A couple of years ago, I debated Pat Buchanan on the question of free trade. I endorsed free trade; Pat Buchanan, of course, defended protectionism. (Buchanan won the debate, I’m chagrined to admit.)
One point Buchanan made in that debate – and that he’s made in print – is that the impressive American economic growth of the latter half of the 19th century was promoted by protectionism. The last three decades of the 19th century and the first few years of the 20th century were indeed overall years of impressive economic growth. And these were also years of high tariffs. Is Pat Buchanan correct? Did these tariffs contribute to the growth?
In an interesting new article published in The Independent Review, economists Cecil Bohanon and T. Norman Van Cott argue against the proposition that America’s economic growth in the several decades following the U.S. Civil War was promoted by tariffs.
First, they show that the tariff rate on all imports — that is, imports taken as a whole — fell, if only gradually, from 1870 through 1910. This fact contrasts with the steady rate of tariffs on dutiable imports. This happened because, during these years, the volume of nondutiable imports grew relative to that of dutiable imports.
Second, the U.S. in those years (as today) received huge amounts of foreign capital.
Third, and most interestingly, Bohanon and Van Cott argue convincingly that the open-immigration policy America followed during these years effectively undercut tariff protection. After all, if people can come freely to the U.S. – as they did, in droves, during this time – the notion that growth depends upon protecting American workers from foreign workers is undercut.
Bohanon and Van Cott put an intriguing Julian-Simonesque spin on the point by noting that the immigrant labor that came freely to the U.S. circa 1870-1910 contained inchoate goods and services – goods and services that these immigrants would eventually actually produce once they began working in the U.S. economy. So, to admit an immigrant is to admit in — duty free! — a stream of goods and services. It is, in short, a means around high tariffs. Because immigration during these decades was so significant, Americans effectively imported, duty-free, many more goods and services (inchoate though they were) than is revealed by conventional trade statistics.