The “favorable balance-of-trade” argument, with the emphasis on money rather than on goods, is that the protective tariff keeps money at home which, if trade is free, will be sent abroad to buy foreign goods, thus impoverishing the country.  This doctrine as presented in the seventeenth and eighteenth centuries in Europe, was known as mercantilism.  It had great influence upon the commercial policies of all the great European nations.  A superficial glance at the trade relations of an old, rich country with a new province seems to give evidence for such a belief.  A richer country that is lending capital (sent to the debtor country in the form of goods) has at the same time a larger supply of money.  The lack of money and the poverty of the newer country are looked upon by the protectionist as due to the importation of goods.  The common cause of the imports to newly settled districts and of their scanty stocks of money, it need hardly be repeated here, is the comparative poverty of settlers and pioneers.[6] Often these are paying for imports by means of loans, and in any case their monetary stocks are not decreased either by their foreign trade or by their domestic trade with the older and richer parts of the same country.  Europe and the United States, in their trade with China and South America, usually do not get gold in exchange, but merchandise of various sorts.  It is true that in the trade of England and New York with great gold-producing districts, such as California, South Africa, and Alaska, gold is received in return for merchandise, for much of the gold in gold-producing districts is merely merchandise, and its export does not drain them of their due portion of money.  There was a time when the states of Kansas, Nebraska, Iowa, and their neighbors were filled with resentment against the money-lenders of the Eastern states.  There was a widespread belief that hard times were due to an insufficient currency.[7]

Attempted action took the form of the greenback and free silver movements, which were defeated by the opposition of the East, but there can be little doubt that if the Federal Constitution had not forbidden it, the discontented states would have established a protective tariff “to keep their money at home.”  Few advocates of protective tariffs are ready to admit that the money stock of the country is dependent on the general wealth of the country and on the methods of doing business, rather than on a protective tariff.

Sec. 8. #The claim that protection raises wages.# The most effective popular claim made for protection is that it raises, or maintains, the general scale of wages in the country.  This argument takes two forms:  first, when wages are low in a country it is claimed that a tariff is needed to raise them; and, secondly, when wages are high it is argued that a tariff alone can preserve them.  In Germany the fear is of the higher paid and more efficient labor of England.  In America, where general wages at