The Pamphlet Collection of Sir Robert Stout: Volume 12
Protection of Native Industries
Protection of Native Industries.
Aware of the difficulties which have for the last sixty years surrounded the question of Free Trade versus Protection, it is not without considerable diffidence the following considerations in support of the Protective theory are submitted to the League, not as authoritative utterances upon a phase of political economy of such magnitude, but rather as opinions arrived at after careful thought and diligent enquiry. An earnest desire to promote the prosperity of New Zealand has prompted and guided the researches upon which these conclusions have been formed, and if it may be urged that they are somewhat circumscribed, the reply must be, that "from a Colonist's point of view the question has been examined, the battle as to the manner in which it affects older countries being left to be fought by those it more immediately concerns."
That a country so highly favoured as New Zealand, in the possession of numerous sources of mineral wealth and natural products, should continue to depend upon foreign or outside sources to supply the major portion of its wants, indicates the existence of a condition of things antagonistic to its prosperity, and that the development of its producing powers, so necessary to increase its wealth, has been comparatively neglected. Its people see this, but fail to understand the cause, and continue unwittingly, by their adherence to the Free Trade policy, in which they have been educated in older countries, to heap impediments in the way of their own advancement. They fail to sec that the injunction, "Buy in the cheapest market," can be otherwise than beneficially followed. Satisfied with their present capability of doing so they forget that in a question of political economy, as in other matters, there is a side which is unseen in addition to that which is seen, the selfish and immediate interest of the individual in either case determining the position in which he may view it. To buy in the cheapest market, if it be an outside one, may, or may not, be wise. It may be wise to do so if the whole of the people of the colony are profitably employed in producing the means of purchasing, and the balance of exchange is in favour of the buyer; but it may not be wise to do so if the means of purchase are, as in New Zealand, in a great measure derived from the accidental introduction of capital incident to the increase of population by means of immigration and the unhealthy resource of borrowing money to be expended in works which present but a doubtful possibility of becoming reproductive. It need hardly require demonstration that these sources of supply must gradually become diminished, and that page 2 so much of it as may be from time to time sent out of the country is so much wealth to lost it, as had this money been employed in the production of home manufactures it would necessarily have reproduced itself, and assisted to create a field for the absorption and profitable employment of surplus labour. An apparent loss would then result in a real gain, as the additional cost above imported articles would be compensated for by the distribution of two capitals, and thus doubling the net increase of the country while employing the working capacity of its people. The interest of an individual is not always identical with that of the community; his may be served by neglecting the producing powers of the country. To him it may be beneficial to buy in the cheapest market, but it is evident that in order to enable him to do this the whole country must suffer by the violation of a maxim upon the observance of which its natural prosperity depends. Individual interest should be sacrificed to the public good.
No country can ever become wealthy or great which is not possessed of manufacturing industries, or even hope for permanent prosperity. To encourage by all means in our power, even at the expense of self-sacrifice, the production and manufacture of those articles of home consumption which can be grown or made in the colony, is a duty which a regard for the future imperatively imposes upon us To enable this to be done successfully requires that a moderate protective tariff should be enforced, which would not only afford to the manufacturer a guarantee that his capital was safely and profitably invested, but give increased facilities for developing the natural resources of the country and adding to its general wealth, as the more a country produces the richer it becomes, and vice versa. It was not by means of a Free Trade policy that England accumulated its vast riches, and attained its commercial supremacy, but by encouraging, for centuries, the principles of Protection. The colonizing spirit of her people opened up vast markets for her products, and so far was the principle of Protection carried that it was extended even to her colonies, Lord Chatham remarking of them that "they should not make so much as a nail." Had Free Trade existed a hundred years ago, and been continued to the present time, it is morally certain that England, instead of occupying her present magnificent commercial and wealthy position, would, in consequence of unrestricted competition with countries where labour is more abundant and not less skilled, have occupied a much lower place in the scale of wealthy nations. Fortunately her statesmen were too wise to risk sacrificing the substance by grasping at the shadow, or to yield readily to the specious arguments of men like Adam Smith. It has been reserved to a subsequent generation to carry out the principles he taught; it will be left to another to return to those which were abandoned—its note has already been sounded, and ere long the Free Trade bird will have its pinions clipped.
