Samuel MacClintock, Ph. D. (continued 4)

There is one other phase of the subject of consumption that may well be mentioned before leaving this subject. Owing to the constant pressure of the consuming public for cheap goods, many articles are produced under conditions dangerous to the health, morality and well-being of the operatives, as in the case of the “sweated trades.” To remedy these evils consumers’ leagues have been started in many places, the members of which pledge themselves not to buy goods or to trade in stores where the conditions of work are not up to certain prescribed standards. They realize that as consumers they owe a duty to other members of society not to exploit them. While this method has proven a fairly effective method of protest in some cases, it cannot be looked to as a solution of this evil. But it emphasizes the fact that the interests of all members of society as producers and consumers are closely interdependent, and that the progress of society requires the improvement of the condition of all.

XV. MONEY AND BANKING.

Probably on no subject has there been such confused thinking or have such widely varying views been held as on that of money. There is, however, substantial unanimity of opinion on the important points among economists today, though in practice there still remain many unsolved problems. The modern industrial system has already been characterized as one of capitalistic production, of large-scale enterprises with extended use of machinery. Not less fundamental are the processes of valuation and exchange made possible by the use of money and credit; and also by the machinery for the geographical distribution of goods, our railroads and steamship lines. The modern stage of economic development has been described by Hildebrand as one of “credit economy,” as opposed to those of barter and money economy, which preceded. It is inconceivable that the modern complex system of exchange could be maintained without the extended use of money and credit. Without attempting to define these terms or to trace their historical development, we may proceed at once to state some of the problems to which they have given rise.

The first question that suggests itself is, what determines the value of money? The generally accepted answer may be briefly stated: it is, that the value of money depends, other things remaining the same, upon its quantity. According to the quantity theory an increase in the supply of money will cause a fall in the value of each unit, just as an increase in the supply of wheat or cotton will cause a fall in the value of each bushel or bale. Conversely, a decrease in the quantity of money will cause a rise in the value of money. It is simply an application of the general law of value to money. The phrase “other things remaining the same” is however an important one, for it assumes that the amount of business and the methods by which it is conducted will remain substantially unchanged. Of course if an increase in the amount of money is accompanied by an equivalent expansion of trade, the one may offset the other and the value of money remain unchanged. Now, inasmuch as the prices of all goods and services are measured and expressed in terms of money, it is clear that a fall in the value of money means a rise of general prices; the value of each commodity is now expressed in terms of a larger number of less valuable units or dollars. Prices will be high if the quantity of money in circulation in a country is large; they will be low if the quantity is small. To the question, which is better for a country, high prices or low prices, it may be answered that it is a matter of indifference, provided only that there is enough money to do the work of exchange efficiently and that fluctuations are prevented. Just how much constitutes enough is, however, a matter of contention. In the undeveloped sections of our country, where capital is scarce and banking facilities undeveloped and where most of the people are debtors, there has always been a demand for cheap and abundant money. Capital and money have been confused and the need of one has led to a demand for the other.

It is not a matter of indifference, however, whether prices be rising or falling, that is, whether inflation or contraction of the currency is taking place. A period of falling prices means hardship and injustice to debtors and producers of goods, as farmers, manufacturers, etc. Having contracted obligations and engaged in the production of commodities with the expectation of a given price, they find their goods worth less when ready for the market and themselves confronted with a loss instead of the anticipated profit. Under such circumstances a contraction of the currency and falling prices means lessened production of wealth. Consequently many writers, and even so good an economist as President Walker, have urged that a slow steady inflation of the currency would promote trade and “give a fillip to industry.” The monetary history of the United States is filled with attempts to realize this in practice: colonial and revolutionary bills of credit were first issued; when these were forbidden by the new Constitution resort was had to issues by state banks. When the Federal Government began the issue of greenbacks and restricted the use of state bank notes, the inflationists looked to this source for assistance. After the defeat of the Greenback party, they turned finally to the coinage of silver, which was now falling in price, and the question of bimetallism in the United States was made a practical political issue.

Down to 1870 practically all the nations of Europe and America had the system of bimetallism at ratios of 15½ or 16 to 1. About that date the great increase in the supply of gold and the fall in the value of silver led one country after another to abandon the latter and to adopt the system of gold monometallism. This was vigorously resisted by many persons and several fruitless efforts made to secure a system of international bimetallism. Failing that, the friends of silver in this country endeavored to secure independent action by the United States alone, and were ultimately successful in obtaining the purchase by the Federal Government of practically the entire silver output of the country during the years 1878-1893.

Development of the Manufacturing Industries in the United States, 1800-1905.

Fiscal Year, ending June 30— Population June 1. Wealth. Production of wool.[B] Raw wool imported.

Total. Per capita.

Dollars. Dollars. Pounds. Pounds.

1800 5,308,483 … … … …

1810 7,239,881 … … … …

1820 9,638,453 … … … …

1830 12,866,020 … … 35,802,114 669,883

1840 17,069,453 … … 52,516,959 9,898,740

1850 23,191,876 7,135,780,000 307.69 … 18,695,294

1851 23,995,000 … … … 32,607,315

1852 24,802,000 … … … 18,343,218

1853 25,615,000 … … … 21,616,035

1854 26,433,000 … … … 20,228,035

1855 27,256,000 … … … 18,599,784

1856 28,083,000 … … … 14,778,496

1857 28,916,000 … … … 16,505,216

1858 29,758,000 … … … …

1859 30,596,000 … … 60,264,913 …

1860 31,443,321 16,159,616,000 513.93 75,000,000 …

1861 32,064,000 … … 90,000,000 …

1862 32,704,000 … … 106,000,000 42,131,061

1863 33,365,000 … … 123,000,000 73,931,944

1864 34,046,000 … … 142,000,000 90,464,002

1865 34,748,000 … … 155,000,000 43,877,408

1866 35,469,000 … … 160,000,000 67,918,253

1867 36,211,000 … … 168,000,000 16,558,046

1868 36,973,000 … … 180,000,000 24,124,803

1869 37,756,000 … … 162,000,000 39,275,926

1870 38,558,371 30,068,518,000 779.83 160,000,000 49,230,199

1871 39,555,000 … … 150,000,000 68,058,028

1872 40,596,000 … … 158,000,000 122,256,499

1873 41,677,000 … … 170,000,000 85,496,049

1874 42,796,000 … … 181,000,000 42,939,541

1875 43,951,000 … … 192,000,000 54,901,760

1876 45,137,000 … … 200,000,000 44,642,836

1877 46,353,000 … … 208,250,000 42,171,192

1878 47,598,000 … … 211,000,000 48,449,079

1879 48,866,000 … … 232,500,000 39,005,155

1880 50,155,783 43,642,000,000 850.20 240,000,000 128,131,747

1881 51,316,000 … … 272,000,000 55,964,236

1882 52,495,000 … … 290,000,000 67,861,744

1883 53,693,000 … … 300,000,000 70,575,478

1884 54,911,000 … … 308,000,000 78,350,651

1885 56,148,000 … … 302,000,000 70,596,170

1886 57,404,000 … … 285,000,000 129,084,958

1887 58,680,000 … … 269,000,000 114,038,030

1888 59,974,000 … … 265,000,000 113,558,753

1889 61,289,000 … … 276,000,000 126,487,729

1890 62,622,250 65,037,091,000 1,038.57 285,000,000 105,431,285

1891 63,844,000 … … 294,000,000 129,303,648

1892 65,086,000 … … 303,153,000 148,670,652

1893 66,349,000 … … 298,057,384 172,433,838

1894 67,632,000 … … 309,748,000 55,152,585

1895 68,934,000 77,000,000,000 1,117.01 272,474,708 206,033,906

1896 70,254,000 … … 259,153,251 230,911,473

1897 71,592,000 … … 266,720,684 350,852,026

1898 72,947,000 … … 272,191,330 132,795,202

1899 74,318,000 … … 288,636,621 76,736,209

1900 76,303,387 88,517,306,775 1,164.79 302,502,328 155,928,455

1901 79,003,000 … … 287,450,000 166,576,966

1903 80,372,000 … … 291,783,032 177,137,796

1904 81,752,000 107,104,211,917 1,310.11 295,488,438 173,742,834

1905 83,143,000 … … 298,915,130 249,135,746

1906 84,216,433 … … 298,294,750 201,688,668

1907 85,817,239 … … 311,138,321 203,847,545

1908 87,189,392 … … … 125,980,524

Fiscal Year, ending June 30— Production of cotton.[B] (500-lb. bales, gross weight.) Manufactures of cotton.

Thousands of spindles in operation on Sept. 1st. Thousands of bales of domestic cotton taken by mills.

In Southern States. In Northern States. Total United States. In Southern States. In Northern States. Total United States

Number. Thou- sands. Thou- sands. Thou- sands. Thou- sands. Thou- sands. Thou- sands.

1800 73,222 … … … … … …

1810 177,824 … … … … … …

1820 334,728 … … … … … …

1830 732,218 … … … … … …

1840 1,347,640 181 2,104 2,285 71 166 237

1850 2,136,083 265 3,733 3,998 78 497 575

1851 2,799,290 … … … 60 404 464

1852 3,130,338 … … … 111 588 699

1853 2,766,194 … … … 153 650 803

1854 2,708,082 … … … 145 592 737

1855 3,220,782 … … … 135 571 706

1856 3,873,680 … … … 138 633 771

1857 3,012,016 … … … 154 666 820

1858 3,758,273 … … … 143 452 595

1859 4,309,642 … … … 167 760 927

1860 3,841,416 324 4,912 5,236 94 751 845

1861 4,490,586 … … … 153 650 803

1862 1,596,653 … … … … … …

1863 449,059 … … … … … …

1864 299,372 … … … … … …

1865 2,093,658 … … … … … …

1866 1,948,077 … … … 127 541 668

1867 2,345,610 … … … 150 573 723

1868 2,198,141 … … … 168 800 968

1869 2,409,597 … … … 173 822 995

1870 4,024,527 328 6,804 7,132 69 728 797

1871 2,756,564 … … … 91 1,072 1,163

1872 3,650,932 … … … 120 977 1,097

1873 3,873,750 … … … 138 1,063 1,201

1874 3,528,276 … … … 128 1,192 1,320

1875 4,302,818 … … … 130 1,071 1,201

1876 4,118,390 … … … 134 1,220 1,354

1877 4,494,224 … … … 127 1,302 1,429

1878 4,745,078 … … … 151 1,345 1,496

1879 5,466,387 … … … 186 1,375 1,561

1880 6,356,998 561 10,092 10,653 189 1,382 1,570

1881 5,136,447 … … … 225 1,713 1,938

1882 6,833,442 … … … 287 1,677 1,964

1883 5,521,963 860 11,800 12,660 313 1,759 2,072

1884 5,477,448 1,050 12,250 13,300 340 1,537 1,877

1885 6,369,341 1,125 12,250 13,375 316 1,437 1,753

1886 6,314,561 1,150 12,250 13,400 381 1,781 2,162

1887 6,884,667 1,200 12,300 13,500 401 1,687 2,088

1888 6,923,775 1,250 12,300 13,550 456 1,805 2,261

1889 7,742,511 1,360 2,700 14,060 480 1,790 2,270

1890 8,562,089 1,570 12,814 14,384 539 1,979 2,518

1891 8,940,867 1,740 12,900 14,640 613 2,027 2,640

1892 6,658,313 1,950 13,250 15,200 684 2,172 2,856

1893 7,433.056 2,100 13,450 15,550 723 1,652 2,375

1894 10,025,534 2,200 13,500 15,700 711 1,580 2,291

1895 7,146,772 2,400 13,700 16,100 852 2,019 2,871

1896 8,515,640 2,850 13,800 16,650 900 1,605 2,505

1897 10,985,040 3,250 13,900 17,150 999 1,793 2,792

1898 11,435,368 3,550 13,900 17,450 1,254 2,211 3,465

1899 9,459,935 3,950 14,150 18,100 1,415 2,217 3,632

1900 10,266,527 4,368 15,104 19,472 1,523 2,350 3,873

1901 9,675,771 5,500 11,700 20,200 1,583 1,964 3,547

1902 10,827,168 6,400 15,000 21,400 2,017 2,066 4,083

1903 10,045,615 6,900 15,100 22,000 1,958 1,966 3,924

1904 13,679,954 7,650 15,200 22,850 1,889 2,046 3,935

1905 10,804,556 7,631 16,056 23,687 2,140 2,139 4,279

1906 13,595,498 8,995 16,255 25,250 2,373 2,536 4,909

1907 11,375,461 9,528 16,847 26,275 2,411 2,574 4,985

1908 13,587,306 10,201 17,304 27,505 2,187 2,352 4,539

Fiscal Year, ending June 30— Exports. (domestic) Imports. Unmanufactured silk imported. Imports of crude rubber.

