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On True Political Economy
(The Whole-Hog Book)
John Wilson Bengough
1908

Chapters 16 and 17
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CHAPTER XVI: A STRAIGHT LOOK AT THE "SHIELD"

CHAPTER XVII: THE "SHIELD" IS A HARM, NOT A HELP

 
Notes and Links

CHAPTER XVI: A STRAIGHT LOOK AT THE "SHIELD"

 

The first aim of the High Tax plan is to "shield" the home trade; that is to say, it seeks by means of a tax on the goods sent in to raise their price, so that the firms which make the same class of goods at home can raise their price, too, and thus make more than they could if there was no tax.

protectionist, prices, cost of living
Of course, the price thus put on must be paid by those who buy the home goods.  
If the tax fails to raise the price it proves to be no good, for that is what it is for; that is its chief aim.
 
You might think, in view of this fact, that though it might be hard on those who buy, the high tax scheme would be sure to make all the firms it thus "shields" rich. Yet this is by no means the case. It is found, in fact, that the gains are as small in these lines, and the chance of loss as great, as in those that do not have the tax to help them. Nor is it hard to see why this is so.  
The rise in price is all they have to look to for gain. But they do not get all of this. It costs them some part of it to get the tax they want put through the House. They have to "see" the men who have votes and square them, and pay all the costs of the game of pull and haul. All this work comes high, and it must be done not once, but it may be year by year. Then there is the loss that must cling to a trade so weak that it must be kept up by the tax, and could not pay at all on its own base. Such trades as a rule are run with great waste, and are not kept up to date, as they would need to be if they had to "hoe their own row." So that, it is but a small part of what the tax adds to the price of the goods that they get in the end. deadweight loss
As for those who buy the goods, their case is, of course, much worse. They have to pay (1) the price of the goods plus the tax, plus the charge on the tax. (2) The loss that may come through those who dodge the tax, and sneak goods in free. (3) All it costs to catch and try such crooks; (4) the bribes paid to those who are set to guard the port and get the tax. paying twice, corruption
Add it all up and the loss is a vast one. It is safe to say in each case, the loss to all is far worse than the gain to the trade can be. But as the loss, spread far and wide, can not be seen, while the gain to the Mill, or what not, seems so plain, the plan on the whole may look like a good one.  
A plan that will shield all trades by means of a tax has not yet seen the light of day, nor will such a plan be found while the world lasts.  
More, a plan that will shield some trades and not hurt others can not be made. If it helps one (by a rise in the price of its goods) it must hurt all trades which have to make use of such goods. A tax on Steel is a good thing for the Steel Mills, but it harms all forms of work in which steel must be used; a tax on salt hurts those who cure fish or feed stock, and so on. Both ends of a teeter board can not be kept up at the same time.  
A plan to be fair should shield all and hurt none. The High Tax plan as it is is a gain but to the few, and this gain grows less with each new trade that gets into the ring, since for each new line that gets aid, more and more have to bear loss, and this is felt through the whole field of trade. If all trades were dealt with in the same way (as, of course, they should be by rights) then things would be in the same state as though none got aid. The plan would be of no use if it were fair. And in fact the good goes out of it at a point far short of aid to all. Say there are 100 lines of trade, half of which are of a kind which you can aid by means of a tax; and let us say that the part of the tax which they can get, that is, less what it costs them, is one fourth. Now in the first place, half of these trades can get no aid at all, since no goods of the kind they deal in are brought in, but they have to help to pay the tax in aid of the rest in the form of a rise in price. The whole tax is 100, and if but one of the trades gets aid (less what it costs) it will get 25. If two get aid, each will get 12 1/2; if three get aid, each will get 8¼, and so on. When 25 trades come in each will get no aid at all that will be of any use, though in the mean time all the rest will be at a loss. When 26 come in a loss comes in with it, and so on. special interests, barriers to entry,
One can not find out to a jot just how such a tax works out, but there is no doubt there is a point at which such "aid" gets to be of no use; and in the States, they have gone past that point. The high wall there is a dead weight on the whole trade of the land; it is a dead weight on those very trades the law seeks to shield and nurse and feed.
deadweight loss