If Free Trade is universally beneficial, how was it that Ireland did not flourish under it? Previous to the Union her manufactures were page 3 protected, and in many districts a contented and thriving population were engaged in working up their native commodities. Thousands of operatives were employed in blanket, carpet, woollen, and other manufactures. By the Act of Union the duties were gradually reduced, as gradually her manufactures decayed, until absolute Free Trade extinguished them, and a few half-starved hand-loom workers are all that remain to indicate that manufactures ever existed. She was prosperous under Protection. She has enjoyed Free Trade with the greatest manufacturing country in the world for over half a century, and it is notorious that she is not now in a very flourishing condition. Her natural resources may again be developed, and although the plants may be nearly withered, the genial waters of Protection will revive them. No stronger instance of the baneful effects of Free Trade can be cited, and the colonists of New Zealand may, with such an example before them, see the necessity of exercising great care before submitting themselves unreservedly to its influence.
Free Trade can scarcely be termed otherwise than an experiment which has been tried and found wanting, and occupies so small a space in the age of the commercial world that we may well ask ourselves whether, in the desire to progress, its followers have not gone beyond the bounds of progression, have turned aside from the direct path to national prosperity, and, enchanted with a delusive mirage, have lost themselves in a maze of uncertainty. Facts are more powerful than theories. It may be argued that, theoretically, Free Trade is the most beneficial policy for a country to pursue. The conclusion may be correctly deduced from the premises; and, if the premises are correct, the conclusion may be true also. The premises to be correct it must be established that nations have reached a high state of prosperity under its fostering influence. But such an assertion would be false, and the conclusion would most assuredly be false also, as not a single instance can be cited in the world's history where any nation or people have prospered through carrying out this line of policy. Nay, the reverse is absolutely the case; nor can we, with the knowledge of this fact before us, ever hope to establish large manufacturing centres of population with this upas-tree flourishing in our midst and blighting all our efforts. If this is the positive result of Free Trade, how can we reconcile the wisdom of its adoption with the admitted truism, "that no country can be wealthy or prosperous without manufactures?" Here we are placed on the horns of a dilemma. The following syllogisms are submitted for the consideration of Free Traders:—
Free Trade prevents the establishment of manufacturing industries in New Zealand.
No country can be prosperous without manufacturing industries.
Therefore Free Trade prevents New Zealand from becoming prosperous.
Manufactures are essential to the prosperity of New Zealand.page 4
Free Trade prevents the establishment of manufactures in New Zealand.
Therefore New Zealand cannot become prosperous.
A short examination of the relative effects of Free Trade and Protection as affecting this colony may not be uninstructive. We will admit, for the sake of argument, that trade shall be perfectly free—in fact, that there shall be no duties imposed which might be construed to be prohibitive. Possessed of immense natural resources, capable not only of supplying the wants of our present population, but of a vastly increased number, we are unable to utilize them in consequence of our inability to contend successfully against the advantages which other countries possess over us in being able and willing, so long as we can find the means to pay, to supply us with manufactured goods cheaper than we can make them. They have secured this power, not because they were originally endowed with greater facilities than ourselves, but because their markets have been closed against the admission of similar manufactures from other countries. Secure, then, against outside competition, the safe investment of their capital enabled them gradually to increase their operations, and by means of production in immense quantities to secure the ability to manufacture at a minimum price, thus rendering successful competition on our part utterly hopeless, even though the natural advantages we possess may be greater than theirs. Under such conditions the attempt to establish manufacturing industries would become fruitless, as neither within or without could a market be found for our commodities except at a positive loss; they would literally be strangled at their birth.
