prosperity. Just so far as Free-Trade contributes to the supremacy of British manufactures, it is a means towards the maintenance of national wealth and power. If it shall ever cease to do this, it will be abandoned.

2. If, during the past fifty years, America had permitted a system of unrestricted trade with all the world, she could never have reached the development of her manufactures which has rendered her independent; but would, today, be little more than a huge agricultural colony, exchanging the produce of her fields for the manufactures and fabrics of Europe. To be a nation of farmers, to excell in sheep-raising and in agriculture-this is the English ideal of what America ought to content herself with being. If there existed between the United States and England a perfectly free and open trade, a distribution of industry unfettered by tariffs, England would be the manufacturing member, and the United States the agricultural member of the partnership.

3. Under the system of protection America has been able to develop her boundless mineral resources, to encourage the growth of her manufacturing industries, until, today, she is not merely independent and able to supply her own wants, but she exports to foreign nations, and has begun to compete with England for the markets of the world. Conclusive evidence of this exists on all sides. The careful observer can not escape it.

4. A protective tariff has been the most important, and, indeed, the essential agent, in the development of the manufacturing industries of the United States. This proposition can hardly be seriously denied at the present time. Through the enhanced prices paid at first by consumers, manufactures have been created and fostered. Perhaps for a while they have been very costly to the nation. But of the result the country can well be proud. It has made them independent of other nations for their supplies. And, in the end, with growth and improvements, goods have fallen in price, greatly to the benefit of the American consumer.

5. The working class in the United States, under a system of protection, enjoy a greater degree of prosperity than the working classes of England under a system of Free-Trade. No test can be more satisfactory and practical than to compare the position of the laborer in one country with his position in another; and, however difficult it may seem at first thought to weigh in the balances privilege, opportunity, comfort, and general prosperity, certain financial facts and statistics afford us a tolerably safe method for arriving at sound conclusions. That the working man here, if thrifty, has a

far better chance for improving his condition, for educating his family, for acquiring landed property than is the case with his brother in Europe is generally admitted. It could not well be otherwise. where one may so easily exchange the forge or loom for the settler's cabin and the plow. The great mass of the American working people are better housed, better fed, better clothed, and in all respects better situated than the working millions of the nations whose ports are open to the world.

These are some of the reasons which appear to me to largely determine the persistent allegiance to the doctrine of Protection by the people of the United States. Of the ultimate adoption by nations of the principles of absolute Free-Trade I have as little doubt as the most sanguine disciple of Adam Smith. But it is a dream of the fardistant future. It assuredly cannot be realized while the tramp of armies is louder than the din of the work-shop. By America, however, the day of its adoption may be much nearer our own time. History often repeats itself. Like England, by thorough protection of our growing industries, we have laid the foundations of success in every branch of manufacture. So soon as our preeminence is absolutely assured, there will exist no longer the necessity to protect. Of that future we have apparently every reason to hope. When the production of American skill and industry is found in shops in Europe cheaper than their home-made wares, it is probable that we shall then take our turn in eulogizing Free-Trade, in opening our ports to all nations, and in preaching the blessings of unrestricted trade to a reluctant and still doubting world.

151. Present Validity of the Young-Industry Argument18

BY FRANK WILLIAM TAUSSIG

The possibility of good results from protective duties in young countries is now denied by few. A different question, and one not so simple, is whether there is any prospect of gain from protecting young industries in a country as fully developed as the United States has been since 1860; whether, for so robust and full-grown a social body as this has become, ridicule is not a sufficient answer, whatever the terms in which the argument is stated. In that early formulation of the argument which won a respectful hearing from the fairminded, stress was laid on the general conditions of the country im

18 Adapted from Some Aspects of the Tariff Question, 20-23. Copyright by Harvard University Press (1915). The practical validity of the argument, with reference to particular commodities, is discussed in succeeding chapters of the book.

posing protective duties. It was a young country that was spoken of by Mill, rather than one having young industries. List's well-known plea rested on the doctrine of stages in economic evolution-on the inevitableness of the transition from the agricultural and extractive stage to the manufacturing stage, and on the advantages of protective duties for furthering and easing the transition. He found the United States in this stage of development when he was sojourning here during the period of our early protective movement. On his return to Germany he found his own country in a similar stage, and agitated for nurturing protection there also. But does the same possibility exist when this period of transition is past, when the manufacturing stage has been fairly entered, when the question no longer is whether manufacturing industries shall be established at all, but whether some particular kinds of manufactures shall be added to others already flourishing?

I am disposed to admit that there is scope for protection to young industries even in such a later stage of development. Any period of transition and of great industrial change may present the opportunity. No doubt the obstacles to new ventures were greater during the first half of the nineteenth century than they have come to be in the modern period. The general diffusion of technical knowledge and technical training, the lessening of secrecy in trade processes which is the inevitable result of large-scale operations, the greater plenty of expert mechanics and machinists-all these factors tend to facilitate the establishment of industries whose difficulties are no more than temporary and transitional.