If the force of a tax on a class of goods is to start up works in that line — and this is what we may count on — in due time rates will be cut down till the "good thing" that was in it is gone; there then is no great gain to be made by any, though the price that has to be paid by those who buy is more than they would have to pay had there been no tax. As soon as a tax is put on and there is a chance of big gains in any line, there is a rush in to that line, and this tends to pull the gains down. But here and there we note there is some force which serves to head off such a rush. This force takes more than one shape.  
As a case in point, take that of the thing we call chrome. There is a tax on chrome in the States, and as luck will have it, one man there owns the only chrome mines that are known. By means of the tax he can, of course, add to the price, and yet there can be no rush in to his line of trade. special interests, natural resources, well-provisioned ship, monopoly, land monopoly, land monopoly capitalism
Then the same thing may be done by what we call patent rights. There is a tax on wood pulp, and the man who owns the sole right to the plan by which paper is made from this sort of stuff has what we may call a cinch; and no fear of a rush. intellectual property, monopoly
Then, once more, the force may take the shape of a trust, or pool or ring, in which a lot of strong firms join hand in hand to crush out those who are in their line, so as to keep up the price.
special interests, monopoly
In each case it is clear that the gains made are not gains from work. If the tax is to be a gain to you (with no fear that it will be cut down) you must own some thing which no one else can get hold of. You then may be said to have your feet on firm rock and can put forth your strength to keep off the crowd that would rush in to share your gain. unearned increment
Now there ought to be clear thought on this point. Much turns on it. Yet strange to say, there are few who seem to see that a line must be drawn to show that gain from work is not the same as gain from a "cinch." A man who owns a toll gate and does not have to keep up the road may make great gains, yet no one would claim that he does any real work for it. If the same man has a shop in which he makes boots and shoes, that, of course, is a fair form of work, and what he makes at it he earns in a true sense. In such a case, what we claim is that it is not fair to take his whole year's gain from both these lines, though they are put in one purse, and call them the fruit of his toil. In so far as he has hides and tools, wax and thread and so on, he is a capitalist; in so far as he works he is a laborer, and the gains he thus makes are interest and wages. But in so far as he owns the tollgate, he is a monopolist and his gain from that source we call Toll or Rent. He is, in fact, two men in one, for his wealth comes to him in two streams 'twixt which we must draw a clear line. Yet there is a great fog these days on this plain point. monopoly, privilege, special interests, unearned increment, theft, privatization, three hats, rent,
We hear shouts of wrath at Capitalists. It would be as good sense to shout at Labor, for they are just two forms of the same thing. Those who raise the shouts thus prove that they have not clear thought, and do not see the line we have drawn 'twixt "work" and "cinch." In so far as men get wealth through their work, no odds how much they get, they do no harm to the rest; but, in so far as they get gain; not through work, but just by means of what they own — the toll they take in some form — they may do harm, for what they thus get some one else who made the wealth must lose. Now, not a few both work and own — as in the case of the tollgate man I have set forth. But we can see that when we call such a man a "law made thief" we do not take note of what he gets by the trade of boots and shoes, but of that part of his gain which comes from the tollgate he owns. theft, he who produces, three hats
It is not hard to see that as the whole race of man must live on the ground — since they can not live in the air nor in the sea — the man who owns land holds the prime key to wealth. For no wealth at all can be got but from the ground and from that but in one way — by toil. This is true, as will at once be seen, of wealth in the form of crops, on a farm. And it is just as true of wealth in the form of sheep, cows, pigs and so forth fed and bred on a farm. This is plain to all. But to some it is not quite so clear that wealth is got out of the ground in the town and city. To be sure, it is not got in just the same way; but it comes in just as real a way out of the ground there. For a town must stand on ground, must it not? Is not the ground in a town worth much more per foot than the land of a farm? And why so? This is why: A man can make more out of land in towns. The wealth to be made in trade is as a rule more than is to be made on farms, and the work is not so hard. The chief worth of farm land is in what it will grow. The chief worth of a town lot is its site; that is, the part of the town in which it lies, with the chance for trade there is in it. As a town grows large the chance grows with it, and the lots go up in price, and in each town they range on a scale from low to high. Lots at the heart of a town are best for trade and so are worth much, from there out to the bounds, less and less. Then, some parts of the town have choice sites for homes, and these are of high worth, while less choice sites are worth less. Of each town we may say — when we note the chance there is for trade, the style of the