The New Freedom by Woodrow Wilson

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When I reflect upon the "protective" policy of this country, and observe
that it is the later aspects and the later uses of that policy which have
built up trusts and monopoly in the United States, I make this contrast in
my thought: Mr. McKinley had already uttered his protest against what he
foresaw; his successor saw what McKinley had only foreseen, but he took no
action. His successor saw those very special privileges, which Mr.
McKinley himself began to suspect, used by the men who had obtained them
to build up a monopoly for themselves, making freedom of enterprise in
this country more and more difficult. I am one of those who have the
utmost confidence that Mr. McKinley would not have sanctioned the later
developments of the policy with which his name stands identified.

What is the present tariff policy of the protectionists? It is not the
ancient protective policy to which I would give all due credit, but an
entirely new doctrine. I ask anybody who is interested in the history of
high "protective" tariffs to compare the latest platforms of the two
"protective" tariff parties with the old doctrine. Men have been struck,
students of this matter, by an entirely new departure. The new doctrine of
the protectionist is that the tariff should represent the difference
between the cost of production in America and the cost of production in
other countries, _plus_ a reasonable profit to those who are engaged in
industry. This is the new part of the protective doctrine: "_plus_ a
reasonable profit." It openly guarantees profit to the men who come and
ask favors of Congress. The old idea of a protective tariff was designed
to keep American industries alive and, therefore, keep American labor
employed. But the favors of protection have become so permanent that this
is what has happened: Men, seeing that they need not fear foreign
competition, have drawn together in great combinations. These combinations
include factories (if it is a combination of factories) of all grades: old
factories and new factories, factories with antiquated machinery and
factories with brand-new machinery; factories that are economically and
factories that are not economically administered; factories that have
been long in the family, which have been allowed to run down, and
factories with all the new modern inventions. As soon as the combination
is effected the less efficient factories are generally put out of
operation. But the stock issued in payment for them has to pay dividends.
And the United States government guarantees profit on investment in
factories that have gone out of business. As soon as these combinations
see prices falling they reduce the hours of labor, they reduce production,
they reduce wages, they throw men out of employment,--in order to do what?
In order to keep the prices up in spite of their lack of efficiency.

There may have been a time when the tariff did not raise prices, but that
time is past; the tariff is now taken advantage of by the great
combinations in such a way as to give them control of prices. These things
do not happen by chance. It does not happen by chance that prices are and
have been rising faster here than in any other country. That river that
divides us from Canada divides us from much cheaper living,
notwithstanding that the Canadian Parliament levies duties on
importations.

* * * * *

But "Ah!" exclaim those who do not understand what is going on; "you will
ruin the country with your free trade!" Who said free trade? Who proposed
free trade? You can't have free trade in the United States, because the
government of the United States is of necessity, with our present division
of the field of taxation between the federal and state governments,
supported in large part by the duties collected at the ports. I should
like to ask some gentlemen if very much is collected in the way of duties
at the ports under the particular tariff schedules under which they
operate. Some of the duties are practically prohibitive, and there is no
tariff to be got from them.

When you buy an imported article, you pay a part of the price to the
Federal government in the form of customs duty. But, as a rule, what you
buy is, not the imported article, but a domestic article, the price of
which the manufacturer has been able to raise to a point equal to, or
higher than, the price of the foreign article _plus the duty_. But who
gets the tariff tax in this case? The government? Oh, no; not at all. The
manufacturer. The American manufacturer, who says that while he can't sell
goods as low as the foreign manufacturer, all good Americans ought to buy
of him and pay him a tax on every article for the privilege. Perhaps we
ought. The original idea was that, when he was just starting and needed
support, we ought to buy of him, even if we had to pay a higher price,
till he could get on his feet. Now it is said that we ought to buy of him
and pay him a price 15 to 120 per cent. higher than we need pay the
foreign manufacturer, even if he is a six-foot, bearded "infant," because
the cost of production is necessarily higher here than anywhere else. I
don't know why it should be. The American workingman used to be able to do
so much more and better work than the foreigner that that more than
compensated for his higher wages and made him a good bargain at any wage.

Of course, if we are going to agree to give any fellow-citizen who takes
a notion to go into some business or other for which the country is not
especially adapted,--if we are going to give him a bonus on every article
he produces big enough to make up for the handicap he labors under because
of some natural reason or other,--why, we may indeed gloriously diversify
our industries, but we shall beggar ourselves. On this principle, we shall
have in Connecticut, or Michigan, or somewhere else, miles of hothouses in
which thousands of happy American workingmen, with full dinner-pails, will
be raising bananas,--to be sold at a quarter apiece. Some foolish person,
a benighted Democrat like as not, might timidly suggest that bananas were
a greater public blessing when they came from Jamaica and were three for a
nickel, but what patriotic citizen would listen for a moment to the
criticisms of a person without any conception of the beauty and glory of
the great American banana industry, without realization of the proud
significance of the fact that Old Glory floats over the biggest banana
hothouses in the world!

