860 there 
 were 9,439 ; by 1869, 17,111. 3 In 1850 the merchant 
 shipping of France (2 tons and upwards) was re- 
 turned at 688,000 tons ; by 1860 the amount had 
 reached 996,000 tons, and by 1870, 1,072,000 tons. 4 
 The home production of coal was 4,040,000 tons in 
 1849, 7,600,000 in 1859, and 13,509,000 in 1869 ; 
 in the same period the total consumption increased 
 in almost the same proportion, from 6,434,000 to 
 21,809,000 tons. 5 The production of pig-iron was 
 414,195 tons in 1849 ; by 1859 it had a little more 
 
 1 Statistical Abstract for the United Kingdom, Nos. 13 and 27. 
 
 2 Noel, pp. 238-9. 3 Foville,, p. 307. 
 
 4 Report on British and Foreign Trade and Industry, p. 386. 
 6 Ame, ii. p. 387.
 
 ECONOMIC PROGRESS 311 
 
 than doubled ; and by 1869 it amounted to 1,381,000 
 tons. 1 In 1849 only 9,000 tons of steel were manu- 
 factured, as against 23,000 in 1859, and 110,000 in 
 1 869. 2 The cotton industries were naturally affected 
 by the American Civil War, and the consequent 
 temporary cessation of supplies, but, nevertheless, 
 the consumption of raw cotton in France averaged 
 78 million kilo, for the period 1857-9, and 90 million 
 kilo, for 1867-9. 3 Between the same two periods 
 the average consumption of imported raw wool 
 grew from 36^ million kilo, to 93 million kilo. 4 In 
 the case of linens, the surplus of imports over 
 exports rose from an average of 25 million kilo, in 
 1857-9 to an average of 45 million kilo, in 1867-9, 
 in spite of a very large growth in French exports ; 
 the chief cause of this condition of affairs seems to 
 have been the slowness of the French manufacturers 
 to make use of jute. 5 
 
 In agriculture it was natural that the wine 
 growers should reap the greatest benefit. The 
 production is, of course, subject to fluctuations 
 due to natural causes, and the statistics of particular 
 years are scarcely an adequate indication of the 
 movement of the industry ; but it may be pointed 
 out that the estimated output of wine was 45 million 
 hectolitres in 1850, 15 million in 1855, 39 million 
 in 1860, and 69 million in 1865. 6 The exports of 
 brandy and spirits were 173,000 hectolitres in 1858, 
 
 1 Ame, ii. p. 397- 2 Ibid., p. 404. 
 
 3 Ibid., p. 422. 4 Ibid., p. 415. 
 
 5 Ibid., pp. 425-6. c Foville, p. 161.
 
 312 THE COMMERCIAL TREATIES 
 
 224,000 in 1863, and 333,000 in 1867 ; after that 
 there was a decline. 1 The manufacture of home- 
 produced sugar was 132 million kilo, in 1859 ; after 
 being stationary for some years it leaped up to 
 210 million in 1865, and reached 242 million in 
 1869. 2 The quantity of corn grown, which had 
 averaged 82 million hectolitres for the years 1845-9, 
 reached 98 million for the years 1865-9, 8 in spite 
 of poor harvests in 1866 and 1867. Finally, it 
 should be noted that population was increasing 
 very slowly ; in 1849 it was estimated at 35,690,000, 
 and twenty years later at only 38,330,000, in spite 
 of the fact that the acquisition of Savoy and Nice 
 had added 689,000 persons to the inhabitants of 
 French territory in I860. 4 The proportion engaged 
 in agriculture diminished considerably ; in 1851 
 the rural population numbered 6,146 out of every 
 10,000 of the whole, whilst by 1866 the number 
 had fallen to 5,119. 
 
 It is evident, then, that in the twenty years 
 I of Napoleon's rule France had made very substan- 
 tial progress. By 1870 she had become a great 
 industrial power ; her commerce had expanded 
 largely, her manufactures were firmly established, 
 her agriculture was flourishing ; and her economic 
 strength was revealed to an astonished Europe 
 by the ease with which she bore the burdens cast 
 upon her by the war. 
 
 i Noel, p. 236. 2 Ibid., p. 236. 
 
 3 Brandt,, p. 231. 4 Foville, pp. 9-10.
 
 CHAPTER IV 
 COMMERCIAL POLICY, 1870-81 
 
 THE Government of the Third Republic was called 
 upon to deal at the close of the war with a financial 
 situation of almost unparalleled difficulty. Thiers, 
 who had been entrusted with the conduct of the 
 Executive Government, estimated that to provide 
 for all necessary expenditure (including the great 
 debt-charges caused by the war indemnity) the 
 annual amount raised by taxation must be in- 
 creased by 556 million francs, or 22 million pounds 
 sterling an increase absolutely unprecedented. 1 
 By various forms of internal taxation he could 
 raise, he thought, about 350 millions ; and for the 
 rest he resolved to have recourse to the customs. 
 His own economic views had become frankly protec- 
 tionist, but his main anxiety at this time was to 
 secure revenue. He proposed in 1871 to increase the 
 duties on sugar and coffee ; to subject a number of 
 raw materials silk, wool, hides and skins, wood, 
 etc. to the duties from which they had been freed 
 by the reforms of Napoleon III. ; to re-establish 
 some export duties ; to impose harbour dues, and 
 
 1 Tliiers, Notes et Souvenirs, pp. 186-92. 
 313
 
 314 COMMERCIAL POLICY, 1870-81 
 
 to renew the surtaxes on commodities carried in 
 ships not belonging to the country of origin. 1 
 Manufactured commodities it was not possible to 
 touch to any great extent, since most of the 
 treaties made under the Empire would continue in 
 force for a number of years. 
 
 The proposals had a varied reception in the 
 National Assembly. The revenue duties on sugar 
 and coffee were approved at once, and extended to 
 tea, cocoa, pepper, and some other commodities. 
 On the other hand, the proposed export duties 
 were dropped without the Government making any 
 strenuous effort to retain them. The shipping 
 surtaxes were imposed, and also the harbour dues ; 
 but in this connection difficulties were caused by 
 the commercial treaties. With one unimportant 
 exception, goods brought direct from the country 
 of origin were exempted from the surtax 2 if carried 
 in the ships of treaty states ; and even if brought 
 indirectly they were exempt if carried in Austrian, 
 Belgian, Dutch, Italian, Swedish, German, or Por- 
 tuguese vessels. The only country to whom these 
 privileges were expressly granted by treaty was 
 Austria ; but they were extended to the others by 
 force of the " most favoured nation " clause. For 
 the proposed change to be productive of much 
 revenue it must apply to all shipping, but this was 
 possible only if Austria would consent to abandon 
 its rights under the treaty of 1866. It might have 
 
 1 DeverSj p. 147. 
 
 2 The so-called " droits de pavilion.''
 
 TRIERS' FINANCIAL PROPOSALS 315 
 
 done so, since it was interested only in the Medi- 
 terranean trade, and the French Government was 
 willing to meet its wishes so far as that was con- 
 cerned ; but it was subjected to strong pressure 
 from Prince Bismarck, and ultimately refused to 
 grant the French request. 1 The proposals of Thiers 
 in regard to shipping remained then ineffective, 
 except the harbour dues, which affected foreign 
 and French vessels alike. 
 
 But the great question was the taxation of raw 
 materials. The Ministry proposed to subject silk, 
 wool, cotton, flax, and jute to a duty of 20 per 
 cent, ad valorem ; and hides, timber, oil-seeds, etc., 
 dye-stuffs, and all other raw materials hitherto 
 exempt, to various duties not to exceed 20 per 
 cent. 2 Clearly this would hamper the manufac- 
 turers, and the President (who made himself re- 
 sponsible for the new scheme, which was, in fact, 
 his work) proposed to remedy this first by the 
 grant of drawbacks, and secondly by imposing on 
 imported manufactured goods a compensating sur- 
 tax presumed to be equivalent to the amount of 
 the duty on raw materials. 3 But it was evident 
 that the calculation and arrangement of the draw- 
 backs would be a task of very great administrative 
 difficulty, and the Budget Commission proposed, 
 as an alternative scheme, the abandonment of the 
 high duties and drawbacks, and the substitution 
 
 1 Ame, ii. p. 318 seq. a Devers, p. 150. 
 
 3 The right of France to do this had been recognised in the com- 
 mercial treaties.
 
 316 COMMERCIAL POLICY, 1870-81 
 
 of a uniform rate of 3 per cent, on raw materials, 
 and an equivalent surtax on manufactured goods. 
 It was estimated that this arrangement would pro- 
 duce some 60 million francs ; the Government had 
 counted on obtaining 165 million. There was 
 a long parliamentary conflict ; the manufacturers 
 (especially those of Lyons) resisted the President's 
 proposals fiercely ; and finally the matter was 
 referred to a new commission, which was directed 
 to investigate the probable effect of the proposed 
 taxation, and it was definitely stated in the resolu- 
 tion that the National Assembly would adopt duties 
 on raw materials only if it proved impossible to 
 provide adequate revenue in any other way. Thiers 
 resigned, but was persuaded to retain office. 1 
 
 In May, 1872, the commission reported. It 
 recommended duties of 5 per cent, on cotton (with 
 a drawback), and 2j to 2 per cent, on silk, wool, 
 flax, hemp, and jute (without drawbacks) ; and 
 its plans were adopted. It was an unsatisfactory 
 proposal, since until the expiration of the treaties 
 the new taxes would yield only some 42 million 
 francs a comparatively unimportant sum. More- 
 over, it was resolved that no duties should be 
 imposed on raw materials unless a corresponding 
 surtax was imposed on manufactured goods ; and, 
 whatever the actual powers of the French Govern- 
 ment under the existing treaties may have been, 
 the practical result was to render the new tariff 
 
 1 For his own account of these events see Thiers, Notes et Souvenirs, 
 pp. 259-62.
 
 COMMERCIAL NEGOTIATIONS 317 
 
 law useless until the revision of the treaties or 
 the establishment of an entirely new set. 1 
 
 Already negotiations had commenced, first with 
 Great Britain. But there the French Government 
 encountered many difficulties ; the British ministers 
 were unwilling to recognise the right of France to 
 impose duties on imported raw materials unless 
 the same commodities were taxed when produced 
 at home, and they were not so favourable to the 
 idea of commercial treaties as they had been in 
 1860. France had difficulties with Belgium also ; 
 and in March, 1872, she renounced both the 
 British and Belgian treaties. Then fresh delibera- 
 tions began, and in November, 1872, a new con- 
 vention with Great Britain was signed. France 
 pledged itself not to increase the taxes on raw 
 materials imposed by the new tariff, and it aban- 
 doned some ; it exempted British ships from the 
 operation of the surtaxes up to 1879. In the 
 following February a new arrangement was made 
 with Belgium on similar lines. 2 Both of these 
 were only to be in force till the middle of 1877. 
 The numerous exemptions from the shipping 
 surtaxes, and the practical impossibility of doing 
 anything with the proposed duties on raw materials, 
 at last brought the National Assembly to recognise 
 the uselessness of the two enactments, and in July, 
 1873, both were repealed. Two months earlier, 
 Thiers had abandoned office ; and of all his elabo- 
 rate plans of 1871 only that unimportant part which 
 
 1 Ame, ii. p. 297. a Devers, pp. 155-6.
 
 318 COMMERCIAL POLICY, 1870-81 
 
 concerned the harbour dues had been realised. 
 The deficit was met by a number of new internal 
 taxes of various kinds excises, stamps, etc., and 
 the taxation per head in France was higher than 
 in any other country of Europe. 1 
 
 It soon became necessary for the French Govern- 
 ment to consider what policy it should adopt when 
 the various treaties came to an end, and in order 
 to obtain some guidance on this point the Ministry 
 of Commerce invited, in April, 1875, an expression 
 of opinion from the Chambers of Commerce and 
 similar bodies. It asked three questions : Was the 
 general tariff in need of revision ? Was it desir- 
 able to continue the system of commercial treaties ? 
 Should the customs duties be specific or ad valorem ? 
 The great majority replied that the general tariff 
 did need revision, and preferred specific to ad 
 valorem duties ; the larger number were in favour 
 of the treaty system, but a strong minority (in- 
 cluding Rouen, Roubaix, and Turcoing) urged the 
 establishment of a simple autonomous tariff. 2 And 
 it is noteworthy that even amongst the supporters 
 of the commercial treaties, the greater part were 
 opposed to the insertion in them of the "most 
 favoured nation " clause. The task of preparing 
 a new scheme of duties was entrusted to the 
 Superior Council of Commerce, Agriculture, and 
 Industry a body formed a few years previously, 
 and composed of members of the Chamber of 
 Deputies, presidents of Chambers of Commerce, 
 
 1 Brandt, pp. 146-7. 2 Devers, p. 157.
 
 NEW TARIFF SCHEMES 319 
 
 representatives of agriculture, industry, and bank- 
 ing, and some officials who, however, were not 
 entitled to vote. 1 
 
 The result was a scheme for a moderate tariff 
 which reproduced almost without alteration the 
 rates of duty established by the conventional tariff 
 already in force ; almost the only increase of import- 
 ance was on woollen goods. Ad valorem duties 
 were abandoned almost entirely ; whatever theo- 
 retical advantages they might have, experience had 
 shown that they caused endless difficulties. 2 At 
 the time of the treaty with Great Britain in 1860 
 an attempt had been made to get rid of them ; but 
 considerations of time, and the difficulty of calcu- 
 lating the specific equivalents, had caused many of 
 them to be retained. But difficulties as to the 
 valuations at the customs-houses were constant ; 
 and in spite of various administrative changes, 
 frauds by under-valuation were frequent. The 
 customs officials themselves were anxious to be 
 freed from a complicated and irksome task. 
 
