Magazine article Financial History

Economic Titans DEBATE ON Free Trade versus Protectionism IN 1869

Magazine article Financial History

Economic Titans DEBATE ON Free Trade versus Protectionism IN 1869

Article excerpt

The Civil War was history. But by 1869, a new war had emerged as the United States set on a path to become the leading industrialized nation of the world. The nation, ravaged with debt from the war, needed to make money fast. Tariffs were seen by many as the most effective solution.

In the last four years of the 1860s, tariffs on all imports averaged 45%.

"Those interested in an expanded role for the federal government, whether building national roads...or paying for postCivil War pensions, tended to approve higher tariffs," said University of California at Berkeley economist J. Bradford Delong, in his study on US trade policy. Delong, who also served as a Deputy Assistant Treasury Secretary under former President Bill Clinton, reported that those seeking higher tariffs joined political forces with a coalition of Northeastern and Midwestern manufacturers seeking protection against the British.

However, much like in today's Congressional battles concerning the overreaching role of government, not everyone supported the idea of raising government tariffs.

Free trade advocates believed that the rising tariffs on imports would become permanent. They blamed high tariffs on imported copper ore for the demise of Baltimore and Boston copper smelters. The tariffs resulted in rising copper prices, which led to falling demand.

American businesses that imported goods from overseas and US agricultural exporters, concerned over foreign taxes on their produce, pressed Congress for tariff reform.

Both sides of the issue of foreign tariffs were showcased in landmark public debates between two New Hampshireborn Republicans. They were Horace Greeley, a founder of the Republican Party and editor of the New York Tribune, and Arthur Latham Perry, an author and economics professor at Williams College in Williamstown, MA.

The two squared off in four heated debates during the summer of 1869 that spanned St. Louis, Detroit, Boston and New York.

How the Debates Got Started

The seeds of the post-Civil War US free trade movement sprouted in March 1865, when Treasury Secretary Hugh McCulloch appointed David A. Wells chairman of the country's revenue commission. His annual salary was $4,000 plus travel expenses. Wells, an economist, initially was a firm believer that tariffs on imports were required to protect American workers. His commission wrote revenue bills that reduced domestic sales taxes, but increased tariffs on foreign goods. Congress adopted them.

However, Wells abruptly changed his tune and ultimately was dismissed from his post following the failure of his last proposed bill to cut tariffs. Historians report that Wells, disgusted at all the influence peddling in Washington - especially by Pennsylvanians - changed his views following a fact-finding mission. He used his taxpayer-funded travel expenses to visit free-trade England. There, Wells studied the controversial British "Corn Laws," which, especially in the 18th and 19th centuries, regulated grain prices before their repeal in 1846. Though initially enacted to protect England's farmers and the country's food supply, the British regulations came under fire when they triggered higher costs that hurt British textile manufacturers.

In 1867, Wells, with Perry and William Cullen Bryant, editor of the New York Evening Post, helped launch the American Free Trade League, New York. The organization, of which Wells ultimately became president, committed to campaigning politically against tariffs on imports - except when truly needed for revenue.

The American Free Trade League sponsored lectures and published news articles and pamphlets supporting lower foreign tariffs. By 1869, they had built a war chest of more than $30,000, which would be worth more than $2 million today.

Horace Greeley, then 59, was an extremist favoring the tariff on imports. A friend of President Abraham Lincoln, he has been credited with founding the first national newspaper, the New York Tribune, and building its circulation to 300,000 readers. …

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