Principles of political economy

Introduction

BY HORACE GREELEY.

• NEW-YORK:

GREELEY & McELRATH, TRIBUNE BUILDINGS.;]

PRICE TWENTi-FlVB CENTS.

PRINCIPLES

OR, THE

LAWS OF THE FORMATION

NATIONAL WEALTH,

DEVELOPED BY MEANS OF THE CHRISTIAN LAW OF GOVERNMENT.

BEING THE SXJBSTANC6 OF A CASE DELIVERED TO THE HAND-LOOM WEAVERS' COMMISSION.

BY WILLIAM ATKINSON.

AN INTRODUCTION

BY HORACE GREELEY; TREATING OF THE PRESENT STATE OF THE SCIENCE OF POLITICAL ECONOMY, ,, ^,^ ,

ADAPTATION OF ITS PRINCIPLES TO THE CONDITION OF OUR OWN COUNTR|,

NEW-YORK ;

GREELEY & McELRATH, TRIBUNE BUILDINGS.

PHILADELPHIA : ZEIBER & CO.

CINCINNATI : WM. H. MOORE & CO.

18 4 3.

ADVERTISEMENT TO THE AMERICAN EDITION.

The work herewith first presented to the American public, — being the substance of a case submitted to a Commission appointed by the British House of Commons to inquire into the distresses of the Hand-Loom Weavers, with additions and iUustrations, — was published in England in 1840 ; but no attention was called to it in this Country till late in 1842, when two copies were received from the author by Gen. James Tallmadge, President of the American Institute. (Great Britain produces much Political Economy for exportation, but with rare exceptions this is of the Free Trade school ; works defending and illustrating the Protective Policy are there deemed adapted to the Home market alone.) — This work, having been placed by Gen. T. in the Library of the American Institute, the attention of several thinkers and practical men was speedily attracted to it, and by them it was regarded as eminently adapted to correct some of the most popular and specious of the errors prevailing with respect to Political Economy, as well as to elucidate and defend some of the more important truths of that Science which had hitherto been too generally felt rather than clearly understood. The knowledge and the popularity of this work, as exhibiting the true Theory of a wise and benignant Policy for Nations with respect to the Industrial Interests of their People, gradually extended from one to another, imtil it was rapidly diffused by a discriminating review of its contents by Mr. C. C. Haven, which appeared in Ilunfs Merchant's Magazine for April of this year. A notice with extracts was likewise given in The American Laborer about the same time. The knowledge of the work thus imparted has created a very earnest if not a very wide-spread desire that an American Edition should be published, in order to place it within the reach of those of our citizens to whom the heavy cost of the English Edition would present a formidable barrier to its perusal, even were it to be procured here at all, as it is not. Impelled by a profound conviction of the value of Mr. Atkinson's work, its eminent adaptation to the existing circumstances of our Country, and earnestly desiring that its views should be widely disseminated, and its truths sink deeply into the minds of the American People, the tmdersigned (having been favored by Gen. Tallmadge with his copy for the purpose) have incurred the hazard of printing so liberal an edition, as will enable them to afford the work at the low price of twenty-five cents a copy, or one-tenth the cost of the English edition. They therefore appeal with confidence to all who feel an interest in the dissemination of sound and just views of Political Economy, and all who are concerned in the Protection of our Home Industry, to aid by spirited efforts in the diffusion of this work.

GREELEY & McELRATH,

Tribune Office, 160 Nassan-st.

New-VorJ;, June 1, 1843.

Introduction To The American Edition

In presenting to the American public an edition of Mr. Atkinson's work elucidating the fundamental principles of PoUtical Economy, the Editor is impelled to accompany it by a brief introductory essay, beaiing on the progress and present condition of the Science herein illustrated. Hasty and immethodical as the multiplicity and imceasing exaction of his cares and duties as Editor of a Daily Journal must render it, he trusts it will be found not without pertinence to the matter, nor unworthy of the consideration of the public.