Our natural advantages are really magnificent, yet these would not enable us to contend with Holland in any one branch of manufacture,—a country raised by the skill and industry of her people from what may not inaptly be termed a vast swamp to a leading position among the commercial and manufacturing nations of the old world. They protected themselves. To "scatter plenty o'er a smiling land" is the work Protection has hitherto performed, and will continue to perform, in all countries sheltered under its benign influence. It enables us to concentrate our energies upon the development of our natural productions, to cultivate the land, and to foster and encourage the manufacture of its products, whether they exist in nature's crudest forms or spring from the industry of the people. The agriculturalist and manufacturer would flourish side by side, a mutual dependence existing between them. The former would till the soil without fear of loss, as he would know that he had a market for his produce literally at his door; while the latter would rejoice in the knowledge that customers were in his immediate vicinity ready to bear away the results of his labour or his skill. A mutual exchange thus ensues, and wealth is created at each end of the exchange; each, as he adds to his stock of wealth, extends the sphere of his operations, the labour of the country becomes absorbed in the ever-widening field for industry, page 5 and plenty would surround the homes of all. The sound of the axe would resound through the forest, and its giant denizens fall before the advancing tide of progress. Where all are busy no room would exist in the hive for drones. Under Protection not only would the working classes find abundance of employment, but those whose educations fits them for a less rough sphere of action would find ample scope for the exercise of their genius or their powers. Now they must become "waiters on Providence," a brood of young Micawbers watching for the chance of obtaining an office, however mean, under the Government; their intellects, which might have attained a high degree of excellence, becoming weakened almost to senility for want of legitimate exercise. The learned professions literally swarm with aspirants for honours who live in the vain hope of being able to distinguish themselves, but the fields are too crowded with laborers, and they sink into a state of apathetic indifference, their young hopes blighted, and he who it was fondly hoped would become a shining light among his brethren must become a starveling clerk, a hanger-on upon his relations. Justice to the rising generation demands self-sacrifice on our part if we wish to see a race of men succeed us of whom it may be said—"They are as legislators or private citizens an honor to humanity."
Farming, owing to free imports, is, with few exceptions, rendered utterly unprofitable—the legitimate market of the farmer being closed against him. Wool-growing certainly is a profitable occupation, but presents no field for the labor of additional hands, and is limited to a few. This may be termed an extraordinary Protection whose proportions do not require extension but limitation. Wool-growing involves a sparse and scattered population, a state antagonistic to the well-being, and, if without corresponding manufactures, to the settlement of the country. No sooner is the word "Protection" sounded within the hearing of a Free Trader than he immediately shouts—"We cannot tax the poor man's loaf." He does not, or will not, understand that it is the want of a sufficient Protective duty upon corn and other agricultural products which makes the "poor man" an institution in the country, an institution which comprises within its limits a larger proportion of the food-producing class than any others; nor can we be surprised at this when, in consequence of the non-existence of proper restrictions, they are unable to compete with outside markets. The backbone of a new country is then literally broken. Receiving no support or assistance the agriculturist sinks beneath the burdens unjust and unequal taxation imposes upon him. Protected in the most infinitesimal degree he is compelled to pay heavy duties upon 167 out of 263 articles imported into the country, and which are necessary to his occupation, upon 30 of which duties are levied, ranging from 20 to 400 per cent, upon the imported value. No wonder there are poor men. The wonder is that the country was not one huge nest of paupers. Whether a country has Free Trade or Protection the good of all classes should be equally cared for. If one section fails in its under- page 6 takings through unequal privileges, it must of necessity become a burden, directly or indirectly, upon the remainder. It follows, therefore, that if the food-producing classes do not receive direct protection they should at least, in common fairness, have every facility afforded them of carrying on their work with the prospect of reaping the advantages to which their labour would entitle them, and be allowed to receive all imported articles required by them in prosecuting their work upon the payment of an equally infinitesimal import duty. This would be carrying Free Trade to its legitimate issue. This would interfere with the home manufacture of the articles in question. Just so; let Free Trade be equal, or protect both. Justice would not then be as she is now—outraged.
The introduction of the system of giving bonuses has, to a limited extent, been attended with apparently beneficial results, but is objectionable, as the bonus being paid out of the public funds becomes a tax upon the whole community, each member of which has to contribute to the production of a particular article, whether he may use it or not. The equity of this is questionable, and may be illustrated by the following example:—A bonus is given for the manufacture of tobacco: those who do not use it are thus unfairly compelled to contribute towards the production without receiving any benefit from the outlay. Protection, on the other hand, showers its benefits upon consumer and manufacturer alike, without injury to the non-consumer. Under the bonus system the manufacturer must enter into competition with the importer, and to succeed in his undertaking must be able to give to the consumer corresponding value for his money. If he is successful a monoply is indirectly established, as the bonus, if a large one, enables him to out-distance the unsuccessful competitors. He has received what is equivalent to Protection. They, not being equally fortunate, could not enter into competition with him, as he, without the sacrifice of his original capital, could afford to sell profitably at a price which would involve loss to them. The public would consequently suffer by the transaction, as not only would the bonus under the circumstances be a direct loss, but that healthy competition so necessary to secure the great desideratum—cheapness, the certain result of Protection, would be prevented.