 The plan so elaborated was not discussed by the 
 Chamber, owing to the constitutional crisis of 
 1877, but in the first month of the following year 
 Teisserenc de Bort, the Minister of Commerce, 
 brought forward a new scheme. It was much 
 more protectionist than the previous proposals, 
 
 1 The great work of Ame, who was Director-General of Customs, 
 was published chiefly for the guidance of the council at the instigation 
 of Leon Say, the Minister of Finances. 
 
 2 For German and American experience in this matter, see pp. 5-6, 
 168, 236-8.
 
 320 COMMERCIAL POLICY, 1870-81 
 
 since it increased the duties by about 24 per cent, 
 on the average ; so that whilst the council had 
 practically recommended that the conventional 
 tariff should become the general tariff, and be 
 subject to reductions by treaty, the Ministry now 
 proposed merely to retain the existing arrange- 
 ments. But that did not satisfy the Legislature. 
 There was a marked revival of the agitation in 
 favour of Protection just as in Germany in the 
 same years ; in both countries the campaign was 
 led by the textile and iron industries, which were 
 able to act the more effectively since they were in 
 the hands of a comparatively small number of 
 powerful firms. 1 The silk industry alone was 
 ranged with the commercial classes on the other 
 side, and favoured the maintenance of the treaties, 
 to which the Protectionists were particularly 
 hostile. In agriculture the wine-growers sup- 
 ported the policy pursued since 1860, but the 
 great majority of the landowners were with the 
 opposition they were alarmed by the growing 
 invasion of American wheat and the continued 
 low prices. The imports and exports of corn into 
 France fluctuate greatly ; between 1861 and 1880 
 there was a surplus of exports over imports in five 
 years, and in the other fifteen the surplus of 
 imports over exports varied from 971,000 to 
 29,349,000 hectolitres. 2 The surplus of the im- 
 ports of corn over exports, which had never 
 previously exceeded 14 million hectolitres, reached 
 
 1 Brandt, pp. 152-3. 2 Ibid., p. 231.
 
 MOVEMENT OF FOREIGN TRADE 
 
 321 
 
 nearly 18 million in 1878, more than 29 million 
 in 1879, and nearly 27 million in 1880. The 
 result was that prices did not rise, and even fell a 
 little, 1 in spite of poor harvests (the cause of the 
 large importations) in 1878 and 1879 ; and the 
 French farmers became alarmed. They threw 
 themselves into alliance with the manufacturers, 
 and the agitation was helped by the commercial 
 crisis which had commenced elsewhere in Europe 
 in 1873, but did not make itself felt in France till 
 some years later: it was marked, amongst other 
 things, by a general fall in prices, due in part to 
 the growth of means of transport and the fresh 
 developments of mechanical power in industry. 
 All over Europe and America industry was enter- 
 ing on a period of transition which tried manu- 
 facturers severely, and harassed commerce also. 
 Yet in spite of all these difficulties, French foreign 
 trade continued to make steady progress ; the 
 following table gives the figures from 1871 to 
 1880 in million francs 2 -it should be remembered 
 that prices declined sharply after 1872-3 : 
 
 Year. Imports. 
 
 SPECIAL TRADE 
 Exports. Year. Imports. 
 
 Exports. 
 3,576 
 3,436 
 3,180 
 3,231 
 3,468 
 
 1 Average prices per hectolitre were : 1877, 23-4 francs ; 1878, 
 21-2 ; 1879, 22-1 ; 1880, 22 2 (Brandt, p. 231). 
 
 2 Foville, pp. 271-2. 
 
 Y 
 
 1871 
 
 . 3,567 
 
 2,873 
 
 1876 
 
 1872 
 
 . 3,570 
 
 3,762 
 
 1877 
 
 1873 
 
 . 3,555 
 
 3,787 
 
 1878 
 
 1874 
 
 . 3,508 
 
 3,701 
 
 1879 
 
 1875 
 
 . 3,537 
 
 3,873 
 
 1880
 
 322 COMMERCIAL POLICY, 1870-81 
 
 These various circumstances, and the example 
 of Germany, made the Senate and Chamber of 
 Deputies even more protectionist than the 
 Ministry. The Senate appointed a commission to 
 inquire into the commercial and industrial depres- 
 sion ; and the Chamber sent the ministerial tariff 
 proposals to a committee. Both held elaborate 
 inquiries extending over nearly a year, and during 
 that time the campaign in the country in favour of 
 Protection was carried on by the Societe des Agri- 
 culteurs de France and the Association de I' In- 
 dustrie franpaise pour la Defense du Travail 
 national ; the Free Trade party started a counter- 
 campaign, but without conspicuous success. Under 
 the guidance of Meline the commission of the 
 Chamber made radical changes in the proposals 
 submitted by the Government. It declared that 
 special advantages should be given to those 
 national industries which employed most labour ; 
 it asserted that the treaties of commerce had 
 clearly failed, since in the seventeen years after 
 1860 the total imports had exceeded the total 
 exports by 270 million francs ; it drew especial 
 attention to the " American peril " ; and it aban- 
 doned the hitherto avowed and moderate object of 
 the protective policy the possibility of French 
 manufacturers competing with foreigners on equal 
 terms and advocated the purest Protection. It 
 accepted the Government's recommendations in a 
 number of cases, but it made substantial increases 
 on woollen yarn, and for the agrarians on hides,
 
 A PARLIAMENTARY CONFLICT 323 
 
 cheese, cattle, etc. The Ministry stood firmly by 
 the original proposals, and the new Minister of 
 Commerce, Tirard, announced that the commercial 
 treaties must be made ; that they had promoted 
 the economic progress of France ; that the chief 
 industries, particularly cotton and metallurgy, 
 were quite able to stand alone, with only the 
 moderate help given them by the treaty tariffs ; 
 and that the difficulties of agriculture were due 
 chiefly to inclement seasons. The leader of the 
 commission, Meline, urged that its proposed 
 duties were not intended to be universally applied 
 that, in fact, the increases were intended to 
 facilitate the work of the French diplomatists in 
 the negotiation of the new treaties, which he and 
 his friends recognised must be made. 1 There was 
 a long parliamentary struggle, but the Ministry 
 had its way, helped by the lack of union between 
 the industrial and agricultural wings of the pro- 
 tectionist forces ; nearly all the additions and 
 changes recommended by the commission were 
 rejected, and the agrarians secured only duties on 
 certain animals imported for food. There were 
 more difficulties in the Senate, which was favour- 
 ably inclined to protection for agriculture ; but 
 ultimately the original ministerial proposals, only 
 slightly altered, became law in May, 1881. The 
 new Tariff was far more elaborate and detailed than 
 any of its predecessors. 
 
 On the whole, it was a victory for the supporters 
 
 1 See the lengthy summary of the debates in Devers, pp. 162-72.
 
 324 COMMERCIAL POLICY, 1870-81 
 
 of Free Trade. The new general tariff on manu- 
 factured goods exceeded the previous conventional 
 rates by an average of 24 per cent., but this was 
 intended only as a basis for negotiations ; coffee, 
 sugar, cocoa were taxed for revenue purposes only ; 
 raw materials and foodstuffs were free, or subject 
 only to small duties, and some articles had been 
 added to the free list ; ad valorem rates were 
 almost entirely abolished. The new system was 
 much more moderate than the one adopted a little 
 earlier in Germany ; and unlike the German 
 Government, the French ministers were prepared 
 to continue the policy of international commercial 
 agreements, subject to the approval, in each case, 
 of the Legislature. They laid down three principles 
 for their own guidance in the negotiations : (1) the 
 concessions to be made should not exceed as a 
 whole 24 per cent, on the general tariff; (2) specific 
 duties alone should be imposed ; (3) cereals and 
 cattle should not be included, since it was desirable 
 for the Government to have a free hand in cases of 
 emergency. 1 The negotiations began immediately, 
 first under the guidance of Rouvier, and later of 
 Tirard. Treaties were made in 1881 with very 
 little difficulty with Belgium, Italy, Portugal, 
 Sweden, and Norway, and in 1882 with Spain and 
 Switzerland ; in 1883 an agreement with Austria- 
 Hungary secured reciprocal " most favoured 
 
 1 Devers, pp. 171-2. It seems probable, however, that the last 
 principle was dictated partly by the desire to give agriculture, which 
 was admittedly in difficulties, as much help as possible.
 
 THE NEW TREATIES 325 
 
 nation " treatment, and this was extended to 
 Russia and Turkey, to Germany under the terms 
 of the Treaty of Frankfurt, to Servia in 1883, and 
 to Holland in 1884. With Great Britain no treaty 
 could be made, partly because Great Britain would 
 not reduce the wine duties, and for financial 
 reasons would not guarantee that they should not 
 be increased ; and partly because no agreement 
 could be reached on the question of ad valorem 
 and specific duties. The negotiations broke down, 
 but by legislative enactment France granted Great 
 Britain "most favoured nation" terms in 1882. 
 The net result of the treaties was that the new 
 conventional tariff included some 1,200 articles, 
 whilst 300 remained subject in all cases to the 
 rates of the general tariff. 1 All the treaties pro- 
 vided for the equal treatment of French and 
 foreign shipping ; but as the French mercantile 
 marine was far from prosperous (it amounted to 
 996,124 net tons in 1860, rose to 1,072,048 in 1870, 
 and fell to 919,298 in 1880), 2 and the free import 
 of materials for shipbuilding had not apparently 
 been of much service, it was decided in 1881 to 
 give State bounties to shipbuilders, and to owners 
 for long-distance voyages. 3 In the ten years 
 
 1 For full details of those negotiations, see Rausch, pp. 186 seq. 
 
 2 Blue Book on British and Foreign Trade and Industry, p. 376. 
 The figures are for vessels of two tons and upward. 
 
 3 The bounties ranged from 60 francs per gross ton on steel ships 
 to 10 francs per gross ton on wooden vessels of less than 10 tons. On 
 machinery and boilers 12 francs per 100 kilo, were paid. The bounty 
 on voyages was li francs per net ton for every 1,000 miles of journey ; 
 on vessels bought from abroad the bounty was half this amount.
 
 326 COMMERCIAL POLICY, 1870-81 
 
 1881-90 about 27 million francs were paid in 
 bounties on shipbuilding alone, and the mercantile 
 steam shipping increased from 356,636 to 747,512 
 gross tons. 1 
 
 It will be convenient to add here the figures of 
 French foreign trade from 1881 to 1891, in million 
 francs. 2 
 
 SPECIAL TRADE 
 
 Year. Imports. Exports. 
 
 1881 . . . 4,863 ... 3,561 
 
 1882 . . . 4,822 ... 3,574 
 
 1883 . . . 4,804 ... 3,452 
 
 1884 . . . 4,343 ... 3,232 
 
 1885 . . . 4,088 ... 3,088 
 
 1886 . . . 4,208 ... 3,249 
 
 1887 . . . 4,026 ... 3,247 
 
 1888 . . . 4,107 ... 3,247 
 
 1889 4,317 ... 3,704 
 
 1890 . . . 4,437 ... 3,753 
 
 1891 - . . 4,768 ... 3,570 
 
 1 Franke, p. 137. But the net tonnage of mercantile shipping rose 
 only from 919,000 to 944,000, Report on British and Foreign Trade and 
 Industry, p. 376. For a detailed discussion of French shipping and 
 the bounty system, see Franke, pp. 122-39. 
 
