Some Aspects of the Tariff Question

Taussig, Frank William
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Cambridge, MA: Harvard University Press
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Part IV, Chapter XX

The Woolen Manufacture. The Compensating System; Woolens and Worsteds


The main products of the woolen manufacture are woolen and worsted fabrics, and to these attention will be given in the present chapter. To them the much-discussed compensating system was applied, as indeed it was to all woolen products. That system, though initiated as early as 1861, was not fully developed until the passage of the wool and woolens tariff act of 1867. As then elaborated, it remained in operation without essential changes (barring the years 1894-97) until 1913. The questions that arise regarding the effects of protection on the industry cannot be followed without some understanding of the method by which the woolen manufacturers were "compensated" for the charges laid on them through the wool duties. The whole system, be it remembered, was swept away in 1913. The very fact that this episode in protection is closed, at least for the time being, makes its study profitable.*124


In essence, the system was simple. A duty on wool raises the price of that material for the American manufacturer. He is compelled to pay more for it than is his foreign competitor. To equalize the competition between domestic and foreign manufacturers, a duty should be levied on imported woolens equivalent to the increased price of wool used in making domestic woolens. In the same way,—to state an analogous case,—if an internal tax is put on a commodity, an equal tax should be put on the same commodity when imported; otherwise the importer would be given an advantage, and would undersell the domestic producer. Once a duty was imposed on wool, an equivalent duty was clearly called for on woolens,—known in this case as the compensating duty.


The compensating duty on woolens was fixed, in general, on the supposition that it required four pounds of wool to make one pound of cloth. This large proportion, always surprising to persons not cognizant of the peculiarities of the industry, is due mainly to the amount of fatty matter contained in wool as it comes from the sheep's back. In the scouring process, most wool loses at least one-half of its weight. Often the loss is two-thirds, sometimes even four-fifths; though it is true that there are grades of wool on which the loss is considerably less than half. It is not feasible to take into account the variations in shrinkage by fixing a different compensating duty for each several kind of cloth; some general average, a fair approximation to the usual shrinkage, must be made the basis. The kind of wool most largely used in the United States in 1867, when the system was put in the shape which proved permanent, lost about two-thirds of its weight in scouring; the same was the case with the wool which was then expected to be imported. Further allowance had to be made for some wastage of the fibre in the manufacturing process. The upshot was that four pounds of wool were reckoned to be needed for making one pound of cloth. If, therefore, the duty on wool was eleven cents a pound, a duty on foreign cloths of four times that amount (forty-four cents a pound on the cloth) would put the foreign manufacturer who used four pounds of similar wool in the same position as the domestic manufacturer who also used them and paid duty on them.


A figure not far from this (forty-four cents a pound) appeared as compensating duty on woolen cloths in all the protective tariff acts from 1867 to 1909. Some changes and readjustments were made from time to time. At the very start, in 1867, the compensating figure was swelled, in order to offset some internal taxes then still left over from the civil war levies, though abolished shortly afterwards. In 1883, when the general trend was toward abating somewhat the high range of duties, the figure was reduced to thirty-five cents; the duty on wool itself being also reduced slightly in that year. In 1890, a differentiation was made. Cheap goods, it was admitted, used less wool (some admixture of cotton) and less expensive wool, than dearer goods; the compensating duty was accordingly graded, from thirty-three cents on the cheapest goods to forty-four cents on the dearest. In the tariff acts of 1897 and 1909 no change of note was made in the compensating figures. On the whole, the changes in the several tariffs brought no serious modification of the general system based on the ratio of four to one.


Over and above this compensating duty came the protective duty proper. The former simply put the manufacturer in the same position, relatively to his foreign competitor, as if he, like the foreigner, secured his wool free; it gave him no favor. But the essence of the protective system is to favor the domestic producer. An additional duty was therefore imposed on foreign woolens, which was designed to be the protecting element in the combination, and the sole protecting element. This additional or protecting duty was always ad valorem. In 1867, the manufacturers who framed the scheme modestly alleged that they wished a net protection of but 25 per cent; this had been the rate fixed 1861, just before the civil war. To be sure, the actual duty requested and secured in 1867 was not 25 per cent, but 35 per cent, because allowance was asked here, as in the case of the compensating duty itself, for some additional charges due to the internal taxes of the war. But this moderation soon was forgotten; the supposed standard of a net protection amounting to no more than 25 per cent was early put aside. If one cared to use an analogy from biology, one might say that in the propitious environment a rapid development took place from the original form, until a variety was evolved which, though like its ancestor in structure, quite out-topped it in size. The ad valorem or protecting duty not only was retained at 35 per cent long after all the special war charges had disappeared, but was increased (on all but the cheaper goods) to 40 per cent in 1883, to 50 per cent in 1890, and to 55 per cent in 1897 and 1909. The increase and accentuation of protection was nowhere more striking than in the woolens schedule.


