I T is one of the worst incidental evils of a
Protective system that the party in the State which supports Protection is almost bound to become, not merely careless hbont the national finances, but actually interested in bad finance. This sounds a very startling proposition, but, unfortunately, it is capable of proof. When a Protec- tionist system is established, but is faced by a Free-trade Opposition, the Protectionists, and all persons directly and indirectly interested in the maintenance of the tariff, never feel really safe as long as the Treasury is full. If the Treasury is kept empty by large expenditure, there is little opportunity for an outcry to grow up for taking off duties. If, however, it is full and there is a large surplus, the demand for reducing taxation may become irresistible. But in a Protectionist country reducing taxation almost necessarily means lowering the tariff-wall at some point er other; Here comes in the source of Protectionist anxiety. Every protected manufacturer is afraid that his industry may be selected for the reduction, and for the destruction of the barrier behind which he has been sheltering himself against what he, Balls the.'Unfair competition of the foreigner. It is when Hugh a case arises that we realise fully what is done,when the tariff is used, not to raise money for the State, but for the perfectly different purpose of conferring benefits on certain industrial ndustrial undertakings. The taxpayer cannot be relieved because certain persons claim a vested interest in taxing him. The State may say : " We do not *ant this tax " • but the manufacturer says : " Yes, but we do, and therefore it must be kept on whether you want the money or not for public purposes." But if this situa- tion were to arise. often, as it must arise in a Protectionist country if surpluses were frequent, and there were ne National Debt available to pay off, it is obvious that there would be a considerable danger of the taxpayer loOking into the matter and insisting on a reduction of duties. If he and the manufacturers once really got face to face over the question, things would certainly go against the Manufacturers. Hence the manufacturer and the political party which is pledged to him are bound by self-interest to do everything they can to' avoid the creation of a situation so dangerous,—are bound, that is, to prevent too full a Treasury:' In other ' Words, keeping the Treasury empty and preventing. bloated surpluses—and preventinc, ta the, riot by low. taxes,''but by high expenditure--becomes a• sort of instinct with the Protectionists in any State fortunate enough not to be already so overweighted with taxation that the risk of a surplus is too infinitesimal to be worth—con- sidering. Lavish expenditure becomes a kind Of insurance against any tampering with the tariff in the interests of Free- trade. This favouring of improvident finance 'has been exhibited again and again in the United States. It is to the desire to keep the Treasury free from a dangerous over- flow that the United States owes in the last 'resort• its intolerable pension-list of £27,000;000 a year. No 'doubt that pension-list is also due to the gratitude' of the Republic for the splendid services of the mem who fought to maintain the Union, but that the American pension-list has assumed its present bloated proportions is the effect of the exploitation of the patriotic idea by the Protectionists. They felt instinctively that after the debt had been reduced as it was reduced in the first twenty years after the war, they could not maintain the -tariff in 'face of large annual surpluses, and they therefore encouraged the notion of showering the public money on the veterans of the war. This policy, half conscious and half unconscious, was in its result a most ingenious one. It not only kept the Treasury empty, but it also Tecrnited'a vast atizirbt 'refers as defenders of the tariff. The thousands of veterans, all voters, who diiide the £27,000,000 not unnaturally feel that if the tariff were abolished there would be' a. rill it)f the money not being forthcoming to' supply their pensions. Lavish expenditure on public works throughout the- trniOn has had, we believe, a similar effect. It helps to prevent the danger of the tariff-wall being lowered owing to incon- veniently large surpluses.
Hitherto in this country we have not had, at any rate within living memory, any party or latge body of people with a direct interest in lavish expenditure or in an empty Treasury,—and so in bad finance. Every one has bean agreed in wanting the expenditure kept low, and the taxes also as low as possible. Hand-in-hand with Mr. dhainber- lain's proposals for the reversal of our fiscal policy and for the creation of a Protective general tariff to save. " ruined industries," has come, however, a feeling tha an empty Treasury may prove a blessing in disguise to the tariff reformer. If the way in which tariff. reformers deal with the question of this year's deficit is looked at carefully, it will be seen that they regard our financial difficulties as their opportunity. They do not, of course, consciously rejoice in the emptiness of the Treasury, and would no doubt sincerely deplore it if they were asked whether they were glad or sorry, but they realise that they will find it, much easier to get the country to listen. to their cherished plans if there is a want of money at the Exchequer than if the Treasury is full. Already, that- is, with the rise of Chamberlainism, we have a party in the State who have an interest in bad finance. The men who think that their industries can only be saved by the shelter of 'a tariff- wall, and who are longing to build that wall, would not be 'human if they did not feel that an obstacle would be placedin their path by a full' Treattity,'while an 'empty Treasury would give them the opportunity they desire to get the nation to listen to schemes of tariff reform which they sincerely believe would benefit the nation as a whole. Remember, we do not for a moment suggest that the men who now cannot suppress a certain satisfaction in the prospect of a deficit are interested in bad finance from any consciously unworthy motive. The vast majority of them no more entertain any sinister designs than do the Free-traders, but that does not alter the fact that through the circumstances we have set forth the Protectionists are interested in bad finance, and feel that an empty Treasury is to their advantage.
If we go a little deeper, and try to discover why it is that people who are just as patriotic as the Free-traders, and just as little inclined in intention to bad finance, have managed to reach so paradoxical a position, we should say that the difficulty arose through the ignoring of the very simple, but yet essential, principle of taxation for revenue only. If you stick to the principle that the aim of a tax is to raise revenue for the public needs, and that this is its only justification, you cannot go far wrong. If, on the other hand, you use taxation, not to pay for public needs, but to effect some other entirely different object, such as the encouragement of native industry or to retaliate on the foreigner, you are certain to go wrong. You are trying to make a machine meant for one purpose accomplish another. As a 'matter of fact, you cannot tax a country into wealth and prosperity ; yet that is, in truth, what you are trying to do with a Protective tariff. It is, of course, true that a country can grow rich and prosperous in spite of a Protective tariff, and that the waste of Protection will hardly be noticed when a country's natural resources are very great, but that does not make Protection any less wasteful. Protection is economic waste,—that is the rock- bed fact of the whole controversy. You can, no doubt, resolve to incur that waste for some moral or political object, but the waste remains, and cannot ever be over- taken, however carefully the circumstances may be manipulated. And besides Protection necessarily in- volving waste, and so reducing the material resources of the nation that adopts it, it encourages bad finance, as we have shown, by giving those who depend upon it a direct interest in prodigal expenditure. An empty Treasury is the only real safeguard of the Protectionist. A full Treasury is a standing menace to the system on which the industry of the protected manufacturer rests.
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