 2 Brandt, p. 226.
 
 CHAPTER V 
 
 THE MOVEMENT TOWARDS PROTEC- 
 TION FOR AGRICULTURE 
 THE FRANCO-ITALIAN TARIFF WAR 
 
 THE agricultural classes had been disappointed by 
 the tariff of 1881 ; they had made considerable 
 efforts to secure the extension of Protection to 
 their own particular interests, but without success 
 except in a few almost unimportant instances. 
 Yet they were the most numerous class of the 
 community ; in 1882 the number of persons 
 connected with agriculture was over 18 millions, 
 as against about 9 millions for industry and 
 4 millions for trade. 1 Nearly one-half the total 
 population (actually 48 '8 per cent.) were dependent 
 on agriculture in one way or another. Moreover, 
 the great number of small holdings made agricul- 
 tural prices a subject of keen interest to a much 
 larger class in France than anywhere else ; in 1882 
 there were 5,529,917 holdings of 100 acres or less, 
 and of these 4,802,697 did not exceed 25 acres. 2 
 And there is no doubt that those farmers who 
 were engaged in corn growing were not doing at 
 
 1 Brandt, p. 168. 2 Ibid., p. 168. 
 
 327
 
 328 THE FRANCO-ITALIAN TARIFF WAR 
 
 all well in the period from 1881 to 1890 ; in the 
 first five years prices fell. The following table 
 gives the average prices of corn from 1881 to 1890, 
 in francs per hectolitre : 
 
 1881 . 22-2 
 
 1882 . 19-3 
 
 1883 . 19-0 
 
 1884 . 17-8 
 
 1885 16-4 
 
 1886 . 16-5 
 
 1887 . 17-7 
 
 1888 . 18-8 
 
 1889 18.1 
 
 1890 18-9 
 
 Average prices between 1881 and 1890 were on the 
 whole considerably lower than those for the period 
 1861-70, and very much lower than those for 
 1871-80, and the average production per acre had 
 increased only slightly, 1 partly because of the 
 smallness of the holdings and the lack of capital 
 necessary for improvements ; on the other hand, 
 taxation had greatly increased since 1860, and 
 especially since 1870, whilst the average wages of 
 agricultural labour had increased 20 per cent. 2 
 The cattle-rearing industry was in a much better 
 position, but the wine-growers and silk-producers, 
 hitherto large exporters and therefore ranged on 
 the side of the Free Traders, were now entering on 
 a period of grave difficulties owing to the ravages 
 of phylloxera and other diseases. The production 
 of wine, which had reached in 1875 the exception- 
 ally high figures of 84 million hectolitres, sank to 
 34 million in 1881 and 25 million in 1886; as a 
 natural consequence the imports, which were 
 insignificant in 1876, reached 8 million in 1881 
 
 1 See the tables in Brandt, p. 231. 
 
 2 Foville., pp. 98-9.
 
 DEMAND FOR AGRICULTURAL PROTECTION 329 
 
 and 11 million in 1886. 1 In the case of silk, the 
 growing competition of China and Japan made 
 itself felt acutely at the time when the French 
 producers were struggling to recover from their 
 disasters. The sugar-producers of Northern France 
 complained of the ineffective character of the 
 surtaxes on beet sugar, which did nothing to check 
 the influx of the bounty-fed sugar of Germany and 
 Austria-Hungary. 2 For all these various reasons 
 the agriculturists were distressed and dissatisfied ; 
 they were ready to follow the leadership of Meline 
 in his energetic campaign in favour of the exten- 
 sion of Protection to agriculture ; and the charac- 
 teristic feature of the tariff history of France, as of 
 Germany, in the decade 1881-90 is the develop- 
 ment of Protection in this particular direction. 
 The various agricultural interests were no longer 
 hostile ; they combined, and, as in Germany, were 
 able to force their policy upon the country, 3 in 
 spite of the activity of the "Ligue anti-pro- 
 tectioniste," led by Leon Say. 
 
 It will suffice to sketch the growth of this 
 legislation very briefly. In 1881 on sanitary 
 grounds the importation of American pork was for- 
 bidden, though there was some opposition to this 
 from the seaports. In 1884, as the result of strong 
 pressure from Northern France, the surtax on beet 
 sugar was raised from 3 to 7 francs, and various 
 excise changes made in order to encourage the 
 home producers. In 1885 the taxes on imported 
 
 1 Devers, pp. 183-4. ' Ibid., p. 176. 3 Ibid., p. 184.
 
 330 THE FRANCO-ITALIAN TARIFF WAR 
 
 animals for food were raised on oxen from 15 to 
 25 francs, on cows from 8 to 12, on calves from 1^ 
 to 4, on pigs from 3 to 6, on sheep from 2 to 3. 
 At the same time rye, barley, and oats, which had 
 been duty free since 1861, were subjected to a tax 
 of 1^ francs per 100 kilo., and the rates on flour 
 were raised from 1*2 to 6 francs. In 1887 the duty 
 on oxen was raised to 38 francs, on cows to 20, on 
 calves to 8, on sheep to 5 ; the duty on flour was 
 advanced to 8 francs, and on oats to 3 francs. 1 
 
 In the same year the customs duty on alcoholic 
 liquors was raised to 70 francs per hectolitre of 
 pure alcohol ; this was at first intended as a tem- 
 porary measure to deal with some passing difficulties 
 created by German tariff legislation, but ultimately 
 in 1888 the tax was continued indefinitely. In 
 1890, in order to give such help as was possible 
 to the wine-growers, an excise was imposed on the 
 manufacture of certain " wines " from raisins ; ad- 
 ditional customs duties could not be imposed owing 
 to treaty obligations. 
 
 In the case of wheat, the first enactment was in 
 1885. Under the tariff of 1881 the duty was 
 60 centimes per 100 kilo. ; the growers now asked 
 that the amount should be raised to 5 francs. The 
 Government, with Meline at the Ministry of Agri- 
 culture (established in 1881), was not unfavourable, 
 but the Chamber of Deputies was not prepared to 
 make so sweeping a change, and contented itself 
 with fixing the duty at 3 francs. But the Pro- 
 
 1 Devers, pp. 176-9.
 
 THE CORN DUTIES 331 
 
 tectionists regarded this merely as the first step, 
 and immediately began to call for a fresh increase. 
 They urged that the prices realised in the home 
 market were not sufficient to cover the cost of 
 production, which amounted to 19-20 francs per 
 hectolitre ; prices were actually considerably below 
 this (see the table given above), although the import 
 declined rapidly after the new corn law came into 
 effect. In March, 1887, the duty was raised to 
 5 francs, but the Government was empowered 
 to suspend the law at any time by simple proclama- 
 tion. 1 The following table shows the home pro- 
 duction and surplus imports over exports of wheat 
 in hectolitres, and the average prices, from 1886 to 
 1892 : 2 
 
 Year. Production. Surplus Imports. Average Price. 
 
 1886 . 107,287,082 ... 9,586,987 ... 16-5 
 
 1887 . 112,456,107 ... 12,084,587 ... 17'7 
 
 1888 . 98,740,728 ... 15,356,830 ... 18-8 
 
 1889 108,391,770 ... 15,311,060 ... 18-1 
 
 1890 . 116,915,880 ... 10,466,448 ... 18'9 
 
 1891 . 77,657,568 ... 19,593,472 ... 20-5 
 
 1892 . 109,537,907 ... 18,833,960 ... 17'8 
 
 On the whole the duties seem to have raised 
 prices (there were further changes in 1891 and 
 1892), but not considerably the only substantial 
 rise was in the extremely bad year 1891. But 
 probably the best view as to the effect of the new 
 duties is obtained by a comparison with English 
 prices. In 1883 and 1884 the import duty on wheat 
 in France was Is. Id. a quarter; in the first year 
 
 - Franke, p. 13. Brandt, p. 231.
 
 332 THE FRANCO-ITALIAN TARIFF WAR 
 
 the amount imported was 13*9 million hectolitres, 
 in the second, 14 '8 million ; but in 1883 the price 
 per quarter in France was only 2s. 8d. more than 
 in England, in 1884 it was 5s. 8d. In 1886, after 
 the duty had been raised from 60 centimes to 
 3 francs, the French price was higher than the 
 English by 7*. Qd. per quarter, but the average 
 price in France was still lower than in 1884, and 
 very much lower than in any previous year since 
 1865. In 1888, 1889, and 1890, after the increase 
 of the duty to 5 francs, the average prices in France 
 rose somewhat, but the excess of French prices 
 over English rose in the three years to lls. lid., 
 12s. 4<d., and 12s. 2d. respectively. 1 It would seem, 
 then, to be fairly clear that the effect of the duties 
 was not so much to raise prices as to prevent a 
 fall in France similar to that which took place 
 in England, and to that extent doubtless the French 
 corn-growers benefited by the tariff changes. 2 
 
 The one considerable event in the history of 
 French foreign commerce during this period is 
 the tariff war with Italy. Relations with that 
 country had been decidedly strained for some time 
 past. Italy had entered in 1863 into the treaty 
 system established by Napoleon III. ; but at the 
 time the convention lapsed in 1875 she was 
 engaged in the preparation of a new general tariff, 
 and there were difficulties in the way of the re- 
 
 1 Report on British and Foreign Trade and Industry, p. 126. Probably 
 some allowance should be made for difference in qualities. 
 
 2 Cf. Franke, pp. 10-13.
 
 EARLIER COMMERCIAL RELATIONS 333 
 
 newal of a commercial agreement. At last, in 
 1877, a treaty was signed, and promptly rejected 
 by the French Chamber by a narrow majority. 
 On July 1st, 1877, Italy's new tariff came into 
 force, and for some months the trade between that 
 country and the French Republic was governed 
 by the two autonomous tariffs ; but neither party 
 was content, and negotiations were soon renewed. 
 An arrangement was quickly reached, and this in 
 turn was superseded by the treaty of 1881, follow- 
 ing on the new French tariff of that year. The 
 new arrangements were to hold good until 1892, 
 but there was provision for the termination of the 
 treaty by either party in December, 1887 ; and a 
 year before that date the Italian Government gave 
 notice of its intention to use this power in the 
 case of all treaties by which it was bound. The 
 changed economic conditions of Italy, due to the 
 completion of unity, the abolition of internal 
 customs boundaries, and the growth of railways, 
 had rendered it desirable in the judgment of the 
 Italian Ministry that there should be a complete 
 tariff revision it was also in need of revenue ; 
 and the result of its deliberations was a strongly 
 protectionist set of duties, which averaged nearly 
 60 per cent, ad valorem? It had renounced the 
 treaties in order to give itself a free hand in tariff 
 matters, but at the same time it declared its 
 readiness to enter into a new arrangement with 
 France, and negotiations began in August, 1887. 
 
 1 Report on Tariff Wars, p. 14.
 
 334 THE FRANCO-ITALIAN TARIFF WAR 
 
 By this time, however, the Italians had been 
 greatly annoyed by the increase of French import 
 duties on cattle, which had inflicted serious 
 damage on an important part of the Italian export 
 trade. 1 The French Government desired that 
 the basis of discussion should be furnished by the 
 treaty rates of 1881 ; Italy desired to start from 
 its new general tariff, and summarily rejected the 
 French suggestion. The diplomatic discussion 
 was then transferred from Paris to Rome, and the 
 Italians put forward their definite proposals. They 
 would consider only 89 articles out of the 272 on 
 which they had made reductions in 1881 ; and on 
 most of these 89, and especially silk and woollen 
 goods, they intended to make substantial in- 
 creases. 2 On the other hand, they desired from 
 France the guarantee of " most favoured nation " 
 treatment, and some reductions of duties, chiefly 
 upon cattle. These demands were rejected by the 
 French Government; an alternative proposal on 
 its part proved inacceptable to Italy ; and the 
 negotiations came to an end in February, 1888. 
 
 From the 1st March, Italy intended to apply 
 to French products her new general tariff; and as 
 the rates thus levied were somewhat higher than 
 the duties imposed by the French general tariff, 
 France established surtaxes on a number of Italian 
 commodities. Thus there was an increase on 
 
 1 The value of the Italian export of cattle to France was l 
 million pounds sterling in 1880, and only 240,000 pounds in 1889 
 (Report on Tariff Wars, p. 15). 
 
 2 Franke, p. 18.
 
 END OF THE CONFLICT 335 
 
 wines from 15 to 20 francs per hectolitre, on 
 butter from 13 to 25 francs per 100 kilo., on eggs 
 from 10 to 20 francs, on dried fruits from 6 to 15 
 francs ; and such raw materials as silk, flax, hemp, 
 and skins, hitherto free, were subjected to small 
 duties. 1 Italy replied by some further increases ; 
 and each party imposed surtaxes on goods brought 
 in its opponents' ships. Diplomatic discussion 
 still continued, and in July Italy made fresh 
 suggestions ; it offered reductions of 50 per cent, 
 on its new general tariff, without, however, getting 
 near to the terms of 1881. The new scheme was 
 not acceptable to France, and the conflict con- 
 tinued. It lasted till the end of December, 1889, 
 when the Italian Parliament authorised the 
 abandonment of the war tariff against France ; 
 but it was not until January, 1892, that the 
 French Government dropped its surtaxes on 
 Italian products. From that time on the two 
 countries dealt with each other under their re- 
 spective general tariffs until 1899. 
 