PoUtical Economy is among the latest born of the Sciences. Mainly intent on the homd game of War, with its various reverses and only less ruinous successes, it is but yesterday that the rulers of the world discovered that they had any duty to perform toward Industry, other than to interrupt its processes by their insane contentions, to devastate its fields, and ultimately to consume its fruits. And when the truth did pierce through their scarcely pervious skulls, it came distorted and perverted by the resistance it had met, by selfish and sinister influences, so that it had parted with all its vitaUty, and was blended with and hardly distinguishable firom error. When it began to be dimly discerned that Government had a legitimate duty to perform toward Industry — that the latter might be cherished, improved, extended by the action of the former — legislators at once jumped to the conclusion that all possible legislation upon and interference with Industry must be beneficial. A Frederick the Great finds by experience that the introduction of new arts and industrial processes into liis dominions increases the activity, thrift and prosperity of his People ; forthwith he rushes (as Macaulay and the Free Trade Economists represent him) into the prohibition of every tiling but coin from abroad, and the production of every thing at home, without considering the influences of soil and climate, or the practicability of here prosecuting to advantage the business so smnmarily established. The consequence is of course a mischievous diversion of Labor from useful and productive to profitless and fruitless avocations. But this is not the worst. Some monarch finds himself unable to minister adequately to the extravagancn of suma ngviT favorite or mistress ; so he creates hi her iuvor'a Mv«wpui_y of tho o«ppiy and sale of Salt, Coffee, or whatever else is not already monopolized, and styles it a " regulation of trade," to prevent ruinous fluctuations, competitions and excesses ! Thus private ends are subserved under the pretence of public good, and the comforts of the People abridged or withheld to pander to the vices and sustain the lavish prodigaUty of princes and paramours.

From a contemplation of these abuses, pierced and uncovered by the expanding intelligence of the Eighteenth Century, the PoUtical Economy of the Schools was evolved. In its origin a protest against existing abuses, it shared the common lot of all reactions, in passing impetuously to an extreme the opposite of the error it went forth to combat. From a scrutiny and criticism of the gross abuses of the power of Government over Industry, it was impelled to the conclusion that no such power properly existed or could be beneficially exercised. Thus the Science became, in the hands of the latest professors of the ' en- Ughtened ' school, a simple and sweeping negation — a demand for incessant and universal abolisliing — a suicidal Science, demonstrating that to do nothing is the acme of governmental wis. dom, and King Log the profoundest and greatest of nionarchs.

These conclusions would have staggered the founders of the school, and yet it is difficult to resist the evidence offered to show that they are legitimately deduced by their disciples from the premises those founders themselves have laid down. In the cases cited by Mr. Atkinson in this work of the comparative beneficence of Home Trade and Foreign, and of Resident ajid Non-Resident Landlords, it is plain that the disciples are truer to their common principle in denying than their masters were in asserting the superior benefits of Home Trade and the Residence of proprietors on their estates.

There are many strong reasons for believing that the reaction against a sinister and false regulation of Industry has spent its force, and that the error which denies that any regulation can be beneficent, equally with the fraud which has cloaked schemes of personal aggrandisement under the pretence of guiding Industry aright, will cease to exert any practical influence over the affairs of nations, l^xperiencc, the groat cor-

IV introduction to the American Edition.

rector of delusive theories, has long since settled this point, tliat any attempt to grow Coffee in Greenland or dig Coal from the White Mountams must prove abortive; that same Experience, it seems most obvious, has by tliis time established that it is wise, it is well, for each nation to draw from its own soil every desirable and necessary product which that soil is as well calculated to produce as any other, and to fabricate within itself all articles of utility or comfort which it may ultimately produce as advantageously — that is, with as little labor — as they can be steadily produced elsewhere. To do this may require fostering legislation at first, to shield the infant branches of Industry against the formidable competition of their adult and muscular rivals, wlaich would otherwise strangle them in the cradle ; it may require efficient and steady Protection in after years, to counteract the effects of differing standards of money values, and different rates of wages for Labor — nay, of the disturbing rivalries and ruinous excesses of mere foreign competition, wliich often leads to underselling at the door of a rival (especially if that rival be shut out from retaliation by duties on the other side) when living prices are maintained at home. A protected branch of Industry — cloth-making, for instance — might thus overthrow an unprotected rival interest in another nation vnthout selling its products at an average price lower than that of the latter. Having its own Home Market secured to it, and unlimited power given it to disturb and derange the markets necessarily relied on by its rival, it would inevitably cripple and destroy that rival as the mailed and practiced swordsman cuts down in the field of combat the unarmed and fenceless adversary whom fate or fatuity has thrown within his reach.