streets, the cars, the schools, and all things which go to make up a full life — it is worth so and so per year to live there. And we find that this "so and so" is, as it were, writ in the land. That is to say, the land is worth just what it is worth to live in the town. In this sense, all that the town can gain in wealth through trade comes out of the land, for, of course, if the land was not there, there could be no town. Now, is it not plain that if John Smith owns the site of the town he can take, by way of toll or rent from all who live in it all that it is worth to live there? If he owns one lot can he not take in the same way, all that lot is worth as a site for trade? And is not this the same thing as for him to take, as the rent of a farm, (in the form, it may be of a share of the crop) all that the farm is worth? all benefits..., landlord, urban land value relative to rural, the Savannah, rent, unearned increment, absentee ownership, leakage
What we call Rent is in each case the Worth of the Chance, be it farm or town lot, and the rent is there all the while, though John Smith works the chance, or lets some one else work it. In one case he gets the rent as well as the gain he makes by his work; in the other he gets the rent and leaves the gain from work to the man who has the use of the land. urban land value relative to rural,
The great thing to be borne in mind is that each jot of wealth through the whole world, on farm, in mine, or in town, must be got out of the ground by means of work, and in no way else; and that it is such share of this wealth as goes to those who work to make it, and no more than such share, that forms their "pay" and gives them heart of hope to work on — that, in short builds up trade in the world. So it must be just as clear that such share of the wealth as goes to those who do not in any way help to make it must come off the share of those who do, and is a mere toll on their toil. This is the case with the whole share that goes in the form of Rent. The men who "own" rent do no sort of work for it. They get it as a mere toll on toil, and as the price for the use of the ground. They get it just as the man who owns a toll gate on the high road gets it. What does he give the man who comes up in the rig? He takes a toll, but what does he give? Nought but leave to the man to drive on. So the man who owns the ground gives nought but leave that work may be done. rent, ownership, possession, privilege, labor, land, wealth concentration, in one's sleep, all benefits..., absentee ownership, property rights, theft, land as common property, landlord, rack rented
A man who owns ground and gets rent may, of course, work, too, but, if so, what he gets for his work is a wage. The part he gets in the form of Rent is not a wage, for he does no work for this. three hats, small business, landlord
Now, let us see how all this bears on the case of the High Tax plan. Here we find some smart folk in John Bull's land who strive to get rid of what they now have by the name of "Free Trade," and urge that the old plan of a tax on goods be a tax put on grain. This is to "shield" the farms of the old land, and it will do so in so far as it lifts the price of grain. As soon as that is done there will be a rush to the farms, of course, for they will then have a chance to pay. There will be a call for farms. Lands that have of late years been idle will be sought. Then what? Why, of course, the lords of the soil — those who own the land — will raise the rent (as the chances grow bright the rent goes up, you see — that is the rule). John Bull at large will have to pay more for his bread, since the price of grain has had a rise, but the men who work the farms will in a short time be just where they were, since all the fresh gain they make will have to be paid out in fresh rent. The men who will gain by the move in the end are those who toil not nor spin, but who own the land, and sit in their clubs and draw the rent. landlord, all benefits..., absentee ownership, rack rented, wages, rent,
To own the ground is the short cut to get rich, and the High Tax plan ever plays into the hands of those who own the ground. The ground may be in the form of town lots or farms, or it may be what we call wild land, it is all the same. In the States they have a tax on boards. Do you think this helps the men whose trade it is to cut down trees and saw them up in mills? That is what it was meant to do, they said. But some shrewd chaps long since got hold of the land on which the trees grew, and it was, in fact, they who got the tax put on. The tax keeps out logs from o'er the lakes, and so, if the mills are not to close down, logs must be bought from the ring, and the tax adds to their price. This is a straight blow to the men who work at this trade, but it is a "snap" for those who own the wild land. fruits, monopoly, privilege, special interests, theft,
And so it works all through the list.  
Should mills spring up by the score, and call for scores and scores more of men to work in them, so that vast stores of new goods would be brought forth, who in the end would gain by it? So long as mills have to stand on ground, and those who own ground have the right by law to own the rent as well, is there need to ask who would gain? all benefits..., rent as provisioning for all, privatization