Dollars. Dollars. Pounds. Pounds.

1800 … … … …

1810 … … … …

1820 … 7,812,326 … …

1830 1,318,183 5,774,013 … …

1840 3,549,607 6,504,104 … …

1850 4,734,424 20,781,346 … …

1851 7,241,205 22,164,442 … …

1852 7,672,151 19,689,496 … …

1853 8,768,894 27,731,363 … …

1854 5,535,516 33,949,503 … …

1855 5,857,181 17,757,112 … …

1856 6,967,309 25,917,999 … …

1857 6,115,177 28,685,726 … …

1858 5,651,504 18,584,810 … …

1859 8,316,222 26,976,381 … …

1860 10,934,796 33,215,541 … …

1861 7,957,038 25,271,382 … …

1862 2,946,464 8,890,119 … 2,125,561

1863 2,906,411 14,121,589 … 5,104,650

1864 1,456,901 14,341,501 407,935 …

1865 3,451,561 9,223,686 288,286 …

1866 1,780,175 27,502,194 567,904 …

1867 4,608,235 19,302,005 491,983 …

1868 4,871,054 17,335,406 512,449 8,438,019

1869 5,874,222 20,481,312 720,045 7,813,134

1870 3,787,282 23,380,053 583,589 9,624,098

1871 3,558,236 29,876,640 1,100,281 11,031,939

1872 2,304,330 35,307,447 1,063,809 11,803,437

1873 2,947,528 35,201,324 1,159,420 14,536,978

1874 3,095,840 28,193,869 794,837 14,191,320

1875 4,071,882 27,738,401 1,101,681 12,035,909

1876 7,722,978 22,725,598 1,354,991 10,589,297

1877 10,235,843 18,923,614 1,186,170 13,821,109

1878 11,438,660 19,081,037 1,182,750 12,512,203

1879 10,853,950 19,928,310 1,889,776 14,878,584

1880 9,981,418 29,929,366 2,562,236 16,826,099

1881 13,571,387 31,219,329 2,790,413 20,015,176

1882 13,222,979 35,719,791 3,549,404 22,712,862

1883 12,951,145 38,036,044 4,731,106 21,646,320

1884 11,885,211 29,074,626 4,284,888 24,574,025

1885 11,836,591 27,197,241 4,308,908 24,208,148

1886 13,959,934 29,709,266 6,818,060 29,263,632

1887 14,929,342 28,940,353 6,028,091 28,649,446

1888 13,013,189 28,917,799 6,370,322 36,628,351

1889 10,212,644 26,805,942 6,645,124 32,339,503

1890 9,999,277 29,918,055 7,510,440 33,842,374

1891 13,604,857 29,712,624 6,266,629 33,712,089

1892 13,226,277 28,323,841 8,834,049 39,976,205

1893 11,809,355 33,560,293 8,497,477 41,547,680

1894 14,340,886 22,346,547 5,902,485 33,757,783

1895 13,789,810 33,196,625 9,316,460 39,741,607

1896 16,837,396 32,437,504 9,363,987 36,774,460

1897 21,037,678 34,429,363 7,993,444 35,574,449

1898 17,024,092 27,267,300 12,087,951 46,055,497

1899 23,566,914 32,054,434 11,250,383 51,063,066

1900 24,003,087 41,296,239 13,073,718 49,377,138

1901 20,272,418 40,246,935 10,405,555 55,275,529

1902 32,108,362 44,460,126 14,234,826 50,413,481

1903 32,216,304 52,462,755 15,270,859 55,010,571

1904 22,403,713 49,524,246 16,722,709 59,015,551

1905 49,666,080 48,919,936 22,357,307 67,234,256

1906 52,944,033 63,043,322 17,352,021 57,844,345

1907 32,305,412 73,704,636 18,743,904 76,963,838

1908 25,177,758 68,379,781 16,662,132 62,233,160

Fiscal Year, ending June 30— Population June 1. Wealth.

Total. Per capita.

Dollars. Dollars.

1800 5,308,483 … …

1810 7,239,881 … …

1820 9,638,453 … …

1830 12,866,020 … …

1840 17,069,453 … …

1850 23,191,876 7,135,780,000 307.69

1851 23,995,000 … …

1852 24,802,000 … …

1853 25,615,000 … …

1854 26,433,000 … …

1855 27,256,000 … …

1856 28,083,000 … …

1857 28,916,000 … …

1858 29,758,000 … …

1859 30,596,000 … …

1860 31,443,321 16,159,616,000 513.93

1861 32,064,000 … …

1862 32,704,000 … …

1863 33,365,000 … …

1864 34,046,000 … …

1865 34,748,000 … …

1866 35,469,000 … …

1867 36,211,000 … …

1868 36,973,000 … …

1869 37,756,000 … …

1870 38,558,371 30,068,518,000 779.83

1871 39,555,000 … …

1872 40,596,000 … …

1873 41,677,000 … …

1874 42,796,000 … …

1875 43,951,000 … …

1876 45,137,000 … …

1877 46,353,000 … …

1878 47,598,000 … …

1879 48,866,000 … …

1880 50,155,783 43,642,000,000 850.20

1881 51,316,000 … …

1882 52,495,000 … …

1883 53,693,000 … …

1884 54,911,000 … …

1885 56,148,000 … …

1886 57,404,000 … …

1887 58,680,000 … …

1888 59,974,000 … …

1889 61,289,000 … …

1890 62,622,250 65,037,091,000 1,038.57

1891 63,844,000 … …

1892 65,086,000 … …

1893 66,349,000 … …

1894 67,632,000 … …

1895 68,934,000 77,000,000,000 1,117.01

1896 70,254,000 … …

1897 71,592,000 … …

1898 72,947,000 … …

1899 74,318,000 … …

1900 76,303,387 88,517,306,775 1,164.79

1901 79,003,000 … …

1903 80,372,000 … …

1904 81,752,000 107,104,211,917 1,310.11

1905 83,143,000 … …

1906 84,216,433 … …

1907 85,817,239 … …

1908 87,189,392 … …

Fiscal Year, ending June 30— Production of wool.[B] Raw wool imported.

Pounds. Pounds.

1800 … …

1810 … …

1820 … …

1830 35,802,114 669,883

1840 52,516,959 9,898,740

1850 … 18,695,294

1851 … 32,607,315

1852 … 18,343,218

1853 … 21,616,035

1854 … 20,228,035

1855 … 18,599,784

1856 … 14,778,496

1857 … 16,505,216

1858 … …

1859 60,264,913 …

1860 75,000,000 …

1861 90,000,000 …

1862 106,000,000 42,131,061

1863 123,000,000 73,931,944

1864 142,000,000 90,464,002

1865 155,000,000 43,877,408

1866 160,000,000 67,918,253

1867 168,000,000 16,558,046

1868 180,000,000 24,124,803

1869 162,000,000 39,275,926

1870 160,000,000 49,230,199

1871 150,000,000 68,058,028

1872 158,000,000 122,256,499

1873 170,000,000 85,496,049

1874 181,000,000 42,939,541

1875 192,000,000 54,901,760

1876 200,000,000 44,642,836

1877 208,250,000 42,171,192

1878 211,000,000 48,449,079

1879 232,500,000 39,005,155

1880 240,000,000 128,131,747

1881 272,000,000 55,964,236

1882 290,000,000 67,861,744

1883 300,000,000 70,575,478

1884 308,000,000 78,350,651

1885 302,000,000 70,596,170

1886 285,000,000 129,084,958

1887 269,000,000 114,038,030

1888 265,000,000 113,558,753

1889 276,000,000 126,487,729

1890 285,000,000 105,431,285

1891 294,000,000 129,303,648

1892 303,153,000 148,670,652

1893 298,057,384 172,433,838

1894 309,748,000 55,152,585

1895 272,474,708 206,033,906

1896 259,153,251 230,911,473

1897 266,720,684 350,852,026

1898 272,191,330 132,795,202

1899 288,636,621 76,736,209

1900 302,502,328 155,928,455

1901 287,450,000 166,576,966

1903 291,783,032 177,137,796

1904 295,488,438 173,742,834

1905 298,915,130 249,135,746

1906 298,294,750 201,688,668

1907 311,138,321 203,847,545

1908 … 125,980,524

Fiscal Year, ending June 30— Production of cotton.[B] (500-lb. bales, gross weight.) Manufactures of cotton.

Thousands of spindles in operation on Sept. 1st.

In Southern States. In Northern States. Total United States.

Number. Thou- sands. Thou- sands. Thou- sands.

1800 73,222 … … …

1810 177,824 … … …

1820 334,728 … … …

1830 732,218 … … …

1840 1,347,640 181 2,104 2,285

1850 2,136,083 265 3,733 3,998

1851 2,799,290 … … …

1852 3,130,338 … … …

1853 2,766,194 … … …

1854 2,708,082 … … …

1855 3,220,782 … … …

1856 3,873,680 … … …

1857 3,012,016 … … …

1858 3,758,273 … … …

1859 4,309,642 … … …

1860 3,841,416 324 4,912 5,236

1861 4,490,586 … … …

1862 1,596,653 … … …

1863 449,059 … … …

1864 299,372 … … …

1865 2,093,658 … … …

1866 1,948,077 … … …

1867 2,345,610 … … …

1868 2,198,141 … … …

1869 2,409,597 … … …

1870 4,024,527 328 6,804 7,132

1871 2,756,564 … … …

1872 3,650,932 … … …

1873 3,873,750 … … …

1874 3,528,276 … … …

1875 4,302,818 … … …

1876 4,118,390 … … …

1877 4,494,224 … … …

1878 4,745,078 … … …

1879 5,466,387 … … …

1880 6,356,998 561 10,092 10,653

1881 5,136,447 … … …

1882 6,833,442 … … …

1883 5,521,963 860 11,800 12,660

1884 5,477,448 1,050 12,250 13,300

1885 6,369,341 1,125 12,250 13,375

1886 6,314,561 1,150 12,250 13,400

1887 6,884,667 1,200 12,300 13,500

1888 6,923,775 1,250 12,300 13,550

1889 7,742,511 1,360 12,700 14,060

1890 8,562,089 1,570 12,814 14,384

1891 8,940,867 1,740 12,900 14,640

1892 6,658,313 1,950 13,250 15,200

1893 7,433,056 2,100 13,450 15,550

1894 10,025,534 2,200 13,500 15,700

1895 7,146,772 2,400 13,700 16,100

1896 8,515,640 2,850 13,800 16,650

1897 10,985,040 3,250 13,900 17,150

1898 11,435,368 3,550 13,900 17,450

1899 9,459,935 3,950 14,150 18,100

1900 10,266,527 4,368 15,104 19,472

1901 9,675,771 5,500 11,700 20,200

1902 10,827,168 6,400 15,000 21,400

1903 10,045,615 6,900 15,100 22,000

1904 13,679,954 7,650 15,200 22,850

1905 10,804,556 7,631 16,056 23,687

1906 13,595,498 8,995 16,255 25,250

1907 11,375,461 9,528 16,847 26,275

1908 13,587,306 10,201 17,304 27,505

Fiscal Year, ending June 30— Manufactures of cotton.