 The consequences of the war to the commerce 
 between the two countries are unmistakable. The 
 following table shows the French exports to Italy 
 and Italian exports to France for the five years 
 preceding and five years following the commence- 
 ment of the war. It will be remembered that 
 practically, although the acute struggle was over 
 by the beginning of 1890, the conflict continued 
 to 1899, since until that year neither country 
 
 1 Report on Tariff Wars, p. 23.
 
 336 THE FRANCO-ITALIAN TARIFF WAR 
 
 would grant the other its best terms ; the table 
 shows that the trade never recovered from the 
 blow of 1888. The figures are million pounds 
 sterling. 1 
 
 French Exports Italian Exports 
 
 Year. to Italy. to France. 
 
 1883 . . . 12-0 ... 17-1 
 
 1884 . . . 11-3 ... 14-7 
 
 1885 . . . 11-5 ... 10-5 
 
 1886 . . . 12-4 ... 12-4 
 
 1887 . . . 13-0 ... 12-3 
 
 1888 . . .6-2 ... 7-2 
 
 1889 .6-7 ... 5-3 
 
 1890 . . .6-5 ... 4-9 
 
 1891 . . .5-4 ... 4-9 
 
 1892 . . .6-7 ... 5-3 
 
 1899 .6-1 ... 6-3 
 
 The Italian Government admitted that the 
 export trade in wine had suffered badly ; that Spain 
 and Portugal had replaced Italy in the French 
 market. In 1887 France took from Italy 2,782,000 
 hectolitres of wine, and in 1888 only 817,000 ; in 
 the former year France took 78 per cent, of the 
 total Italian export, and in the latter year 45 per 
 cent. In that case there was a marked falling off 
 in the Italian exports ; in other cases there was no 
 such decline, since either new markets were found, 
 as in the case of some agricultural produce, or the 
 goods went to the same destination by a different 
 route. A striking illustration of this latter alter- 
 native is furnished by silk : in 1887 Italy exported 
 to France 28,178 quintals 2 of raw silk, and to 
 
 1 Report on Tariff Wars, p. 24. 2 A quintal = 100 kilo.
 
 EFFECTS ON FRENCH TRADE 337 
 
 Switzerland 7,300 quintals; but in 1888 France 
 took only 9,188 quintals, whilst the amount sent 
 to Switzerland rose abruptly to 29,621 quintals. 
 
 On the other side, France suffered in regard to 
 her exports to Italy of colonial produce, silk and 
 woollen manufactures, and a number of other com- 
 modities. The value of the woollen goods taken 
 by Italy from France fell from 20 million francs in 
 1887 to 6'6 million in 1888 ; silk goods dropped 
 from 6*8 to 3'4 million, cotton from 5'3 to 1*6 
 million, yarns of all kinds from 3 to 1*7 million. 1 
 On the whole, however, the total of French exports 
 to all countries did not fall off, but, on the contrary, 
 they showed an increase ; so that France was able 
 to recoup herself elsewhere for the loss (chiefly to 
 Great Britain, and in woollen goods to Germany) 
 of much of the Italian market. Italy suffered 
 much more her total exports declined consider- 
 ably. The competitors of the two countries 
 reaped the benefits of the struggle ; to the com- 
 batants themselves it brought only difficulties and 
 a great amount of damage. 
 
 The elections of 1885 and 1889 had greatly 
 strengthened the parliamentary forces of the Pro- 
 tectionists, and they prepared to carry out their 
 policy. They had been able, owing to the agrarian 
 difficulties, to rally the agricultural classes to their 
 cause ; and their first efforts in 1890 were, as we 
 have seen, on behalf of the wine-growers. In the 
 same year, on the proposal of Meline, they secured 
 
 1 Franke, p. 20.
 
 338 THE FRANCO-ITALIAN TARIFF WAR 
 
 increased duties on maize, rice, and meal. The 
 manufacturing classes had always been in favour of 
 Protection, and their zeal for it was stimulated by 
 the continued commercial depression after the 
 crisis of 1882, and the fact that the chief industries 
 of France were making only slow advances. 
 
 One of the chief reasons for this was doubtless 
 the very slight growth of the population, which 
 numbered 36,103,000 in 1872 and 38,348,000 in 
 1892 an increase of only a trifle over 6 per cent, 
 in twenty years. Consequently, in spite of the 
 development of railways and the extension of the 
 application of machinery to industry, the industrial 
 output did not make very satisfactory progress. 
 In 1872 there were 27,644 steam engines of 338,328 
 horse-power engaged in French industry ; by 1891 
 there were 58,967 of 916,086 horse-power. 1 Rail- 
 ways made, or in making, increased from 26,640 to 
 47,352 kilometres. 2 The following table shows the 
 movement of the iron and steel industry : s 
 
 PRODUCTION (in tons) 
 
 Pig-iron. Iron. Steel. 
 
 1872 . . 1,217,838 ... 883,348 ... 141,704 
 
 1891 . . 1,897,389 ... 833,409 ... 638,530 
 
 The production of coal and lignite was in 1872 
 16 million tons, and in 1891 26 million ; the 
 amount consumed was 23 million tons in the former 
 year, and 36 '5 million in the latter. The average 
 consumption of cotton in France was 98 '8 million 
 
 1 Annuaire Statistique de la France, 1896, p. 261. 
 
 2 Ibid., p. 373. 
 
 3 Ibid., p. 261.
 
 OPPOSITION TO TREATIES 339 
 
 kilo, in 1873-5, and 111 million in 1888-90. 1 The 
 consumption of silk was estimated at 5*8 million 
 kilo, in 1872; 2 it fluctuated greatly, and in 1891 
 was 6*8 million (after being as high as 9*6 million 
 in 1888). Woollens made moderate progress. In 
 one industry alone the manufacture of alkali and 
 its kindred products was there marked success, 
 mainly owing to the discovery of the ammonia- 
 soda process by Solvay ; the output increased 
 from 525,000 tons on the average for 1874-8 to 
 1,023,000 for 1889-93. 3 Foreign trade was un- 
 satisfactory ; 4 France was declining in comparison 
 with her neighbours. 
 
 There was growing dissatisfaction in France 
 with the system of commercial treaties. Partly 
 the agriculturists and manufacturers were inclined 
 to high Protection, and were opposed to anything 
 which mitigated it ; and partly it was thought that 
 the treaties made for a definite term of years tied 
 the hands of the Government unduly, since no 
 alteration could be made during the period, how- 
 ever much economic conditions might change. 
 When at the end of 1889 the Superior Council 
 of Commerce invited the opinions of the Chambers 
 of Commerce and similar institutions on the sub- 
 ject, 96 out of 107 Chambers declared for the 
 renunciation of the existing treaties, and 62 were 
 opposed to any renewal. A substantial majority 
 
 1 Dictionnaire du Commerce (ed. Guyot and Raffalovichj, i. p. 1089. 
 
 2 Foville, p. 234. 
 
 8 Dictionnaire du Commerce, ii. p. 1357. 
 4 See the table on p. 326.
 
 340 THE FRANCO-ITALIAN TARIFF WAR 
 
 of the other institutions consulted gave similar 
 advice. 1 On the other hand, it was felt to be 
 undesirable to isolate France completely, and there 
 was a general feeling in favour of the adoption of a 
 suggestion of Meline that there should be mini- 
 mum and maximum tariffs, the former to be 
 granted to those countries with which France made 
 treaties, and the latter to apply to all countries not 
 so favoured. This arrangement would differ from 
 the system adopted by Germany at about this 
 time in that the German " conventional " tariff 
 was unchangeable so long as the treaties endured, 
 whilst France would be able to raise her minimum 
 tariff whenever she thought it necessary. The 
 " most favoured nation " clause was extremely 
 unpopular. 
 
 The general arguments of the advocates of Pro- 
 tection were those with which we are already 
 familiar in other countries. They emphasised the 
 necessity of a policy of defence against growing com- 
 petition, especially from the United States ; they 
 urged that a policy of Protection for agriculture, 
 however much to be condemned in Germany, 
 where it was adopted in the interests of the large 
 landowners, was laudable in a country like France, 
 with its great multitude of peasant proprietors ; 
 they put forward the doctrines of national self- 
 sufficiency and security of the home market ; and 
 they argued that the restriction of imports would 
 stimulate native industries, create an increased 
 
 1 Franke, pp. 25-6,
 
 THE ARGUMENT FOR PROTECTION 341 
 
 demand for labour and a consequent rise of wages. 1 
 The fears of some manufacturers that they would 
 be further hampered by the taxation of raw 
 materials were allayed by the promise of compen- 
 satory duties or drawbacks, and by the prospect 
 of an enlarged home market owing to the renewed 
 prosperity of the agricultural classes. But, indeed, 
 argument was almost unnecessary ; with the 
 farmers and manufacturers combined the Protec- 
 tionists were strong enough to overcome all oppo- 
 sition without difficulty. 
 
 1 See the summary of debates in Devers, pp. 186-206. Cf. Brandt, 
 pp. 182-5.
 
 CHAPTER VI 
 
 THE TARIFF OF 1892 AND SUBSE- 
 QUENT DEVELOPMENTS 
 THE FRANCO-SWISS TARIFF WAR 
 CONCLUSION 
 
 THE preparation of the new tariff was entrusted 
 to the two Councils of Commerce and Industry 
 under the general guidance of the Ministry ; and 
 the resultant scheme was presented to the Chamber 
 of Deputies in October, 1890. It adopted the 
 plan of the maximum and minimum scales of 
 duties the former to be applied as a rule, whilst 
 the latter should be granted to those countries 
 which gave corresponding advantages to France. 
 The basis of the minimum tariff was declared 
 to be not Protection, but simply an attempt to 
 enable French industries to meet foreign com- 
 petition on equal terms. 1 In most cases it was 
 proposed to increase the old duties, but the Govern- 
 ment still declined to recommend taxation of those 
 agricultural products which were raw materials for 
 industry. The Chamber referred the plan to a 
 
 1 Devers, p. 186. 
 342
 
 THE NEW TARIFF 343 
 
 standing commission for such matters, which had 
 been established at the commencement of the year 
 at the instigation of Meline ; and that commission, 
 under Meline's guidance, proceeded to make radi- 
 cal changes it increased the proposed duties con- 
 siderably, in particular on timber, wines, cattle, and 
 meat (in order to compensate the farmers for the 
 free admission of wool and hides) ; it made some 
 advances on manufactured goods ; and it recom- 
 mended the grant of bounties to the native growers 
 of flax and silk, since those commodities were to 
 be exempt from duty. It urged also that the 
 grant of the minimum tariff should not be made 
 in such a way as to prevent France from increasing 
 it at any time if she thought fit. 
 
 The discussions were long, not so much because 
 of the strength of the opposition (though under 
 the leadership of Leon Say that was able enough) 
 as because of the resistance of the Ministry 1 to 
 some of the proposals of the commission, and 
 differences between the Senate and the Chamber 
 the former made 176 amendments, of which 148 
 were ultimately accepted. Some increases on 
 agricultural products made by the commission 
 were adopted, but, on the other hand, the Chamber 
 rejected proposals for the taxation of silk-cocoons, 
 and established instead bounties for six years to 
 the silk-growers and weavers. 2 The commission 
 
 1 France was enjoying a period of ministerial stability under 
 Freycinet. Jules Roche was Minister of Commerce all through the 
 period of tariff discussion. 
 
 2 Franke, p. 37.
 
 344 TARIFF OF 1892 CONCLUSION 
 
 recommended higher duties on wine than the 
 Ministry, and these were accepted ; but its changes 
 in regard to oil-seeds (in which the agriculturists 
 were greatly interested) were rejected. The altera- 
 tions made by the Senate were entirely in the 
 direction of increased rates. The new tariff be- 
 came law in January, 1892. 
 
 The new customs schedules dealt with 721 
 commodities, or groups of commodities, and were 
 much more detailed and elaborate than any other 
 continental tariff of the period. The minimum rates 
 could be imposed on all products of countries which 
 gave France similarly advantageous treatment ; but 
 non-European products coming from European 
 countries and European products not coming 
 directly from the country of origin were subject to 
 surtaxes. Specific duties were employed almost 
 alone ; the only exceptions were in the case of 
 chemicals. The new duties marked a very con- 
 siderable advance of Protection ; the average duty 
 on agricultural produce was 25 per cent, ad 
 valorem (the grain duties remained unaltered), 
 and the following table shows some of the changes 
 on manufactured goods. 1 It will be noticed that 
 the advances are chiefly on textiles. The new 
 tariff was very much higher than the conventional 
 tariff created in the same year for Germany by the 
 Caprivi treaties. 
 
