Some Aspects of the Tariff Question

As yet, however, the main agricultural region of the United States,—the great central region in which are the wheat and corn belts,—has been little affected. Here we still find extensive cultivation, agricultural machinery, the one-family farm. It is true that during the harvest season there is a heavy demand for agricultural laborers, and that this is satisfied by laborers who may be said also to constitute an agricultural proletariat. It is true, further, that the stage of pioneer farming has been passed or is rapidly being passed, that rotation is becoming more systematic and skilful, the land more valuable, cultivation more intensive. Nevertheless this remains the region of the one-family farm. The farmers “ride on their stirring plows and cultivators” and in this way are able to do most of the work on their lands for themselves.

Throughout the corn belt, more particularly, there is no sugar-beet industry of any moment. It pays better to raise corn; there is a clear comparative advantage in corn growing. This grain is peculiarly adapted to extensive agriculture. It also lends itself readily to the use of machinery; corn can be “cultivated” between the rows by horse power. It is a substitute for root crops, and can be rotated steadily with small-grain crops.
*69 It is a direct competitor with the sugar beet for cattle fattening. The advocates of beet raising always lay stress on the value of the beet pulp, the residue at the factory after the juice has been extracted, for cattle feeding. But corn is at least equally valuable for the purpose, and the typical American farmer raises it by agricultural methods which he finds both profitable and congenial. One man can grow forty acres of corn. He can plant only twenty acres of beets; and these he cannot possibly thin and top.
*70 In Iowa “the farmers are progressive, successful, and satisfied. In fact, this has been the main obstacle to installing the sugar industry there. The farmers have not shown a disposition to grow the beets. When the farmers are advised that beet culture is accompanied with considerable hard work, factory propositions usually succumb to the inevitable. The farming class of the state is accustomed to the use of labor-saving implements in the fields.”
*71

It is not an accident that the states of the Great Lakes region in which the sugar-beet industry has shown some development,—Michigan, and in much less degree, Ohio and Wisconsin,—are outside the corn belt. Except along the southern edge of these states, the grain does not ordinarily mature. Yet even here corn remains a formidable competitor of the sugar beet, in its use through ensilage.
*72 It is cut green, stored in the silos, and so is available for cattle feeding. It continues to be available in rotation with other grain and with grass. During the last two decades Wisconsin has become a great dairy state. “The pasture, hay, and corn lands of the state form the basis of the livestock industry.”
*73 Here there is a profitable system of agriculture in which there is no need of the minute attention, the elaborate cultivation, the wearisome labor, which are required for the sugar beet. As compared with the far west, Michigan and Wisconsin, as will presently appear, lack some climatic advantages. A tariff subsidy may make it worth while for their farmers to grow the beets; but without the subsidy this use of the land cannot compete with others more advantageous.

When the tariff legislation of 1913 was under consideration the beet-sugar makers of Michigan pleaded strenuously for the maintenance of protection on the ground of consideration for vested interests. It must be admitted that the plea was in one regard of exceptional force. Not only had the general policy of protection been long maintained by Congress, and investment in accord with it encouraged; but, as one of the witnesses before the Ways and Means Committee said in 1909, “the investment which our company made in the sugar business was made on the invitation and urgent advice of the United States Government through its Department of Agriculture.”
*74 It was a serious responsibility which the Department thus took on itself. Its zeal too often was indiscriminate. Its propaganda rested, in part at least, on a crudely mercantilist principle; on the assumption that it is desirable to produce within our own borders anything and everything that can possibly be produced there, and that a tariff policy based on this assumption will be maintained indefinitely.

Turn now to the far west, where most of the beet sugar is made. Two conditions are favorable to beet growing in this western region: the climate, and the special advantages of irrigation.

The variety of the beet suitable for sugar making flourishes in a cool climate; but it needs plenty of sun. “Abundance of sunshine is essential to the highest development of sugar in the beet. Other things being equal, it may be said that the richness of the beet will be proportional to the amount—not intensity—of the sunshine.”
*75 Evidently the cool region of cloudless sky in the arid west meets this condition perfectly.

