Page:Forgotten Man and Other Essays.djvu/112

104 protection. As there is no equivalence or compensation in the case as it already stands, it is evident that the effect of any further tax, instead of bringing about equivalence or compensation, will be to depart from such a result still further.

145. It is, however, impossible to admit assumptions 3, 4, and 5 above, or to deal with any economic problem by any arithmetical process. The result above reached is totally incorrect and only serves to clear the ground for a correct analysis. The producer may have to bear part of a tax, if he is under the tax jurisdiction, or if he has a monopoly. If he has no monopoly, and is not under the tax jurisdiction, and works for the world's market, he cannot lower his price in order to assume part of the tax. What he does is that he differentiates his commodity. This is the fact in the art of production which is established by abundant experience. It is the explanation of the constant complaint, under the protective system, of "fraud" and of the constant demand for subclassification in the tariff schedules. The protected product never is, at least at first, as good in quality as the imported article which it aims to supersede. Hence the foreigner, if he desires to retain the protected market, can prepare a special quality for that market. The "silk" after the tax is laid is not the same silk as before. It nets to the foreign producer 97½ cents, and pays him business profits at that price. Therefore when he sells it at $1.02½ he gets back the whole tax from the consumers. The domestic silk sold at $1.02½ is no better than might have been obtained for 97½ cents. Hence the consumers are paying a tax for protection which is full and equal to the revenue rate. The fact that the price has fallen to $1.02½, and is not $1.05, evidently proves that instead of disproving it, as many believe.

146. Thus this case falls to pieces. It gains a momentary plausibility from the erroneous assumptions which