How were tariffs bad in the 1800s? (details)

It’s a question that’s still going on today.

If you happen to take a worldview of economics, then having no tarrifs frees up the global economy. That is, you can manufacture things where labor is cheap, ship them to the places where the prices are high, and sell them there at a higher profit.

Adding tarrifs to the mix means that, for instance, that if you grow rice in China (where costs are low), and try to import it into the US, you’re going to pay hefty tariffs that try to balance out the low costs, vs. the higher cost of US rice farmers. This helps the US rice farmers (who couldn’t afford to sell rice at the cost you can produce and import it into the US).

However, the flipside of this is that the tarriff is esentially lost productivity (e.g., it’s a cost that gets sunk into.. well, nothing… taxes…). The more global view says that by making it cost prohibitive to farm rice, in this example, in the US, we free up that labor to do something more productive. The problem with this view is that if you’re a rice farmer who is put out of business by a lack of a tariff, it’s not like you can pack up and move to China and start rice farming out there. You’re unemployed. Your children may go do something more productive, but for the individual people involved, removing tariffs tend to be painful.

(This ties in with the protests/objections to things like NAFTA, WTO, etc.)

(Taking the Ayn Rand approach that Productivity is the highest goal of man, Tariffs are an abomination. The current approach seems to be a middle ground, but I think as we move towards more and more of a world economy, we’ll see a continuing reduction of tariffs.)

Tariffs provide some income to the government and the people, it also serves to protect domestic industry, especially Infant Industry; which sorely needs protection. A matter of fact, many European nations built their industry under the protection of tariffs. In my opinion this is one of the many problems today in the third world. With no laws and economical protection of their emerging domestic industry, global corporations wipe them out.

If they are bad? It depends. In an ideal market with industrial countries, I think free trade is to prefer. I think it depends on when they are imposed, how and for what purpose.

@oratio – this may seem really naive, but what’s the free market for? I’ve heard about it but no one’s ever told me about it.

@ragingloli ; because it wasn’t helpful. with all due respect.

@troubleinharlem
yes it was.
people were poor. most of the population had trouble earning enough to not starve most of the time, meaning most did not have enough money to indulge themselves in luxuries. this also means that tariffs, which increase the price of goods and which might seem negligible in today’s context, were the main criterion to decide whether to buy or not to buy. in a society where most people, due to being poor, simply could not afford a foreign product because of tariffs, tariffs severely inhibited international trade.

how is that not helpful, huh?

“with all due respect”

Well, free trade usually pertains to import export. The free market is often used as a concept of a market of independent companies which we traditionally have in the west as opposed to other economical systems.

No country – that I know- really has a truly free market though, or a Laissez-faire market economy. A free market is decided only by competition, with no governmental regulations. Some countries regulate more and some less. The idea of an unregulated market is that the growth will be bigger, and that regulations stands in the way.

The point of a regulated market though is to protect both the work force and also the market from running amok. Sometimes creating depressions.

@ragingloli With all due respect, the 1800’s was the birth of the industrial revolution in western countries. You can’t build machinery and factories such if everyone is starving.

Yes, there was a lot of poverty at the time, but there was also a large amount of wealth.

@grumpyfish
“with all due respect”, the industrial revolution has known a period of the greatest poverty in history. certainly you don’t have to be reminded that in those times, factory workers were paid so little that the entire family, including the children, was forced to work to earn enough money to pay for even the most basic accommodations (food and housing).

@ragingloli – all you put was that people were poor. D: sorry if that was rude, but that comment wasn’t very helpful.

@oratio – right now we have a free market, right?

@grumpyfish – the wealth was going to the north because they didn’t have to pay the money to export their items, but the southern states had to, right?

@ragingloli unless you were the factory owner. Or a farmer. Or a railroad tycoon.

Or lived somewhere other than western Europe.

You do remember that prior to the industrial revolution, everyone pretty much worked 18 hour days just to survive, yes?

@troubleinharlem Yes, we do. Some people don’t think it’s free enough though. :)

@oratio And others think it’s a little TOO free =)

@grumpyfish Yes. =)

@grumpyfish
“You do remember that prior to the industrial revolution, everyone pretty much worked 18 hour days just to survive, yes?”
Which didn’t exactly change during the IR.

free market = no money has to be paid to export/import items. why would that be too free? I suppose everything in moderation, but..

@ragingloli Well, no. But that was the rebuttal to “factory workers were paid so little that the entire family, including the children, was forced to work to earn enough money to pay for even the most basic accommodations (food and housing).” Which is to say, that it wasn’t really a change. Things didn’t get better for the lower classes until PROBABLY WWI, if I’ve got my history right. You do have a point, but you’re ignoring the upper class (who got a lot richer) and the middle class that grew significantly (factory managers, sales reps, etc.) during the industrial revolution.

@troubleinharlem Read back about my US rice farmers—in short, in countries where labor costs are higher (which is where you want to sell things), you can’t make things unless you charge import duties (tariffs) on things made in other countries to help equalize the prices, or keep out competition. This produces a drag (some would say friction) on the free trade of goods, but is a good short-term goal, particularly if you are trying to build up a new industry in your country.

What I was saying is that some people feel that importing goods from other countries is too much of a drain on the local economy—e.g., if you keep all the money in your own country, then your overall wealth level is constant.

Ultimately, the reward to free trade is peace. The economic benefits from free trade strongly outweigh the economic costs of going to war with the countries you are trading with. It certain works as a moderator—that is, things have to get REALLY BAD before countries will start going to war with their economic partners.

@grumpyfish Yes. Interdependency. The saying that democracies don’t go to war against each other I believe is more due to Interdependent economies, than anything else. The economies of the democracies in the west are deeply tied together, and it is the basis of the creation of the EU. This doesn’t make war impossible, but it does make it a lot harder.