Thousands of bales of domestic cotton taken by mills.

In Southern States. In Northern States. Total United States

Thou- sands. Thou- sands. Thou- sands.

1800 … … …

1810 … … …

1820 … … …

1830 … … …

1840 71 166 237

1850 78 497 575

1851 60 404 464

1852 111 588 699

1853 153 650 803

1854 145 592 737

1855 135 571 706

1856 138 633 771

1857 154 666 820

1858 143 452 595

1859 167 760 927

1860 94 751 845

1861 153 650 803

1862 … … …

1863 … … …

1864 … … …

1865 … … …

1866 127 541 668

1867 150 573 723

1868 168 800 968

1869 173 822 995

1870 69 728 797

1871 91 1,072 1,163

1872 120 977 1,097

1873 138 1,063 1,201

1874 128 1,192 1,320

1875 130 1,071 1,201

1876 134 1,220 1,354

1877 127 1,302 1,429

1878 151 1,345 1,496

1879 186 1,375 1,561

1880 189 1,382 1,570

1881 225 1,713 1,938

1882 287 1,677 1,964

1883 313 1,759 2,072

1884 340 1,537 1,877

1885 316 1,437 1,753

1886 381 1,781 2,162

1887 401 1,687 2,088

1888 456 1,805 2,261

1889 480 1,790 2,270

1890 539 1,979 2,518

1891 613 2,027 2,640

1892 684 2,172 2,856

1893 723 1,652 2,375

1894 711 1,580 2,291

1895 852 2,019 2,871

1896 900 1,605 2,505

1897 999 1,793 2,792

1898 1,254 2,211 3,465

1899 1,415 2,217 3,632

1900 1,523 2,350 3,873

1901 1,583 1,964 3,547

1902 2,017 2,066 4,083

1903 1,958 1,966 3,924

1904 1,889 2,046 3,935

1905 2,140 2,139 4,279

1906 2,373 2,536 4,909

1907 2,411 2,574 4,985

1908 2,187 2,352 4,539

Fiscal Year, ending June 30— Exports. (domestic) Imports.

Dollars. Dollars.

1800 … …

1810 … …

1820 … 7,812,326

1830 1,318,183 5,774,013

1840 3,549,607 6,504,104

1850 4,734,424 20,781,346

1851 7,241,205 22,164,442

1852 7,672,151 19,689,496

1853 8,768,894 27,731,363

1854 5,535,516 33,949,503

1855 5,857,181 17,757,112

1856 6,967,309 25,917,999

1857 6,115,177 28,685,726

1858 5,651,504 18,584,810

1859 8,316,222 26,976,381

1860 10,934,796 33,215,541

1861 7,957,038 25,271,382

1862 2,946,464 8,890,119

1863 2,906,411 14,121,589

1864 1,456,901 14,341,501

1865 3,451,561 9,223,686

1866 1,780,175 27,502,194

1867 4,608,235 19,302,005

1868 4,871,054 17,335,406

1869 5,874,222 20,481,312

1870 3,787,282 23,380,053

1871 3,558,236 29,876,640

1872 2,304,330 35,307,447

1873 2,947,528 35,201,324

1874 3,095,840 28,193,869

1875 4,071,882 27,738,401

1876 7,722,978 22,725,598

1877 10,235,843 18,923,614

1878 11,438,660 19,081,037

1879 10,853,950 19,928,310

1880 9,981,418 29,929,366

1881 13,571,387 31,219,329

1882 13,222,979 35,719,791

1883 12,951,145 38,036,044

1884 11,885,211 29,074,626

1885 11,836,591 27,197,241

1886 13,959,934 29,709,266

1887 14,929,342 28,940,353

1888 13,013,189 28,917,799

1889 10,212,644 26,805,942

1890 9,999,277 29,918,055

1891 13,604,857 29,712,624

1892 13,226,277 28,323,841

1893 11,809,355 33,560,293

1894 14,340,886 22,346,547

1895 13,789,810 33,196,625

1896 16,837,396 32,437,504

1897 21,037,678 34,429,363

1898 17,024,092 27,267,300

1899 23,566,914 32,054,434

1900 24,003,087 41,296,239

1901 20,272,418 40,246,935

1902 32,108,362 44,460,126

1903 32,216,304 52,462,755

1904 22,403,713 49,524,246

1905 49,666,080 48,919,936

1906 52,944,033 63,043,322

1907 32,305,412 73,704,636

1908 25,177,758 68,379,781

Fiscal Year, ending June 30— Unmanu- factured silk imported. Imports of crude rubber.

Pounds. Pounds.

1800 … …

1810 … …

1820 … …

1830 … …

1840 … …

1850 … …

1851 … …

1852 … …

1853 … …

1854 … …

1855 … …

1856 … …

1857 … …

1858 … …

1859 … …

1860 … …

1861 … …

1862 … 2,125,561

1863 … 5,104,650

1864 407,935 …

1865 288,286 …

1866 567,904 …

1867 491,983 …

1868 512,449 8,438,019

1869 720,045 7,813,134

1870 583,589 9,624,098

1871 1,100,281 11,031,939

1872 1,063,809 11,803,437

1873 1,159,420 14,536,978

1874 794,837 14,191,320

1875 1,101,681 12,035,909

1876 1,354,991 10,589,297

1877 1,186,170 13,821,109

1878 1,182,750 12,512,203

1879 1,889,776 14,878,584

1880 2,562,236 16,826,099

1881 2,790,413 20,015,176

1882 3,549,404 22,712,862

1883 4,731,106 21,646,320

1884 4,284,888 24,574,025

1885 4,308,908 24,208,148

1886 6,818,060 29,263,632

1887 6,028,091 28,649,446

1888 6,370,322 36,628,351

1889 6,645,124 32,339,503

1890 7,510,440 33,842,374

1891 6,266,629 33,712,089

1892 8,834,049 39,976,205

1893 8,497,477 41,547,680

1894 5,902,485 33,757,783

1895 9,316,460 39,741,607

1896 9,363,987 36,774,460

1897 7,993,444 35,574,449

1898 12,087,951 46,055,497

1899 11,250,383 51,063,066

1900 13,073,718 49,377,138

1901 10,405,555 55,275,529

1902 14,234,826 50,413,481

1903 15,270,859 55,010,571

1904 16,722,709 59,015,551

1905 22,357,307 67,234,256

1906 17,352,021 57,844,345

1907 18,743,904 76,963,838

1908 16,662,132 62,233,160

Development of the Manufacturing Industries in the United States, 1800-1905—Continued.

Year. Production of Exports of domestic copper & manufactures of.

Coal.[C] Copper.[C]

Long tons. Long tons. Dollars.

1800 … … …

1810 20 … 17,426

1820 3,080 … 18,547

1830 285,779 … 36,601

1840 1,848,249 100 86,954

1850 6,266,233 650 105,060

1851 7,798,683 900 91,871

1852 8,764,879 1,100 103,039

1853 9,437,757 2,000 108,205

1854 10,698,841 2,250 91,984

1855 11,541,672 3,000 690,766

1856 12,095,469 4,000 534,846

1857 11,910,883 4,800 607,054

1858 12,477,213 5,500 1,985,223

1859 13,958,192 6,300 1,048,246

1860 13,044,680 7,200 1,664,122

1861 14,721,439 7,500 2,375,029

1862 15,612,353 9,000 1,098,546

1863 19,034,877 8,500 1,026,038

1864 21,076,003 8,000 251,272

1865 21,243,012 8,500 991,746

1866 25,896,056 8,900 143,761

1867 27,432,520 10,000 474,110

1868 29,341,036 11,600 479,488

1869 29,378,893 12,500 355,274

1870 29,496,054 12,600 504,741

1871 41,861,679 13,000 188,218

1872 45,940,535 12,500 185,983

1873 51,430,786 15,500 88,711

1874 46,969,571 17,500 356,758

1875 46,739,571 18,000 1,085,688

1876 47,571,429 19,000 3,441,939

1877 54,019,429 21,000 2,913,943

1878 51,728,214 21,500 2,319,901

1879 60,808,749 23,000 2,831,053

1880 63,822,830 27,000 793,455

1881 76,679,491 32,000 824,896

1882 92,456,419 40,467 658,941

1883 103,310,290 51,574 1,404,243

1884 107,281,742 64,708 2,664,964

1885 99,250,263 74,052 5,447,423

1886 101,500,381 70,430 2,602,869

1887 116,652,242 81,017 2,033,523

1888 132,731,837 101,054 3,812,798

1889 126,097,779 101,239 2,348,954

1890 140,866,931 115,966 2,349,392

1891 150,505,954 126,839 4,614,597

1892 160,115,242 154,018 7,226,392

1893 162,814,977 147,033 4,525,573

1894 152,447,791 158,120 19,697,140

1895 172,426,366 169,917 14,468,703

1896 171,416,390 205,384 19,720,104

1897 178,776,070 220,571 31,621,125

1898 196,407,381 235,050 32,180,872

1899 226,554,636 253,870 35,983,529

1900 240,789,310 270,588 57,852,960

1901 261,874,836 268,782 43,267,021

1902 269,277,178 294,423 41,218,373

1903 319,068,229 311,627 39,667,196

1904 314,121,784 362,739 57,142,081

1905 350,820,840 402,637 86,225,291

1906 369,783,284 409,735 81,282,664

1907 428,895,914 387,945 94,762,110

1908 … … 104,064,580

Year. Production of Iron and steel Manufactures.

Natural gas.[C] Iron ore.[C] Pig iron.[C] Steel.[C] Imports. Exports (domestic)

Dollars. Long tons. Long tons. Long tons. Dollars. Dollars.