In its application to a considerable number of fabrics, the compensating system lost some of that simplicity which it had when both cloth and wool were subjected to specific duties on the same basis,—that is, by the pound. It was not deemed feasible to apply the pound duty to all woolens. Dress goods,—for example, lighter fabrics for women,—were made dutiable by the yard; a fixed sum per yard was calculated which was supposed to be equivalent to the higher price of wool used by the domestic manufacturer in producing a yard of such dress goods. Similarly the compensating duties on carpets were fixed by the yard, not by the pound. These adjustments, already complicated in the tariff act of 1867, became still more so in the later acts; until schedule K became extraordinarily intricate, full of compensations based on approximations twenty or thirty years behind the times, inviting attack, yet difficult to reconstruct without danger of collapse to the entire edifice.*125


Throughout, in sum, there was the system of double duties: specific duties by the pound (in some cases by the yard) which constituted "compensation" for the effect of the duties on the raw wool; and superimposed on them, ad valorem duties, reaching at the maximum 55 per cent, which were alone supposed to give protection. What now was the real weight of the duties, the real outcome of the system? What was the degree of protection actually given the wool manufacturers? These questions must be answered before proceeding to the further and more important question of the economic consequences.


It is probable that the compensating duties were fixed at the outset in good faith and with sufficient accuracy. The charge was often made, by those free traders who see nothing but robbery and corruption in the protective system, that they were manipulated from the start. No doubt the manufacturers whose calculations were then used made sure that the compensating figures were quite high enough; but there seems to have been no deliberate manipulation on the staple goods, and probably no serious excess.*126 But as time went on, the system got completely out of gear. The compensating duties, so far from being merely sufficient for their avowed purpose, came to be very much more so. In consequence, the duties on woolens as a whole proved to be so much higher than the supposed and avowed rate of protection as to reach the extreme height in the entire tariff system. They became the particular object of attack by its opponents; and they served as still another illustration of the difficulty of ascertaining the real effect of duties that are quite prohibitory to importation.


For this divergence between plan and outcome there were several causes. Attention has already been called to those which must be considered in gauging the effect of the wool duty itself. It did not in fact cause all domestic wool to rise in price by the full amount of the duty. It was quite natural that the framers of the compensating system should have proceeded on the assumption that it would; not only because the assumption underlies the usual discussions of protection, but because the circumstances of the time (1865-70) doubtless warranted it. But, as we have seen, the domestic wool clip grew rapidly during the years 1870-1885, and imports were comparatively small; and during these years there was probably a difference between the quality of the imported wool and most of that grown within the country. And in later years also a difference of the same sort persisted. It is true that after 1890 the domestic supply remained on the whole stationary, while the imports increased; true also that the intrinsic qualities of the two ceased to show considerable differences. But the "skirted wool" complication set in after 1890. Its consequence was, as already noted, that imported wool, in the form in which it came to market, was better in quality than domestic; the latter accordingly did not rise in price by the full amount of the duty on foreign wool.*127 Except for some special wools, used for particular grades of cloth, it was probably never true that the American manufacturer when buying domestic wool (that is, for the great bulk of his purchases) was handicapped as against the foreigner by the wool duty to its full extent.


Even more important, and also of special effect during the later years, was the change in the character of the wool commonly used. This again was a consequence of the great change in the woolen manufacture itself to which attention will presently be given,—the transition from woolens to worsteds. It led to greater use of combing and cross-bred wools, and less use of clothing wools. The latter, it happens, have the highest shrinkage, and alone justify the four-to-one basis of calculation. The strict combing wools, from sheep of the pure English breed, shrink at the most 30 per cent, often as little as 18 or 20; cross-bred wools a little more, but rarely in excess of 33 per cent. Merino wools (clothing wools in the strictest sense) alone shrink as much as 60 per cent; on some of these the scoured wool content goes even as low as 25 per cent, i.e., 75 per cent is lost in scouring.*128 When the compensating system was established, the woolen manufacture was engaged almost exclusively on "cloths," and was using almost exclusively merino wool subject to shrinkage of 60 per cent or more. But in proportion as the worsted branch of the manufacture grew, and the older branch of the industry itself used more and more of cross-bred wool, the computations of the compensating system became quite inapplicable to the prevalent conditions. And yet there remained parts of the woolen industry to which those computations did remain applicable, and for which the four-to-one adjustment was barely sufficient for equalization, occasionally even less than sufficient. Some very fine wools are extremely "heavy," i.e., contain a great proportion of grease; and not only four pounds of such wool, but more, are used in making a pound of (say) fine broadcloth. The rigid simplicity of the compensating was quite out of accord with the great variety and complexity of the industrial conditions.*129