 1 Braiidt, p. 193.
 
 INCREASED DUTIES 
 
 345 
 
 22-375 
 
 ... 24-500 
 
 50-540 
 
 ... 62-620 
 
 13-100 
 
 ... 16-100 
 
 15-300 
 
 ... 15-310 
 
 20-80 
 
 ... 28-80 
 
 
 
 400 
 
 1-50 
 
 ... 1-50-3-50 
 
 6 
 
 5 
 
 6 
 
 6 
 
 7 
 
 , 7-50-10 
 
 DUTIES IN FRANCS PER 100 KILO. 
 
 Conventional Minimum 
 Tariff before 1892. Tariff of 1892. 
 Linen or hemp tissues 1 (unbleached) 22-375 
 Cotton tissues 
 Linen yarn 
 Cotton yarn 
 Combed woollen 
 Silk tissues 
 Pig-iron 
 Iron bars 
 Steel rails . 
 Tin plates . 
 
 At the same time the Act establishing bounties 
 for shipbuilding and subsidies to shipping was 
 renewed, and bounties given for the growing of 
 silk, flax, and hemp. 
 
 1 The rates given are the highest arid lowest. The scale is highly 
 complicated, as the following example (which is not exceptional) will 
 show. 
 
 Duties on tissues of linen or hemp, unbleached, weighing from 10 
 to 40 kilo, per 100 square metres, and containing in warp and weft 
 in a square of 5 millimetres each side, after division of the total by two. 
 
 6 threads or less ... 45 francs. 
 7 or 8 ... 65 
 
 9 or 10 
 11 or 12 
 13 or 14 
 15, 16, or 17 
 18, 19, or 20 
 21, 22, or 23 
 more than 23 
 
 There are similar groups for goods weighing more than 40 or less 
 than 10 kilo, per 100 square metres. For bleached cotton tissues there 
 are seven divisions, and six of these contain four separate rates of duty, 
 according to the number of threads in a square of the usual 5 milli- 
 metres. It is unnecessary to point out the trouble and cost of 
 administration resulting from so elaborate a classification, which is, 
 however, probably inevitable if the system of specific duties is to be 
 satisfactory.
 
 346 TARIFF OF 1892 CONCLUSION 
 
 France was able, without much difficulty, to 
 make arrangements with most of the European 
 Powers, by which she granted them the advantages 
 of her minimum tariff, and secured their lowest 
 tariff rates in return. There were some difficulties 
 with Spain, and against Portugal and Italy the 
 maximum scale was adopted. But the most 
 serious conflict was with Switzerland. That Re- 
 public had undertaken in 1890 the revision of its 
 general tariff, partly in order to secure additional 
 revenue for the Federal Government. When the 
 tariff of 1892 was under discussion in France, the 
 Swiss authorities intimated that they could not 
 accept the French minimum scale as a return for 
 concessions on their side, and consequently they 
 asked for reductions on sixty-two articles, chiefly 
 industrial products. The French Ministry was not 
 unwilling to give way, on account of the import- 
 ance of the Swiss market ; but the protectionist 
 movement in France was too strong, and the 
 proposals of the Minister of Commerce were rejected 
 by the Chamber. Consequently in January, 1893, 
 the Swiss Government subjected French goods to 
 its new general tariff, and imposed even higher 
 duties on some 200 commodities. France in its 
 turn levied its maximum tariff on Swiss goods, but 
 its war rates were much lower than those employed 
 by Switzerland. 1 
 
 The war lasted for a little more than two years 
 and six months. But both sides soon became 
 
 1 Franke (p. 48) regards this as the chief cause of France's defeat.
 
 EFFECTS OF THE TARIFF WAR 347 
 
 weary of the struggle, and were alarmed at its 
 effects. Negotiations began in the latter part of 
 1894 ; but Switzerland adhered to its refusal to 
 accept the French minimum tariff in return for 
 its own conventional rates it insisted on a number 
 of special reductions, and as France was anxious 
 to come to terms, she at last agreed to give 
 Switzerland lower rates on twenty -nine com- 
 modities. In return she received the benefits of 
 the Swiss conventional rates, with the "most 
 favoured nation" clause. Legislation in the two 
 countries in July and August, 1895, confirmed the 
 new arrangements, which remained, however, ter- 
 minable by either party at any time. 1 
 
 The effects of the war were severe on both 
 sides. The following table gives (in million francs) 
 the French exports to Switzerland, and Swiss ex- 
 ports to France, for the four years preceding the 
 war, and the four years after its commencement: 
 
 French Exports to Swiss Exports to 
 
 Year. Switzerland. France. 
 
 1889 230-5 ... 101-5 
 
 1890 . . . 242-8 ... 104-2 
 
 1891 . . . 234-8 ... 103-4 
 
 1892 . . 227-9 ... 91-9 
 
 1893 . . . 172-8 ... 74-9 
 
 1894 . . . 129-9 ... 66-6 
 
 1895 . . . 163-2 ... 67-3 
 
 1896 . . . 179-9 ... 75-4 
 
 The figures for 1895 show the beginning of an 
 improvement, since the war only lasted for seven 
 months of that year ; since then the upward move- 
 
 1 See Report on Tariff Wars, pp. 1-6, 77-85.
 
 348 TARIFF OF 1892 CONCLUSION 
 
 ment has on the whole continued, but up to 1901 
 the trade between the two countries had not returned 
 to the level of 1891. 1 France's export trade suffered 
 most in the case of wine (which dropped from 
 19 '3 million marks in 1891 and 15*6 millions in 
 1892 to 1*4 million in 1894), sugar (which was also 
 almost entirely destroyed), cattle, and clothing. 
 Switzerland, on its side, lost in silk and silk goods 
 and cottons. But France lost much the more 
 heavily, and the result of the war was so much 
 a victory for Switzerland that she secured some 
 preferences over other nations in the French 
 market, without giving France any such preference 
 in return. 
 
 We may now examine the general movement 
 of French trade and industry since 1892, and 
 notice some of the subsequent developments of 
 commercial policy. First as to French foreign 
 trade. The following table gives the figures in 
 million francs for the period 1892 to 1901 : 
 
 SPECIAL TRADE 
 
 Year. 
 1892 . 
 
 Imports. 
 . 4,188 
 
 Exports. 
 3,461 
 
 1893 . 
 
 . 3,854 
 
 3,237 
 
 1894 . 
 
 . 3,850 
 
 3,078 
 
 1895 . 
 
 . 3,719 
 
 3,374 
 
 1896 . 
 
 . 3,799 
 
 3,401 
 
 1897 . 
 
 . 3,956 
 
 3,598 
 
 1898 . 
 
 . 4,471 
 
 3,511 
 
 1899 - 
 
 . 4,518 
 
 4,152 
 
 1900 . 
 
 . 4,698 
 
 4,109 
 
 1901 . 
 
 . 4,715 
 
 4,166 
 
 Report on Tariff Wars, pp. 84-5.
 
 FRENCH FOREIGN TRADE 349 
 
 Comparing these figures with those given for 
 the years 1881-91 on p. 326, we obtain some 
 interesting results. Excluding the year of the 
 tariff changes, 1892, we find that the average 
 imports were for 1883-91 4,344 million francs, 
 and for 1893-1901 4,175 million a slight de- 
 crease. But it is noteworthy that imports were 
 unusually high (4,767 million) in 1891 ; with the 
 introduction of the new tariff there was a drop, 
 but not a considerable one. Then in 1896 re- 
 covery began, and by 1901 imports had reached 
 again nearly to the height of 1891. So that the 
 legislation of 1892 did realise its purpose for a 
 time it did check imports for some years, but 
 not for long. Its only permanent effect seems 
 to have been in staying the import of foodstuffs, 
 as the next table shows. 1 
 
 IMPORTS OF FOODSTUFFS (million francs) 
 
 1889 1,441 
 
 1890 . . 1,445 
 
 1891 - . 1,652 
 
 1892 . . 1,400 
 
 1893 . . 1,061 
 
 1894 . . 1,198 
 
 1896 . . 1,007 
 
 1897 . . 1,029 
 
 1898 . . 1,505 
 
 1899 . . 951 
 
 1900 . . 819 
 
 1901 . . 802 
 
 1895 . . 1,035 
 
 When we contrast this with the growth of similar 
 imports into Germany and Great Britain during 
 the same period, there can be no question as to 
 the effectiveness of the Protection given to agri- 
 culture that is, so far as the keeping-out of 
 foreign supplies is concerned. 
 
 1 Franke, pp. 61-2,
 
 350 TARIFF OF 1892 CONCLUSION 
 
 When we turn to the exports, we find that the 
 average for 1883-91 was 3,393 million, and for 
 1893-1901 3,623 million a fair increase, but not 
 comparable to the expansion of the exports of 
 France's neighbours, Great Britain and Germany. 
 The growth is in raw materials and manufactured 
 goods ; the export of foodstuffs shows an average 
 for the latter period of 692 million, as against 782 
 million for 1883-91. But even these showed a 
 marked recovery at the end of the century ; from 
 759 million in 1892 they sank to 591 million in 
 1895, rose to 721 million in 1897, fell in the follow- 
 ing year, and then rose to 769 million in 1900 and 
 778 million in 1901. 
 
 Next as to agriculture, which the tariff of 1892 
 was particularly intended to benefit. The follow- 
 ing table gives the home production of corn and sur- 
 plus of imports over exports in million hectolitres, 
 and the average prices in francs per hectolitre : 
 
 3. Average Price. 
 20-6 
 17-9 
 16-5 
 15-2 
 14-4 
 14-8 
 18-8 
 19-9 
 15-6 
 1.5-5 
 
 There has been a marked increase in the average 
 amount of land under wheat cultivation, and a 
 
 1 For previous years see p. 328, 
 
 Year. 
 
 Production. 
 
 Surplus In 
 
 1891 . 
 
 . 77-2 
 
 27-3 
 
 1892 . 
 
 . 109-5 
 
 25-7 
 
 1893 . 
 
 . 97-8 
 
 13-3 
 
 1894 . 
 
 . 122.5 
 
 16-5 
 
 1895 . 
 
 . 120-0 
 
 6-4 
 
 1896 . 
 
 . 119-7 
 
 2-2 
 
 1897 . 
 
 . 86-9 
 
 6-9 
 
 1898 . 
 
 . 128-3 
 
 26-2 
 
 1899 ' 
 
 . 128-4 
 
 1-7 
 
 1900 . 
 
 . 114-7 
 
 1-6
 
 FURTHER PROTECTION FOR AGRICULTURE 351 
 
 substantial increase in the average production. 
 Prices have shown, with the exception of the years 
 1897 and 1898, a tendency to a continued fall, 
 with the result that the growers have not reaped 
 all the advantage which they apparently antici- 
 pated when they secured the increased duties in 
 the eighties ; all that can be said is that the fall 
 would have been much greater without the tariff. 
 But the farmers were not satisfied, especially when 
 the fall of prices continued after 1892 ; they began 
 to make fresh demands on the Legislature, and 
 in 1897 they obtained an increase in the duty from 
 5 to 7 francs per 100 kilo. the duty on flour was 
 increased at the same time. Similarly, as a result 
 of the continued fall in the prices of meat, the 
 cattle-rearers began to agitate, but they secured no 
 advances of duties until 1903, when the rates on 
 fresh and salted meat, and on live cattle, were 
 raised substantially. 1 Between 1894 and 1898 
 there was a decline in the price of butter, with the 
 result that the duty, hitherto 6 francs per 100 
 kilo, was raised to 20 francs without checking the 
 fall for long. 2 In this connection it should be 
 added that the wine duties were rearranged and 
 increased in 1899. Since 1892 the tendencies seem 
 to have been towards enlarged production of wine, 
 
 1 Blue Book on British and Foreign Trade and Industry, pp. 128-9. 
 
 2 The average price of butter per kilo, was in francs : 
 
 1892 
 
 3-90 
 
 1896 . 
 
 2-67 
 
 1900 
 
 3-24 
 
 1893 
 
 4-20 
 
 1897 . 
 
 2-77 
 
 1901 
 
 2-89 
 
 1894 
 
 3-25 
 
 1898 . 
 
 3-06 
 
 
 
 1895 
 
 2-80 
 
 1899 . 
 