But that is a matter on one side. What I am trying to point out to you
now is that this "protective" tariff, so-called, has become a means of
fostering the growth of particular groups of industry at the expense of
the economic vitality of the rest of the country. What the people now
propose is a very practical thing indeed: They propose to unearth these
special privileges and to cut them out of the tariff. They propose not to
leave a single concealed private advantage in the statutes concerning the
duties that can possibly be eradicated without affecting the part of the
business that is sound and legitimate and which we all wish to see
promoted.

Some men talk as if the tariff-reformers, as if the Democrats, weren't
part of the United States. I met a lady the other day, not an elderly
lady, who said to me with pride: "Why, I have been a Democrat ever since
they hunted them with dogs." And you would really suppose, to hear some
men talk, that Democrats were outlaws and did not share the life of the
United States. Why, Democrats constitute nearly one half the voters of
this country. They are engaged in all sorts of enterprises, big and
little. There isn't a walk of life or a kind of occupation in which you
won't find them; and, as a Philadelphia paper very wittily said the other
day, they can't commit economic murder without committing economic
suicide. Do you suppose, therefore, that half of the population of the
United States is going about to destroy the very foundations of our
economic life by simply running amuck amidst the schedules of the tariff?
Some of the schedules are so tough that they wouldn't be hurt, if it did.
But that isn't the program, and anybody who says that it is simply doesn't
understand the situation at all. All that the tariff-reformers claim is
this: that the partnership ought to be bigger than it is. Just because
there are so many of them, they know how many are outside. And let me tell
you, just as many Republicans are outside. The only thing I have against
my protectionist fellow-citizens is that they have allowed themselves to
be imposed upon so many years. Think of saying that the "protective"
tariff is for the benefit of the workingman, in the presence of all those
facts that have just been disclosed in Lawrence, Mass., where the worst
schedule of all--"Schedule K"--operates to keep men on wages on which they
cannot live. Why, the audacity, the impudence, of the claim is what
strikes one; and in face of the fact that the workingmen of this country
who are in unprotected industries are better paid than those who are in
"protected" industries; at any rate, in the conspicuous industries! The
Steel schedule, I dare say, is rather satisfactory to those who
manufacture steel, but is it satisfactory to those who make the steel with
their own tired hands? Don't you know that there are mills in which men
are made to work seven days in the week for twelve hours a day, and in the
three hundred and sixty-five weary days of the year can't make enough to
pay their bills? And this in one of the giants among our industries, one
of the undertakings which have thriven to gigantic size upon this very
system.

Ah, the whole mass of the fraud is falling away, and men are beginning to
see disclosed little groups of persons maintaining a control over the
dominant party and through the dominant party over the government, in
their own interest, and not in the interest of the people of the United
States!

* * * * *

Let me repeat: There cannot be free trade in the United States so long as
the established fiscal policy of the federal government is maintained. The
federal government has chosen throughout all the generations that have
preceded us to maintain itself chiefly on indirect instead of direct
taxation. I dare say we shall never see a time when it can alter that
policy in any substantial degree; and there is no Democrat of
thoughtfulness that I have met who contemplates a program of free trade.

But what we intend to do, what the House of Representatives has been
attempting to do and will attempt to do again, and succeed in doing, is to
weed this garden that we have been cultivating. Because, if we have been
laying at the roots of our industrial enterprises this fertilization of
protection, if we have been stimulating it by this policy, we have found
that the stimulation was not equal in respect of all the growths in the
garden, and that there are some growths, which every man can distinguish
with the naked eye, which have so overtopped the rest, which have so
thrown the rest into destroying shadow, that it is impossible for the
industries of the United States as a whole to prosper under their
blighting shade. In other words, we have found out that this that
professes to be a process of protection has become a process of
favoritism, and that the favorites of this policy have flourished at the
expense of all the rest. And now we are going into this garden and weed
it. We are going into this garden and give the little plants air and light
in which to grow. We are going to pull up every root that has so spread
itself as to draw the nutriment of the soil from the other roots. We are
going in there to see to it that the fertilization of intelligence, of
invention, of origination, is once more applied to a set of industries now
threatening to be stagnant, because threatening to be too much
concentrated. The policy of freeing the country from the restrictive
tariff will so variegate and multiply the undertakings in the country that
there will be a wider market and a greater competition for labor; it will
let the sun shine through the clouds again as once it shone on the free,
independent, unpatronized intelligence and energy of a great people.

