dustrious and inventive, this nation would not, though unaided by any protection, arrive in time at the front of all competition and outstrip all foreign nations. Without protection the result might be delayed, but there would have been more markets for our goods, commodities would have been cheaper, and the vast army of laborers would have been able to get relatively more for their wages.

3. The balance of trade" argument is futile, because exports and imports tend to equal each other. When exports exceed imports in a country, money flows into the country. Prices will rise. The country will become a poor market for foreigners to buy in, and exports will decrease. The exports will not long remain in excess of imports, and the supply of money will not be permanently increased.

4. The "taxation " argument is false, if not wholly, at least in great measure, because foreigners pay but a small share of the tariff rates. Ultimately, the burden falls on the home conAnd even if the argument be admitted, other nations, by their protective duties, will impose on us the burden of paying their taxes.

sumer.

Furthermore, if the price of the foreign article is not raised, and if the foreigner really pays the tariff rate, protection has missed its aim. The object of the protective duty was to exclude the foreign article by forcing a rise in its price. If, then, the price is not raised, because the foreign producer bears the burden, foreign competition is not prevented and protection is ineffective.

5. To the argument of the protectionists, that under protection producers are enabled to sell their products in neighboring markets and thus save the great expense of transportation, it is asserted that, owing to the increased facilities of our railroad systems and the low freightage by rail and steamship due to increased competition, the cost of transportation is comparatively small. Moreover, the burden of paying the transportation charges is borne in greatest part by the foreign consumer. Otherwise, it would not be profitable to export.

POL. ECON. - - 18

6. Protection raises the prices of all commodities at home. The price of the foreign article is increased by the tariff duty. The home producers fix their price slightly below the price of the foreign article. Thus, all prices are artificially raised, and the burden falls on the consumer.

Even when increased efficiency has made it possible for home producers to reduce the cost of production, and thus reduce the price of the product, they seldom do so; instead, it is possible for combinations to be made to keep the price at the former level, in order to secure wholly unreasonable profits. Free traders assert that this is done, and in proof they point to the fact that many of our home products are sold abroad at lower prices than at home.

7. Protection increases the cost of living and prevents a decrease in that cost. Living is cheaper in England and in Belgium, free trade countries, than in France or the United States. Under protection the price of all commodities is raised. The consumer pays yearly an immense sum to the producers.

8. Protection is class legislation. The producers are benefited at the expense of the consumers.

9. Protection injures national production by increasing the cost of raw materials, implements, machinery, and the many things which enter into productive enterprises.

10. Protection reduces imports and consequently exports.

II. Protection injures and hinders industrial progress by cutting off foreign competition.

12. International trade is like internal trade. The freedom of our internal trade is the great source of its extraordinary expansion; so, the more free our international trade is, the greater will be the advantages for home and foreign producers. There will be more consumers for goods.

13. Under free trade every one is able to buy in the cheapest market and sell in the dearest, so that the gains of all will be at a maximum.

14. Under free trade, every nation will be able to develop to

the utmost its natural advantages, and the world's wealth will be increased.

15. Protection involves political corruption.

16. Protection brings about national animosities and tariff

wars.

17. Protection does not increase wages. More capital is wasted in materials and less is to be had for wages. Moreover, it raises prices for consumers and thus counteracts any increase of wages.

18. Protection fosters trusts with all their attendant evils.

19. Protection extorts high prices at home, where it has a monopoly, and sells to foreigners at lower prices. Adam Smith declares that this is inevitable under the protective system.

20. Protection makes orderly public finance impossible. There are huge revenues and extravagance.

QUESTIONS

1. Give a brief historical sketch of protection in the United States. How was the policy of protection introduced in the United States?

2. Mention the principal tariffs.

3. What tax was imposed by the Payne tariff law?

4. What are the important provisions of the Underwood bill?

5. Show by example how protection increases the industries of a country. 6. What is the effect of protection on labor and capital? How does it establish less productive industries in place of more productive industries? Give examples.

7. Why should protection be temporary?

8. Show by examples how the burden of raised prices falls on the con

sumer.

9. Why should protection be limited?

10. How does protection reduce foreign trade?

II. How does protection tend to cause international animosities?

12. What is your opinion about the connection between protection and wages? Does protection raise wages in a country?

13. Give the main arguments for protection.

14. Give the main arguments for free trade.

CHAPTER XV

TRANSPORTATION. RAILROADS

Transportation aids Production. - Transportation is an aid to production, and hence it takes its place in this division of Political Economy. It was formerly thought that transportation had no part in production. It was claimed that only those agencies were productive which actually created materials. The mere transporting of materials already existing from one place to another was not considered as in any way entering into the idea of production.

But transportation really has the effect of creating new values in certain objects, of practically creating valuable materials out of materials which otherwise would have had no value and consequently no economic existence. Commodities which are produced in great abundance in one place and which, because of slight demand, would have little or no value there, are transported to other places where the demand is great, and hence acquire value. Change of place gives value.

Transportation, again, produces wealth, because it makes possible countless industries which otherwise could never be undertaken. The facilities of transportation over roads or waterways are among the greatest advantages a country or town can have, and they have caused the wealth and prosperity of many of the great commercial centers. The coast towns of Europe and of the United States owe their commercial progress to their location. The same may be said of the flourishing cities built along the great rivers and lakes of our country. The Erie Canal through New York state has brought wealth to the towns along

its course. It would be difficult to estimate the value, to the cities of the Mediterranean, of the Suez Canal, opening to them, as it does, all the markets of the East. And in our own day, perhaps, we may be able to see the advantages to the midcontinent countries that will be derived from the Panama Canal. The project now earnestly advocated, of opening up the Mississippi so that ocean vessels could reach the ports along that great waterway, would prove of incalculable value to all the middle section of our country.

Kinds of Transportation. There are various means serviceable for transportation - dirt roads, made roads, canals, railroads, with the conveyances which may be respectively used carts, wagons, boats, barges, cars. The method of transportation to be constructed between any two points will depend on the traffic.

It would not be economic to build a concrete or macadamized road where, on account of the small amount of the traffic and the rough nature of the transportable materials, a dirt road would be amply sufficient for the safe transportation of the commodities. Nor will a railroad economically replace a turnpike unless the traffic is large and valuable enough to warrant the expensive outlay and give promise of sufficiently reasonable profits for the investment.

The natural waterways, rivers, lakes, and oceans, are the cheapest means of transportation, and an enormous amount of merchandise is shipped in this way. Transportation by water is used even when it would be possible to use railroads, as along the coast and on rivers. Certain classes of merchandise not perishable and not of immediate need at the points of destination can be sent cheaper by water than by rail.

Canals are cheap, one cent a ton mile being considered a paying rate. They compete with railroads when there is question of heavy, slow-moving freight. In temperate climates, however, they are subject to changes of the seasons, ice in winter and droughts in summer impeding and at times wholly stopping their efficiency.