 3-31 
 

 
 352 TARIFF OF 1892 CONCLUSION 
 
 a decline in exports of the cheaper kinds, and a 
 greater home consumption. The average of this 
 last was 36 '2 million hectolitres in the years 1884- 
 91, and 477 million in ISOS^igOO. 1 Probably the 
 duties were of some use in helping the wine- 
 growers through the crisis caused by the phyl- 
 loxera. Finally, the quantity of beet sugar manu- 
 factured in France was 523 million kilo, in the 
 years 1892-3, and 869 million in 1899-1900. 2 
 
 The industrial progress of France has been much 
 more marked, at least in some branches. The 
 quantity of coal produced, 3 which was 25*2 million 
 tons in 1893, rose steadily to 33*3 million in 1900, 
 whilst the consumption advanced uninterruptedly 
 from 34*4 million tons to 46'7 million. The out- 
 put of pig-iron increased in the same period from 
 2 million tons to 2 '7 million, whilst iron and steel 
 advanced from 1*5 million tons to 1*9 million, and 
 were much higher than this in 1899. The cotton 
 industry made considerable progress ; the follow- 
 ing table shows the average consumption of raw 
 cotton in million kilo., omitting the year 1892 
 (when, however, the amount was unusually high 
 178-6 millions) : 4 
 
 1884-7 106-7 
 
 1888-91 124-6 
 
 1893-96 143-2 
 
 1897-1900 . . . . . 174-6 
 
 1 Franke, p. 82. 
 
 2 Statistical Abstract for the Principal and other Foreign Countries, 
 1903, p. 324. 3 Excluding lignite. 
 
 Annuaire Statistigue de la France, 1900, p. 542,
 
 SHIPPING LEGISLATION 353 
 
 After 1893 the imports of cotton goods showed a 
 tendency to fall somewhat rapidly, whilst exports 
 fluctuated ; and it certainly appears that the 
 French manufacturers have been strengthening 
 their hold on the home market. The silk industry 
 remained almost stationary, both in total produc- 
 tion and in exports (these latter averaged 244 -5 
 million francs for the period 1892-6, and 265 
 million for 1897-1901), in spite of the greatly 
 increased duties levied in 1899 on silk goods 
 coming from Asia a measure directed chiefly 
 against Japan. The woollen manufacture, so far 
 as can be judged from the statistics of foreign 
 trade, is also not in a very flourishing condition, 
 but apparently it is increasing its control of the 
 home market, since the imports of raw wool show 
 no falling off, whilst in manufactured goods im- 
 ports and exports alike have a downward 
 tendency. 1 
 
 Two other points in French commercial policy 
 should be noticed. The first is the shipping legis- 
 lation ; we have already seen that in 1881 bounties 
 were established on shipbuilding and long-distance 
 voyages. From that year up to 1892 there was 
 real progress in shipping the tonnage of French 
 mercantile steamships more than doubled, and the 
 share of French vessels in the over-sea trade of 
 France was 30 per cent, on the average for 
 1881-92, as against 26 per cent, for 1877- 80. 2 But 
 
 1 The export of raw wool has, however, risen considerably. 
 a Franke, p. 139, 
 ? A
 
 354 TARIFF OF 1892 CONCLUSION 
 
 shipbuilding made no such advance ; the following 
 table gives the tonnage built in France and bought 
 from abroad : 
 
 Tonnage built Tonnage bought 
 
 Year. in France. from abroad. 
 
 1881 . . . 11,559 ... 5,006 
 
 1882 . . . 12,692 ... 4,938 
 
 1883 . . . 9,183 ... 5,974 
 
 1884 . . . 16,507 ... 8,279 
 
 1885 . . . 10,591 ... 5,800 
 
 1886 . . . 9,800 ... 9,224 
 
 1887 . . . 7,293 ... 4,953 
 
 1888 . . . 18,197 ... 11,492 
 
 1889 . . . 10,230 ... 14,574 
 
 1890 . . . 10,391 ... 25,891 
 
 1891 . . . 17,800 ... 8,816 
 
 1892 . . . 11,026 ... 5,759 
 
 The movements of 1888-90 had caused dis- 
 satisfaction amongst the shipbuilders, and in 1892 
 they demanded an increase in the bounties on 
 building, the continuance of the voyage bounties 
 to French-built ships, and the abolition of the half 
 bounties given to ships purchased from abroad. 
 The shipowners were strongly hostile to this last 
 suggestion, and asserted that the prices of the 
 French yards were much too high owing to the 
 limited competition, and that the number of yards 
 was altogether inadequate. Both the Ministry and 
 the tariff commission of the Chamber agreed with 
 them ; but the Chamber itself accepted the pro- 
 posals of the shipbuilders by the law of 1893. But 
 the controversy was not ended ; there were renewed 
 complaints from the shipowners, and in 1897 the 
 Government inaugurated an elaborate inquiry,
 
 DECLINE OF FRENCH SHIPPING 355 
 
 which lasted until the end of 1898. The investiga- 
 tion showed that since 1893 there had been general 
 retrogression the building of steam vessels was 
 practically stationary from 1892 onwards, and the 
 average for the years 1892-9 was only 498,000 
 tons as against an average of over 500,000 tons for 
 the period 1886-91. On the other hand, the 
 building of sailing vessels was increasing, and the 
 total tonnage of French sailing vessels in the 
 mercantile marine rose from 397,000 tons in 1893 
 to 451,000 tons in 1899. The share of French 
 ships in French over-sea trade dropped to 25 per 
 cent, in 1893 and 1894, was 24 per cent, in the 
 three following years, and sank to 22 per cent, in 
 1898. 1 It is not suggested that this decline was 
 due to the law of 1893, except in so far as it 
 discouraged the purchase of vessels from abroad ; 
 the causes of the decline are rather to be sought 
 in the defects of the French shipbuilding yards, 
 the cost of materials, 2 the unsatisfactory character 
 of many of the French exports considered as 
 freight, the heavy dues, and a number of other 
 difficulties with which the shipowners had to cope. 
 But after long discussion it was resolved to con- 
 tinue the old system, but to extend the arrange- 
 ment again to ships purchased from abroad. An 
 Act of 1902 established a new and increased scale 
 of bounties. 
 
 1 These figures are taken chiefly from Franke (pp. 122-46), who 
 follows the report of the inquiry. 
 
 2 It was estimated that the cost of huilding an ordinary small 
 steamer was 80 per cent, higher in France than Great Britain.
 
 356 TARIFF OF 1892 CONCLUSION 
 
 The other noticeable point is the arrangements 
 made for the French colonial possessions by the 
 Act of 1892. They are divided into two classes. 
 The first includes Indo-China, Madagascar, French 
 Guiana, New Caledonia, the French West Indies, 
 and a few others. In all these the tariff on 
 foreign products is commonly identical with the 
 rates levied by France ; but French goods are 
 admitted free. Goods coming from these colonies 
 into France are in general exempt from duty ; but 
 " colonial produce " coffee, cocoa, tea, pepper, 
 etc. are for financial reasons subject to half the 
 ordinary (minimum) rates, and sugar and its de- 
 rivatives pay special duties for the sake of the 
 home producers. The second group includes 
 French Congo, Ivory Coast, Dahomey, Guinea, 
 Senegal, Somaliland, and the French possessions 
 in India. Imports from these into France pay 
 the minimum tariff rates as a rule, but there are 
 a number of commodities, such as coffee, cocoa, 
 timber, palm oil, etc., which may be imported into 
 France either freely or at reduced rates up to a 
 certain amount. French imports into these 
 possessions are duty-free. The Algerian tariff 
 is almost identical with the French ; it is treated 
 as if it were a member of the first group, but may 
 impose a duty on French sugar. 
 
 This brings our survey of French tariff history 
 to an end. Since 1872 France has had part in the 
 economic development of the world, but compared 
 with Great Britain, Germany, or the United
 
 THE ECONOMIC POSITION OF FRANCE 357 
 
 States, her part has been only small. It is true 
 that the disasters of the Franco- German War had 
 crippled her at the outset of that period, but her 
 marvellously rapid recovery then only encouraged 
 expectations which time has disappointed. In 
 the great industrial and commercial expansion of 
 the last decade of the nineteenth century France 
 had little share ; her coal and metal industries 
 show progress which is satisfactory only if the 
 growth elsewhere be ignored ; on her textile in- 
 dustries (if cotton be excluded) even so moderately 
 favourable a judgment seems hardly possible ; her 
 shipping is stationary. Agriculture is doing fairly 
 well, with the aid of strong Protection, and 
 opinions as to the condition of the peasantry are 
 divided ; but there is little movement forward. 
 One reason for this uncheering economic position 
 of France is certainly the slow growth of popula- 
 tion, which in the thirty years up to 1901 in- 
 creased only 3 millions, as against 10 millions in 
 Great Britain and 15 millions in Germany. It 
 may be that this is a result of the system of 
 peasant holdings and the French law of succes- 
 sion ; l but whatever be the cause, a remedy must be 
 found if France is to retain her place as a great 
 nation. Other reasons for her economic stagnation 
 for such it really is can be indicated : the racial 
 character of the French, and the fact that they 
 are essentially not a business people ; their in- 
 
 1 Cf. Coubertiii, L' Evolution frani^aise sous la troisieme Itepublique, 
 pp. 392-7.
 
 358 TARIFF OF 1892 CONCLUSION 
 
 difference towards colonisation and foreign trade ; l 
 the undue attention to a home market which is 
 not extensive ; and the dulling influence of the 
 protective tariff on the initiative and energy of 
 the manufacturers, hampered as they are also by 
 the taxation of many materials. Protection in the 
 United States seems to have had no such effect, 
 and probably the reasons for the difference 
 between the two countries must be sought in 
 national character and the extent of the home 
 market. The causes of economic progress and 
 retrogression are so numerous and complex that 
 it is almost impossible to discover the effect of 
 any particular force ; and in the case of France 
 the task is peculiarly difficult. But of the French 
 tariff legislation it can be said with some con- 
 fidence that, whatever it may have done to main- 
 tain agriculture and even there it is arguable 
 that it has encouraged the continuance of old- 
 fashioned methods it has wrought little good 
 and in various ways much harm to industry and 
 commerce. 
 
 1 " Le grand mal en France, c'est 1'esprit casanier. Le Fra^ais ne 
 sort pas de chez lui " (Hanotaux).
 
 A BRIEF BIBLIOGRAPHY 
 
 AME. fitude sur les Tarifs de Doudne. 2 vols. 1 876. 
 
 BRANDT, A. VON. Beitr'dge zur Geschichte der franzosischen Handcls- 
 
 politik. 1896. 
 DEVERS, A. "La Politique Commerciale de la France depuis 
 
 I860" (Verein filr Socialpolilik. Vol. li. 1892). 
 RAUSCH, E. Franzosische Handelspolitik vom Frankfurter Frieden 
 
 bis zur Tarif reform von 1882. 1900. 
 FRANKE, B. Der Ausbau des Heutigen Schutzzollsystems in Frank- 
 
 reich. 1904. 
 LEVASSEUR, E. Histoire des Classes Ouvrieres et de I' Industrie en 
 
 France (1789 a 1867). 2 vols. 1867. (New edition now 
 
 appearing.) 
 
 NOEL. Histoire du Commerce Exterieur de la France. 1879- 
 PIGEONNEAU. Histoire du Commerce de la France. 2 vols. 1889- 
 MORLEY, J. Life of Richard Cobden. Popular edition, 1903. 
 WOLOWSKI. La Liberte Commerciale et les Resultats du Traite de 
 
 Commerce de I860. 1869- 
 BUTENVAL. Politique ficonomique et Negotiations Commerciale du 
 
 Gouvernement de la Republique Franqaise, 1871-73. 1874. 
 FUNK-BRENTANO et CHARLES Dupuis. Les Tarifs Douaniers et les 
 
 Traites de Commerce. 1895. 
 
 Foreign Office Report on Tariff Wars. (Cd. 1938. 1904.) 
 FOVILLE, A. DE. La France ficonomique. 1 890. 
 RAMBAUD, A. Histoire de la Civilisation contemporaine en France. 
 
 5th edition. 1898. 
 Annuaire Statistique de la France. 
 
