The Panic of 1819 (37 page)

Mr. Baldwin began the debate on the bill in the House, stressing the depression, the decline in property values, and unemployment.
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Debate in the Senate was led by Senator Mahlon Dickerson of New Jersey, chairman of the Committee of Manufactures which reported the bill. He stressed the dominant theme of the protectionists—the great distress of the country and protection as the remedy. Protection would provide a home commerce and a home market for agriculture, raise property values, cure unemployment, eliminate the unfavorable balance of trade and the specie drain. Also speaking for
protection was Senator James J. Burrill, Jr., of Rhode Island. The Baldwin Bill passed the House by a considerable majority, 90 to 69. It failed in the Senate by only two votes, 20 to 22.
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Geographically, taking both Houses into consideration, the pattern of the voting was as follows:

In the Middle Atlantic states, Maryland supplied almost the entire anti-tariff vote. The bulk of the protectionist majority was supplied by four states (House figures only): New York (25–0); Pennsylvania (22–1); New Jersey (6–0); Ohio (6–0).

The Baldwin Bill was reintroduced in January, 1821, but with little success. The beginnings of business recovery were becoming apparent, and protectionist ardor cooled considerably. It was finally able to succeed three years later.
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Not all protectionists confined their doctrines to the national level. Every once in a while, a protectionist writer would accept the challenge of his opponents and push protection doctrine near to its logically absurd limit. Thus, Matthew Lyon of Eddyville, Kentucky, advocated a state law prohibiting imports into Kentucky of all “foreign” cotton goods and other foreign manufactured products.
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“Plain Truth” in the Pittsburgh
Gazette
suggested a western tariff to prevent a continued specie drain from the West, and to develop its
own manufactures to provide a home market for western expenditures. He advocated western secession if necessary for this purpose.
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“Mechanic of Detroit” went even further. He attributed the economic difficulties of the Detroit artisans to the merchants of the town importing large quantities of goods that could have been made in Detroit. Merchants, he asserted, should only purchase the product of local, rather than of “foreign,” mechanics.
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One Pennsylvanian evolved an ingenious scheme reminiscent of later American development, to exclude imported manufacture by using the state power of quarantining commerce ruinous to morals, industry, and “political” health.
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“A Pennsylvanian” suggested that every retailer in the state be forced to take out a state license, and that the condition of the license be the retailers’ agreement not to sell any imported goods on credit to anyone, except tools for manufacturers or mechanics.
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This would prevent people from running into excessive debt and help out domestic manufactures.

The protectionist movement encountered formidable opposition that was able to defeat its proposals, although four years later protection was to triumph in the Tariff of 1824. Effective opposition came from the Monroe administration. The Washington
National Intelligencer
, known as reflecting administration views, strongly opposed higher tariffs. Ardent opposition came, as is well known, from the South. Strongly agricultural and relying on export markets for their staples of cotton and tobacco, the South opposed the protectionist measures vigorously. Southern opposition in the Congressional tariff vote was virtually unanimous.

Particularly active opposition to the tariff came from John Taylor of Caroline, who wrote many memorials for Agricultural Societies of Virginia, attacking the tariff. The focal point of opposition
in Congress was the House Committee on Agriculture, which prepared comprehensive anti-tariff reports based primarily on the Taylor memorials. Also actively opposed to an increased tariff were merchant groups in the North—particularly Salem, Massachusetts—and the Chamber of Commerce of Philadelphia, which sent opposition memorials to Congress.
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Whereas the protectionists devoted a great deal of attention to the depression, the “free traders” in opposition devoted little space to the depression, since they could not counter with a simple remedy of their own. Free traders generally concentrated on general political or economic questions such as, the benefits of international trade and the division of labor, the danger of monopoly, the injustice of special privilege, and the morals of factory life.

Some free traders undertook, however, to rebut the depression argument. Counters took two general forms: (1) denying the depression was caused by lack of protection and that the tariff could provide a remedy, and (2) asserting a tariff would aggravate rather than relieve the hard times. On the first point, the free traders argued that the depression was universal and strong in the leading European countries. Yet, they were heavily protected; therefore, a
protective tariff in the United States could offer no cure. This was a leading argument of the House Agriculture Committee.
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Condy Raguet, only of late a protectionist himself,
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in his 1820 report on the depression to the Pennsylvania Senate, brought up the point that if the protectionists were right, the manufacturing towns should have been the hardest hit by the depression, whereas hard times were universal throughout the nation.
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The positive argument against the new tariff was that it would worsen the depression rather than improve it. It would largely do so by increasing the depression of agriculture and commerce, which would be taxed for the benefit of possible new industries. Thus, the merchants of Portland (Maine) warned that higher tariffs would destroy their maritime commerce and also the nation’s agricultural markets abroad.
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The Portland petition was endorsed by the Portland
Gazette
, the Boston
Gazette
, and by a convention of Maine merchants and agriculturists in Portland.