Another circumstance that contributed much to the misfit was the large use of substitutes or adulterants. This took place more particularly in the woolen branch of the industry. It was in the worsted branch that the low shrinkage of the wool served most to make the compensation excessive; in the other and older branch it was the extensive use of substitutes for wool. Chief among these are shoddy, noils, cheap grades of wool, cotton. Shoddy is the wool fibre got from woolen rags torn to pieces; by no means so worthless as is implied by the familiar connotation of the word, but still poorer and cheaper than wool. Noils are short fibres culled from the longer fibres of combing wool in the process of combing.*130 Different both from shoddy and noils in not being a second-hand or quasi-discarded product, yet of similar significance for the compensating system, are the cheaper grades of wool which the tariff system classed as carpet wool and admitted at rates of duty lower than those on the other wools. Though most of this wool was in fact used in the carpet manufacture, a substantial amount was and is used in making the cheaper grades of woolen cloths. Last but not least among the substitutes is cotton, which forms the warp in many of the cheaper woolens and worsteds.*131


There was much foolish recrimination between free traders and protectionists concerning these so-called adulterants. The free traders maintained that it was the tariff system which caused them to be resorted to, thus depriving the people of all-wool fabrics; while the protectionists alleged that the foreign manufacturers were the greatest adepts in using shoddy and that the high duties served to keep out flimsy and worthless stuff. The obvious truth was that within the country as well as without the pressure for using any available substitute for the expensive wool was enormous, and that every device was tried in order to manufacture presentable fabrics from the cheapest possible material. Probably the tariff, by making wool even dearer than it had to be because of the natural conditions that operate on all animal products, drove American manufacturers to substitute somewhat more than would have been the case under free wool. On the other hand, the very limitations which the wool duty caused in the choice of the various grades may have prevented the domestic makers of woolens from securing as good results as their foreign rivals from the deft mixture of coarse fibres with fine. But the influence of the protective system in these directions was much exaggerated by both sides.


So far as concerns the compensating system, however, the consequences from the use of substitutes were great. Obviously, to the extent they were resorted to, four pounds of wool were not required in order to make one pound of cloth; and the compensating duty based on that assumption; liberal even in the case of most all-wool goods, was grossly excessive on that large portion of the domestic output for which there was use of shoddy, noils, carpet wool, or cotton. A niggardly allowance for this obvious defect in the system was made in the tariff acts passed subsequent to 1867; woolen goods were graded after 1883 according to the value, and those having the lowest value were subjected to compensating duties based on a proportion of three to one instead of four to one. But the allowance was quite insufficient; the compensating duty remained much higher than would have sufficed for its avowed purpose.*132


The consequence, to repeat, was that the whole system got out of gear within a few years after its adoption in 1867. At an early date it was easily seen that the apparent simplicity and frankness of schedule K covered a vast amount of complexity and pretense.*133 In its actual working the system was intricate, not simple; the compensating duties did not merely compensate, they added very much to the manufacturers' protection. During the short period of free wool from 1894 to 1897 this fact was brought home to the manufacturers, and then was freely admitted.*134 After 1897, when protectionism revived in full force, and the good old times seemed to have returned without prospect of relapses to tariff reduction, the system in all its details was again accepted as part of the unalterable order of things. But in 1909, in the debates on the tariff act of that year, it was again sharply attacked. The unwillingness of the manufacturers to consider the slightest modification (it will be remembered that in the tariff of 1909 Schedule K was left quite intact) added to the bitterness of the critics. The most important investigation by the Tariff Board was on this schedule; and the conclusions stated in its Report laid bare the anomalies of the compensating system in a way to leave it quite indefensible. The Board unequivocally concluded that "the specific duty is more than compensatory for manufacturers using wools of lighter shrinkage"; and in the more detailed portions of the Report the excesses were made clear beyond a shadow of doubt.*135


The further course of events need not here be recounted in detail. The free admission of wool in the tariff act of 1913 necessarily brought with it the complete abolition of the system. All the specific duties on woolen manufactures were swept away; there was no longer occasion or excuse for compensation. Not only this; the ad valorem or protective duty was much reduced. From a range of 50 and 55 per cent it went down to 35 per cent. This simple duty of 35 per cent replaced the previous elaborate compound duties, bringing not only a marked reduction in the nominal protection, but a much greater reduction in the really effective protection. A new chapter was opened in the history of protection and probably in the history of the woolen industry itself.