Those who profess an inability to see how Protection can benefit the producer if it docs not raise the average price of his product contradict not merely the dictates of a uniform experience but the clearest deductions of reason. The artisan who makes piano fortes, flay at $300 each, having a capricious demand for some twenty or thirty per year, and liable at any time to be thrown out of business by the importation of a cargo of piano fortes — will ho produce them cheaper or dearer, think 3'ou, if the foreign rivalry is cut off, and lie is thence enabled to find a steady market for some twelve instiuments per month ? Admit that his natural tendency will he to cling to the old price, and thereby secure larger profits — tliis will be speedily corrccted.by a Home Competition, which will in. crease until the profits are reduced to the average profits of buBiuCBU. It will not bo in llic jKJWCr of the Home as it is of the Foreign rival interests to depress liis usual prices without depressing their own — to destroy his market yet presence and even extend theirs — to crush him by means of cheaper Labor than he can obtain. If vanquished now it will be because his capacity is unequal to that of his rivals — not that circumstances inevitably predict and prepare his overthrow. No inteUigent man can doubt that Newspapers, for example, are cheaper in tlxis country than they would be if Foreign journals could rival and supplant them here as Foreign cloths may rival and supplant in our mau-kets the cor. responding products of our own Country. The rule will very generally hold good that those ar. tides of Home Production which cannot .be rivaled by Importation are and will be relatively cheaper than those of a different character.

And here it may be well to speak more directly of the discrepancy between Theory and Practice which is so often affirmed in connection with our general subject. There are many who think the theory of Free Trade the correct, or at any rate the more plausible one, but who yet maintain, because they know by experience, that it fails practically of securing the good it promises. Hence they rush to the conclusion that a policy may be faultless in theory yet pernicious in practice, than which no idea can be more erroneous and pernicious. A good theory never yet failed to vindi. cate itself in practical operation — never can fail to do so. A theory can only fail because it is defective, unsound — lacks some of the elements which should have entered into its composition. In other words, the practical working is bad only because the theory is no better.

Let us consider, for illustration, the fundamental maxim of Free Trade, ' Buy where you can buy ciieapest.' This sounds well and looks plausible. But let us hold it up to the light : What is ' cheapest V Is it the smallest sum in coin ? No — very far from it ; and here is where the theory gives way. AVe do not, as a nation, produce coin — do not practically pay in coin. We pay for products in products, and the real question first to be resolved is, Whence can we obtain the desired fabrics for the smaller aggregate of our products — from the Foreign or the Home manufacturer ? Take Woolen Clotiis, for instance : We require of tiiem, siiy One Hundred Millions' worth per anninn. Now tiic point to be considered is not where we could buy most cloths for One Hundred Millions in money, for that we have not to pay ; but where our nurphis product oC Pork, Lumber, Dairy Produce, Sheep, Wnnl, &.0; &c. will buv the vcQuirc.t ciuiU most advanta

Buy where you can Cheapest.'

geously. The Nominal or Money price paid for it may be Eighty MilUons or One Hundred and Twenty MilUons, and yet the larger sum be easier paid than the smaller — that is, with a smaller amount of our Produce. The relative Money prices do not determine the real question of cheapness at all— they may serve, if implicitly relied on, to blind us to the merits of that question. In the absence of all regulation, the relative Money price will of course determine whether the cloths shall be imported or produced at home, but not whether they should be.