CHAPTER XVII: THE "SHIELD" IS A HARM, NOT A HELP
 
If mills and so forth can not be built up in a land which has no tax wall, how comes it that in the States they had firms which made iron and cloth goods and so forth ere the first High Tax Act in 1789?  
If it is true that a "poor" or "new" or "young" land can not hope to grow in the way of mills and works if it has not a wall to bar out the trade of a land that is near by and is full of big mills and the like, with stores of cash, "hands" that have great skill at their work, and cheap help, how comes it that this has not been the case with the West in the U. S., though it has had no wall to shield it from the East? As the tide of life has swept from East to West, these works have sprung up and have gone with it. They have grown up just as there was call for them, with no aid from tax laws.  
In fact, they have grown up in spite of such laws. There is no doubt these laws have hurt the States as a whole. If free trade had gone on from the first the States might rule the marts of the whole world, where now they make but a poor show, and for the most part trade at a loss. When there is tax, tax, tax all round, so that all parts of each piece of goods are made dear, how could such goods hope to meet those made at a much less cost? What is the fact at this time? That most of what the States sends out is raw stuff from the farms, and most of what it brings in goods made in mills and works o'er the sea. There is a trade with Brazil. Goods are brought from there; are goods sent from mills and works in the States to pay for it? No. Wheat and so forth is sent to John Bull, and John squares off the deal with Brazil. He sends goods which Sam buys with his wheat.  
This is the queer way in which the high tax plan has "built up the trade of the States with the world at large." It is well known that the "Yank" is as shrewd a man, with as good brains, as can be found on earth. He ought of right to lead the whole race in trade. Yet it is the fact that he does not; he is down near the tail end of the list. Strange, you say. No, just what one might look for when he loads tax weights on all things. To get the trade of the world the first thing to do is to make things cheap, and here this shrewd chap ties his own hands, or puts a clog on his own leg in the race. We hear much just now of how he "dumps" goods in lands o'er the sea. It is true he does a good deal in this line, but is it trade that is square, and that has real gain in it to him? Not at all. For the most part he sells these "dump" goods at cost, or less than cost, just to get rid of them. How can he do this? you ask. Well, you see, the high wall at home gives him the chance to hold his home trade and force the folks there to pay him twice the price the goods are worth, so that he can keep his mills on the go all the while, and when he finds more stuff on hand than the home man can take he "dumps" it o'er the sea in this way at "any old price." This, of course, is a good thing for those who get the goods; let us hope the dear folk in the States like the plan. It seems to be most kind on their part, does it not? "It is grand — but it is not trade."  
Then, too, the Yank's bright, shrewd brain works all the while on new schemes, and brings forth ideas by which work may be done with less toil and cost. If he could but get and hold the trade of the world in these things when he had thought them out, it would be a fine thing for him. But what takes place? Why the tax strings so tie him up that he cannot do it. John Bull takes up these new ideas, and, as he is not bound up with tax bands, makes the class of goods on the plan thought out by his smart friend, cuts down the price, and takes the trade. Once more we must say this looks kind on Sam's part.  
If you would see one case in which tax clogs have spoilt a great trade for the States, take ships. Where will you find more brains and skill, or more wood, iron, steel and all that goes to build a ship, than in the States? Why, then, are no ships built there to speak of? Think that out. It tells the whole tale. You will find that all the things that go into a ship from keel to truck, from the wire in her stays to the brass in her log, and all that goes to fit and store her, has to bear a tax load. Thus once more has the kind Yank made a free gift to John Bull of the ship yard trade of the world. barriers to entry
And then note the facts as to the coast trade. The law says that no ship but one which flies the stars and stripes shall sail from port to port on the coast of the States. The rates of freight from New York round the Horn to the ports on the west coast are high. There is no doubt they could be made much less, and yet be fair, if all ships were free to go in for the trade, and this would be a gain to those who own the goods. But ships cost so much to build at home that few are built, and that the rates may be kept up, the "pool" which owns the lines of rails from east to west pay the firm which owns the chief line of ships a large sum each month to keep up its rates. Thus, once more, we see how the high tax scheme plays into the hands of those who own land or right of way, or some "cinch" of the kind. special interests, privilege

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