The outstanding fact in all this tortuous development is that for a long period the duties on most woolens were not only high, but high to the point of prohibition. So far as the range of duties goes, the case is similar to that of cottons; in both instances prohibition on most classes of goods. There is similarity, too, in that the extreme height of the duties was in neither case really designed by the legislators. Those on cottons became undesignedly high because left so long at the figures fixed when the civil war caused the great rise in the price of raw cotton; those on woolens became high because of the unforeseen working of the compensating system. Were the consequences or concomitants of extreme protection similar for the two industries? The answer to this question calls for an examination of the history and characteristics of the woolen manufacture.


The growth of the two main branches of the industry—woolens and worsteds—is shown by the appended tabular statement.*136 As regards the relation between domestic production and volume of imports, the figures tell a tale essentially the same as for cottons and silks. The value of the domestic product enormously increased during the half-century; that of the imports at no time showed a substantial increase and in the later years an unmistakable decline. The imports have been a steadily diminishing quota in the total supply, and in recent times an almost negligible fraction. Only certain selected grades have continued to be procured from foreign countries—a few specialties and certain sorts of fine fabrics. Even for these, it may be remarked, the domestic manufacturers have been supplanting their foreign rivals more and more. Concerning the imports which still come in and their significance, more will be said later. It suffices for the present to point out that, if the test of success in a protectionist policy be the mere substitution of domestic products for foreign, almost complete success in this case also has been achieved.


Looking at the figures for domestic production more closely, it will be seen that a marked change took place in the relation between the two branches. Woolens lost ground, absolutely and still more relatively. Worsteds, comparatively insignificant in 1860, increased with extraordinary rapidity, and came to be by far the most important part of the manufacture as a whole. In the older branch an extraordinary and abnormal growth took place between 1860 and 1870, in consequence of the exceptional demand during the civil war period; and the unusual figure of product which was reached in 1870 was still maintained in 1880. But since the latter year, the output of woolens has declined, while that of worsteds has mounted without interruption.


No doubt the stated figures of value of product somewhat exaggerate the extent of the growth in the worsted branch. As in other cases, allowance must be made for the increase of specialization. A tendency in this direction appeared more especially in the worsted branch. It has become more common than in former times for a worsted mill to buy material in partly-manufactured state,—as tops or as yarn. Then the yarn (say) appears in the census reports as product for the spinning mill, and presently appears again in the value of the cloth turned out by the weaving mill. A curious and unexpected stimulus to specialization was given by the tariff act of 1883, which admitted some yarns (by a miscalculation on the part of those who adjusted the details in the duties) at low rates and tempted domestic mills to buy imported yarns; the practice, once begun, was continued to a large extent even after later tariff acts raised the yarn duties and caused the weaving establishments to turn to domestic spinners. These questions of organization, important and interesting as they are, lie in the main outside the scope of the present inquiry. The extent to which they must be borne in mind when referring to the census figures of "value of product" is indicated by other supplementary figures, such as those for numbers of persons employed, machines, and the like. A glance at such corrective data, given in the note, shows that they lead to no great modification of the general conclusions. It still appears not only that the domestic industry in general has grown greatly, but that the woolen branch has sensibly declined.


For this great shift two explanations have been offered. That which is doubtless most in accord with the facts ascribes it to general industrial causes,—changes both in the demand for goods and in the methods of production.*137 The other ascribes it, at least in large part, to the tariff system, and more particularly to the way in which the duties on wool and woolens were adjusted. Attention may first be given to the latter explanation, since it is closely connected with what has just been said of the compensating system.


The mode in which the duty was levied evidently led the American manufacturers to refrain from buying foreign wools whose shrinkage was high and whose scoured content was low. It proved to be prohibitory on wools whose shrinkage was very high; these could not be profitably imported at all. Now, as has been pointed out, the short fibre wools of the merino type shrink most, and are the wools used by the makers of carded goods, or woolens. These manufacturers were virtually prohibited from using some grades of foreign wool suitable for their branch of the industry.