None the less the early stage of any new industry remains difficult. In every direction economists have come to recognize the immense force of custom and routine, even in countries where mobility and enterprise are at the highest. Departure from the habitual paths of industry brings unexpected problems and difficulties, false starts and initial losses, often a fruitless imitation of familiar processes before new and better ones are devised. All this is made more trying when a young competitor is trying to enter the market against a producer who is established and well equipped. The obstacles in the way of promising industries, though doubtless not so great as they were a century ago, remain great. The experiences of the United States during the last fifty years indicate that there remains in modern times at least the possibility of acquiring a self-sustaining industry by aid during the early stages.

The most striking cases in which success of this sort may be fairly alleged to have been secured are those of industries quite new -not existing at all at the time when the protective duty was

imposed. Where an industry is already started, or where there exist others closely related, further extension may be expected to take place, if the conditions are really favorable, without any legislative stimulus. If a silk manufacture already is established, the development of new branches of silk-making is not likely to meet with the special obstacles to young industries. And if, none the less, protection has been applied, and if thereafter a self-sustaining additional branch of the manufacture has grown up, the question at once presents itself, Would not the same growth have ensued in any case, and was the protection needed? Such skepticism, however, would hardly be justified if there had been no silk manufacture of any sort before the protection was applied. Precisely this outcome--the establishment of an industry entirely new-has appeared under our duties on silks during the last half-century. Without these duties it is doubtful whether there would have been any silk manufacture at all. And if in course of time that manufacture proved capable of supplying its products more cheaply than those imported, or at least as cheaply, the presumption would be strong that a new industry had been successfully nurtured. In the case of worsteds, also, there was virtually no industry at all before the Civil War; it has grown up under the barrier of protection. The same thing has happened with plate glass, and with many another commodity. In such cases, if eventual independence has been achieved, it may be fairly said that protection was applied to an industry really young.

Further the length of time to be allowed for the experiment should not be too brief. Ten years are not enough; twenty years may be reasonably extended; thirty years are not necessarily unreasonable. What has already been said of the tenacity of old habits and the difficulties of new enterprises justifies the contention that a generation, more or less, may elapse before it is clear whether success has been really attained.

Nevertheless, in the end the final test must be applied-can the industry, after a period not unreasonably long, maintain itself unaided? The gist of the young-industry argument is that the community bears an initial charge for the sake of an eventual gain. That gain is secured only if the community is finally supplied with its goods as cheaply as the displaced foreigner could supply it. The young industry must mature so fully as to sustain itself. The final test would seem to be indifference to the continuance of the duty and willingness to meet foreign competition on even terms. If the industry continues to need protection indefinitely, and never succeeds in offering its products as cheaply as they could be got by importation, then its protection cannot be defended on this plea. There

may be good pleas on political or social or military grounds; or the stock arguments about home labor and home markets and the "acquisition" of valuable industries may be repeated; but there can be no pretense that a young industry has been nurtured with success.

152. Protection and the Formation of Capital1o

BY ALVIN S. JOHNSON

The additions to the capital of a nation must come from the annual income. That the income of a nation will, at any given time, attain its maximum under freedom of trade is a proposition that admits of only rare exceptions. Does it not then follow that the capacity of a nation to accumulate capital will be greater under free trade than under protection? If all classes in society saved equal proportions of their incomes, it would follow of necessity that whatever tends to reduce the national income must reduce the annual addition to the fund of capital. But, in fact, the disposition to accumulate capital varies widely in the different classes that compose a nation; and it is the essence of protection to alter the proportions in which the social income is distributed. We cannot, therefore, accept without further examination the view that protection and the consequent reduction of the social income must necessarily retard the accumulation of capital.

Apart from purely individual differences in thrift, the tendency to save is affected by general economic and social conditions that enable us to divide the members of society into more or less distinct thrift classes. A man is not likely to save, if he knows of no investment attractive to him; he is not very likely to save if the road to the esteem of his fellows lies through expenditures for consumption.

The most attractive form of investment is the acquisition of tangible capital goods to be employed under one's own control. Such an investment gives visible evidences of economic efficiency. Accordingly those who are in a position to make such investments have the strongest incentive to save. These persons are entrepreneurs who have not yet fully equipped their businesses with capital. Them we may place in our highest thrift class. We may assign to a lower thrift class those who live upon salaries or returns from professional service. They have no ever-present means of investment; they are under the domination of rigid standards of consumption.

19Adapted from an article in the Political Science Quarterly, XXIII. 221-241. Copyright (1908).