Merchants of Salem, Massachusetts, in a petition written by the famous Supreme Court Justice Joseph Story, turned the tables on the protectionists by accusing them of being visionary theorists, heedless of the practical effects tariffs would have in destroying the capital and profits of commerce. Tariffs, they declared, would worsen
the depression by increasing unemployment in commerce.
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Many critics pointed out that agricultural exports would be damaged because lower imports would supply less dollars abroad with which to buy American products.
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A New England writer, “Public Good,” asked his readers to suppose that all imports into the country were prohibited. American mechanics and farmers would then have
fewer
means with which to purchase domestic manufactures than before. Importers would earn less and exporters’ markets abroad would suffer.
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A group of Boston merchants charged that a protective tariff would cause widespread starvation among the mechanics and merchants of the seaports.
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More specifically, merchants and distillers of Boston objected to a proposed import duty on molasses. They pointed to their investment of $11 million in buildings, protesting that a tariff would lead to the unemployment of thousands of people in the molasses and rum trade.
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A more general argument held that protective tariffs would necessarily cause unprofitable business. An interesting presentation of this view appeared in a memorial by citizens of Charleston, written by the wealthy South Carolina banker and landowner Stephen Elliott.
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Elliott pointed out that a tariff would penalize labor and capital employed in commerce and agriculture, and would divert factors
from the latter to manufacturing. But if labor and capital employed in manufacturing produced as much profit as that employed in the other occupations, a tariff would be unnecessary, since labor and capital would then shift to manufacturing without government help. If manufacturing were
not
as profitable then tariffs would be forcing labor and capital into unprofitable employments.
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One of the most sophisticated expositions of the doctrine that increased tariffs would only aggravate the depression was delivered by John Taylor of Caroline. Thus, in his memorial of the farmers and merchants of Fredericksburg, Virginia,
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Taylor established this chain of causation: tariffs cause diminished imports, that would in turn bring about restriction of exports, which would cause a fall in the prices of domestic products. The depression had already brought about great price declines, declared Taylor, which were equivalent to an increased value of the money unit. The result was an increase in the
real
burden of tariff duties. The further price fall following higher tariffs would add still more to the real burden.

Taylor regarded tariffs as a burden because he saw them as taxes on consumption; a tariff was a tax which diminishes consumption, hence diminishes production and prosperity. Taylor wrote:

The tariff . . . is a tax upon the national ability . . . since it was imposed, one half the national ability to pay taxes has been destroyed by the doubled value of money, and a reduction to the same amount in the value of products and property. Therefore the burden of taxation has been doubled by circumstances without the agency of legislation . . . if the whole duty is continued, it will compel the payers to retrench their consumption. . . . The enjoyments of consumption are the food of industry; diminish them, and it flags; leave them free, and it is invigorated.
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Taylor also pursued this reasoning to advocate
reducing
tariffs in order to reduce the real tax burden on consumption—a surprisingly modern position. The House Committee on Agriculture, in its anti-tariff report, echoed this position.
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Others also advocated reduction in existing tariff as a method of remedying the depression. For example, the
National Intelligencer
early in the depression declared that a depression needed a
reduction
in tariffs instead of an increase, to benefit the harassed merchants.
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An interesting counter on the unemployment problem was delivered by one of the most influential of the anti-protectionists, the leading New York merchant and politician, Churchill C. Cambreleng.
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The United States, he declared, was underpopulated, so unemployment could not be a permanent problem. Present unemployment was merely temporary, and even natural. “Every nation experiences a want of employment at intervals, amidst the natural fluctuations of industry.”

There was, of course, a good deal of deprecating of the manufacturers asking for protection. Cambreleng denounced the protectionists as idlers and malcontents, or as wartime speculators in manufacturing stock who wanted a government subsidy. John Taylor laid the plight of the manufacturers at the door of the banks; these were speculative manufacturers who had invested with “fictitious capital” supplied by the banks, and now were left without funds as a result of credit contraction.
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The New Orleans
Louisiana Gazette
spoke for many anti-tariff readers when it stated: “In these times of extraordinary embarrassment, we ought particularly beware how we prune the wing of honest
industry” and concluded,
“laissez-nous faire.”
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An amusing attack on the tariff from the
laissez-faire
point of view, by “The Friends of Natural Rights,” attacked “Professor Matthew Carey” and “Professor Hezekiah Niles” for implicitly advocating government ownership and management of all property, with the government guaranteeing full employment (no moments of idleness) for all capital and labor.
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The writers thus described the “Careyan Scheme of Government”:

The people of the United States being in a very unenlightened condition, very indolent and much disposed to waste their labor and their capital . . . the welfare of the community requires that all goods, wares, merchandise, and estates . . . should be granted to the government in fee simple, forever . . . and should be placed under the management of a Board of Trustees, to be styled the Patrons of Industry. The said Board should thereupon guarante [sic] to the people of the United States that thenceforth neither the capital nor labor of this nation should remain for a moment idle.

Among the maxims that such a Board would try to inculcate in the people:

It is a vulgar notion that the property which a citizen possesses, actually belongs to him: for he is a mere tenant, laborer, or agent of the government, to whom all the property in the nation legitimately belongs. The government may therefore manage this property according to its own fancy, and shift capitalists and laborers from one employment to another.

These writers thus saw in the tariff position a logic implicitly leading to a wholly government-planned economy.

In Congress, the leading speeches opposed to the Baldwin Bill were delivered by future president John Tyler, Representative from Charles City County in eastern Virginia, and by Representative Nathaniel Silsbee, from the great shipping center of Salem, Massachusetts.
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Tyler, like Story, denounced the protectionists as hasty theorists, willing to destroy commerce and agriculture to put their experiment into practice. Tyler also brought up the interesting and important point that, in the long run, even manufacturers would not benefit from the subsidy, since competition would flow into the protected industries until their rates of profit were no higher than in any other industry.
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Silsbee also stressed the aggravating effect the tariff would have on the existing depression in the seaports.
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