1800 … … … … … 52,144

1810 … … 53,908 … … 91,914

1820 … … 20,000 … … 46,552

1830 … … 165,000 … 6,346,287 322,747

1840 … … 286,903 … 8,157,923 1,127,877

1850 … … 563,755 … 20,145,067 1,953,702

1851 … … … … 22,439,297 2,336,587

1852 … … … … 23,568,649 2,368,384

1853 … … … … 34,944,002 2,541,554

1855 … … 700,159 … 28,693,979 3,803,706

1856 … … 788,515 … 29,050,101 4,256,613

1857 … … 712,640 … 30,743,649 4,959,238

1858 … … 629,548 … 20,171,007 4,843,592

1859 … … 750,560 … 22,379,743 5,577,748

1860 … … 821,223 … 26,158,235 5,870,114

1861 … … 653,164 … 21,160,235 6,039,149

1862 … … 703,270 … 11,451,707 4,732,348

1863 … … 846,075 … 16,152,843 6,681,417

1864 … … 1,014,282 … 23,822,876 7,541,967

1865 … … 831,770 … 16,660,991 11,227,294

1866 … … 1,205,663 … 25,598,147 4,006,180

1867 … … 1,305,023 19,643 31,630,519 9,351,062

1868 … … 1,431,250 26,786 30,346,768 10,950,275

1869 … … 1,711,287 31,250 38,213,717 10,938,492

1870 … 3,031,891 1,665,179 68,750 40,273,682 13,483,163

1871 … … 1,706,793 73,214 53,024,075 21,189,692

1872 … … 2,548,713 142,954 67,852,616 11,463,880

1873 … … 2,560,963 198,796 74,302,102 13,655,087

1874 … … 2,023,733 389,799 31,432,380 19,534,215

1876 … … 1,868,961 533,191 23,197,417 15,449,846

1877 … … 2,066,594 569,618 19,320,927 16,501,638

1878 … … 2,301,215 731,977 18,987,130 16,053,571

1879 … … 2,741,853 935,273 19,594,608 15,133,493

1880 … 7,120,362 3,835,191 1,247,335 71,266,699 14,716,524

1881 … … 4,144,254 1,588,314 60,604,477 16,608,767

1882 215,000 … 4,623,323 1,736,692 67,976,897 20,748,206

1883 475,000 … 4,595,510 1,673,535 58,495,246 22,826,528

1884 1,460,000 … 4,097,868 1,550,879 40,147,053 21,909,881

1885 4,857,200 … 4,044,526 1,711,920 33,610,093 16,592,155

1886 10,012,000 … 5,683,329 2,562,503 37,534,078 15,745,569

1887 15,817,500 … 6,417,148 3,339,071 49,203,164 15,958,502

1888 22,629,875 … 6,489,738 2,899,440 48,992,757 17,763,034

1889 21,097,099 14,518,041 7,603,642 3,385,732 42,377,793 21,156,077

1890 18,792,725 16,036,043 9,202,703 4,277,071 41,679,591 25,542,208

1891 15,500,084 14,591,178 8,279,876 3,904,240 53,544,372 28,909,614

1892 14,870,714 16,296,666 9,157,000 4,927,581 28,928,103 28,800,930

1893 14,346,250 11,587,629 7,124,502 4,019,995 34,937,974 30,106,482

1894 13,954,400 11,879,679 6,657,888 4,412,032 20,925,769 29,220,264

1895 13,006,650 15,957,614 9,446,308 6,114,834 23,048,515 32,000,989

1896 13,002,512 16,005,449 8,623,127 5,281,689 25,338,103 41,160,877

1897 13,826,422 17,518,046 9,652,680 7,156,957 16,094,557 57,497,872

1898 15,296,813 19,433,716 11,773,934 8,932,857 12,626,431 70,406,885

1899 20,074,873 24,683,173 13,620,703 10,639,857 12,100,440 93,716,031

1900 23,698,674 27,553,161 13,789,242 10,188,329 20,478,728 121,913,548

1901 27,066,077 28,887,479 15,878,354 13,473,595 17,874,789 117,319,320

1902 30,867,863 35,554,135 17,821,307 14,947,250 27,180,247 98,552,562

1903 35,807,860 35,019,308 18,009,252 14,534,978 51,617,312 96,642,467

1904 38,496,760 27,644,330 16,497,033 13,859,887 27,028,312 111,948,586

1905 41,562,855 42,526,133 22,992,380 20,023,947 23,510,164 134,728,363

1906 46,873,932 47,749,728 25,307,191 23,398,136 29,053,987 160,984,985

1907 52,866,835 51,720,619 25,781,361 23,362,594 40,587,865 181,530,871

1908 … … 15,936,018 … 27,607,909 183,982,182

Year. Prices of staple commodities.

Per ton.[C] Middling cotton per pound.[C] Standard sheetings per yard.[C] Washed Ohio fleece wool, per lb., in eastern m’k’ts, July 1. Medium.

Pig iron No. 1, foundry. Steel rails, standard sections

Dollars. Dollars. Cents. Cents. Cents.

1800 … … … … …

1810 … … … … …

1820 … … … … …

1830 … … … … 50.0

1840 27.88 … … … 39.0

1850 20.88 … 12.34 7.87 37.0

1851 21.38 … 12.14 7.08 42.0

1852 22.63 … .50 6.96 38.0

1853 36.13 … 11.02 7.92 53.0

1854 36.88 … 10.97 7.96 37.0

1855 27.75 … 10.39 7.64 40.0

1856 27.18 … 10.30 7.50 42.0

1857 26.34 … 13.51 8.90 50.0

1858 22.19 … 12.23 8.25 37.0

1859 23.33 … 12.08 8.50 40.0

1860 22.70 … 11.00 8.73 50.0

1861 20.26 … 13.01 10.00 30.0

1862 23.92 … 31.29 18.55 47.0

1863 35.24 … 67.21 36.04 70.0

1864 59.22 … 101.50 52.07 100.0

1865 46.08 … 83.38 38.04 73.0

1866 46.84 … 43.20 24.31 67.0

1867 44.08 166.00 31.59 18.28 49.0

1868 39.25 158.46 24.85 16.79 45.0

1869 40.61 132.19 29.01 16.19 48.0

1870 33.23 106.79 23.98 14.58 45.0

1871 35.08 102.52 16.95 13.00 60.0

1872 48.94 111.94 22.19 14.27 70.0

1873 42.79 120.58 20.14 13.31 48.0

1874 30.19 94.28 17.95 11.42 53.0

1875 25.53 68.75 15.46 10.41 49.0

1876 22.19 59.25 12.98 8.85 35.0

1877 18.92 45.58 11.82 8.46 44.0

1878 17.67 42.21 11.22 7.80 36.0

1879 21.72 48.21 10.84 7.97 38.0

1880 28.48 67.52 11.51 8.51 48.0

1881 25.17 61.08 12.03 8.51 44.0

1882 25.77 48.50 11.56 8.45 45.0

1883 22.42 37.75 11.88 8.32 41.0

1884 19.81 30.75 10.88 7.28 34.0

1885 17.99 28.52 10.45 6.75 31.0

1886 18.71 34.52 9.28 6.75 33.0

1887 20.93 37.08 10.21 7.15 37.0

1888 18.88 29.83 10.03 7.00 39.0

1889 17.76 29.25 10.65 7.00 39.0

1890 18.41 31.78 11.07 7.00 37.0

1891 17.52 29.92 8.60 6.83 35.0

1892 15.75 30.00 7.71 6.50 34.0

1893 14.52 28.12 8.56 5.90 26.0

1894 12.66 24.00 6.94 5.11 21.0

1895 13.10 24.33 7.44 5.74 21.0

1896 12.95 28.00 7.93 5.45 18.0

1897 12.10 18.75 7.00 4.73 23½

1898 11.66 17.62 5.94 4.20 29.0

1899 19.36 28.12 6.88 5.28 31½

1900 19.98 32.29 9.25 6.05 31½

1901 15.87 27.33 8.75 5.54 26.0

1902 22.19 28.00 9.00 5.48 26¾

1903 19.92 28.00 11.18 6.25 31½

1904 15.57 28.00 11.75 7.13 32½

1905 17.88 28.00 9.80 7.00 39.0

1906 20.98 28.00 11.50 7.25 37.0

1907 23.89 28.00 12.10 7.62 36.0

1908 17.70 28.00 10.62 6.75 38.0

Year. Production of

Natural gas.[C] Iron ore.[C]

Dollars. Long tons.

1800 … …

1810 … …

1820 … …

1830 … …

1840 … …

1850 … …

1851 … …

1852 … …

1853 … …

1855 … …

1856 … …

1857 … …

1858 … …

1859 … …

1860 … …

1861 … …

1862 … …

1863 … …

1864 … …

1865 … …

1866 … …

1867 … …

1868 … …

1869 … …

1870 … 3,031,891

1871 … …

1872 … …

1873 … …

1874 … …

1876 … …

1877 … …

1878 … …

1879 … …

1880 … 7,120,362

1881 … …

1882 215,000 …

1883 475,000 …

1884 1,460,000 …

1885 4,857,200 …

1886 10,012,000 …

1887 15,817,500 …

1888 22,629,875 …

1889 21,097,099 14,518,041

1890 18,792,725 16,036,043

1891 15,500,084 14,591,178

1892 14,870,714 16,296,666

1893 14,346,250 11,587,629

1894 13,954,400 11,879,679

1895 13,006,650 15,957,614

1896 13,002,512 16,005,449

1897 13,826,422 17,518,046

1898 15,296,813 19,433,716

1899 20,074,873 24,683,173

1900 23,698,674 27,553,161

1901 27,066,077 28,887,479

1902 30,867,863 35,554,135

1903 35,807,860 35,019,308

1904 38,496,760 27,644,330

1905 41,562,855 42,526,133

1906 46,873,932 47,749,728

1907 52,866,835 51,720,619

1908 … …

Year. Production of

Pig iron.[C] Steel.[C]

Long tons. Long tons.

1800 … …

1810 53,908 …

1820 20,000 …

1830 165,000 …

1840 286,903 …

1850 563,755 …

1851 … …

1852 … …

1853 … …

1855 700,159 …

1856 788,515 …

1857 712,640 …

1858 629,548 …

1859 750,560 …

1860 821,223 …

1861 653,164 …

1862 703,270 …

1863 846,075 …

1864 1,014,282 …

1865 831,770 …

1866 1,205,663 …

1867 1,305,023 19,643

1868 1,431,250 26,786

1869 1,711,287 31,250

1870 1,665,179 68,750

1871 1,706,793 73,214

1872 2,548,713 142,954

1873 2,560,963 198,796

1874 2,023,733 389,799

1876 1,868,961 533,191

1877 2,066,594 569,618

1878 2,301,215 731,977

1879 2,741,853 935,273

1880 3,835,191 1,247,335

1881 4,144,254 1,588,314

1882 4,623,323 1,736,692

1883 4,595,510 1,673,535

1884 4,097,868 1,550,879

1885 4,044,526 1,711,920

1886 5,683,329 2,562,503

1887 6,417,148 3,339,071

1888 6,489,738 2,899,440

1889 7,603,642 3,385,732

1890 9,202,703 4,277,071

1891 8,279,876 3,904,240

1892 9,157,000 4,927,581

1893 7,124,502 4,019,995

1894 6,657,888 4,412,032

1895 9,446,308 6,114,834

1896 8,623,127 5,281,689

1897 9,652,680 7,156,957

1898 11,773,934 8,932,857

1899 13,620,703 10,639,857

1900 13,789,242 10,188,329

1901 15,878,354 13,473,595

1902 17,821,307 14,947,250

1903 18,009,252 14,534,978

1904 16,497,033 13,859,887

1905 22,992,380 20,023,947

1906 25,307,191 23,398,136

1907 25,781,361 23,362,594

1908 15,936,018 …

Year. Iron and steel Manufactures.

Imports. Exports (domestic)

Dollars. Dollars.

1800 … 52,144

1810 … 91,914

1820 … 46,552

1830 6,346,287 322,747

1840 8,157,923 1,127,877

1850 20,145,067 1,953,702

1851 22,439,297 2,336,587

1852 23,568,649 2,368,384

1853 34,944,002 2,541,554

1855 28,693,979 3,803,706

1856 29,050,101 4,256,613

1857 30,743,649 4,959,238

1858 20,171,007 4,843,592

1859 22,379,743 5,577,748

1860 26,158,235 5,870,114

1861 21,160,235 6,039,149

1862 11,451,707 4,732,348

1863 16,152,843 6,681,417

1864 23,822,876 7,541,967

1865 16,660,991 11,227,294

1866 25,598,147 4,006,180

1867 31,630,519 9,351,062

1868 30,346,768 10,950,275

1869 38,213,717 10,938,492

1870 40,273,682 13,483,163

1871 53,024,075 21,189,692

1872 67,852,616 11,463,880

1873 74,302,102 13,655,087

1874 31,432,380 19,534,215

1876 23,197,417 15,449,846

1877 19,320,927 16,501,638

1878 18,987,130 16,053,571

1879 19,594,608 15,133,493

1880 71,266,699 14,716,524

1881 60,604,477 16,608,767

1882 67,976,897 20,748,206

1883 40,147,053 21,909,881

1885 33,610,093 16,592,155

1886 37,534,078 15,745,569

1887 49,203,164 15,958,502

1888 48,992,757 17,763,034

1889 42,377,793 21,156,077

1890 41,679,591 25,542,208

1891 53,544,372 28,909,614

1892 28,928,103 28,800,930

1893 34,937,974 30,106,482

1894 20,925,769 29,220,264

1895 23,048,515 32,000,989

1896 25,338,103 41,160,877

1897 16,094,557 57,497,872

1898 12,626,431 70,406,885

1899 12,100,440 93,716,031

1900 20,478,728 121,913,548

1901 17,874,789 117,319,320

1902 27,180,247 98,552,562

1903 51,617,312 96,642,467

1904 27,028,312 111,948,586

1905 23,510,164 134,728,363

1906 29,053,987 160,984,985

1907 40,587,865 181,530,871

1908 27,607,909 183,982,182

Year. Prices of staple commodities.