 359
 
 INDEX 
 
 "Act of Abominations," 161-3 . 
 Adams, leader of American Whigs, 
 
 180 
 Agrarians, protectionist attitude in 
 
 Germany, 106 
 
 Agrar- und Industriestaai, 114 
 Alsace-Lorraine, admitted to Zoll- 
 
 verein, 51 
 
 American Customs Union sug- 
 gested, 254 
 Argentina opposed to reciprocity 
 
 with United States, 255 
 d'Artois, Comte, reduces duties in 
 
 France, 274 
 Austria-Hungary, attitude towards 
 
 Zollverein, 25-30 
 
 conditions necessary for joining 
 Zollverein, 35 
 
 treaties with France, 1866, 307 ; 
 1883, 324 ; with Zollverein, 1853, 
 32; 1865, 44; 1868, 50; with 
 German Empire, 1891, 86 
 
 Autonomous and conventional 
 tariffs, 40, 45, 96, 318 
 
 Baden supports protection, 24 
 Bastiat, Uobden et la Ligue, 295 
 Bavaria, customs union with Wiirt- 
 temberg, 9 
 
 suggests treaty with Austria 
 excluding Prussia, 44 
 
 supports protection, 24 
 Belgium, treaties with France, 
 
 1842, 291 ; 1861, 306, 317 ; 1881, 
 324; with Zollverein, 1844, 18; 
 1865, 45 ; with German Empire, 
 1891, 87 
 
 Benton, leader of American Demo- 
 crats, 180 
 
 Berlin Decrees, 270 
 
 Bismarck, dependent on free trade 
 party, 53 
 
 economic policy, 56-60, 75-7, 82 
 
 leaves office, 82 
 
 Blaine proposes reciprocity clauses 
 
 in McKinley Tariff, 254 
 Bort, T. de, tariff scheme, 1878, 
 
 319-20 
 
 Bounties, advocated by Hamilton, 
 147 
 
 on French shipping, 325-6, 
 353-5 
 
 Bremen, supports free trade, 23 
 
 enters Zollverein, 79 
 Brentano, leader of German free 
 
 trade economists, 113 
 
 his views, 132-3 
 
 British Guiana, treaty with United 
 
 States, 256 
 Brunswick, joins Steuerverein, 15 
 
 joins Zollverein, 17 
 
 supports Prussian policy, 24 
 Buchanan, president of United 
 
 States, 195 
 Bund der Landwirte represents 
 
 German agrarian movement, 108 
 Billow, Prussian finance minister, 4 
 van Buren, M., leads Jackson party 
 
 in United States, 162 
 
 president of United States, 180 
 
 Calhoun, leads Southern opposition 
 to United States tariff of 1832, 
 169 
 
 proposes distribution of surplus 
 revenue, 177 
 
 Canada, treaty with United States, 
 
 1854, 253 
 Caprivi, German chancellor, 82 
 
 overthrown by agrarians, 100 
 Carey, M., American free trade 
 
 advocate, 161 
 
 Central American States, treaties 
 with United States, 256 
 
 Central Union formed in Germany, 
 53 
 
 Centre party, rise in Germany, 82 
 
 Chaptel, influence on French in- 
 dustrial development, 271 
 
 Chevalier, M., and the Anglo- 
 French treaty, 302 
 
 Chili, opposed to reciprocity with 
 United States, 255 
 
 Clay, H., leader of American pro- 
 tectionists, 161 
 
 introduces Compromise Bill, 172 
 
 3 6i
 
 362 
 
 INDEX 
 
 Clay, H., forms Whig party, 180 
 Cleveland, first presidency of 
 United States, 217 
 
 advocates reduction of tariff, 
 218-19 
 
 second presidency, 239 
 
 policy, 240-1 
 
 Cobden and the Anglo-French 
 
 treaty, 302 
 Compensating duties, 204-5, 215, 
 
 230, 242, 247 
 Conrad, criticism of Wagner, 119 
 
 views on economic policy, 131 
 Continental system, 5, 49-50 
 
 Darmstadt Conferences, 1820-1823, 
 
 8 
 Delbriick, carries out German free 
 
 trade policy, 51 
 Democratic party in United States, 
 
 its rise, under Jackson, 161-2 
 
 hostility to National Bank, 176 
 
 policy, 180 
 
 victory at elections of 1844, 184 
 
 break up, 193 
 
 secures presidency after long 
 interval, 217 
 
 committed to free trade, 219 
 
 secures complete control of 
 Federal Government, 239 
 
 confusion and defeat caused by 
 silver question, 245, 258 
 
 attitude towards trusts, 259 
 Dietzel, quoted, 124-5 
 Drawbacks, 143, 250-1, 315 
 Duchatel, attempts to moderate 
 
 protection in France, 288 
 Duties, specific and ad valorem, 
 5-6, 168 ., 236-8, 318-19, 345 n. 
 
 Economic Congress, founded by 
 Prince-Smith, 37 
 
 Fichte, Geschlossene Handelsstaat, 
 
 66, 74 
 Fillmore, president of United 
 
 States, 193 
 Food supply, the world's resources, 
 
 115-16, 122 
 Force Bill, introduced in American 
 
 Congress, 1833, 172 
 France, agriculture, 286 ., 294, 
 
 300 n., 311-12, 327-8, 350-2 
 
 agriculturists demand protec- 
 tion, 320, 328-9, 351 
 
 attack on British trade under 
 Revolution and Napoleon I., 
 269-70 
 
 colonial preference on sugar, 280 
 
 France, colonial tariffs, 356 
 
 Constituent Assembly, economic 
 reforms of, 267 
 
 Corn laws, 277-8, 286, 300, 307, 
 330-2, 344, 350-1 
 
 economic position, 357-8 
 
 economic progress, 271-3, 293-4, 
 308-12, 338-9, 350-3 
 
 exports, vide imports 
 
 financial difficulties after Franco- 
 German War, 313 
 
 food prices, 278, 286, 300, 321, 
 328, 331-2, 350-1 
 
 free trade movement at end of 
 July Monarchy, 294-5 
 
 free trade policy of Napoleon 
 III., 298-9 
 
 imports and exports, 1799-1814, 
 272 ; 1816-1830, 282 ; 1831-1848, 
 292 ; 1849-1860, 301 ; 1860-1869, 
 309 ; 1871-1880, 321 ; 1881-1891, 
 326; 1892-1901,348 
 
 July Monarchy, economic re- 
 forms of, 285-8 
 
 work of, 293 
 
 overthrown, 295 
 
 maximum and minimum tariffs, 
 340,342 
 
 Napoleon I., economic policy 
 of, 269-74 
 
 Napoleon III., economic policy 
 of, 298-300, 302-3 
 
 reaction of political position 
 
 upon economic policy of, 301, 306 
 
 fall, 308 
 
 opposition to commercial treaties, 
 339 
 
 population, 312, 338, 357 
 
 protection adopted, 270 
 
 protection, effects of, 275, 358 
 reactions against, 282, 294-5, 
 
 298 
 
 returns to, 296, 313, 327-8, 
 
 342-3 
 
 relations with Germany, 41 
 
 Restoration Monarchy, economic 
 policy of, 274-5 
 
 shipping legislation, 325-6, 353 
 
 shipping, decline of, 355 
 
 tariff of 1791, 267 ; 1806-1810, 
 270; 1816, 275; 1836, 289; 1841, 
 289 ; 1848, 297 ; tariff proposals 
 of Ste.-Beuve, 297-8 ; tariff re- 
 forms of Napoleon III., 299, 
 304-5, 307; tariff proposals of 
 Thiers, 312-17; proposals of 1875- 
 
 1876, 318-19 ; proposals of Bort, 
 
 1877, 319-20; tariff of 1881, 
 323-4 ; tariff changes, 1881-1892,
 
 INDEX 
 
 363 
 
 329-31 ; tariff of 1892, 342-6 ; 
 tariff changes after 1892, 351 
 France, tariff wars, with the Zoll- 
 verein, 15, 39; with Italy, 332-7; 
 with Switzerland, 346-8 
 
 treaty system, under Napoleon 
 III., 306; in 1881, 324; after 
 1890, 340 
 
 - treaties with Great Britain, 
 1786, 268 ; with Belgium, 1842, 
 291 ; with Sardinia, 1843, 292 ; 
 under Napoleon III. with Great 
 Britain, 39-40, 302-5 ; with other 
 states, 305-7 ; with Great Britain, 
 1872, 317 ; in 1881-1884, 324-5 ; 
 in 1892, 346 ; with United States, 
 258 ; with Zollverein, 41-2, 306 
 
 Franco - German War, economic 
 
 effects of, 50-1, 54 
 Franco-Italian tariff war, 332-7 
 Franco-Swiss tariff war, 346-8 
 Frankfurt, favours free trade, 23 
 
 Treaty of, 50, 325 
 
 Free trade, arguments for, 132-3 
 argument in Walker's Report, 
 185-7 
 
 petition to American Senate, 
 165-6 
 
 Gallatin, A., author of free trade 
 
 petition, 166 n. 
 German Empire, agrarian party, 84, 
 
 88,89,106-8,111-12,119,120,130-2 
 
 autonomous and conventional 
 tariffs, 96 
 
 constitution, 49 
 
 crisis of 1873, 54-5 
 
 economic development, 100-5 
 
 economic theories, 63-74, 113-35 
 
 exports, vide imports 
 
 food prices, 83, 88, 103, 106, 
 121-2 
 
 - foreign commercial relations, 
 1880-1892, 80-2 
 
 grain duties, 61, 80, 87, 108-9 
 
 imports and exports, 1872-1879, 
 103; 1880-1891, 78; 1893-1902, 
 104 
 
 social legislation, 74-7 
 
 socialist indifference to tariff 
 controversy, 61 
 
 socialist opposition to food 
 taxes, 112 
 
 tariff after 1870, 51-2 ; of 1880, 
 61; of 1891, 86-8; of 1902, 
 bases, 107-10; criticism, 110-11 
 
 tariff wars, with France, 15, 39; 
 with Russia, 88-96 ; with Spain, 
 97-8 
 
 German Empire, treaties with 
 Austria, 1868, 50; with France, 
 1870,50 ; with other powers, 1868- 
 1869, 50-1 ; after 1880, 80-2 ; with 
 Austria, 1891, 86-7; with other 
 powers, 1892-1894, 87-8 ; effects 
 of these, 96-8; with Great Britain, 
 98 ; with the United States, 99 ; 
 difficulties of negotiation under 
 tariff of 1902, 111-12 
 
 treaty system, theory of, 84-6, 
 107, 129-31 
 
 Germanic Confederation, condition 
 after 1815, 3 
 
 ended, 48-9 
 
 weakness, 8 
 
 "Grangers "association formed, 207 
 Great Britain, relations with France, 
 1882, 325 
 
 relations with German Empire, 
 98 
 
 treaties with France, 1826, 280 ; 
 1860, 39, 303-5; with United 
 States, 1815, 151-2; with Zoll- 
 verein, 1841, 16 
 
 Greater Germany party supports 
 
 protection, 36 
 Guizot, conservative policy, 284 n. , 
 
 290 
 
 desires commercial treaty with 
 Great Britain, 292 
 
 Hamburg, supports free trade, 23 
 
 enters ZoUverein, 79 
 Hamilton, " Report on Manufac- 
 tures," 145-7, 167 n. 
 
 Hanover, joins Steuerverein, 14 
 
 treaty with Prussia, 29 
 
 enters Zollverein, 34 
 
 Hanse towns, economic policy, 
 12, 23, 79 
 
 form Middle German Com- 
 mercial Union, 11 
 
 treaty with France, 307 
 
 enter Zollverein, 79 
 Harrison, W. H., president of 
 
 United States, 181 
 Harrison, B., president of United 
 
 States, 220 
 Hauptagrarien, conflicting interests 
 
 with N^ebenagrarien, 112 
 Hawaii, treaty with United States, 
 
 254 
 Hayne, leader of Southern party 
 
 in United States, 169, 171 
 Hesse-Darmstadt, agreement with 
 
 Prussia, 10 
 Hildebrand, 67 
 Historical School, in Germany, 67-8
 
 364 
 
 INDEX 
 
 Historical School, attitude towards 
 tariff question, 68-9 
 
 attitude towards theory of State 
 action, 73-4 
 
 Hohenlohe, German chancellor, 100 
 Holland, treaties with Zollverein, 
 
 15-16 ; with France, 1865, 307 ; 
 
 1884, 325 
 
 Insurance, compulsory in Germany, 
 76-7 
 
 International commercial inter- 
 course, growing difficulty, 115-17 
 
 probable extension, 123-5 
 International trade, criticism of 
 
 English theory, 125-6 
 Italy, commercial relations with 
 France, 332-3 
 
 tariff war with France, 334-7 
 
 Jackson, president of United 
 States, 162, 176 
 
 financial policy, 175 
 
 and " nullification," 172 
 
 party, 161 
 
 Johnson, A., president of United 
 
 States, 201 
 Journal des Economistes, 295 
 
 Karlsruhe Conference, 24 
 Kartels in Germany, 104-5 
 Knies, 67-8 
 
 Landowners in Germany, change 
 
 in economic opinions, 55 
 Lassalle, and State socialism, 73 
 " Leutenot," complaint of German 
 
 agrarians, 106 
 
 La ligue anti-protectioniste, 329 
 Le Libre Exchange, 295 
 Lincoln, election as president 
 
 causes secession, 197 
 List, F. , influence on tariff policy, 
 
 20 
 
 doctrines, 20-1, 65-7, 69, 72 
 Lotz, criticism of Wagner, 119 
 Louis Philippe, economic policy, 
 