One of the counts of the indictment against the so-called "protective"
tariff is that it has robbed Americans of their independence,
resourcefulness, and self-reliance. Our industry has grown invertebrate,
cowardly, dependent on government aid. When I hear the argument of some of
the biggest business men in this country, that if you took the
"protection" of the tariff off they would be overcome by the competition
of the world, I ask where and when it happened that the boasted genius of
America became afraid to go out into the open and compete with the world?
Are we children, are we wards, are we still such puerile infants that we
have to be fed out of a bottle? Isn't it true that we know how to make
steel in America better than anybody else in the world? Yet they say, "For
Heaven's sake don't expose us to the chill of prices coming from any other
quarter of the globe." Mind you, we can compete with those prices. Steel
is sold abroad, steel made in America is sold abroad in many of its forms,
much cheaper than it is sold in America. It is so hard for people to get
that into their heads!

We set up a kindergarten in New York. We called it the Chamber of Horrors.
We exhibited there a great many things manufactured in the United States,
with the prices at which they were sold in the United States, and the
prices at which they were sold outside of the United States, marked on
them. If you tell a woman that she can buy a sewing machine for eighteen
dollars in Mexico that she has to pay thirty dollars for in the United
States, she will not heed it or she will forget it unless you take her and
show her the machine with the price marked on it. My very distinguished
friend, Senator Gore, of Oklahoma, made this interesting proposal: that
we should pass a law that every piece of goods sold in the United States
should have on it a label bearing the price at which it sells under the
tariff and the price at which it would sell if there were no tariff, and
then the Senator suggests that we have a very easy solution for the tariff
question. He does not want to oblige that great body of our
fellow-citizens who have a conscientious belief in "protection" to turn
away from it. He proposes that everybody who believes in the "protective"
tariff should pay it and the rest of us should not; if they want to
subscribe, it is open to them to subscribe.

As for the rest of us, the time is coming when we shall not have to
subscribe. The people of this land have made up their minds to cut all
privilege and patronage out of our fiscal legislation, particularly out of
that part of it which affects the tariff. We have come to recognize in the
tariff as it is now constructed, not a system of protection, but a system
of favoritism, of privilege, too often granted secretly and by subterfuge,
instead of openly and frankly and legitimately, and we have determined to
put an end to the whole bad business, not by hasty and drastic changes,
but by the adoption of an entirely new principle,--by the reformation of
the whole purpose of legislation of that kind. We mean that our tariff
legislation henceforth shall have as its object, not private profit, but
the general public development and benefit. We shall make our fiscal laws,
not like those who dole out favors, but like those who serve a nation. We
are going to begin with those particular items where we find special
privilege intrenched. We know what those items are; these gentlemen have
been kind enough to point them out themselves. What we are interested in
first of all with regard to the tariff is getting the grip of special
interests off the throat of Congress. We do not propose that special
interests shall any longer camp in the rooms of the Committee on Ways and
Means of the House and the Finance Committee of the Senate. We mean that
those shall be places where the people of the United States shall come and
be represented, in order that everything may be done in the general
interest, and not in the interest of particular groups of persons who
already dominate the industries and the industrial development of this
country. Because no matter how wise these gentlemen may be, no matter how
patriotic, no matter how singularly they may be gifted with the power to
divine the right courses of business, there isn't any group of men in the
United States or in any other country who are wise enough to have the
destinies of a great people put into their hands as trustees. We mean that
business in this land shall be released, emancipated.

VIII

MONOPOLY, OR OPPORTUNITY?

Gentlemen say, they have been saying for a long time, and, therefore, I
assume that they believe, that trusts are inevitable. They don't say that
big business is inevitable. They don't say merely that the elaboration of
business upon a great co-operative scale is characteristic of our time and
has come about by the natural operation of modern civilization. We would
admit that. But they say that the particular kind of combinations that are
now controlling our economic development came into existence naturally and
were inevitable; and that, therefore, we have to accept them as
unavoidable and administer our development through them. They take the
analogy of the railways. The railways were clearly inevitable if we were
to have transportation, but railways after they are once built stay put.
You can't transfer a railroad at convenience; and you can't shut up one
part of it and work another part. It is in the nature of what economists,
those tedious persons, call natural monopolies; simply because the whole
circumstances of their use are so stiff that you can't alter them. Such
are the analogies which these gentlemen choose when they discuss the
modern trust.

I admit the popularity of the theory that the trusts have come about
through the natural development of business conditions in the United
States, and that it is a mistake to try to oppose the processes by which
they have been built up, because those processes belong to the very nature
of business in our time, and that therefore the only thing we can do, and
the only thing we ought to attempt to do, is to accept them as inevitable
arrangements and make the best out of it that we can by regulation.