The condition of affairs in New Zealand at the present moment presents to the mind of a stranger the appearance of health and vigour. He sees or knows nothing of the canker that is gnawing at its vitals, and passes on impressed with the idea that it is a perfect Eden of prosperity. He sees a maiden to all appearance as beautiful as a houri; the rose tint of health appears to have found a dwelling in her face. Alas! it is the hectic flush of consumption, the forerunner of an early death, and unless measures are taken to arrest the progress of a disease which in its present stage is not altogether beyond the reach of a cure, speedy dissolution is inevitable. That maiden is New Zealand. A poison has been introduced into her system by the "Great Scheme" of 1870, which is rapidly sapping the foundation of her robust youth. Its only antidote is Protection.page 7
The Public Works scheme carried out by means of borrowed money will in the end prove a curse to the country unless means are taken to provide for the future employment of the people. Its labour is being drawn from the ordinary channels. No care is being taken to ensure its retention when the works cease and the loans become exhausted. Unless this is done the neighbouring Colonies of Australia, and perhaps America, will reap the benefit of the tremendous outlay incident to the introduction of population into the country under the Immigration and Public Works Act. How can we expect to retain them? How anticipate that they will recoup the cost of bringing them here unless by the gradual introduction of manufacturing industries in our midst we prepare a profitable field for their labour and that of their children? If we ask for what purpose these Public Works and Railways are being constructed, we are told—"That it is for the purpose of opening up the country." If this be so we may repeat our question, and ask further for what purpose? Is it to settle an agricultural population upon the land who could not pursue their calling without loss; and if not an agricultural population it cannot be for the purpose of introducing manufacturers, as they could not enter into competition with outside sources of supply. Then if neither of these can in consequence of Free Trade develop the resources of the country, what in Heaven's name is the proposed end of this extravagant expenditure? It may be urged that America opened up her inland territory by means of Railways, and has prospered in consequence; but is there no difference between New Zealand and America. The latter abounds in natural grasses, upon which cattle luxuriate and fatten; while the former has only a very partial and limited supply of very inferior natural grasses. The forests of America are easily cleared, while that of New Zealand is one of the most stubborn and tangled in the world. America offers her land in many instances free of cost. New Zealand does nothing of the sort. American railways are almost entirely constructed with home-manufactured materials, while we get the most expensive portions of ours from foreign sources; nay, so prodigal are we of our borrowed money, that not content with buying those materials we do not at present produce, we actually send to other countries for railway sleepers, although we have an overabundance of wood better suited for the purpose. America protects all her industries; we protect next to none. There is a slight difference between America and ourselves. She must prosper; we cannot while the existing policy of Free Trade is being pursued.
Our proper course is clear. Let us do as America has done—protect our agriculturalists and manufacturers from outside rivals, and immediately, as there, new and profitable industries would spring up in every part of the land, absorbing the skilled and unskilled labour of the country. Our vast mineral treasures would be uncovered, and our indigenous products would be worked up, and capital and labour united add to the common stock of wealth. Without adopting this course is it possible to imagine that the page 8 yearly increasing expenditure in governing the country, and the interest payable upon loans, can be met? No other is open to us unless we intend to fold our hands, and while patiently gazing upon the monuments of our own folly await with passive indifference the coming of inevitable bankruptcy. It is with nations as with individuals, reckless, unchecked, and useless expenditure is certain sooner or later to result in ruin. Let us take warning in time and calmly consider our position. Notwithstanding the decrease in the quantity of imports which would ensue in the initiation and continuation of a gradual Protective policy, a sensible diminution in the revenue would not be a consequential sequence, as a multitude of articles which could not be manufactured in the Colony, many of them coming under the head of luxuries, could be made to bear increased burdens, and thus supply a temporary deficiency. No objection could be reasonably urged to this; all classes of the community being fully and profitably employed no inconvenience would be felt. Now is the opportunity to retrieve past errors and prepare for the time when, as before indicated, a deal of surplus labor will be thrown on our hands. It would be positively criminal to wait until the loans are spent before taking a rightful course, as the people then, being without employment, and unable to obtain means to supply their daily wants, would be compelled to fly to the Government to relieve them in their adversity. But what could the Government do with a beggered exchequer? It might attempt to stave off the evil day by raising another loan at ruinous rates to assist the applicants to another and more favoured land, or by increased taxation levied upon the remaining portion of the population initiate a smaller scheme of Public Works to stop the clamour its folly had raised. Upon whom would this increased taxation fall? The capitalists, the rightful employers of labor, who gradually becoming crippled in their resources, would be compelled to abandon the country. In addition to increased taxation upon luxuries and the superfluities of life yet another means of supplementing the ordinary revenue, if rendered temporarily necessary, would be the imposition of an Income and Property Tax, to which little objection would be raised, as in proportion to the increase of the sum of national wealth by means of manufactures, so would property rise in value, and side by side with increase in value would arise increased ability to pay.