 284-5 
 Luxemburg, joins Zollverein, 17 
 
 Maassen, author of Prussian tariff 
 of 1818, 4 
 
 work for Zollverein, 13 
 McKinley Tariff, vide United States 
 Manteuffel, action at Zollverein 
 
 Conference, 31 
 Manufactured goods, extent of 
 
 market, 116, 123-5 
 Maryland, bankruptcy of, 182 
 
 Maximum and minimum tariffs, 340 
 Meline, leads commission on tariff 
 proposals of 1878, 322 
 
 leads campaign for agricultural 
 protection, 329 
 
 proposes increases in tariff of 
 1892, 343 
 
 suggests maximum and mini- 
 mum tariffs, 340 
 
 Metternich, policy, 25-6 
 
 Middle German Commercial Union, 
 10-11 
 
 Middle School of German econo- 
 mists, 127 
 
 Von Mieg, work in formation of 
 Zollverein, 13 
 
 Milan Decrees, 270 
 
 Minimum valuations, 154. , 230, 
 234-5, 248-50 
 
 Moniteur universal, 295 
 
 " Most favoured nation " clause, 
 American interpretation, 252-3 
 
 French hostility, 318, 340 
 
 nature, 40 
 
 working, 42, 46, 81, 85, 90-1, 
 98, 306, 324-5 
 
 Monroe, president of United States, 
 
 157 
 Muller, A., criticism of Adam 
 
 Smith, 64 
 
 Napoleon I., attack on British 
 trade, 269-70 
 
 failure of commercial policy, 273 
 Napoleon III., economic opinions, 
 
 298 
 
 reforms of tariff, 298-300 
 
 political position, 301 
 
 commercial treaties, 301, 305-6 
 Napoleonic wars, effect on French 
 
 trade, 270-4 
 
 effect on United States trade, 
 149-51 
 
 Nassau, supports free trade, 24 
 Nebenagrarien, conflicting interests 
 
 with Hauptagrarien, 112 
 Nebenius, memorandum, 7 
 Neo-mercantilism, meaning, 129 
 
 dangers, 129-31 
 
 New York State, financial re- 
 forms, 179 
 
 Niles, Weekly Register, 161 
 Northern states of Germany, 
 favourable to free trade, 22, 37 
 
 treaty with southern states, 48 
 Norway, treaties with France, 1865, 
 
 307; 1881,324 
 
 " Nullification," adopted by South 
 Carolina, 171
 
 INDEX 
 
 365 
 
 Oldenburg, joins Steuerverein, 14 
 
 treaty with Prussia, 29 
 
 Pan-American Congress, 254-5 
 " Patrons of Husbandry," 207 
 Pennsylvania, bankruptcy, 182 
 
 supports Democratic party, 184 
 Pierce, president of United States, 
 
 193 
 Polk, president of United States, 
 
 184 
 Populist party in United States, 239 
 
 supports Democratic candidate, 
 245 
 
 Portugal, treaties with France, 
 
 1867, 307; 1881, 324; with 
 
 United States, 258 
 Prince -Smith, leader of early 
 
 German free trade movement, 37 
 Protection, advocated by Bismarck, 
 
 58-60 
 
 advocated by German Historical 
 School, 68-71 
 
 advocated by agrarian party in 
 Germany, 113-18 
 
 advocated by Hamilton in " Re- 
 port on Manufactures," 145-7 
 
 advocated by Republican party 
 in United States, 196, 225-6, 259 
 
 advocated in France, 340-1 
 
 effect on industrial progress, 
 260-1, 273, 358 
 
 extended to agriculture, in 
 Germany, 62, 80, 108 
 
 United States, 228 
 
 France, 327, 329-31 
 
 and " infant industries,"66-7, 146 
 powers of American Congress, 
 
 159, 163-4, 169-71 
 
 temporary necessity of, 67, 72 
 
 true character, 71 
 
 Prussia, attitude towards Austria, 
 
 26-33, 38, 42-4 
 
 - conducts foreign relations of 
 Zollverein, 15 
 
 difficulties in forming Zollverein, 
 11-13 
 
 favourable to free trade, 5, 22-3 
 
 policy towards allies, 6-7, 9-10 
 
 at first renewal of Zollverein, 17 
 
 Tariff Act of 1818, 4-5 
 
 Railway policy of Bismarck, 75-6 
 Raw materials, possible exhaustion, 
 
 115, 122-3 
 Republican party in United States, 
 
 formation, 193 
 
 committed to protection, 196, 
 219, 220-1, 225 
 
 Republican party in United States, 
 end of long period of power, 
 210-11 
 
 passes McKinley Tariff after 
 victory of 1888, 220-1 
 
 defeat, 1892, 239 
 
 returns to power and passes 
 Dingley Tariff, 1897, 245-6 
 
 Roosevelt, economic policy, 259 
 Roscher, 67 
 
 Roumania, treaty with Germany, 
 88-9 
 
 supply of grain to Germany, 
 88-9 
 
 Russia, commercial relations with 
 Germany prior to 1892, 81, 89- 
 90 
 
 tariff war with Germany, 91-6 
 
 treaties with France, 1883, 325 ; 
 with Germany, 1894, 94-5 
 
 St. Cricq, prepares scheme of 
 
 tariff reform, 282 
 Sainte-Beuve, free trade proposals, 
 
 297 
 
 Saratoga Convention, 99 
 Sardinia, treaty with France, 292 
 Saxony, supports free trade, 23 
 
 joins Prussia, 12 
 
 supports Prussia against Austria, 
 32 
 
 supports Prussia on French 
 treaty, 43 
 
 Say, L., leader of French free 
 traders, 329, 343 
 
 Schacht, criticism of German tariff 
 of 1902, 108-11 
 
 Schmoller, leader of German Mid- 
 dle School, 113 
 
 Mercantile System, 69-71, 73 
 
 on German tariff of 1902, 111 
 
 on tariffs for negotiation, 128-9 
 Schumacher, favours tariffs for 
 
 negotiation, 129 
 
 Schwarzburg-Sondershausen, cus- 
 toms union with Prussia, 6 
 
 Sering, and agricultural protection, 
 131-2 
 
 Servia, treaties with France, 325 ; 
 with Germany, 88 
 
 Smith, Adam, influence in Ger- 
 many, 64 
 
 Socialists and tariff questions, 61, 
 112, 296 
 
 " Socialists of the Chair," 73 
 
 South Carolina, protests against 
 protective duties, 164 
 
 threatens to withdraw from 
 American union, 171-3
 
 366 
 
 INDEX 
 
 Southern States of America, atti- 
 tude towards protection, 155, 
 158, 166 
 
 constitutional doctrines, 170-1 
 
 discontent with tariff of 1828, 
 164 
 
 economic distress after Civil 
 War, 200 
 
 exports, 164 
 
 resistance to tariff of 1832, 169 
 
 secede, 196 
 
 Southern States of Germany, sup- 
 port protection, 24, 53 
 
 plan common tariff, 8-9 
 
 reject French treaty, 43 
 
 relations to Austria, 27-8, 30, 
 32,36 
 
 North German Confederation, 
 
 48-9 
 Spain, treaties with France, 1865, 
 
 307 ; 1882, 324 ; with Germany, 
 
 98 
 
 Steuerverein, formation, 15 
 Stuttgart, conference, 9 
 Sweden, treaties with France, 1865, 
 
 307 ; 1881, 324 ; with Germany, 
 
 81 
 Switzerland, treaties with Zoll- 
 
 verein, 51 ; with Germany, 81, 
 
 87; with France, 1864, 307; 
 
 1882, 324. 
 
 tariff war with France, 346-8 
 
 Taylor, president of United States, 
 
 193 
 Thiers, economic views, 288, 298 
 
 financial policy, 313-16 
 Tirard, supports commercial 
 
 treaties, 323 
 
 negotiates treaties, 324 
 Tocqueville, La Democratic en 
 
 j4.m6rique, 167 n. 
 Turkey, treaty with France, 325 
 Tyler, president of United States, 
 
 181 
 
 United States, abolition of internal 
 taxes, 202 
 
 "Act of Abominations," 161 
 
 agricultural protection, 229 
 
 Bank, 175-7 
 
 Civil War, 197; effect upon 
 economic policy, 199-200 
 
 commercial crises, 152, 155-6, 
 178, 194, 209 
 
 commercial relations of states 
 after War of Independence, 141 
 
 commission to revise tariff, 1882, 
 214-15 
 
 United States, Compromise Act, 
 172-5 
 
 Customs Act, 1862, 198 
 
 Customs Administrative Act, 
 235-6 
 
 Dingley Act, 246-51 
 
 Distribution Act, 181 
 
 economic progress, 151, 188-91, 
 212, 221-4, 260 
 
 effects of war tariff on com- 
 mercial policy, 199-200 
 
 Embargo Act, 150 
 
 exports, vide imports. 
 
 financial reconstruction after 
 Civil War, 201-3 
 
 free traders and revenue duties, 
 165-6 
 
 growth of factory system, 151, 
 188 
 
 imports and exports, 1791-1807, 
 148 ; 1807-1814, 150 ; 1847-1857, 
 190 ; 1870-1875, 209 ; 1876-1882, 
 213 ; 1883-1890, 224 
 
 Internal Revenue Act, 198 
 
 McKinley Tariff, 228-35 
 - Mills Bill, 219 
 
 Morrill Act, 196-7 
 
 Morrison Bill, 217 
 
 " most favoured nation " clause, 
 interpretation of, 252-3 
 
 political parties and recent tariff 
 policy, 259-60 
 
 protection and trusts, 262 
 
 reciprocity under McKinley Act, 
 254-7 
 
 reciprocity under Dingley Act, 
 257-8 
 
 shipping, unsatisfactory condi- 
 tion of, 223-4 
 
 tariff acts, 1789, 143; 1816, 153; 
 1824, 157 ; 1828, 161 ; 1832, 168 ; 
 1841, 182; 1842, 183; 1846, 187 
 1857, 193 ; 1872, 208 ; 1875, 210 ; 
 1883, 215 
 
 tariff legislation to 1787, 141-2 ; 
 1792-1816, 147-8 
 
 tariff bill of 1867, 203-4 
 
 treaties with Canada, 253-4 ; 
 with Hawaii, 254 ; under McKin- 
 ley Act, 256-7 ; under Dingley 
 Act, 258 
 
 war tariffs, 197-200 
 
 Wilson Act, 241-3 
 
 Woollens Act, 204 
 
 Wages argument for protection, 
 
 160, 226-8, 259 
 Wagner, Agrar- und Industrie- 
 
 staat, 114
 
 INDEX 
 
 367 
 
 Wagner, general argument for 
 
 agricultural protection, 114-18 
 - criticism of English theory of 
 international trade, 125-6 
 
 attitude towards State action, 74 
 
 discussion of his theories, 119- 
 25, 126 
 
 Walker, F. A., reforms United 
 
 States trade statistics, 209 
 Walker, Secretary to Treasury, 
 
 report, 185-7 
 Webb, S. and B., on theory of 
 
 international trade, 126-7 
 Wells, United States Commissioner 
 
 of Revenue, 207, 209 
 West Indian Islands, treaty with 
 
 'United States, 256 
 Whig party in United States, 180 
 De Witte, commercial policy, 91 
 Wiirttemberg, union with Bavaria, 9 
 
 supports protection, 24 
 
 Zollbundesrath, 49 
 
 Zollparlement, 49 
 
 Zollverein, autonomous and con- 
 ventional tariffs, 45 
 
 established, 11-13 
 
 formation proposed in 1819, 8 
 
 growth, 14-15, 17, 29, 79 
 
 organisation, 13-14, 48-9 
 
 - policy, 13-14, 20, 24-5, 34, 42, 
 45 
 
 possible policies, 36-7 
 
 relations with Austria, 12 ., 
 15, 25-8, 29-33, 35-7, 42-4 
 
 relations with other powers, 
 15-16, 39, 41-3 
 
 renewals, 17, 29-33, 42-4, 48-9 
 
 tariff, 14, 24-5, 33, 45-7 
 
 treaties with Austria, 1853, 
 32-3; 1865, 44; 1868, 50; with 
 Belgium, 1844, 18-19 ; 1865, 45 ; 
 with France, 41-2, 45 ; with 
 Great Britain, 1841, 16; 1865, 
 45, 98; with Holland, 15-16; 
 with United States, 243
 
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