SECTION VIII.. Industrial-Protective Policy in Particular.

INDUSTRIAL-PROTECTIVE POLICY IN PARTICULAR.

If it be once established generally that an industry is to be artificially promoted, and if there be question only of a choice between the different measures to be adopted to thus promote it, moderate[A3-8-1] import duties are not only the most equable, least subject to abuse, but also attended by the greatest number of secondary advantages. Here the sacrifice is imposed on all the consumers of the "protected" commodity, that is, on the entire people, to the extent that they come in contact with the commodity in question. Export duties on raw materials, on the other hand, compel one single class of the people to make sacrifices in order to advance the favored industry.[A3-8-2] Export premiums for commodities on which labor has been expended are distinguished from import duties as the offensive from the defensive: the former promote the artificial trade, the trade which has gone beyond its natural basis, the latter curtail it.

Premiums, advances without interest, gifts of machinery etc., to persons engaged in industry would operate very usefully under an omniscient government.[A3-8-3] But they generally fall to the lot not of the most skillful manufacturers, but of the most acceptable supplicants, who now are doubly dangerous to the former as competitors.[A3-8-4] The same is true to a still greater extent of monopolies granted to undertakings which it is intended to promote.[A3-8-5] They require, at least, to be vigilantly superintended in case of sale from one person to another; otherwise the individual to whom they were first granted is very apt to withdraw with the capitalized value of the privilege accorded, and his successors, loaded with a heavy debt in the nature of a mortgage, to derive no advantage from it.[A3-8-6]

Further, import duties, besides the fiscal advantage which they afford, have the police advantage that they may, like quarantine provisions, prevent somewhat the inroads of many economic diseases: thus, for instance, gluts of the market, and still more, the severe chronic disease of ruinously low wages.[A3-8-7] But only very moderate hopes from protective duties should be entertained in all such respects as these.[A3-8-8]

Prohibition proper operates, as a rule, very disastrously.[A3-8-9] It spoils those engaged in industry by a feeling of too great security (mortals' chiefest enemy: Shakespeare). It may even lead to complete monopoly, when the industry requires very large means and the country is small. The inducement to smuggling is peculiarly great here. But even duties, so high that they far exceed the insurance premium of smuggling, can be of very little advantage either to industry or to the exchequer. They can only promote the smuggling trade. However, the repeal of an import prohibition or the abolition of a tariff approaching to a prohibition should be announced long enough in advance to enable the capital invested in the protected industry to be withdrawn without too heavy a loss.

They might, by way of exception, become necessary, in case a foreign state should desire to make our protective duties illusory by export premiums. But the exportation of Prussian cotton stuffs, for instance, has increased, with a moderate tariff, much more than the Austrian, with full prohibition. The English silk manufactures were, so long as the prohibition continued, inferior to the French, even in respect to the machinery system. (McCulloch, Statist., I, 681.)]