But this is not all. We may obtain a desired product to-day and fitfully cheaper abroad, and yet pay more for it in the average than if we produced it steadily at home. The question of cheapness is not determined by a single transaction but by many,*

And again : We cannot buy to advantage abroad that wliich, being bought abroad, leaves whole classes of our people to famish at home. — For instance ; Suppose one hundred miUions of garments arc made by the women of this country yearly at an average price of twenty-five cents each, and these could be bought abroad for twothirds of -that sum ; Would it be wise so to buy them ? Free Trade asserts that it would — that all the labor so tlurown out of employment would be promptly absorbed in other and more productive occupations. But sad experience, common sense, humanity, say Not so. The truth is very different from this. The industry thus thrown out of its time-worn channels would find or wear others slowly and with great difficulty ; meantime the hapless makers, no longer enabled to sup. port themselves by labor, must be supported in idleness. By indirect if not by pubUc charity they must somehow be subsisted ; and our citizens will have bought their garments some twenty per cent, lower from abroad, but will be compelled to pay tmother price for them in charities and poor-rates. Such is the effect of ' Buying where we can buy cheapest' in a low, short, sighted, miserly, Free Trade view of cheapness.

But why, it is asked, should not a Nation purchase of others as freely as individuals of the same nation are permitted to trade with each other ? Fairly as this question would seem to be put, there is a fatal fallacy linking beneath its use of the term ' nation.' A nation should always buy where it can (in the long run) ' buy cheapest' or most advantageously; where that may be is a question for the nation, through its legal organism, to decide. The query mistakenly

Madison's Messages, 18U-15-16.

assumes that the immediate, apparent interest of each individual purchaser is always identical with the interest of the community, which common sense as well as experience refutes. The lawer or clergyman in IlUnois may obtain his coat of the desired quality cheaper (for less money) from Paris than it can be fabricated in Illinois, yet it by no means follows that it is the interest of Illinois to purchase her coats or cloths from Europe — quite the contrary is the fact. Nay, it would be easy to show that the real, permanent interest of the lawyer or clergyman himself — certainly of his class — is subserved by legislation which encourages and protects the home producer of those articles, not only because they improve in quality and are reduced in price under such a policy, but because the sources of his own prosperity and income are expanded or dried up as the Industry of his own region is employed, its capacities developed, and its sphere of production enlarged and diversified. Let us illustrate this truth more fully :

The State of Illinois, for example, is primarily grain-growing, producing a surplus of five millions of bushels of Wheat and Indian Corn annually, worth in New-York $4,000,000, and requiring in return ten millions of yards of Cloths of various kinds and quaUties, costing in New- York a like sum. In the absence of all legislation, she purchases and consumes mainly English cloths, which can be transmitted from Leeds to Chicago in a month, at a cost, including insurance and interest, of not more than five per cent, and there undersell any Ilhnois fabricator of cloths equal in quality and finish. Is it the real, permanent interest of Illinois (disregarding the apparent, momentary interest of this or that class of persons in Illinois) to persist in Free Trade ? or, on the other hand, to concur in such legislation as will ensure the production of her cloths mainly at home ? Here is opened the whole question between Free Trade and Protection.

The advocate of Free Trade insists that the solution of the problem HeS plain on the surface. — The British broadcloth is offered in abundance for $3 per yard ; the American is charged twenty per cent, higher, and cannot be afforded for three dollars. The true course is obvious — • Buy where you can buy cheapest.' But the advocate of Protection answers that the real, intrinsic question of cheapness is not determined by the market price of the rival fabrics in coin — specie not being the chief staple of Illinois, nor produced there at all — but where may the required Cloth be bought with the smallest amount of her Grain ? Is not this true ? What avails it to H-

Introduction to the American Edition^ linois that she may have Cloth from England twenty per cent, cheaper if she is, by purchasing her supply there, constrained to sell her Grain at half price or less ? Let us see, then, v.-hat is the inevitable fact :

That we cannot buy, perpetually, without paying— that in paying for a single article we must regard, not how much the payment is cailsd, but how much it is, (that is, the amount of Products absorbed in paying for, or of the Labor expended in producing them)— we assume to- be obvious or sufficiently demonstrated. Let us now consider what will be the inevitable cost to lUinois— the real cost— of one million yards of broadcloth obtained from England as compared with the same cloth produced at home.

