Principles Of Political Economy

§ 1. The doctrine of Protection to Native Industry.

We proceed to the functions of government which belong to what I have termed, for want of a better designation, the optional class; those which are sometimes assumed by governments and sometimes not, and which it is not unanimously admitted that they ought to exercise. We will begin by passing in review false theories which have from time to time formed the ground of acts of government more or less economically injurious.

Of these false theories, the most notable is the doctrine of Protection to Native Industry—a phrase meaning the prohibition, or the discouragement by heavy duties, of such foreign commodities as are capable of being produced at home. If the theory involved in this system had been correct, the practical conclusions grounded on it would not have been unreasonable. The theory was that, to buy things produced at home was a national benefit, and the introduction of foreign commodities generally a national loss. It being at the same time evident that the interest of the consumer is to buy foreign commodities in preference to domestic whenever they are either cheaper or better, the interest of the consumer appeared in this respect to be contrary to the public interest; he was certain, if left to his own inclinations, to do what according to the theory was injurious to the public.

It was shown, however, in our analysis of the effects of international trade, as it had been often shown by former writers, that the importation of foreign commodities, in the common course of traffic, never takes place except when it is, economically speaking, a national good, by causing the same amount of commodities to be obtained at a smaller cost of labor and capital to the country. To prohibit, therefore, this importation, or impose duties which prevent it, is to render the labor and capital of the country less efficient in production than they would otherwise be, and compel a waste of the difference between the labor and capital necessary for the home production of the commodity and that which is required for producing the things with which it can be purchased from abroad. The amount of national loss thus occasioned is measured by the excess of the price at which the commodity is produced over that at which it could be imported. In the case of manufactured goods the whole difference between the two prices is absorbed in indemnifying the producers for waste of labor, or of the capital which supports that labor. Those who are supposed to be benefited, namely, the makers of the protected articles (unless they form an exclusive company, and have a monopoly against their own countrymen as well as against foreigners), do not obtain higher profits than other people. All is sheer loss to the country as well as to the consumer.

Of the industries in a country some are said to “need protection” and others not—that is, those industries which are carried on at a relative disadvantage are the only ones which need protection in order that they may continue in operation. By relative disadvantage is meant a greater relative cost, or sacrifice, to the same amount of labor and capital. Those industries which can not yield so great a value for the labor and capital engaged in them as other more profitable industries are those which are said to “need protection.” Wherever protective duties exist it is implied by those who lay them on that there production is carried on under more onerous conditions than in other competing places or occupations. After duties are thus supposed to have protected the less advantageously situated occupations, it may be said that all industries will then have an equal chance. “No doubt,” as Mr. Cairnes says, “they would be equalized just as by compelling every one to move about with a weight attached to his leg. The weight would, indeed, be an impediment to locomotion, but, provided it were in each case exactly proportioned to the strength of the limb which drew it, no one ... would have any reason to complain. No one would walk as fast as if his limbs were free, but then his neighbor would be equally fettered, and, if it took him twice as long to reach his destination as before, he would at least have company on his journey.”[357]