Page:The New International Encyclopædia 1st ed. v. 16.djvu/530

* PEOTAGOEAS. 462 PEOTECTION. weg, History of Philosophy, English translation, vol. i. (New York, 1872); Eidinann, History of Philosophy, English translation, vol. i. (New York, 1890). " PKOTECTION (Lat. proirctio, from pinte- gerc, to protect, cover over, from pro, before, for + leycre, Gk. areyeiv, stegcin, Skt. sthag, to cover, Lith. slogas, roof, Olr. teg, house, OHG. dah, Gcr. Dach, AS. pa-c, Eng. thalch ) . The term applied to the policy of encouraging and develop- ing liome industries by means either of bounties paid to lionie producers or of duties imposed upon goods imported from abroad. The encouragement afTorded by bounties is so direct and certain that they have been preferred to duties by many writ- ers! including Alexander Hamilton. Nevertheless they have been little used in practice, because of their cost and of administrative difficulties con- nected with them. The latest examples of the use of bounties are afforded by the sugar bounty provided in the United States tariff of 1890 (the McKinley Act) and the export bounties on the same connnodity paid by Germany and some other European States. The former remained in force onlv four vears, and is not likely to be re- vived, wliile the latter have been abrogated except in the case of Russia by the Brussels Sugar Con- vention. Import duties serve to encourage home indus- tries under the following circumstances: They must apply to goods that may be produced within the country imposing them; they must not be offset either by reductions in the export prices of the commodities taxed nor by internal revenue duties on the same commodities produced within the country; tinally, they must serve to raise the prices of the taxed articles in the home market sufficiently to make their home production profit- able. Given these conditions, a dutj- is increas- ingly protective according to the completeness with which it excludes the foreign producer from the hoiii^ market. Its purpose is directly opposed to the acquisition of revenue, since it becomes perfectly protective only wlien it prohibits all importation, that is. ceases to afford any revenue whatever. It is for this reason that highly pro- tective tariff's need to Ijo supplemented by reve- nue schedules and even internal revenue duties to satisfy the fiscal requirements of modern' gov- ernments. See Tariff. The policy of protection does not differ out- wardly from the restrictive polic.y advocated by the Mercantilists (see Mercantilism), but is de- fended on grounds quite independent of their erroneous balance of trade theory. As pointed out elsewhere (see Frke Trade), protection is the policy practiced by most of the governments of the world. In this article attention will be di- rected to protection as it has been applied in the United States. Similar arguments to those re- viewed are advanced in justification of the policy in other countries, and there is therefore no occasion to repeat them. Wlien the American colonies gained their inde- pendence, free exchange with the mother country Avas the policy advocated on all sides. The re- strictive measures put in force by England her- self after 17S.3 made the realization of this ideal impossible and fostered a sentiment in favor of protection to home industries as a means of ren- dering the United States industrially, as it had become politically, independent. Tariffs passed bj Massachusetts and PennsA'lvania in 1785-86 reflect clearly this protectionist attitude, as does the first national tariff" pas.sed in 1789. There was still some misgiving as to whether the cbun- try was adapted to manufacturing, however, and the first Secretary of the Treasury, Alexander Hamilton, was asked to submit to Congress a report on manufactures, together with recom- mendations to guide its future policy. The famous Report on Manufactures was sub- mitted in December, 1791, and has remained down to the present day one of the most impor- tant documents in the literature of protection. Hamilton reviewed the arguments for and against protection, described the development of manu- factures in the United States, the resources of the country fitting it for manufacturing indus- tries, and the policy of Great Britain in taxing its exports. He concluded that in the light of the actual situation a moderate protective policy designed to build up within the country all of the industries necessary to national independence and to the most rapid development of natural resources was advisable. In coining to this con- clusion he ascribed great importance to England's restrictive policy, and said repeatedly that but for these restrictions a freer policy on the part of the United States might be desirable. He also emphasized his conviction that industrial inde- pendence is indispensable to continuous political independence, and that it is the part of wisdom for a new country to foster within its borders, even at consideralile sacrifice, the industries necessary to a complete national life, not forget- ting those concerned with the munitions of war. Hamilton's arguments continued to carry great weight with American statesmen down to about 1850, when England's secession to free trade and the undoubted ability of the United States to hold its own in any international comjilication that was likely to arise had deprived them of their force. During the years immediately following the completion of Hamilton's reiiort, the situation was so favorable to the development of the ship- ping industry of the United States that little attention was given to the question of protection. The Na])oleonic wars made sliipping under the flag of a European State hazardous and gave America, as the only important neutral country, the lion's share of the world's carrying trade. While this condition continued, sliipping and com- merce flourished in an unprecedented fashion. The situation was abruptly clianged by Napo- leon's Berlin Decree and the British Orders in Council of 180l!-07. which set up a ])aper block- ade of all important European ports and deprived American inercliant vessels of the imnnmity which the.y had iireviously enjoyed. The United States retaliated with the Embargo (1S07) and the Non-Intercourse Act (1809), and finally be- came involved in the War of 1812. From 1807 to 1813. in consequence of these difficulties, the United States was more nearly isolated indus- trially than ever before or since. Foreign trade was almost entirely suspended and the country was forced to produce for itself nearly all of the commodities which it required. It was during this period that manufacturing first developed to the position of an important American industry. When it ended, the industrial situation was .so different from that described by Hamilton that the whole question of protection assumed a new aspect.