The average value of Wheat throughout the world is not far from CHae dollar per bushel, vary. intr largely, of course, in different localities ^ in the heart of a grain-growing region, away from manufactures or navigation, it must fall greatly below that standard; in other districts, where consumption considerably exceeds production, rendering a resort to importation necessary, the price rises above the average standard. The price at a given point is determined by its proximity to a market for its surplus or a surplus for its market. Great Britain does not produce so much as will feed her own population ; hervce her average price must be governed by the rate at which she can supply her deficiency from abroad ; Illinois produces in excess, and the price there must be governed by the rate at wliich sho can dispose of her surplus, including the cost of transportation to an adequate market. In other words (aU regulation being thrown aside) the price which England must pay must be the price at the most convenient foreign marts of adequate supply, adding the cost of transportation ; while the grain of 11- linois will be worth to her its price in the ultimate market of its surplus, less tlie cost of sending it there.

Now the great grain-growing plains of Poland and Southern Russia, with capacities of production never yet half explored, even, with Labor cheaper than it ever can or should be in this country, are producing Wheat in the interior at fifty cents a bushel or lower, so that it ia abundantly obtained at Dantzic on the Baltic for 90 cents per bushel and at Odessa on the Black Sea for 80, very nearly. With a Free Trade in grain, Britain can be abundantly 8upi)licd from Europe alone at a cost not exceeding $1,10 per bushel; with a competition from America, the average price in her ports would more probably range from 91 to $1,06. Wliat» then, is the prospect for 11- linois, buying her Cloths from Great Britain and compelled to sell somewhere her Grain to pay for them I

That she could not sell elsewhere her surplus to such extent as would be necessary, is obvious. The ability of the Eastern States to purchase thp produce of her fertile prairies depends on the activity and stability of their Manufactiu"es — depends, in short, on the market for their manufactures in the Great West. The markets to which v/e can resort, in the absence of the English, are limited indeed. In point of fact, the rule will iiold substantially good, though trivial exceptions are presented, that, i.\ order to purchase and

PAV FOR THE MANUFACTURES OF GrSAT BrITAIN,

Illinois must sell to that Country the great bulk of her surplus of agricultural produc- TIONS.

The rates at wliich she must sell this surplus, we have already seen ; tiie cost of transporting it is easily computed. Seventy-five cents per bushel is considerably below tiie average cost of trans, porting Wheat from the prairies of Illinois to England, but that may be assumed as a fair average for tho next ten years, in view of the improvements being made in the means of transportation. There is then left to the Illinois farmer — to lUinois — thirty cents per bushel as the net proceeds of her surplus of Wheat or $1,500,- 000 for the five milUons of bushels — purchasing, at tlu-eo dollars per yard, five hundred thousand yards of broadcloth. This would be the net product of Free Trade.

Now the same inevitable law which depresses the price of Wheat in Illinois so far below that prevailing in England, so long as the one is wholly Agricultural, the other predominantly Manufacturing, will as surely raise the price in Illinois so soon and so fast as a sufficient

MARKET FOR HER SURPLUS IS BROUGHT NEARER TO

HER DOORS. Let that surplus be arrested by aa adequate market in New-England, and its price will rise to fifty cents a busliel ; let the supply of her Manufactured products be drawn by Illinois from ixiints West of the Allcghcnies, and it will rise to scventy-fivc cents ; and, whenever they arc mainly produced on her own territory, the price will have advanced to one dollar per bushel. In other words, the net produce of her grain to Illinois will be the average price throughout the world, less the cost of transporting it to the point at which an adequate mtirkct for hor surplus is attained. There may be casual and special cxctptions, but thieistlie fundamental law.