Per ton.[C]

Pig iron No. 1, foundry. Steel rails, standard sections

Dollars. Dollars.

1800 … …

1810 … …

1820 … …

1830 … …

1840 27.88 …

1850 20.88 …

1851 21.38 …

1852 22.63 …

1853 36.13 …

1854 36.88 …

1855 27.75 …

1856 27.18 …

1857 26.34 …

1858 22.19 …

1859 23.33 …

1860 22.70 …

1861 20.26 …

1862 23.92 …

1863 35.24 …

1864 59.22 …

1865 46.08 …

1866 46.84 …

1867 44.08 166.00

1868 39.25 158.46

1869 40.61 132.19

1870 33.23 106.79

1871 35.08 102.52

1872 48.94 111.94

1873 42.79 120.58

1874 30.19 94.28

1875 25.53 68.75

1876 22.19 59.25

1877 18.92 45.58

1878 17.67 42.21

1879 21.72 48.21

1880 28.48 67.52

1881 25.17 61.08

1882 25.77 48.50

1883 22.42 37.75

1884 19.81 30.75

1885 17.99 28.52

1886 18.71 34.52

1887 20.93 37.08

1888 18.88 29.83

1889 17.76 29.25

1890 18.41 31.78

1891 17.52 29.92

1892 15.75 30.00

1893 14.52 28.12

1894 12.66 24.00

1895 13.10 24.33

1896 12.95 28.00

1897 12.10 18.75

1898 11.66 17.62

1899 19.36 28.12

1900 19.98 32.29

1901 15.87 27.33

1902 22.19 28.00

1903 19.92 28.00

1904 15.57 28.00

1905 17.88 28.00

1906 20.98 28.00

1907 23.89 28.00

1908 17.70 28.00

Year. Prices of staple commodities.

Middling cotton per pound.[C] Standard sheetings per yard.[C] Washed Ohio fleece wool, per lb., in eastern m’k’ts, July 1. Medium.

Cents. Cents. Cents.

1800 … … …

1810 … … …

1820 … … …

1830 … … 50..0

1840 … … 39..0

1850 12.34 7.87 37..0

1851 12.14 7.08 42..0

1852 .50 6.96 38..0

1853 11.02 7.92 53..0

1854 10.97 7.96 37..0

1855 10.39 7.64 40..0

1856 10.30 7.50 42..0

1857 13.51 8.90 50..0

1858 12.23 8.25 37..0

1859 12.08 8.50 40..0

1860 11.00 8.73 50..0

1861 13.01 10.00 30..0

1862 31.29 18.55 47..0

1863 67.21 36.04 70..0

1864 101.50 52.07 100..0

1865 83.38 38.04 73..0

1866 43.20 24.31 67..0

1867 31.59 18.28 49..0

1868 24.85 16.79 45..0

1869 29.01 16.19 48..0

1870 23.98 14.58 45..0

1871 16.95 13.00 60..0

1872 22.19 14.27 70..0

1873 20.14 13.31 48..0

1874 17.95 11.42 53..0

1875 15.46 10.41 49..0

1876 12.98 8.85 35..0

1877 11.82 8.46 44..0

1878 11.22 7.80 36..0

1879 10.84 7.97 38..0

1880 11.51 8.51 48..0

1881 12.03 8.51 44..0

1882 11.56 8.45 45..0

1883 11.88 8.32 41..0

1884 10.88 7.28 34..0

1885 10.45 6.75 31..0

1886 9.28 6.75 33..0

1887 10.21 7.15 37..0

1888 10.03 7.00 39..0

1889 10.65 7.00 39..0

1890 11.07 7.00 37..0

1891 8.60 6.83 35..0

1892 7.71 6.50 34..0

1893 8.56 5.90 26..0

1894 6.94 5.11 21..0

1895 7.44 5.74 21..0

1896 7.93 5.45 18..0

1897 7.00 4.73 23½

1898 5.94 4.20 29..0

1899 6.88 5.28 31½

1900 9.25 6.05 31½

1901 8.75 5.54 26..0

1902 9.00 5.48 26¾

1903 11.18 6.25 31½

1904 11.75 7.13 32½

1905 9.80 7.00 39..0

1906 11.50 7.25 37..0

1907 12.10 7.62 36..0

1908 10.62 6.75 38..0

The arguments in favor of bimetallism are as various as the motives of its advocates, but two or three of the more important ones may be briefly stated. It is urged because it would give a more stable measure of value than either silver or gold alone could do; and the evil effects of fluctuations in the value of gold since 1873 are pointed out to illustrate this contention. Monometallists answer this by asserting that most of the price changes can be accounted for by improvements in production; that even if they were caused by a contraction of the currency, this was simply one of the risks of business; and finally, that the evil effects of falling prices are offset by a corresponding reduction in interest rates. A second argument of the bimetallists was the alleged insufficiency of gold on which to do the world’s business. As this has been practically met by the phenomenal increase in gold production in the last decade, especially since the gold discoveries in Alaska, it is not necessary to dwell upon this argument. On February 1, 1909, the per capita circulation of money in the United States reached $35.00, the highest point in our history. A final argument of the bimetallists concerns foreign trade: it would facilitate this by establishing a fixed par-of-exchange between all countries. While the weight of this may be admitted, it has been practically deprived of all force by the adoption of the gold standard by virtually all the industrially developed nations of the world. This last fact shows that the question has now been actually settled by the logic of events and today the issue of bimetallism has only an academic interest.

Another problem connected with money which has been removed from the arena of oratory to that of calm discussion is that of government paper money. It is urged, with much truth, that if a nation issued paper money instead of gold or silver, it would save all the expense of mining these metals. It would resemble, as Adam Smith said, the discovery of wagon roads through the air in the realm of transportation. Another argument advanced in favor of government paper money is that it would be possible by a scientific adjustment of the issues to regulate the amount of money in circulation and so to prevent all fluctuations in prices. Both contraction and inflation would be prevented and a cheap and yet ideal system of money would exist. Still others see in this form of money an instrument for the creation of wealth; this last argument simply results from a confusion of ideas and need not be dealt with. A sufficient answer to the other two is an appeal to the lesson of history: no government which has embarked upon the issue of paper money has ever been able to restrict the issues within reasonable limits; often it has led to national bankruptcy and the repudiation of the entire issues. The experience of the United States with the greenbacks has been more fortunate than that of many countries, but does not tempt to further experiment.

The monetary situation in the United States today may be regarded as fairly well settled. Although we have a very heterogeneous assortment of different kinds of money, a fairly distinct sphere is allotted to each, and as the basis for all, the gold standard has been definitely established by law. Money of large denominations consists of gold and gold certificates (lowest denomination, $20), of greenbacks and national bank notes (lowest denomination, $10, though one-third of bank notes may be $5); the needs of retail trade are met by the issue of silver certificates and silver dollars, and of fractional currency. The system would be much simplified by the retirement and destruction of the $346,000,000 in greenbacks, but as there is now a fifty-per cent reserve in gold back of them, little danger need be apprehended from their presence. Many people have regarded the existence of some $500,000,000 worth of silver dollars as a menace to the goodness of our money supply, but as the amount of gold in circulation increases the silver will form a constantly smaller percentage of the whole. It is a cumbersome and not very valuable asset of the Government, but is now almost powerless for good or ill.

Important as is the subject of money and essential as is the need of a standard of undoubted goodness, it is overshadowed in practical significance by the problems of banking and credit. An investigation by the Comptroller of the Currency some years ago showed that over 90 per cent of the receipts of the national banks consisted of credit instruments, while probably 60 per cent of the trade of the country was carried on by credit rather than by cash transactions. A credit transaction is a transfer of goods or money for a future equivalent; the element of time is introduced. This makes possible an enormous increase in the number of exchanges and obviates the necessity, to a large extent, of using money. Most of us enjoy personal credit, which is limited only by our ability to persuade other people to trust in us. But this power of purchasing things without immediate payment must be made readily available if the ordinary business man is to make use of it. This is done through the medium of a bank, whose business it is to discount the notes of its customers, which in turn is based upon confidence in their prospective earnings. The bank credit thus obtained may be transferred by means of checks to other persons and to other banks. It is the most fluid and volatile means of payment yet devised, and is subject to dangers and abuses. In the last analysis business based upon such a system of credit rests upon confidence in the honesty of individuals and in the enforcement of the law governing contracts, and also in the ability of those who have pledged themselves to future payment to make good their obligations. In times of panic credit fails and resort is had to money.

The fundamental institution in our credit economy is the bank, and it is therefore essential that it be thoroughly safe and responsive to the needs of the business world. A bank may furnish its customers with the ready means of payment they need in exchange for their future promises either in the form of bank notes or bank credit. The former are more largely used on the continent of Europe and in rural districts in this country, the latter by England and the United States, especially in the cities. The preference for one or the other seems to be a matter of geography. The issue of bank notes has been very carefully safeguarded since the establishment of the national banking system in 1863. They are based upon the purchase of government bonds and are absolutely safe. They lack, however, one essential quality of good bank money in that they are quite inelastic. That is to say, the amount of bank notes in circulation does not vary according to the needs of business, increasing to meet an increased demand, and then declining again when the demand has passed. Being based upon government bonds and not upon the value of business assets, they vary in amount only with the price of the former and not at all with the volume of the latter.

The main practical problem connected with our banking system is, therefore, to find some other basis for the issue of bank notes, especially as it is not desirable to maintain a permanent bonded indebtedness solely for this purpose. Various suggestions have been made, as the establishment of a central bank with sole power of issue, like the government banks in European countries. This is a favorite proposal with the big bankers, but is unlikely to be adopted as it is directly contrary to the spirit of the existing system. The Canadian system is held up as a model, with its system of branch banking and 5 per cent safety fund for the redemption of the notes of failed banks. Curiously enough this was copied after the system in operation in New York State, which was nipped in the bud by some early mistakes and by the development of the national banking system. It works admirably in Canada and is well worth careful study. The plan of asset currency is another suggestion, according to which bank notes should be issued up to a certain percentage of the resources of the bank, but without pledging any specific property for their redemption as is done in the case of the national banks at present. It has finally been urged that our present bond deposit system should be modified by substituting state, municipal, railroad, or industrial bonds for those of the Federal Government, but that in other respects the system should be left intact. We may look for legislation along one or another of these lines in the next few years, as the subject is an urgent one whose solution cannot long be postponed.

Another problem is connected with the money reserves that the banks are required by law to keep on hand in order to meet demand liabilities. Under the national system in the United States the country banks may deposit three-fifths of their lawful reserves with banks in reserve cities, and these banks in turn may deposit one-half of their reserves in banks in central reserve cities (New York, Chicago, and St. Louis). Thus there is a massing, under this system, of the bank reserves of the country in the city of New York, and within that city in some twenty banks. While there is great economy in such a system the concentration of reserves is certainly attended by great dangers, not the least of which is its use by speculative influences in the New York money market, as a great part of it is loaned out to speculators on call.