Not only this: but the compensating system in their case did no more than compensate on the all-wool fabrics, nay, on some grades did not suffice for compensation; whereas on worsteds it quite overshot the mark and gave an additional concealed protection. The cross-bred wools, still more the combing wools, used in the making of worsteds, yielded a larger proportion of scoured wool than was assumed by the four-to-one ratio, and the compensating duties based on this ratio were quite excessive. The real protection to the manufacturers of worsteds was much greater than to the manufacturers of the carded woolen goods.*138


All this is true; but it does not go far toward explaining the differences in the development of the two branches. Beyond question the duty on wool, difficult enough to defend in any case, was made the more indefensible because of the way in which it was levied. Beyond question, too, the compensating system favored the manufacturers of worsteds more than those of woolens. But the long-continued trend toward worsteds cannot be ascribed to these causes alone or to these chiefly. True, it is probable that during the first decade or two after 1867 the excessive duties on worsteds contributed to rapid growth in this branch. It is always during the period just after the establishment of protection that it most serves to give high profits to the domestic producers and most stimulates the growth of the domestic industry. As time goes on, however, competition sets in and unusual profits disappear (barring of course the case of monopoly, which is not found in this instance). The notion that a particularly high duty continues to bring particularly high profits to the protected producers really rests on the other notion that the tariff necessarily causes a rise in domestic price by the full amount of the duty imposed. But where the rate is amply high enough to keep out the foreign rivals, it matters little whether it be 50 or 150 per cent. The domestic price is then determined, under competitive conditions, solely by the domestic conditions of supply and cost. As regards woolens and worsteds, though the duties on the latter were particularly high, the duties on woolens were quite high enough. On them also there was not a little concealed protection in the compensating system; on them also the rates in general were prohibitory. Exception must doubtless be made for certain classes of woolen goods, particularly for all-wool fabrics made from fine merino wool of heavy shrinkage. On these the compensating duty achieved no more than its avowed purpose, sometimes failed to achieve it fully. Neither was the net protection here pushed to the point of prohibition; some imports continued. But the great bulk of the domestic manufacture of carded woolens was devoted throughout not to these finer goods but to cheaper grades, on which the duties were as prohibitory as they were on most grades of the rival worsteds. If under the circumstances the older branch of the manufacture was surpassed by its younger rival, the explanation must be sought elsewhere than in the peculiarities of the tariff system.


This conclusion is confirmed by the fact that the same general trend appeared in other countries. In free trade England, in protectionist Germany and France, the worsted branch also gained on its rival. Promoted and hastened though the change may have been in the United States by our tariff, it rested on causes of wider operation.


Among these causes, the vagaries of fashion played a large part, and indeed are often declared to have played the leading part. Next to the silk manufacture, that of woolens is most affected, among textiles, by this psychological element. In the last quarter of the nineteenth century fashion turned largely from the close-matted comparatively heavy woolens to the less compacted, lighter, smoother worsteds; and the direction of production necessarily followed the course of demand.*139


More important, however, and fundamental after all, were changes in the technique of production. These favored the worsted branch both by giving it wider scope and by enabling it to attain in greater degree the advantages of the machine processes,—homogeneity of material and product, standardization, large-scale operation. The changes center about the invention and improvement of the combing machine, from which have flown industrial consequences so great as to entitle this to be reckoned among the revolutionary changes in the textile arts. Moreover, they have an important bearing on our tariff problems, and therefore deserve to be considered more fully than would otherwise be pertinent to the present inquiry.


Reverting for a moment to the difference between woolens and worsteds, let it be recalled that in general woolens are made with short staple wool, worsteds with long staple wool. Woolens are carded goods; that is, the fibres of the wool are pulled apart and interlaced by the card,—strips of leather armed with protruding short teeth. The old hand card was succeeded at a comparatively early period in textile development by the machine card, in which the teeth are set on cylinders that revolve at different speeds. In carding, whether of wool or cotton or silk, the aim is to secure a sheet of smoothed, interlacing fibres, ready for the subsequent operation of spinning. The comb also prepares the fibre for spinning, but in a different way and with a somewhat different object. It selects the longer fibres, pulls these out, and arranges them parallel to each other, rejecting the short fibres. The selected long fibres, laid together in a soft, loose, rope-like strand, are called tops; the rejected short fibres are called noils. These noils, it may be noted, are used in the other, rival branch; they are short fibres, such as the carded industry primarily uses; they are a natural substitute, or complementary material, by no means an adulterant, serviceable in making the woolen goods proper.


