Contemporary American politics is conducted in the shadow of historical myths that inform our present-day choices. Unfortunately, these myths sometimes lead us terribly astray. Case in point is the popular idea that America’s economic tradition has been economic liberty, laissez faire, and wide-open cowboy capitalism. This notion sounds obvious, and it fits the image of this country held by both the Right, which celebrates this tradition, and the Left, which bemoans it. And it seems to imply, among other things, that free trade is the American Way. Don’t Tread On Me or my right to import.
It is, in fact, very easy to construct an impressive-sounding defense of free trade as a form of economic liberty on the basis of this myth. Unfortunately, this myth is just that: a myth, not real history. The reality is that all four of the four presidents on Mount Rushmore were protectionists. (Even the pseudo-libertarian Jefferson came around after the War of 1812.) Historically, protectionism has been, in fact, the real American Way.
This pattern even predates American independence. During the colonial period, the British government tried to force its American colonies to become suppliers of raw materials to the nascent British industrial machine while denying them any manufacturing industry of their own. The colonies were, in fact, the single biggest victim of British trade policy, being under Britain’s direct political control, unlike its other trading partners. The British knew exactly what they were doing: they were happy to see America thrive, but only as a cog in their own industrial machine. As former Prime Minster William Pitt, otherwise a famous conciliator of American grievances and the namesake of Pittsburgh, once said in Parliament,
If the Americans should manufacture a lock of wool or a horse shoe, I would fill their ports with ships and their towns with troops.
Back when protectionism was American policy, it enjoyed a broad popular consensus. Only the left- and right-wing extremists of the day dissented. Extreme right wing Social Darwinists like William Graham Sumner—who published a fuming book in 1885 entitled Protectionism, the Ism That Teaches That Waste Makes Wealth—saw protectionism as a subsidy for the incompetent and an interference with the divine justice of the free market and the survival of the fittest. At the other extreme, Karl Marx, who was alive in those days and keenly watching American capitalism, wanted to see American capitalism break down and therefore favored free trade for its destructive potential.
Unfortunately for Marx, this was the golden age of American industry, when America’s economic performance surpassed the rest of the world by the greatest margin. It was the era in which the U.S. transformed itself from a promising mostly agricultural backwater, pupil at the knee of European industry, into the greatest economic power in the history of the world.
What happened to America’s long protectionist tradition? In the end, America only seriously turned away from protectionism as a Cold War gambit to prop up capitalist economies abroad and tie them to the U.S. Geopolitics trumped domestic economics.
Ironically, our old protectionist playbook for economic development is the same one, in many respects, that China and other nations are using against the United States today. Back when we were the ascending economic power in the late 19th century, it was Britain that complained about “unfair trade!” They were right, of course—but given that nobody forced free trade upon them, it was their own fault. Today, having forgotten our own history, we can’t even recognize the game being played against us, let alone figure out how to counter it. We will continue to pay a high price in lost jobs and declining industries until we wise up.
The principal purpose of the first tariff was to fund the federal government. Protectionism was a response to the distortion of the Colonial economy by its role in the British Empire. There was no intention that a tariff be permanent only while the new nation was getting on its feet.
Another major purpose was to develop industries necessary for the nation’s defense.