Still another practical problem connected with the monetary and banking system of the United States is that of the independent treasury system. The Federal Government is to a large extent its own banker; it collects, disburses its revenue and keeps its money in its own vaults; it even, as we have seen, issues paper money and keeps a reserve therefor. By its action in withdrawing large amounts of money from use, or on the other hand making large disbursements, it can and does affect the money market vitally and sometimes disastrously. While it is permitted to deposit funds in selected national banks and has recently made increasing use of this privilege, thus correlating in a measure the reserves of the Government and the needs of the business community, it is held by most students that the independent treasury system should be abolished, and that the banks should act as the intermediaries between the Government and the people in the collection and expenditure of its funds.

So far we have been discussing commercial banks, but there is another kind of institution which goes by the same name but serves quite a different purpose, namely, the savings bank. The essential and almost the only requirement of such an institution is safety. As we have seen, it is not only desirable for personal reasons to inculcate habits of saving and thrift in individuals, but it is also necessary to secure the accumulation of capital needed in modern industry. It is therefore important that such institutions should be widespread, accessible, and thoroughly trusted. These requirements seem to be best fulfilled by the postal savings banks in England and elsewhere, which have led to a great increase in savings on the part of the people. The introduction of such a system in the United States is greatly to be desired.

XVI. TRANSPORTATION AND COMMUNICATION.

Almost as important for the conduct of modern industry as machine methods and credit are the rapid means of transportation and communication furnished by our railroad, steamship, express, post office, telegraph and telephone systems. Indeed the development of industry on a national scale and its integration under centralized control has been made possible only by these improvements. But not only have these businesses rendered the centralization of industry possible; they themselves exhibit on a national scale concentration of control. They are all industries of increasing returns and lend themselves naturally to monopolistic control. At the very beginning of railroad construction one of the most far-sighted managers enunciated the doctrine that “where combination is possible competition is impossible.” For years competition was regarded as the regulator of rates, pooling between railroads was forbidden, canals were advocated as competitors, and by every possible device it was sought to stimulate it. We are at last beginning to recognize the monopoly character of the railroad industry and to regulate it accordingly.

Consolidation in the railroad world is not a new phenomenon nor is it confined to that industry, but it has proceeded further there than in any other line of business. The first form which combination took was that of pooling, according to which the traffic was “pooled” and the earnings then divided among the companies entering into the pool according to some previous agreement. This was forbidden by the Interstate Commerce Act in 1887 and even more stringently by the Anti-Trust Act of 1890, and accordingly railroad managers next resorted to actual consolidation of competing lines. Where this has not been possible or desirable, virtual combination has been secured by the so-called “community of interests” arrangements, based on the acquisition by one road of enough stock in competing lines to secure representation on their boards of directors. Today some eight or nine groups of capitalists control over two-thirds of the railway mileage of the United States, and according to a recent widely-published statement the late Mr. E. H. Harriman was credited with controlling, directly or indirectly, a system aggregating over 67,000 miles. These great consolidations have followed mainly the territorial groupings of railroads; the United States has now been districted out by a few large transportation companies, much as France, Italy, England and other European countries had previously been divided up. Consolidation has in many instances resulted in increased convenience to the public and in economies in management and operation, but it places a dangerous amount of power in the hands of a few men, which has not infrequently been abused, and should clearly be under strict government control.

The primary economic problem connected with railways is always the question of rates. This has been called in a recent book “the heart of the railroad problem.” The first fact that strikes the student of the subject is the great reduction in rates and fares in the past twenty-five years, especially in freight rates. From 1.24 cents in 1882 the average revenue per ton mile received by railroads in the United States has decreased to .748 cents in 1906. Freight rates, especially through rates for bulky traffic, are considerably lower in this country, and passenger fares somewhat higher, than in Europe. But the vital problem connected with rates is not as to their relative cheapness or extortionateness; it concerns rather the granting of discriminating rates. Discriminations may be of three kinds: those between different classes of goods, those between localities, and those between persons. The first group is based upon the classification of freight and rests upon differences in cost of shipment, in bulk, in risk, etc. If reasonably employed, this kind of discrimination is justifiable. Local discriminations, that is, charging different rates to different localities for substantially the same service, is not only unwarranted in most cases, but is short-sighted as well. Where superior facilities or especially keen competition exists, lower rates may be permitted for favored localities, but the arbitrary exercise of such powers by railway officials is thoroughly unjustifiable. Even less defensible is the practice, now happily less frequent, of granting discriminatory rates to favored individuals or corporations. They have been given by means of secret rates and rebates, by under-billing and under-classification, by free passes, etc. Both of these latter evils have been forbidden or greatly restricted by the passage of the Interstate Commerce Act in 1887 and subsequent legislation.

The public nature of railroads is now fairly well recognized in our law and is beginning to be understood by the people at large. Railroads enjoy peculiar privileges in the grant of corporate franchises and charters, in the right of eminent domain, and in enormous grants of land and money which have been made to them in this country. Moreover in the functions they perform the social character of their duties is emphasized, and they are under the necessity of maintaining a constant service open to all. Though they are owned by private investors and managed as private enterprises, they are essentially public enterprises as to their privileges, functions, and duties. Consequently most of the states have now undertaken, through commissions, to regulate the railroads in the public interest. Some thirty-one have appointed commissions, which probably control four-fifths of the traffic originating and ending in a single state. These state commissions differ in power, those of the Mississippi Valley and the South usually having mandatory powers, that is, power to prescribe and enforce maximum rates. In the eastern and central states commissions with supervisory powers merely, of investigation and report, have been created. The only exceptions are found in the Far West where the need of improved transportation facilities is more pressing than regulation, and in five eastern states whose legislatures are controlled by the railroad interests. While the state commissions have done and are doing valuable service, it is clear that the growth of giant railroad combinations which traverse several states necessitates federal control. The appointment of the Interstate Commerce Commission in 1887 established the principle of federal regulation, but the application of the principle in active practice has been slow and has been impeded by the courts. The final control of rates has not yet been given to the Commission.

Owing to the individualistic character of our institutions and law, public ownership of railroads does not exist in the United States, which thus forms, together with England, almost the sole important exception to the world’s practice in this regard. On the continent of Europe government ownership is the rule. Public control through either ownership or regulation by commission is essential to secure an equitable adjustment of public and private rights and to prevent the abuse of monopoly power inherent in the very nature of railroads. Public ownership has many advantages and has given satisfactory results in Europe. But for the United States the principle of private ownership with stricter governmental regulation has been definitely laid down; the problem of the future is simply how far that control shall go.

The discussion of our steam railroads does not exhaust the subject of transportation. A recent and important development is the growth of electric interurban railways, which are opening up districts untouched by the more expensive steam roads and exercising a marked influence in rural districts upon business and social life. A more significant problem, both because of its close relations to the railroads and its monopoly character, is offered by the express companies. Organized at a time when railroads were new and undeveloped they took over the safe and expeditious delivery of small and valuable articles. They have since grown in importance and power; six large companies now control over 90 per cent of the business. Since they are generally in the form of partnerships and not of corporations it has not been possible to bring them under legal control, and their rates are extremely high—three or four times as much as freight rates. In some cases the railroads, in order to gain the profits from these high rates, have themselves organized express companies to operate over their lines, immune from interference by the Interstate Commerce Commission. Even where that is not done, the express companies are performing a service which could as well be performed by the railroads themselves and at lower rates. These facts have lent great strength to the demand for the establishment by the Federal Government in connection with the post office of a parcels post, such as exists in England and in most European countries. By the extension of the maximum limit of mail packages to ten or fifteen pounds the usefulness of the post office could be immensely increased without any loss in rates. So far, however, the express companies have been strong enough to resist the introduction of this reform, though it is warmly advocated by the present Postmaster-General. A recent important improvement in our postal service has been the extension of rural free delivery to the farming districts, thereby breaking down to a great extent the isolation of country districts. This and the rural telephone have been of great social value.

The importance of the telephone and telegraph in our modern industrial life cannot be overestimated. As means of transmitting intelligence they have served to bring the most distant parts of the world into almost instant touch, and have made possible the modern centralization of business. Both offer the same problems of monopoly that we have seen exist in other parts of this field, the telegraph business being completely monopolized by two large companies, the telephone business by one, all strongly entrenched behind patents. The desirability of public ownership of these utilities rests upon stronger grounds than in the case of railroads and is strongly urged by many conservative writers.

Although attention has usually been centered upon the railroads in any discussion of the transportation question in the United States, there are important practical problems connected with both the inland and the ocean water transportation. The questions of constructing artificial inland waterways and of subsidizing our foreign merchant marine are vital political and industrial issues. The United States is probably better provided with internal navigable natural waterways than any other country. Her navigable rivers comprise some 18,000 miles. Affording access to the very heart of the continent both from the Atlantic coast and from the Gulf. They form a cheap and convenient means of transportation, especially for bulky and cheap articles; 30,000,000 tons a year are carried on the streams of the Mississippi Valley alone, though much of the former traffic has been diverted to the railroads. On the northern border of the country the Great Lakes form an unrivaled series of inland seas. The traffic on these shows a great increase every year, amounting now to over 60,000,000 tons annually. The Federal Government has performed useful service in improving the conditions of navigation along these natural waterways, and is now considering a comprehensive scheme for their further improvement.

A very different problem is offered by our canal system. During the period 1820-1840 many canals were constructed by the states to connect existing waterways and provide an outlet for produce from the interior. The best examples of these were the Erie and the Ohio canals. After the development of the railway, however, traffic began to be steadily and then rapidly diverted from the canals to these quicker avenues of transportation. Many of the canals were bought up by their rivals and permitted to fall into disuse, while those retained by the state governments remained mere shallow ditches, unimproved and ill-adapted to modern needs. The recent appropriation by the people of New York State of over $100,000,000 for the improvement of the Erie Canal, and the construction of the Panama Canal by the Federal Government have brought the question of the rehabilitation of our neglected canal system to the front again. It seems wasteful not to connect the separate links in the magnificent system of natural waterways already provided by nature, and this will probably be the first step taken. And indeed a beginning has already been made by the construction of the Hennepin Canal, the Des Plaines Canal, and others, and a company has been formed to connect Pittsburg with Lake Erie and to cut through Cape Cod. It must, however, be borne in mind that there are two distinct types of canal: those which are simply short connecting links between navigable waterways and which permit the passage of vessels used on those waters; and those canals which are shallow, have extensive lockage, and permit the use of only small boats, thus necessitating the transshipment of freight. One might well advocate the construction and enlargement of the first type, and yet hesitate to approve of the second. As yet, however, owing in part to the opposition and clamor of railroad interests, the question of canals has not received the attention it deserves in the United States.