The machine processes were applied to combing, at a date comparatively recent. The comb remained a hand tool longer than the card. Indeed, the hand card, being simple, and managed with comparative ease, never became the tool of a separate trade. The comb required specialized skill; the wool combers formed a craft, and were important figures in the early history of the worsted manufacture. Like the hand loom weavers, they did not give way to the machine until the middle of the nineteenth century. The fact that machinery triumphed so much later than in carding is in itself an indication of greater complexity in the operation, and so an explanation of the unusual intricacy of the modern combing machine. That machine, or the "comb," as it is now commonly called, was developed by a series of inventors about 1850 and thereafter, exhibiting in its course the characteristic features that appear in the history of most modern inventions. There was a preparatory period of tentative groping, and then an almost simultaneous perfecting of the main processes by several hands; while business shrewdness and enterprise were necessary to bring to full fruition the work of mechanical genius. The main seat of the industry and of the changes in it was Bradford in Yorkshire. As England was the habitat of the long-wool combing breed of sheep, so it was in England that the worsted manufacture began and continued. Bradford was and is still the most important worsted center in the world.*140


The combing machine greatly changed the worsted industry in two respects. In the first place, it served to standardize the conditions of manufacture and so to stimulate a tendency to large-scale operation. The tops turned out by the comb are a homogeneous material; so much so that they have been systematically dealt with on exchanges, and are often the occasion of contracts for future delivery. They are commonly made in Europe by separate top-makers, who sell to the spinners. Here, as with other processes, specialization in the textile industries is much more marked in Europe than in the United States. The very possession of a homogeneous material facilitates the use of highly-perfected and quasi-automatic machinery in the later manufacturing stages. In all countries the worsted branch of the industry is conducted on a larger scale than the woolen branch; it is more capitalistic, more in line with the general trend of modern industry. Thus in England, there were in 1899 about eighty persons employed in the average woolen mill, but as many as two hundred in the average worsted mill.*141 In the United States, the worsted mills turned out on the average (in 1909) a product more than four times as great per establishment as the woolen mills.*142 This contrast is the more striking because in both countries specialization has gone further in worsteds than in woolens. The typical worsted mill confines itself to a less number of manufacturing operations, and yet is larger in size than the woolen mill whose operations are split up into a greater number.*143 The worsted offers greater opportunities for the economies of large-scale production, and grows at the expense of the branch which offers less opportunities in this direction.


Quite a different consequence of the combing machine was an extension of the range of the industry, both as regards the quality of the wools which could be used and the quality of the fabrics which could be turned out. The hand comb had been available only for wool which is combing wool strictly,—the long staple wool of English sheep. The same was the case with the combing machine when first put into use. But gradual improvement made the machine applicable to wools having fibres not so long. Cross-bred wools could be put through it, their shorter fibres eliminated as noils, their longer fibres laid together as tops. It is for this reason that the classification of wool so long maintained in our tariffs,—"clothing" wool in class I, "combing" wool in class II,—became quite out of accord with the industrial facts. Merino wool proper is still too short to be used in the worsted manufacture. But a large part, probably the larger part, of the wool which the tariff classed as clothing wool was in fact put through the combs. The worsted industry thus had at its disposal a very great and varied mass of raw material, and was able to turn out goods resembling closely those of the other branch. The typical worsteds of former days were smooth and lustrous, somewhat harsh in quality. With the improvement in the combing machine softer and suppler goods could be made, having some of the excellences of both kinds. The two in fact came to overlap, and the worsted industry was able to turn out fabrics of much greater variety than in former times.


All these factors were in operation in the United States, and some of them to an exceptional degree. The worsted industry was equipped with machinery at once perfected and expensive, and its material was standardized; so it secured the technological basis for large-scale operations. A wide range of raw material was brought to its disposal. The changes in fashion were toward its products. In the United States an additional factor probably was that the lighter and looser worsteds were better adapted to climate and habit,—a warm summer and in winter houses amply heated. No doubt during the earlier stages the extreme protection which was extended to worsteds under the compensating system gave a special impetus, and caused some manufacturers to reap unusually large profits. But the continued growth and eventual predominance of this branch indicate that, even though stimulated by the tariff and perhaps steadily dependent on the tariff for existence, the protective system alone could not account for its position relatively to the other branch.

Notes for this chapter

On the history of the compensating system I have summarily repeated here what is said more fully in my Tariff History of the United States, where the various modifications of the system are described in detail for the successive tariff acts.
The development of the system is shown by the following figures, which state the duties on "woolen cloths," the typical class of goods and the one still most important in Schedule K.