Now it is evident that, though Illinois may buy bcr cloths for fewer dollars from England, she

Protective Legislation Needful — ' Laissez Faire?

xi can buy them with fewer bushels of Grain from <our own manufactories, and fewer still when the progress of improvement, under a steady and careful Protection to our Industry, shall have established most branches of Manufacture on her own soil. She may pay twenty-five per cent, higher nominal prices for her fabrics, and yet obtain them at one-half the actual cost at which she formerly obtained them from abroad. In other words, by bringing the producers of Cloth from England to America, and placing them side by side with the producers of Grain, she has eifected an enormous Saving of LAEOR-~^f that Labor, namely, which v/as before employed in transporting Grain and Cloth from continent to continent. One hundred thousand grain-growers and cloth-makers produce just as much nov/ as they did with four thousand miles of land and water between them, while they no longer require the services of another hundred thousand persons as boatmen, sailors, shippers, forwarders, &c. to interchange their respective products. These now become producers themselves. By thus diminishing vastly the number of non-producers and adding to that of producers, the aggregate of production is immen-sely increased, increasing in like measure the dividends of Capital and the rewards of Labor.

This is the process by which Protection increases the prosperity of a country, quite apart from its effect in discouraging ruinous fluctuations and competition, whereby thousands of producers are frequently thrown out of employment and thence out of bread. It is this multiplying and diversifying of the departments of Home Industry, bringing the farmer, the artisan, the manufacturer into immediate contact with ■each other, and enabling them to interchange their products without the intervention of several non-producers, which Mr. Atkinson expresses by ^ the term Proportion, and which he justly regards as the great end of an enlightened and paternal policy. To guard against the changes, fluctuations, depressions, which an unbounded competition and rivalry are sure to induce, is also well worthy of «ffort; but the primary aim of Protection is to secure a real cheapness of production and supply, instead of the nominal, indefinite, <leceptive cheapness which Free Trade obtains by looking to the money price only of the staples purchased. The train of reasoning by wliieh he <levelopcs and elucidates the true and permanent first principle of Political Economy, though very different in manner from the homely and desultory remarks by which we have endeavored to with the foregoing, and to result in thesame general conclusions.

— But why, it is asked, have we need of any legislation on the subject, if the Home Trade and Home Production be so much more beneficial than Foreign ? The answer to this question is made obvious by the foregoing illustrations. The individual farmer, lawyer, teacher, of Illinois might v«th Free Trade obtain the Foreign fabrics cheaper than the Domestic, escaping, or seeming to escape, the consequent reduction in the price of Domestic staples which we have seen to be the result ef a resort to distant countries for the great bulk of desirable fabrics ; but the community could net escape it. On the other hand, the individual might perceive clearly the true policy to be pursued by all ; but how could he effect its adoption except through the action of the Government ? The Farmer, producing a thousand bushels of Grain, might see clearly that the general encouragement of Home Manufactures would build up a Home Market for Grain at a more adequate price ; but his bu3nng Domestic fabrics instead of Foreign, while importation remained unrestricted, and the majority purchased abroad, would answer no pm'pose whatever. It would only condemn him to sell his products for a still smaller return than the meagre one which Free Trade vouchsafed him.

On this point it seems obvious that the inculcations of our leading Political Economists must be revised — the solecisms which they embody have grown too glaring and vital to be longer endured. The distinction between real and merely nominal or money cheapness in marts of supply must be acknowledged and respected, or the fliagrant contrarieties of Fact and Theory will impel the practical world to distrust and ultimately to discard the theory and its authors.

But not less mistaken and' sliort-sighted than the First Commandment of tlie Free Trade Decalogue — ' Buy where you can cheapest ' — is the kindred precept, ' Laissez /aire ' — ' Let us alone.' That those who are profiting, amassing wealth and rolling in luxurj', from the proceeds of some craft or vocation gainful to them but perilous and fraught with evil to tho common weal, should strive to lift this maxim from the mire of selfishness and heartless indifference to others' woes tothe dignity of Statesmanship, is not remarkable; but that any one seriously claiming to think and labor for National or Social well-being should propound and defend it, this is as amazing as jamentabie. Regarded in the light of Morality, it cannot stand a moment : it is identical in spirit illustrate it, will be found to agree essentially with the sullen insolence of Cain — ' Am I my