The ocean merchant marine comprises two widely different branches, the coastwise and the foreign trade. The former is open only to vessels flying the American flag, and has shown a very steady growth; five-sixths of our ocean merchant marine today is engaged in this branch of commerce. Coal, lumber, cotton, and similar bulky commodities constitute the chief items entering into the coastwise trade. The tonnage of American vessels engaged in the foreign trade, on the other hand, has shown a steady decline ever since the outbreak of the Civil War. Foreign vessels today carry fully 90 per cent of the foreign commerce of the United States. The causes of this decline are economic rather than political, for American legislation has on the whole been very liberal to the shipping interests. At the time the western part of our country began to be opened up and its great resources exploited, our merchant marine was one of the best in the world. But now the other opportunities for the investment of capital were so profitable and alluring, and the need of it so great, that all the available labor and capital of the American people began to be devoted to the development of their internal resources. A nation cannot do everything with equal advantage at the same time any more than an individual can. Accordingly we began to withdraw our capital from shipping and devote it to agriculture, mining, manufacturing, transportation, and similar more profitable enterprises. Foreigners could build vessels and run them more cheaply than we could and it paid us to hire them to do it. Recently, however, and especially since the recent awakening of a national consciousness after the Spanish-American War, the patriotism of many individuals has been hurt by the thought that we had to depend upon foreign vessels for the carriage of our foreign commerce, while in the minds of others a comprehensive naval program demanded the building up of a native merchant marine. Two questions suggest themselves here: Do we wish to stimulate this growth artificially? And, if we do, what means shall we adopt? On the second point the Merchant Marine Commission of 1904 recommended for the United States a general bounty on all shipping, such as France has, and the subvention of certain lines of steamers over ten specified routes, following the example of Great Britain, Germany, and Japan. Without committing ourselves on this point, it may be suggested that on political, geographical, and economic grounds we may expect in the near future to see the natural development of an American merchant marine. With the growth of our foreign trade, the accumulation of capital at home, and the building up of a strong navy, the conditions for American shipbuilding and shipping will become steadily more favorable, and we may expect to see American enterprise engage in this as in other lines of industry. Eventually we are destined to become a maritime nation.

XVII. TAXATION AND TARIFF.

In no way does the State affect the interests of its citizens more vitally than in the sphere of taxation. The State in modern society is the people organized for certain collective purposes, as for the public defense, the preservation of domestic peace, and the furtherance of the social and industrial welfare. To carry out these objects money is needed and the State has therefore to collect from its citizens sufficient revenue to defray its expenditures. John Fiske has tersely defined taxes as “portions of private property taken for public purposes.” Taxation thus implies a certain degree of compulsion; by it the Government interferes with the free choice of the individual and expends a part at least of his income for him in ways that he himself might not have chosen. The social and industrial consequences of a system of taxation may also be far-reaching and important. As Professor R. T. Ely says: “Taxation may create monopolies, or it may prevent them; it may diffuse wealth, or it may control it; it may promote labor or equality of rights, or it may tend to the establishment of tyranny and despotism; it may be used to bring about reform, or it may be used to aggravate existing grievances and foster dissensions between classes.” It is evident therefore that the utmost care should be exercised in framing a system of taxation.

Certain canons or rules of taxation were laid down by Adam Smith over a hundred years ago and have been generally endorsed by economists ever since. One was that taxes ought to be certain and not arbitrary, as to amount, time and manner of payment; another was that taxes ought to be levied in the manner most convenient to the tax-payer; and a third, that taxes ought to take as little as possible out of the pockets of the tax-payer over and above what is paid into the public treasury. These three maxims—certainty, convenience, and economy—have been generally accepted, but less general agreement exists in regard to the fourth, which states that the subjects of every state ought to contribute to the support of the Government as nearly as possible in proportion to their respective abilities. This rule has given rise to two problems: first, is ability the most just basis of taxation; and secondly, if so, how is ability to be measured? The theory of justice generally accepted by legal writers and by the American courts is expressed in the maxim that taxes should be proportioned to benefits received. The benefit theory affords a good rule in the assessment of local property taxes, but fails utterly in the domain of national and state affairs. Who can measure the benefits to each individual of an appropriation for a new war ship or for a state penitentiary or for the public school system? Probably the benefits are in inverse proportion to the income or wealth of the individual, and the heaviest taxes would then have to be apportioned to those least able to pay. Most economists today agree that taxes should be apportioned according to “faculty” or ability to pay. It satisfies better our sense of fairness and is more readily applicable than the benefit theory. In the last analysis, of course, it may be said that taxation in general must confer real benefits upon society or it will not be tolerated. Here, however, we are concerned with a rule of apportionment.

The second practical problem encountered is when we attempt to apply the faculty principle in practice; how is ability to be measured? Three measures have been suggested: expenditure, income, and property. Expenditure is open to the objection that it would place an unduly large proportion of the tax burdens on the poor, whose expenditures are larger in proportion to their means than those of other classes of society. Property is objected to because large classes of society, including professional men with large incomes, would then escape taxation largely or altogether. Income on the surface seems the fairest measure of ability, but is objected to because the incomes of different individuals, both on account of source and size, really indicate unequal and not similar abilities. In practice, however, all three methods are employed in all advanced states, so it is not necessary to decide which is theoretically the fairest.

Still another practical question confronts us after we adopt the ability theory: Shall the rate of taxation be the same no matter what the amount of the property or income, or shall it increase as the amount grows larger? In other words, shall taxation be proportional or progressive? In general the advocates of the ability theory also support progression, though there are many exceptions to this statement. Three main arguments have been urged in support of this method. First, progression is advocated in order to secure equality of sacrifice; it is argued that each dollar of a $10,000 income affords less gratification to the owner than each dollar of a $1,000 income, and that consequently in order to equalize the sacrifices of the two individuals a larger proportion of the first income should be taken than of the second. Objection is made to this, that wants expand even more rapidly than incomes and therefore the initial assumption is untrue. Progression is urged, in the second place, by those who desire to use taxation as a method of introducing social reforms or of bringing about a more equitable distribution of wealth, as by the breaking up of large fortunes. It seems inadvisable, however, to use the machinery of taxation for such purposes. Other writers urge that the ability to earn or produce wealth increases at an accelerating rate, and that taxation should therefore keep pace with it. “It is the first thousand that counts.” The objection is made here that it would penalize ability and energy. In general, while the arguments are not conclusive, progression certainly secures a nearer approach to the ideal of the ability theory than does proportional taxation. The practical application, after we accept it, is still a difficult matter. It should be applied to the revenue system as a whole by the careful selection of special taxes. As a matter of fact we have just the opposite system in the United States, for the poor man undoubtedly pays out a larger proportion of his income in taxes—principally on articles of consumption—than do his wealthy neighbors.

In the main there has been a clear division in the United States between the sources of income of the Federal Government on the one hand and those of the state and local governments on the other. The Federal Treasury has derived its revenue almost entirely from indirect taxes—excise and customs—while the other governments have depended chiefly upon direct taxes upon persons, property, business, corporations, and inheritances. The division rests upon the constitutional allotment of powers, but it also corresponds very closely to the industrial and political functions of each in their relations to the individual citizens. The chief duty of the Federal Government is that of national defense and foreign intercourse, relations which are national in extent but which affect the individual only remotely; so, too, its taxing area is national and its exactions are felt only distantly. Few persons, it has been said, taste the tax in their tea or their whisky, yet over one-third of all the taxes collected in the United States are derived from either customs or excise duties. Whisky and tobacco contribute most of the internal revenue, while import duties are levied on practically everything brought into the country which could compete with any home product. These two sources yield over $500,000,000 a year to the Federal Treasury. During the Civil War these sources of revenue were supplemented by a federal income tax, but as such a tax was later declared unconstitutional by the Supreme Court, further recourse to this in the near future seems improbable. From a purely economic and financial point of view this is very regrettable, for the Federal Government should unquestionably have at its command the means of quickly raising large additional revenue with as little disturbance to industry as possible. Such a means would be afforded by the income tax, which moreover can be administered only by the Federal Government, as it must be national in its operations to be fair.

The main reliance of the state and local governments in this country is the general property tax, which amounted in 1902 to over $700,000,000 or almost half of all the taxes collected. This really consists of two very distinct parts, which present quite different problems, namely, the tax on real property and that on personal property. Under our peculiar system, by which property is assessed locally, and upon the basis of that assessment its share of the state taxes distributed to each locality, there is every incentive offered to the local assessor to under-value the land in his jurisdiction, thereby escaping part of the state burdens. This evil of inequality between localities could be obviated by the simple expedient of relieving real estate of all state taxes and leaving it solely to the counties and cities for purposes of taxation. In the case of personal property the great evil is evasion. Much of our modern wealth exists in the form of securities, stocks, bonds, mortgages, etc., and this is practically undiscoverable by assessors except by the voluntary declaration of the tax-payer, which is only truthfully made by trustees and a few conscientious persons. Most of our laws have been directed to the discovery of this intangible property, as it is called, but without avail. In a few of the most progressive states the effort has at last been recognized as futile, and the attempt is now being made to reach these sources of income indirectly, by taxes on corporations, on business, franchises and other tangible evidences of wealth.

Not only are corporation, business, license and similar taxes being developed, but increasing resort is had to inheritance taxes, over thirty states now making use of this form of taxation. They are more frequently imposed on collateral than direct inheritances, and in many states are progressive, both as to amount and as to nearness of relationship. Thus in Wisconsin the rates advance from one per cent for bequests under $25,000 to husband, wife, or lineal relation, to 15 per cent for sums over $500,000 to very distant relatives or strangers. These various forms of taxation are necessary to secure the needed revenues for the state governments, especially if these forego further resort to taxation of realty. The tendency is now sufficiently marked to make it possible to indicate with some certainty the future of taxation in this country. To a certain extent, however, this must be regarded as the expression of an ideal rather than the description of an existing system. The Federal Government should have customs and excise duties, supplemented by an income tax. The state governments should have corporation and inheritance taxes. The cities and minor civil divisions should have taxes on realty, and license and franchise taxes. Such a division is logical and avoids duplication of taxation of the same source by two or more grades of government. In view of the pre-emption of the field of corporation taxation by the states, it is therefore doubly regrettable that the Federal Government should now (August, 1909) have adopted a tax on income of corporations for federal purposes.

Other problems connected with finance are suggested in connection with the universal tendency to increase in governmental expenditures and in public debts. The former is an expression of the growth and expansion of state functions, which will be discussed in the next section. The latter is due in part to this same fact, in part also to the development of credit and the creation of a market for the sale of public and other securities, and finally to the growth of constitutional government, which has made the people willing to entrust their capital to a government which they themselves as citizens really control.

The question of the tariff involves such important economic as well as financial consideration that it seems best to discuss this form of taxation somewhat more fully. For it has been used not merely as a means of raising revenue but also as an instrument to develop particular industries and prevent foreign competition. Any detailed discussion of this subject therefore involves a statement of the pros and cons of protection and free trade. It should be said, however, in advance that the real issue is not free trade, for that is demanded by only a few doctrinaires, but freer trade through an intelligent revision of the tariff downward. The system of protection has prevailed in the United States for virtually one hundred years, and could not be suddenly changed and abolished if one would. From the financial standpoint, too, import duties are absolutely essential to the support of our Federal Government; the question here is not absolutely free trade, but the choice of articles for revenue purposes. Shall they be those which are not produced in this country or those which enter into competition with domestic products? If financial considerations alone prevailed, the former would undoubtedly be selected as the more convenient, certain, and economical. But in the determination of the tariff policies of the United States economic considerations have been paramount and to an examination of these we must now turn.

Historically the following arguments have played the main role in support of protection at different times in the United States. The infant industries argument was advanced by Hamilton in his celebrated Report on Manufactures in 1791 and has always been important until recently when the infants had grown to be so lusty that it was evident that other reasons for protecting them must be discovered. This was found in the plea for diversified production, which was necessary for a well-rounded economic development; the need of creating a strong national government and national spirit also played their part. In order to win over the farmers the home market argument was early urged; this has taken various forms. In the first place it was urged that the building up of manufacturing centers and the consequent increase in population would give the farmers a better market than the fluctuating foreign one. As set forth by Carey, it would keep within the country the elements taken from the soil. It would also save the freights on the transportation of goods back and forth across the ocean. Each of these arguments has lost force with the development of the country and the decrease in the cost of transportation. More important today is the wages argument; at first protection was urged because wages were high in the United States and the manufacturer needed to be protected against his foreign competitor who employed cheap labor. Today it is argued that protection has raised wages and must be continued in order to protect the laborer against the pauper labor of Europe. Curiously enough, in France protection is urged for French workmen against the highly paid and efficient American. The effect of the tariff on wages has been greatly exaggerated; wages are high in the United States because the productivity of labor is high. Indeed so far as the tariff raises prices it may be argued that the real wages of labor are lowered. More generally accepted as defensible grounds for protection are the political arguments that a nation should be able to produce its own military armaments and supplies, and that it should be able to use the tariff as a retaliatory measure. Recently this latter has received considerable force from the practice of “dumping,” by which is meant the occasional sale of products abroad at prices lower than those charged at home. Domestic manufacturers in the country thus treated are of course seriously injured and have insisted upon protection against this procedure which has been authorized in Canada.