Again: “in respect to moisture, the sugar beet is peculiar in some respects…. There are three periods in the life history of the sugar beet which demand entirely different treatment so far as moisture is concerned: (1) the germinating or plantlet period; (2) the growing period; (3) the sugar-storing period.” During the first “the beet needs sufficient moisture and warmth to germinate and start it, but never an excess.” During the second, “the beet needs little if any moisture.” During the third, or sugar-storing period, “the plant should be given no water. The conditions desirable at this period are plenty of light and dry cool weather. If the beet is given moisture to any considerable extent, it will be at the expense of both sugar and purity.”
*76

The irrigated regions of Colorado, Utah, Idaho, Montana supply just the right combination of climate and moisture: cool temperature, abundant sunshine, moisture as needed, absence of moisture when harmful. Hence Colorado and Utah are described as the ideal beet-sugar states. “Considering everything, Utah is the ideal beet-sugar State…. Its natural conditions are quite similar to those of Colorado.”
*77 In Colorado 12 to 25 tons of beets to the acre are readily secured; even in the early days 15 to 17½ tons were got on the average; whereas in European countries not only is the tonnage per acre less, but the sugar content smaller.
*78 California, where the industry first was undertaken on any considerable scale, and where it has grown steadily, has some special advantages. A good part of its beet district has just the required combination of climate and precipitation.
*79

Contrast such exceptionally favorable climatic conditions with those of the Great Lakes region. The successive reports of the Department of Agriculture dwell on the uncertainty of the beet-sugar crop in this zone because of the irregularity of rain and sunshine. The Michigan farmer, unlike the grower in the irrigated region, cannot count with certainty on abundant sunshine and cannot apply moisture exactly when needed: difficulties which threaten not only the quantity of the crop but also its saccharine content.
*80

The same climatic difficulties are encountered in the European countries where sugar beets are grown. There also the beet harvest and the sugar output are greatly affected by the weather during the growing and harvesting season. The north central states of our own country are not in this respect at a disadvantage. But they possess no climatic superiority for beet growing; whereas they do possess agricultural and industrial superiority for other crops. Beet growing, in other words, suffers from a
comparative disadvantage. The far western region, on the other hand, does have unusual natural advantages for the sugar beet. Whether these natural advantages are so great as to enable the industry to hold its own, in free competition with cane sugar and with beet sugar made in the European regions of permanently cheap labor supply, is another question. But they explain why, under the stimulus of protection, the industry grew fast in that region, and in widely distributed parts of it; while yet under the same stimulus it made little progress in the typical agricultural states.

It is constantly said, with reference both to the mountain states and to those of the central region, that the culture of the sugar beet brings special agricultural benefits. The high cultivation, it is said, improves the quality of the land; general fertility is enhanced; a better rotation is established; the byproducts, especially the beet cake, are valuable for cattle feeding, and this in turn provides manure and maintains fertility; the factory makes a market for local coal and lime; it “stimulates banking and almost all kinds of mercantile business.” These advantages have been dwelt on almost
ad nauseam in the publications of the Department of Agriculture.
*81 So far as the tariff question is concerned, they prove altogether too much. If beet culture is so very advantageous for the farmer, why does he need a bonus or protective tariff to be induced to engage in it? The American farmer is not an ignorant or stolid person; he has access to a multitude of educational and propagandist agencies, and is even beset by them; he is a shrewd observer, a ready innovator. With the transition from pioneer farming, the agricultural methods of the central region have been revolutionized during the past generation. If beet culture were really so advantageous a part of the general change, we might expect its speedy and wide-spread adoption. The advocates of beet growing have simply accepted the common and fallacious notion that the highest cultivation is necessarily the most advantageous cultivation. The agricultural expert is apt to be intent on the gross product, on the largest yield per acre. But the best agriculture is that which secures the largest yield not per unit of area but per unit of labor. Minute cultivation means a large product per acre but by no means necessarily a large product per man.

