be made most productive. In a new country, where land is cheap and capital small, agriculture is the natural and the most profitable employment. As a country increases in population, and the price of land becomes dear, the grow. ing capital of such country will naturally and gradually be invested in manufactures. And, in due time, the superabundant capital will be extended to foreign commerce. Hence, it is presumed, that all efforts on the part of gov. ernment to increase production, by diverting the capital and industry of a nation from their wonted channel, not only fail of their intended object, but work a direct injury.

CHAPTER IX.

The Encouragement of Domestic Industry by Protective Duties, continued.

§830. THE preceding chapter contains the views of some of the most distinguished writers on political economy, in relation to the effects of the attempts of public authority to increase the prosperity and wealth of a nation, by encouraging domestic industry by protective duties. The theory of these economists has, however, been rejected by a majority of the statesmen of the principal European nations, and of this country; and as this theory has been hitherto contravened by the established policy of the most prosperous commercial nations, it is thought proper to state the arguments and reasons by which this policy is supported; as the question whether the protective system shall be abandoned or perpetuated in this country, must be decided by those who are to be our future legislators.

§ 831. Says Mr. Say, " With respect to the wild or antiquated theories so often produced and reproduced by authors who possess neither sufficiently extensive nor well-digested

§ 830. Does the theory of economists noticed in the preceding chap tor comport with the practice of nations? § 832. What has been the

information to entitle them to form a sound judgment, the most effectual method of refuting them is to display the true doctrines of the science with still greater clearness, and to leave to time the care of disseminating them. We otherwise should be involved in interminable controversies, affording no instruction to the enlightened part of society, and inducing the uninformed to believe, that nothing is susceptible of proof, inasmuch as every thing is made the subject of argument and disputation."

§ 832. The ability of this writer is universally acknowledged; but, although he displays most of the doctrines of political economy with great clearness, the subject under consideration is one on which statesmen of the highest eminence differ from him. The doctrine of protection is doubtless one of the "antiquated theories" alluded to in the above quotation. They are, however, theories which have been carried into practice by nations enjoying the highest degree of prosperity; and as this prosperity is so extensively attributed to the policy of encouraging domestic industry by protective duties, the opinions of these statesmen are deemed worthy of a place in this work.

§ 833. The advocates of protection do not admit that the tax on importations is a loss to the consumer to the amount of the duty paid. They admit that the duty imposed on a foreign product generally causes a rise in the price of such product; but they maintain, that this rise will continue but a short time; and that the advantages which are derived by the community from the encouragement given to industry, overbalance all the inconvenience and loss that may have been occasioned by the imposition of the duty. This is accounted for on natural principles, and proved by facts.

§ 834. First, the conducting of a new business is generally attended with some disadvantage, for the want of the requisite skill and economy: but these are readily acquired by a short experience. Secondly, when any business is effectually protected, it draws into it many adventurers; large

policy of the most prosperous nations? § 833. What effect do the friends of production ascribe to protective duties? § 834. Upon what principles is the reduction of the prices of protected products ac

investments of capital are made in it; the market is speedily filled with its products by the numerous producers; and each, not only desirous, but obliged to sell, will offer his goods at such prices as will ensure their sale. Thus, with the progressive improvements in machinery, and increase of skill in manufacturing, the productiveness of this branch of industry increases, and prices fall.

§ 835. But the friends of the protective system maintain, that the nominal price of a domestic commodity may remain above the price at which the foreign could be purchased were it free of duty, and yet the consumer may find the domestic the cheapest. The cheapness of a commodity depends upon the means and ability of the consumer to pay for it. If the farmer, for instance, cannot sell what he produces, he cannot buy. If foreign nations will not receive our products in exchange for their own, we cannot buy of them at any price. And as that is the cheapest which costs the least amount of labor, a domestic product, at a much higher nominal price, may be cheaper than the foreign. When the demand for a commodity is not equal to the amount produced, the price must fall; and if there be no demand for it, the production must be abandoned altogether.. § 836. By the encouragement of manufactures, a demand for agricultural products is created at home. This home market so raises the price of the produce of the soil, as to enable the farmer to pay a higher price than before. This market is made by drawing off a portion of the capital and labor of the country from agriculture, and investing them in another branch of industry. By this means, the number of producers of agricultural products is comparatively diminished, while the number of consumers of these products is greatly increased: and thus the consumption and production of the country are in a measure equalized.