Duty on Woolen Cloth
Year Duty on
Per Pound
Compensating (Specific)
Per Pound
ad valorem
1861 3c. 12c. 25%
1864 6c. 24c. 40%
1867 12c. 50c. 35%
1883 10c. Costing up to 80c. per lb., 35c. 35%
" over 80c. " 35c. 40%
1890 11c. Costing up to 30c. per lb., 33c. 40%
" 30 @ 40c. " 38½c. 40%
" over 40c. " 44c. 50%
1894 Free No compensating duty Costing up to 50c. per lb., 40%
" over 50c. " 50%
1897 11c. Costing up to 40c. per lb., 33c. 50%
" 40 @ 70c. " 44c. 44c. 50%
" over 70c. " 44c. 55%
1909 11c. Same duties as in 1897 Same duties as in 1897
1913 Free No compensating duty 35%

The wool duty is here stated approximately; for details see the table given above, p. 297. On the splitting of the compensating duty which begins in 1883 and is maintained until 1913, see. p. 330 below.

This I judge to have been the case, at all events, as regards woolen cloths of the kind chiefly made at that time within the country. The compensating duties on dress goods (levied by the yard, and not by the pound, and therefore not easily subject to check) seem to have been designedly excessive even from the start. See the Tariff Board Report, p. 148. Cf. ibid., p. 184, for a curious manipulation and increase in the duty on rugs in 1897,—fairly to be dubbed a "joker."
Cf. what was said in the preceding chapter, p. 306.
See the excellent generalized statement in the Tariff Board Report, Summary, p. 12. Elsewhere (p. 89) it is remarked that "a fleece from an Angora goat or Lincoln sheep may shrink in scouring only 10 or 20 per cent, leaving 80 or 90 per cent of clean wool; a Cape or Australian merino fleece, on the contrary, may shrink as high as 50 to 70 per cent, yielding only 20 to 30 per cent of clean wool."
It was by parading the exceptional cases that the representatives of the woolen manufacturers were able in later years to make a show of validity for the basis of four to one in the compensating system. See, for example, their statement before the Ways and Means Committee in 1909; Tariff Hearings of 1909, p. 7257. The stubbornness of the Association of Wool Manufacturers in clinging not only to the principle but the details of the act of 1867 (they interposed a veritable non possumus to all proposals for change) must be regarded as a strange piece of political ineptitude. As late as 1911, the President of the American Woolen Company made the following extraordinary statement in an address to his fellow-manufacturers: "Schedule K, much maligned, much misunderstood, if properly understood would be the most appreciated of any schedule in the tariff; and if all schedules in the tariff were as scientifically based and as well poised and balanced as Schedule K, it would be the most remarkable document, next to the Constitution of the United States, that the human mind has ever produced"! I quote from a pamphlet reprint of the address.

I have not referred in the text to another episode which played a considerable part in the attacks on Schedule K. Throughout the period of wool duties, the ordinary or normal duty (about eleven cents a pound) was double on wool which had been washed, and triple on wool scoured. Hence most imports were of unwashed wool. But on combing wool (class II) the duty was the same whether washed or unwashed; though still triple when scoured. Hence wool of class II was almost always imported in the washed state. This exceptional treatment of combing wool was the occasion of not a little controversy. It was sought to be justified on the ground that such wool in fact was almost always washed on the sheep's back, and could not well be imported in any other condition; and also justified frankly on the ground that in 1867, when the exception was instituted, the branch of the manufacture using such wool (the worsted branch) was of small dimensions and in its early stages, and so deserving of special consideration. In any case, the discrimination proved of less importance than might have been expected, because almost all wool actually combed, and actually used in the worsted manufacture, came to be not strict "combing wool" as defined in the tariff, but cross-bred wool classed in the tariff as "clothing wool." Nevertheless some millions of pounds of strict combing wool were imported each year, and in occasional years much more; and as regards this, the compensating arrangement never could pretend to be accurate. — Cf. what is said in the Tariff Board Report, p. 89.

Cf. p. 388, below.
The importance of these substitutes or "adulterants" is shown by the fact that little more than half of the woolens made in the country was all wool. The Tariff Board gave the following figures, based on census returns (Report, pp. 220, 224, 226, 230):—

Worsteds: 1900 1910
Value of total goods $120.3 mill. $312.6 mill.
" " all-wool goods 60.5 " 160.9 "
Value of total goods 118.4 " 107.1 "
" " all-wool goods 57.3 " 60.0 "

The quantity of the various materials used in

Wool (in scoured condition) 60
" (yarn) 8
68 mill. lbs.
Camel, alpaca and other hair 18
Rags 38
Shoddy 20
Noils and waste 24
Cotton (including cotton yarn) 38
138 mill. lbs.

I have condensed these figures from the table in the Board's Report, p. 228. There was a marked increase in the use of the substitutes between 1900 and 1910: one among the indications that the woolen branch of the industry was in a declining and precarious state.