The introduction of labor by means of taxes levied upon the whole community is unjust in principle, and is especially disadvantageous to the working classes already in the country—a reduction in the rate of their wages being the necessary consequence. A low rate of wages it is replied is beneficial, as it enables the capitalists to enter into various manufacturing industries which could not be successfully carried out without its aid or that of protection. The importation of labour at the public cost is in a sense a partial development of Free Trade principles, and is a most forcible example of unequal taxation, labour being taxed to bring further labour into page 9 competition with it. It is a palpable injustice to the working classes who formed the bulk of the taxpayers, and are compelled to assist in lowering the rate of wages. It is Free Trade as affecting their interests, but Protection as applied to those of the employers. Such being the case assisted immigration becomes a grievous burden to the bulk of the people, and should be discontinued. The true prosperity of the country would be advanced, not by introducing ordinary labour, of which there is sufficient for present demands, but by offering inducements to men of capital to settle in the country. Not merely moneyed men, but those who in addition to capital possess a skilful acquaintance with various arts and manufactures. Let them clearly understand that they would reap benefits commensurate with their means of working up the products of the country, and an abundance of skilled labour would be attracted to the sphere of their operations. The working classes are not fairly treated in the Colony. They are not only taxed to reduce the rate of wages, but are compelled to enter into unequal competition with importers, who by means of deferred, and in some cases no-payments, exert a despotic influence to crush them in their struggle for existence. They must work or starve, but they cannot resist successfully the destructive effect of imported goods produced by means of unlimited capital and the most perfect machinery in the world. Their profits are reduced to a minimum rate, and were it not that an instinctive desire exists in the minds of a few right thinking people to promote local industries their work, small as it is, would soon leave not a trace to show that it had ever existed. It is our duty to cherish every local industry, be it apparently ever so insignificant. From small beginnings have sprung the proudest monuments of the manufacturing class, and to such may be traced the most splendid illustrations of the constructive genius of modern times. In a prosperous country the wages of the working classes are high, and when wages are high a sign is given that the workers are protected.
The objections urged by importers that increase of duties in any direction simply means adding to the spending capacity of the Government has unfortunately weight with the thoughtless; and the true intention being misunderstood through misrepresentation, it not unfrequently happens that projects, having for their aim the well-being of the community at large, are rendered abortive through the selfishness of a limited number of individuals.
A Government exists for other purposes than merely levying taxes and disposing of the revenue of the country. It is presumed to conserve and administer the estate of the people with a due regard to its permanent good. As a human institution it may not be perfect; nevertheless, while it possesses the confidence of the majority it must always be presumed that it acts for the public weal. Should it, therefore, deem it desirable to impose duties of a restrictive character such a procedure must be interpreted as having been prompted by prudent considerations. In the event of this course being pursued the prospective advantages of importers becomes page 10 necessarily contracted. Free Trade is the palladium of their fortunes, and they may reasonably be expected to desire its continuance in the country whose future concerns them but little. Their opinions then upon the question at issue are consequently susceptible to grave suspicion. They are, however, listented to. Shoddy and sham usurp the place of the substantial and useful which characterise home-made fabrics. Apparent cheapness results in positive dearness, and the substance of the people is frittered away. We cannot succeed without manufactures. The hostility of importers must be met with a determined front by those who desire to see them established. The Government should be asked to appoint a Commission to inquire into and take evidence upon the best means of advancing them, and, while guarding against the creation of monopolies, secure to the country the benefits which a generous rivalry would confer upon it. Let us then endeavour to secure for the colony a measure of those blessings which the history of all wealthy nations has demonstrated to flow from Protection, and keeping constantly in view the maxim, "A nation that manufactures for itself is sure to prosper," create in our midst those industries our position and requirements demand. We then should be independent of the uncertain supplies of foreign markets; capital and labour would assist and be mutually dependent upon each other; activity would prevail in every branch of industry, and the colonists, becoming increasingly removed from the fear of want, and rich in the possession of a magnificent climate, would esteem themselves happy in having made their home in New Zealand.