The only solid ground for maintaining that protection for beet sugar has been of advantage to agriculture is that of the young industries argument. Ignorance, settled habits and prejudices, unaccustomed methods, the inevitable failures in first trials, all these obstacles may have stood in the way of the beet-sugar industry in its first stages. It is true that the argument for protection to young industries was not supposed to apply to agriculture by List and his followers, since unalterable conditions of soil and climate were thought to determine once for all the geographical distribution of the extractive industries. It would, perhaps, be hazardous to lay down an unqualified proposition of this sort. The course of industry may conceivably be guided and diverted to advantage in agriculture as well as in manufactures. The difference between the two cases would seem to be simply one of probability, of degree. None the less, an important difference in degree remains. It is more
likely that industry will pursue its “natural” course in agriculture than in manufactures; since agriculture is affected much more by the physical factors of soil and climate and much less by acquired skill.

There are still other grounds for questioning the applicability to agriculture of the young industries argument. There is not in agriculture that close contact between different producers or that stress of competition between them which is most likely to lead to improvements; and a stimulus to improvement is the essence of the argument. In the contemporary German controversy, considerations of this sort have been advanced in support of the duties on grain; but there is quite as much weight in the counter argument that agricultural improvement is most effectively spurred by adversity. It comes not from high prices and easy gains, but low prices and the need of facing a difficult situation.
*82 The low prices of sugar which prevailed for a considerable period (especially in the decade 1890-1900) proved a blessing in disguise to the Louisiana sugar planters; their methods of cultivation and sugar extraction were improved in the effort to meet conditions of depression. The same seems to have been the case with the Hawaiian planters during the period (1890-94) of free sugar.
*83 It has already been pointed out how difficult it is to say whether protection tends on the whole to promote technical improvement or to retard it.
*84 A general proposition one way or the other would be as hard to prove conclusively with reference to agriculture as with reference to manufactures. But it seems clear that acquired skill and established advantages count for more in manufactures than in agriculture; and that tariff protection is therefore an even less promising device for promoting better use of the soil. Education, experiment stations, diffusion of the right sort of information, are much more promising. But education and the spread of information, to be really effective, must be adapted to the economic conditions. In this regard our Department of Agriculture for many years showed no discrimination. Under the Republican régime of 1897-1913 its publications were pervaded by a crude mercantilism. Its propaganda for beet sugar rested not on the young industry and eventual independence principle, but on the crude protectionist doctrine that any and every increase of domestic supply was necessarily to the country’s advantage.

Questions in some respects different arise concerning the beet-sugar factory, which buys the beets from the farmers and makes the sugar. Here there is what the business world calls “a straight manufacturing proposition.” Whether the manufacturing of sugar can be done to advantage in the United States depends on the same conditions as in other manufactures. It is much affected by the opportunities for using machinery and for the exercise of American inventive and engineering capacity in improving machinery. Such evidence as I can get indicates that so far as this branch of the industry is concerned, the conditions are not unfavorable to its sustained prosecution with little need, if any, of tariff support. When the first factories were built in California the machinery was imported from Germany. “The Yankee inventive genius of machinery men at once took hold of the matter, making so valuable improvements that both the above mentioned factories [at Watsonville and at Chino] were shortly refitted with machines of American make, and every factory in this country in the last few years has purchased American machines.”
*85 So in the Department of Agriculture’s pamphlet on the industry, it is stated that “in the early days of the beet-sugar industry in this country, Europe was called on to furnish all machinery. Now very little is imported, and in fact some of the foreign factories are using American-made machinery.”
*86 The breaking loose from European tutelage and the introduction of technical improvements are significant indications of the successful adaptation of a new industry to American conditions and of the ability to meet foreign competition unaided. It should be borne in mind, moreover, that the factory managers take an active part in directing and supervising the agricultural operations. In this regard there seems to be abundant and successful enterprise. The managers of the beet-sugar factories have been chiefly instrumental in bringing the indispensable labor supply to the farms. Through traction engines and the like they have grappled with the difficulties of transporting the beets from the field to the factory. They have selected the seeds, and have assiduously spread information among the farmers on the best ways of getting a large tonnage of beets and a large content of sugar. In the far west especially, all this activity has been carried on with industrial and pecuniary success. Neither in the factory itself nor in the problems of organization arising from the interdependence of farm and factory has there been a lack of skill or energy.
*87