See the tabular statement on p. 325. Cf. the Tariff Board Report, p. 124.
I said as much in an essay published in 1885; reprinted in my Tariff History (pp. 208 seq.).
In the spring of 1894, when the tariff bill of that year was being debated and the abolition of the compensating system was impending, the American Cotton and Wool Reporter wrote (May 24, 1894): "The specific duty under existing law is more than compensatory. It furnishes a large measure of protection, and in fact is the substance of the protection on medium and low-grade goods.... The proper thing to do now for the manufacturers is to confess to a little deception regarding the make-up of the specific duty, admit the truth, and ask for recognition of the actual facts. The protection was needed, and the only sin committed was in the way it was obtained."
See the Summary, p. 13; and such a concise statement as this (p. 125): "If all wools lost 75 per cent from greasy wool to cloth, this four-to-one ratio would be perfect as a basis for compensation, but only in making the best fabrics from heavy-shrinking wools is so much compensation necessary. Cotton-mixed woolens, cotton warp worsteds, in fact the majority of woolen and worsted fabrics made in the United States do not require compensation equal to four times the duty on class I wool."

(Millions of Dollars)
Woolens Worsteds Total Woolens and Worsteds Total, all Manufactures of Wool Imports of Manufactures of Wool
1860 $61.9 $3.7 $65.6 $73.4 $43.1
1870 155.4 22.1 177.5 199.3 34.5
1880 160.6 33.5 194.1 238.1 33.9
1890 133.6 79.2 212.8 270.5 56.6
1900 118.4 120.3 238.7 297.0 16.2
1905 142.2 165.7 307.9 381.0 17.9
1910 107.1 312.6 419.7 507.2 23.0

The figures of domestic product in the fourth column are for all the manufactures of wool, including carpets, blankets and flannels, and some minor branches, as well as the two leading ones. With these figures (in column four) the imports should be compared, since the figures are for all the imports, not those of worsted and woolens alone. Both in the domestic product and in the imports the woolens and worsteds dominate. — The figures are derived from the Census Bulletin of 1910 on the Woolen Manufacture; see also the Report of the Tariff Board, pp. 190, 226.

The best unit of productive capacity is, for woolens, the set of cards; for worsteds, the combing machine. Between 1900 and 1910 the numbers of these were reported as follows: —

Sets of Cards
in Woolen Mfg.
Combing Machines
in Worsted Mfg.
1900 6,498 1,317
1905 5,753 1,440
1910 5,079 1,978

The data confirm the conclusion that the woolen branch was virtually stationary till about 1900, and thereafter declined; while the worsted branch grew rapidly and continuously.

The National Association of Wool Manufacturers, the compact and influential organization which represented the industry before Congress and the public, was dominated for many years by the worsted makers. This was natural, not only because of the size and rapid growth of their branch, but because the individual enterprises in it were on a larger scale, and were conducted by the more ambitious and dominating personalities. During the period of general tariff revolt which followed the act of 1909, the manufacturers of carded woolens formed an independent organization of their own, protesting against the favored treatment given to their rivals by the wool duty and the compensating system. See the Statement of the Carded Wool Manufacturers.
See the Tariff Board Report, p. 85; cf. Clapham, The Woolen and Worsted Industries, pp. 9, 142.
See the excellent account of the inventions in Burnley, History of Wool and Wool-combing. Cf. what is said by Clapham, The Woolen and Worsted Industries, p. 136. Among the conspicuous inventors were Donisthorpe, Lister, Holden, Heilmann, and Noble,—all English, with the exception of Heilmann (an Alsatian). The start was made by the versatile and indefatigable Cartwright as early as 1790; but it was not until half a century later that machines constructed on his principle were brought to working efficiency. At still later dates various minor improvements were added. Lister (Lord Masham) played in the main the rôle of the business man, appreciating and guiding the inventors, and profiting handsomely. The whole episode is typical of the course of mechanical progress in modern times.
Clapham, p. 131.
The Tariff Board Report gives the following figures (p. 220):—

1899 1909
Worsteds $647,000 $965,000
Woolens 114,000 182,000

The increase in the average output in woolen mills between 1899 and 1909 is ascribed to the disappearance of a large number of small country mills.

Clapham, pp. 134 seq.: "The commonest type of woolen mill... combines all processes, from opening the new wool to dyeing,—when it is piece-dyed,—and finishing the cloth." So the Tariff Board reports (p. 220) that "in the woolen industry the typical mill combines all processes from raw wool to finished cloth."

End of Notes

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