I answer, nevertheless, that this attitude rests upon a confusion of
thought. Big business is no doubt to a large extent necessary and natural.
The development of business upon a great scale, upon a great scale of
co-operation, is inevitable, and, let me add, is probably desirable. But
that is a very different matter from the development of trusts, because
the trusts have not grown. They have been artificially created; they have
been put together, not by natural processes, but by the will, the
deliberate planning will, of men who were more powerful than their
neighbors in the business world, and who wished to make their power secure
against competition.

The trusts do not belong to the period of infant industries. They are not
the products of the time, that old laborious time, when the great
continent we live on was undeveloped, the young nation struggling to find
itself and get upon its feet amidst older and more experienced
competitors. They belong to a very recent and very sophisticated age, when
men knew what they wanted and knew how to get it by the favor of the
government.

Did you ever look into the way a trust was made? It is very natural, in
one sense, in the same sense in which human greed is natural. If I
haven't efficiency enough to beat my rivals, then the thing I am inclined
to do is to get together with my rivals and say: "Don't let's cut each
other's throats; let's combine and determine prices for ourselves;
determine the output, and thereby determine the prices: and dominate and
control the market." That is very natural. That has been done ever since
freebooting was established. That has been done ever since power was used
to establish control. The reason that the masters of combination have
sought to shut out competition is that the basis of control under
competition is brains and efficiency. I admit that any large corporation
built up by the legitimate processes of business, by economy, by
efficiency, is natural; and I am not afraid of it, no matter how big it
grows. It can stay big only by doing its work more thoroughly than anybody
else. And there is a point of bigness,--as every business man in this
country knows, though some of them will not admit it,--where you pass the
limit of efficiency and get into the region of clumsiness and
unwieldiness. You can make your combine so extensive that you can't
digest it into a single system; you can get so many parts that you can't
assemble them as you would an effective piece of machinery. The point of
efficiency is overstepped in the natural process of development
oftentimes, and it has been overstepped many times in the artificial and
deliberate formation of trusts.

A trust is formed in this way: a few gentlemen "promote" it--that is to
say, they get it up, being given enormous fees for their kindness, which
fees are loaded on to the undertaking in the form of securities of one
kind or another. The argument of the promoters is, not that every one who
comes into the combination can carry on his business more efficiently than
he did before; the argument is: we will assign to you as your share in the
pool twice, three times, four times, or five times what you could have
sold your business for to an individual competitor who would have to run
it on an economic and competitive basis. We can afford to buy it at such a
figure because we are shutting out competition. We can afford to make the
stock of the combination half a dozen times what it naturally would be
and pay dividends on it, because there will be nobody to dispute the
prices we shall fix.

Talk of that as sound business? Talk of that as inevitable? It is based
upon nothing except power. It is not based upon efficiency. It is no
wonder that the big trusts are not prospering in proportion to such
competitors as they still have in such parts of their business as
competitors have access to; they are prospering freely only in those
fields to which competition has no access. Read the statistics of the
Steel Trust, if you don't believe it. Read the statistics of any trust.
They are constantly nervous about competition, and they are constantly
buying up new competitors in order to narrow the field. The United States
Steel Corporation is gaining in its supremacy in the American market only
with regard to the cruder manufactures of iron and steel, but wherever, as
in the field of more advanced manufactures of iron and steel, it has
important competitors, its portion of the product is not increasing, but
is decreasing, and its competitors, where they have a foothold, are often
more efficient than it is.

Why? Why, with unlimited capital and innumerable mines and plants
everywhere in the United States, can't they beat the other fellows in the
market? Partly because they are carrying too much. Partly because they are
unwieldy. Their organization is imperfect. They bought up inefficient
plants along with efficient, and they have got to carry what they have
paid for, even if they have to shut some of the plants up in order to make
any interest on their investments; or, rather, not interest on their
investments, because that is an incorrect word,--on their alleged
capitalization. Here we have a lot of giants staggering along under an
almost intolerable weight of artificial burdens, which they have put on
their own backs, and constantly looking about lest some little pigmy with
a round stone in a sling may come out and slay them.

For my part, I want the pigmy to have a chance to come out. And I foresee
a time when the pigmies will be so much more athletic, so much more
astute, so much more active, than the giants, that it will be a case of
Jack the giant-killer. Just let some of the youngsters I know have a
chance and they'll give these gentlemen points. Lend them a little money.
They can't get any now. See to it that when they have got a local market
they can't be squeezed out of it. Give them a chance to capture that
market and then see them capture another one and another one, until these
men who are carrying an intolerable load of artificial securities find
that they have got to get down to hard pan to keep their foothold at all.
I am willing to let Jack come into the field with the giant, and if Jack
has the brains that some Jacks that I know in America have, then I should
like to see the giant get the better of him, with the load that he, the
giant, has to carry,--the load of water. For I'll undertake to put a
water-logged giant out of business any time, if you will give me a fair
field and as much credit as I am entitled to, and let the law do what from
time immemorial law has been expected to do,--see fair play.

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