In answer to these various arguments the free traders, or those desiring a modification of present high rates, make their main appeal to the doctrine of comparative costs. Briefly stated this asserts that nations, like individuals, can do some things better than others. Like the individual lawyer therefore who pays to have his boots blacked while he devotes himself to the law, the nation should produce the things it is best fitted for and pay others to produce other things which it can do less well. In this way each will obtain the largest possible return. Protection, which interferes with this natural international division of labor, simply diverts labor and capital from more into less profitable industries. Practically, this purely abstract economic argument has had little influence on the commercial policy of nations, which have been moved more by political and industrial considerations. Today, however, there is no question but that the freer movement of capital and industry throughout the world would be advantageous. In answer to the home market argument it is pointed out that with the growth of large-scale production the profitable area of manufacture has greatly widened and now in many cases transcends national boundaries. As home producers seek foreign markets, as they are beginning to do, they themselves will demand a reduction of the tariff, especially in the matter of raw materials. Free traders also deny the need of artificially diversifying industry in a country as large and varied as the United States, or of building up infant industries. Indeed, on the latter point, they urge that many of our trusts are the result of the tariff, and that the attempt to grant legislative favors has resulted only in wholesale demoralization and a debauching of our national politics.

In conclusion it may be said that under certain conditions the policy of protection is relatively defensible; that it has undoubtedly hastened the industrial development of the United States, though it has not caused it; and that, on the other hand, it is responsible for not a few evils in our political and industrial life. The struggle of particular interests during the framing of the Payne bill shows the impossibility of deciding this issue upon academic grounds. It may be prophesied, however, that as our manufacturers reach out more seriously after the foreign markets the tariff will be modified so as to make this possible; but he would be a rash prophet who should predict a sudden or great change in our tariff policy within the present generation.

XVIII. THE FUNCTIONS OF GOVERNMENT.

In the course of the preceding pages we have repeatedly referred to the necessity or desirability of governmental action, and have emphasized the important part which it plays in our economic life today. Every practical economic problem that confronts us calls in some degree for the exercise of state activity. It is necessary for us then, if we are to render sound judgment on these questions, to have a clear opinion as to the proper sphere of government action, as to how far the State should interfere in the economic activities of private individuals. We cannot do better than to state first the main functions of a modern state. The modern industrial system, as we saw in the first section, is based upon certain fundamental institutions—personal liberty, competition, and private property. The first function of government is to guarantee to every individual the rights of freedom, property, and contract; this involves the maintenance of peace and order. These are often spoken of as “natural rights”; rather they are rational rights, based upon expediency and human welfare, and are created and maintained by society. Without the constant support and intervention of government they would possess little reality or significance. But in addition to guaranteeing these fundamental institutions, modern governments grant individuals certain privileges, as patents, copyrights, trade-marks, franchises, etc., designed to stimulate the economic activity of individuals.

A second group of functions undertaken by the modern state is regulative. As we have seen, laws are made regulating the freedom of contract, the conditions of labor, the conduct of business, methods of banking and transportation, etc. The terms under which competitive business may be conducted are laid down, and while freedom of industry prevails for every individual it is only on condition that he conforms to the rules of the game thus prescribed. But the conditions are not merely restrictive; sometimes they are designed to promote enterprise, as in the case of gifts, subsidies, protective duties, etc. In all these ways the State interferes with the action of perfectly free competition for the purpose of securing better or more equitable conditions. A third group of functions embraces the direct participation in industry by the Government itself, as the post-office, gas, electric, and water works, canals, roads, sewers, parks, etc. In other countries, when the functions of government are more extended than in the United States, it conducts railroads, telegraph and telephone systems, tenements, pawn shops, theaters, industrial insurance, or various other activities. The line which divides public from private enterprise varies greatly in different countries.

This raises the general question, how far is it desirable that the economic functions of government should extend? As to the necessity of state activity in some form there can be no doubt. Production, exchange, distribution, and to a smaller extent consumption, are all social processes; they concern the whole of society, and must be brought under social control. Montesquieu laid down the proposition in the middle of the eighteenth century that taxes invariably increase with the growth of liberty. Historically this has been verified: the development of freedom in government and industry has meant the realization of self-restraint by the imposition of regulative law. But the modern State has gone further than this: it has realized the necessity of taking an active part in modern industrial life, for the equalization of the terms of competition, the redress of grievances, and the furnishing of utilities, either because it could do it better or because it was the only agency capable of acting. The standpoint of this treatise has been one of moderate individualism, believing in free competition and individual initiative, but not frightened off by the bogey of socialism, if at any point the interference of government seemed desirable or necessary. To present the matter clearly it will be well to state briefly the main theories that have been held as to the proper function of government, arranging them in their logical, though not in their historical, order.

At one extreme stands anarchism, which must be thought of not as anarchy and riot, but as a philosophical theory of society. Scientific anarchism contemplates an ideal state of perfect freedom, in which the State, the coercive exercise of authority by man over man, would not exist. According to this theory only the individual has rights; there is no more divinity of right in a majority than there is in kings. Government is an invasion of the right of the individual to do as he will, and should be abolished; with its abolition would vanish the various moral, social, and industrial evils to which it has given rise, and human society would develop on a higher plane. Stated in its extreme form anarchism is evidently too ideal for frail human nature as at present constituted. Of more practical importance has been the theory of extreme individualism as set forth by Herbert Spencer—a view designated by Huxley as the night-watchman theory of the State. According to this the functions of government should be limited to the protection of life and property and the enforcement of contracts, but should not include such things as education, regulation of industry, local improvements, charities, coinage, etc. Private initiative and competition are trusted to supply these things, while the economic harmony of the interests of each individual with those of society will prevent any wrong from being done. The keynote of the whole theory lies in the view that government is an evil, though a necessary one, and should consequently be restricted. Adam Smith’s system of “national liberty” went somewhat further, as it added to the three functions named above, the construction of public works and buildings, etc.; but it excluded such activities as education and the civil courts, which we regard as most suited to government management. This theory had its origin in the reaction against the undue interference with industry by the Government under mercantilism and had thus a historic justification and value.

The theory most generally held by economists and writers in the United States is probably the modified individualism set forth by John Stuart Mill. According to him, freedom of industry or “laissez faire should be the general practice; every departure from it, unless required by some great good, is a certain evil.” Industry, he said, should be left to individuals and the Government should never interfere unless there is an antagonism between social and private interests. Individuals following their own interests will always conduct business better than the Government, which is inefficient, corrupt, and can fall back on taxation to cover its mistakes. Individualism should therefore be the rule and governmental action the exception. But Mill himself admitted that there was no theoretical limit to the extension of governmental functions, and in so doing is said to have opened the door to socialism. Nevertheless, the basic idea is still that government is an evil and an extension of its activities is on the whole undesirable.

Opposed to this view is the culture state theory, enunciated by Roscher and very generally held in Germany, which regards the State as a beneficent, positive and constructive force in our industrial life. The advocates of this theory point out that the functions of the Government change with progress, and that in our complex modern industrial life it should seek to improve conditions positively, and not leave the people to the mercies of a blind competitive struggle; practically, it should regulate industry, conditions of work, housing, etc., and should manage all public utilities which affect the life or well-being of the citizens, as railroads, telegraphs, industrial insurance, etc. Still further in the same direction goes the view known as state socialism, of whom the best-known advocate is Professor Wagner. This advocates individualism, but insists that it is responsible for many injustices and evils, which it is consequently the duty of the State to redress. For instance, the State should correct the inequalities of wealth brought about by the distribution of the social income under the present competitive system; this should be done by the progressive taxation of inheritances and incomes, the limitation of inheritance and bequest, the government ownership of public utilities, as railroads, telegraph, telephone, coal mines, etc. This theory stops just short of socialism, but enlarges the functions of the State to the largest degree compatible with individualism. Beyond this, and at the farthest extreme from anarchism, stands socialism, which, however, demands a more careful examination than the other views have received because of its present prominence.

Socialism may be briefly defined in the words of Professor Ely[49] as “that contemplated system of industrial society which proposes the abolition of private property in the great material instruments of production, and the substitution therefor of collective property; and advocates the collective management of production, together with the distribution of social income by society, and private property in the larger proportion of this social income.” Four features are involved in this definition, namely, common ownership, production, distribution, and private incomes. The cardinal and distinctive element in socialism is the collective or social ownership of the means of production, that is, of the land and capital. Instead of having these owned privately as today, they would be owned by the people as a whole, by the State, and used by them for production. Socialists do not oppose capital, as is often said, but only the private ownership of capital. But under such a system private business as we know it today, individual enterprise for the sake of profit, could not exist. It is often urged that socialism means a “grand divide,” and that in such an event the shrewder and more thrifty would shortly have the wealth of the idle or stupid members of society. But just that is guarded against under socialism, for there would be no private ownership of capital, and hence no one could get his neighbor’s share; it would all be held under collective ownership. With the abolition of private capital, there would disappear of course all the economic institutions that have grown up around it, as credit, banking, lease, hire, the stock and produce exchanges, etc.

Socialism also means the collective or social organization and management of industry. Socialists criticise severely our present methods of production, which they call planless and wasteful. They point to the constant recurrence of crises as an evidence of mistakes of the competitive system, which they say could be obviated under a well-organized comprehensive scheme. They also urge the wastes of modern capitalism, in the duplication of plants, advertising (which amounts to $500,000,000 a year in the United States and serves little useful purpose), traveling salesmen, multiplication of small stores, etc. Finally, an artificial disharmony between the interests of society and private individuals is promoted by our system of private property and profit: a coal trust limits the supply, farmers rejoice over small crops, and planters burn part of their cotton, in short the bounty of nature is regarded as a calamity. Some truth may be admitted in these criticisms, but in answer it may be said that some of them are being corrected under individualism, while as to those that remain the remedy offered is worse than the disease. The first and fundamental question is the effect of socialism on the amount produced, for as we have seen any diminution would mean a worse economic condition of society, even though it were offset by a more equal distribution. Under individualism the appeal to industry and thrift is the self-interest of the individual, and under the stimulus of this motive the production of wealth has been increased enormously. It is doubtful whether the motives of altruism, desire for social approbation, and similar ones suggested by the socialists would promote industrial activity as efficiently as the individualistic desire for pecuniary gain.

Moreover the difficulties of organizing and managing all industries would be enormous. According to the socialist plan, statistics of consumption would be gathered in advance, the idle changes of fashion would of course disappear, and production could be accurately calculated. But aside from the problem of securing an honest and efficient administration, the work of organizing industry from a centralized bureau would probably prove insurmountable. The distribution of the labor force among various employments suggests another difficulty. Under individualism the necessary distribution takes place through the agency of wage payments and the choice of an occupation is left free to the individual. As the wage-system would disappear with the abolition of private capital, some other means would have to be devised, as allotment by the Government. But more important would be the selection of the managers of industry; competition provides a process whereby the inefficient are eliminated and the able put in charge. As socialism would be an industrial democracy the selection of the captains of industry under that system would probably be made by election. Is it likely that the voters would place over themselves the ablest, that is the strictest, most economical, and most energetic man? Taking men as we find them today, this may well be doubted.