§ 837. Suppose three fourths of the people of the United States to be engaged in agriculture, and the remaining one

counted for? § 835. Is the cheapness of an article invariably determined by the amount of its nominal price? Why not? 836. What effect has the encouragement of manufactures upon the market for agricultural products? How is this accounted for? § 837. What would be the effect of a superabundance of agricultural products upon

fourth to constitute the professional and mechanical classes; and suppose that one half of the produce of the former is: sufficient to supply the whole population of the country. Now, if there were no foreign demand for the surplus products of agricultural labor, such labor would be poorly paid, and agricultural produce would bear a low price. Suppose, however, that the price of wheat is now one dol. lar a bushel, and foreign broadcloth four dollars a yard, as in the case before supposed. (§ 824.)

§ 838. We will next suppose that the government, in order to encourage domestic manufactures, imposes a duty of fifty per cent. on foreign broadcloth. A part of the capital of the country will now take a new direction. New employment will also be given to a part, (one third let us suppose,) of the three fourths of those who had been engaged in agriculture, who will now find employ in the erection of manufactories, the making of machinery, &c.; and also in the construction of roads and canals; for it is to be presumed, that the increased demand for domestic products of various kinds, which are to be conveyed from one part of the country to the other, will require increased facilities of transportation.

§ 839. One half only of the laboring population will now be employed in agriculture; and the non-producers of agricultural products composing the other half, being twice as numerous as before, it will be reasonable to suppose that the price of wheat will be at least one dollar and fifty cents. If now the price of broadcloth be six dollars a yard, the same quantity of wheat will purchase a yard as when the price of cloth was four dollars. But as the domestic article can be afforded for five dollars a yard, we may presume that the competition among the manufacturers will have reduced the price to five dollars. In this case, a less quantity of wheat will buy a yard of cloth than before. And if, as it is said facts have proved, articles of home manufactures eventually become as cheap as the foreign, the consumer will realize a still greater benefit from the protection.

prices and labor? § 838. What, in this situation of things, would be the consequence of a duty on foreign manufactures? 839. What will be the results of increasing the proportion of manufacturing

§ 840. The result, however, of no measure can be calculated with mathematical accuracy; but it is believed, that, in the case above supposed, the benefits ascribed to protection do not exceed what may be reasonably anticipated; because the impulse given to all branches of industry by the increased demand for labor, will have a tendency to stimulate each laborer to perform a greater amount of labor; and every advance towards perfection in manufactures causes a decline in the price of manufactured products.

§841. Dr. Smith admits that there are "two cases in which it will generally be advantageous to lay some burden upon foreign, for the encouragement of domestic industry." First, to encourage a particular sort of industry necessary for the defence of the country. Thus, the security of a nation is said to depend much upon the number of its sailors, and the extent of its shipping; and to encourage the building of ships, nations have enacted laws granting peculiar privileges to their own navigation. In the navigation act of Great Britain, enacted many years ago, a provision was inserted, requiring that no ships, except those whose owners or masters and three fourths of the mariners were British subjects, should be permitted to trade to British settlements and plantations, or be employed in the coasting trade. The navigation laws of this country also, give a preference to our own shipping, by the imposition of discriminating duties.

§842. For the same object, the security of the nation, a government may, it is said, encourage by duty, the manufacture of gunpowder, and other munitions of war, that in case of an interruption of its trade with other nations in times of war, it may not be dependent on them for the means of defence. But if it be proper for a nation to make itself independent of others for these, why is it not expedient to be independent for food and clothing also? The

labor? 840. How does the demand for labor affect the quantity performed by each laborer? How does improvement in manufactures affect their price? § 841. For what reason does Smith admit the propriety of encouraging domestic navigation, by discriminating duties? 842. What particular articles of manufactures are en