It is probably another sign of successful adaptation to new conditions that the American beet-sugar factory carries its operations a stage further than do the factories of Europe. The latter usually produce raw sugar only, which is sent to refineries for the last stage of preparation; precisely as our cane sugar is imported in the “raw” form, and goes through the refineries before being marketed for consumption. The American beet-sugar factories, on the other hand, make refined (granulated) sugar, which is sold at once to the grocers. In Europe the greater geographical concentration of beet growing and sugar making, and the consequent ease of transportation to refineries near by, probably account for the practice there prevailing. The different American practice doubtless took its start because refining was controlled, during the earlier years of beet sugar, by the Sugar Trust and its affiliated concerns; but it persisted because it fitted the geographical and industrial conditions of the industry. Another reason is that in continental Europe beet farming and sugar making constitute commonly one integrated enterprise, and are associated either with estate farming on a large scale or with direct coöperation between large-scale agriculturists and the factory owners. A different sort of cooperation between farm and factory was necessary under our conditions of land ownership, and this has been worked out successfully by the American manufacturers. Neither in the technical aspects of the manufacturing industry, nor in its appropriate organization, is there indication of disadvantage in the United States.

This brings us to the close of our examination of the sources of sugar supply, and their relation to the tariff. Let us now, by way of summary, proceed to a quantitative estimate of the consequences of the duty on raw sugar; postponing for the moment the consideration of the effect (comparatively slight, as will shortly be shown) of the additional duty on refined sugar.

The burden of the sugar duty can be measured with greater exactness than is often possible. We know that the price of sugar was raised by the duty throughout the area of consumption. In this case, we have no reason to question the significance of continued imports. The only serious qualification which needs to be made is that which arises for the later years from the uneven and irregular effect of the partial remission on Cuban sugar.
*88 Except for this, we could say with confidence that from 1897 to 1913 the price of sugar was raised, the country over, by the full amount of the duty,—one and two-thirds cents a pound. Allowing for the modifying influence of the Cuban remission, we may make our calculations on the assumption that the effect of the duty during the years immediately preceding 1913 was to raise the price of all sugar by one and one-half cents. The figure may not be accurate to the last dot; but the economist is fortunate when he can measure his results with so close an approach to exactness as this.

Of the tax paid by consumers in the form of enhanced price, a little less than one-half went to the government treasury; the rest,—more than half,—was handed over to the various favored sugar producers. Let us imagine the United States government to present an account, rendering to its wards, the sugar consumers, a statement of what had become of the sums collected from them. The government would properly enter on the debit side the total which it had taken from the consumers, on the credit side an enumeration of the various ways in which it had distributed the total. The fiscal year 1909-10 may be taken as representative. For that year the account would stand thus:
*89

It appears that in 1909-10 the government collected 111 millions of dollars from the sugar consumers. It put about 50 millions into its own treasury, using that sum for meeting public expenses; and handed over about 60 millions to the various sugar producers. The proportion going to the sugar producers tended to grow greater during the whole of our period,—from the close of the civil war until 1913. During the early years of the period, the sugar duty had been mainly a revenue tax. By its close, the characteristic features of a protective duty had become dominant: the treasury received less in revenue than the favored producers secured in largess or bounty.

The sum paid over to the sugar producers would be described by some free traders as a net bonus or tribute to the protected persons: robbing Peter to pay Paul. By other free traders it would be described as so much net loss to the country; not a source of extra gains to Paul, but merely an inducement for engaging in an industry in which the producer made no improper gains, while the consumer paid more than a proper price. The truth would seem to be mid-way. Since the production of raw sugar has the characteristics of an extractive or raw product industry, different producers were in different circumstances. Some were just able to hold their own even with the higher price caused by the duty: they were at the margin, and made no unusual profits. Such would seem to have been the case with many of the Louisiana planters, perhaps most of them; with many beet-sugar growers; with some planters in Hawaii and Porto Rico. Others were in the fortunate position of producing cheaply and yet selling at the duty-raised price; they secured unusual gains, a producer’s surplus or economic rent. Such was probably the case with the majority of the Hawaiian planters, with some beet-sugar growers, doubtless with other sugar producers also. As regards this second class, the sugar duty brought not a net loss to the community, but a transfer from some to others: Peter really was robbed to pay Paul. How the total charge was divided between the two, it would seem quite impossible to say.