Thursday, March 2, 2017

Prattville Dragoons Commander's Column for March 2017 - Lincoln's Protectionist Tariff Philosophy

While listening to President Trump’s address to the joint session of Congress I noted his reference to Lincoln, “The first Republican President, Abraham Lincoln, warned that the “abandonment of the protective policy by the American Government (will) produce want and ruin among our people.””  As Lincoln’s collection of tariff revenue was foremost in his prosecution of the War Between the States, it should be noted that he wrote his thoughts here quoted by Trump in 1846-1847.   Lincoln stated in his lay study ((;view=fulltext  Collected Works of Lincoln Volume 1, Fragments of a Tariff Discussion), “If a certain duty be levied upon an article which cannot be produced in this country, as three cents a pound upon coffee, the effect will be, that the consumer will pay one cent more per pound than before, the producer will take one cent less, and the merchant one cent less in profits---in other words, the burthen of the duty will be distributed over consumption, production, and commerce, and not confined to either. But if a duty amounting to full protection be levied upon an article which can be produced here with as little labour, as elsewhere, as iron, that article will ultimately in consequence of such duty, be sold to our people cheaper, at least by the amount of the cost of carrying it from abroad.”  He maintained this belief in the benefits of a protectionist tariff assuming that goods produced elsewhere and shipped/imported here must necessarily be more expensive due to the additive costs of everyone who touched the goods either as transporter or intermediate/distributing merchant.  Surely Lincoln is not the economist of Thomas Sewell’s ilk as one must seriously wonder upon what grounds he believes a producer would absorb a duty/tariff without passing that cost along to the consumer and the merchant would just take less also to allow the end consumer to not be burdened with these costs??  What business model is that? Lincoln certainly didn’t envision massive container ships and sweat shops abroad either.   

Lincoln continued, “It seems to be an opinion that the condition of a nation, is best, whenever it can buy cheapest (think NAFTA and “Made in China”); but this is not necessarily true, because if, at the same time, and by the same cause, it is compelled to sell correspondingly cheap, nothing is gained. Then, it is said, the best condition is, when we can buy cheapest, and sell dearest; but this again, is not necessarily true; because, with both these, we might have scarcely any thing to sell (abroad). These reflections show, we must look not merely to buying cheap, nor yet to buying cheap and selling dear; but also to having constant employment, so that we may have the largest possible amount of something to sell. This matter of employment can only be secured by an ample, steady, and certain market, to sell the products of labour in.”  Constant employment or a generous welfare state??
He goes on to provide an example of a small economic system with a manufacturer with employees and a farmer with employees who enjoy commerce exclusively together in a closed/protected system benefitting each in some happily matched orchestrated nirvana.  But he warns, “After awhile the farmer discovers that, were it not for the protective policy, he could buy all these supplies cheaper from a European manufacturer, owing to the fact that the price of labour is only one quarter as high there as here. He and his hands are a majority of the whole; and therefore have the legal and moral right. They throw off the protective policy, and farmer ceases buying of home manufacturer. Very soon, however, he discovers, that to buy, even at the cheaper rate, requires something to buy with (and he has no money as Lincoln believes these foreign cheap labor markets would be too destitute to purchase the farmer’s goods).”  Macro-economist Lincoln or country lawyer or abolitionist hero or Renaissance man?

“But it has so happened in all ages of the world that some have laboured, and others have, without labour, enjoyed a large proportion of the fruits. This is wrong. To secure to each labourer the whole product of his labour is a most worthy object of any good government. (Wouldn’t that be swell, no income tax?) Will the protective (tariff) principle advance or retard this object?  The habits of our whole species fall into three great classes---useful labour, useless labour and idleness. Of these the first only is meritorious. The only remedy for this is to drive useless labour and idleness out of existence. Before making war upon (useless labour), we must learn to distinguish it from the useful.  All labour done in carrying articles to their place of consumption, which could have been produced at the place of consumption, as at the place they were carried from, is useless labour.  Iron and everything made of iron, can be produced, in sufficient abundance and with as little labour, in the United States, as anywhere else in the world; therefore, all labour done in bringing iron and it's fabrics from a foreign country to the United States, is useless labour. The same precisely may be said of cotten, wool, and of their fabrics respectively. While the uselessness of the carrying labour is equally true of all the articles mentioned, it is, perhaps, more glaringly obvious in relation to the cotten goods we purchase from abroad. The raw cotten, from which they are made, itself grows in our own country; is carried by land and by water to England, is there spun, wove, dyed, stamped and then carried back and worn in the very country where it grew.  Why should it not be spun, wove in the very neighbourhood where it both grows and is consumed, and the carrying about thereby dispensed with?”  Drive from existence?  War?  Useless labor?  Perhaps Lincoln needed to read the Department of Transportation’s, Bureau of Transportation Statistics (yes there is such a thing) analysis, “Freight is an important part of the transportation sector, and the transportation sector is in itself a major component of our economy. The transportation sector moves goods and people, employs millions of workers, generates revenue, and consumes materials and services produced by other sectors of the economy. The wide range of transportation services used in the economy includes for-hire freight carriers, private transportation providers, freight forwarders, logistics providers, and firms that service and maintain vehicles.  In 2002, transportation-related goods and services accounted for more than 10 percent—over $1 trillion—of U.S. Gross Domestic Product.  Only three sectors—housing, health care, and food—contributed a larger share of GDP than transportation.”  (  Useless?

“This useless labour I would have discontinued, and those engaged in it, added to the class of useful labourers.  If I be asked whether I would destroy all commerce, certainly not - I would continue it where it is necessary, and discontinue it, where it is not. An instance: I would continue commerce so far as it is employed in bringing us coffee, and I would discontinue it so far as it is employed in bringing us cotten goods.”   Has the ring of a socialist utopia doesn’t it with the omnipotent government determining what is good commerce and worthwhile labor for each comrade citizen.   Lincoln goes on to expound on his theories with another lengthy example of the farmer who could buy his iron farm implements and finished fabrics more cheaply from Europe than from his neighbors.  The farmer throws off the protective tariffs to purchase cheaper imports but finds he has no domestic market for his agricultural goods as he has caused the home manufacturing sector to suffer and fall to ruin. 

He concludes, “Universal idleness would speedily result in universal ruin and useless labour is, in this respect, the same as idleness.  I submit, then, that partial idleness, and partial useless labour, would in like manner result, in partial ruin.  The abandonment of the protective policy by the American Government, must result in the increase of both useless labour, and idleness; and so must produce want and ruin among our people.”  These thoughts and hypotheses of Lincoln’s show that at an early age and at the very beginning of his political career he espoused strong protectionist tariffs and believed that abandoning these would lead to economic ruin for the country.  Where many have correctly surmised that Lincoln prosecuted his War to preserve the tariff income from the Southern ports, his notes here demonstrate he seriously believed the South was effectively instigating or provoking economic warfare on the North and its manufacturing industry in abandoning the closed protective economic system shaped by his federal government.  Certainly an argument can be posited as to the benefits of Trump’s current plans to implement a border adjustment which could lower corporate tax rates and result in companies reinvesting in American manufacturing and facilities and workers, providing jobs and increased wages. One can also suppose this economic philosophy may lead to inflation.  But this again highlights the disparity in the contributions made by the Southern states to the antebellum economy and the federal coffers and the inequitable federal disbursement to and investment in Northern infrastructure.  You need only follow the money to discern the true cause for the War for Southern Independence.  

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