The Golden Age of American manufacturing was driven by protective tariffs. Statistics for the 1890 to 1900 decade support the conclusion that prices came down, profits rose, capital investment went up, and wages held or slightly increased (real wages clearly rose). During the peak tariff years of 1896 to 1901 under President McKinley, steel production increased 111%, electrical equipment production increased 271%, and farm equipment increased by 149%. During the same period wages increased 10% and employment by 20%.
Average annual manufacturing income went from $425 a year and $1.44 a day in 1890 to $432 a year and $1.50 a day in 1900 and to $470 and $1.75 in 1910. Manufacturing employment exploded even against major leaps in manufacturing technology and automation. The average day in manufacturing remained around 10 hours a day. Heavily protected industries such as steel fared far better with wages. The cost of living index fell during the decade from 91 to 84 or about 8 percent. The clothing cost of living dropped even more from 134 to 108 or 19 percent. Food stayed about the same but the cost of protected sugar dropped around 25 percent. The bottom line is that real wage (adjusted for cost of living) index rose from $1.58 a day to $1.77 a day in 1900 or about a 12 percent increase.[1] The success of this period of managed trade depended on government oversight, business cooperation, and labor support. Steel production went from 1.3 million tons in 1880 to 11.2 million tons in 1900 to 28.3 million tons in 1910. In 1898 the American steel and iron industry surpassed Britain in steel and pig iron production. The U.S. gross national product grew from an estimated $11 billion in 1880 to $18.7 billion in 1890 to $35.3 billion in 1910. The American glass industry was another struggling industry in 1880. Due to imports by 1910 the glass industry had increased its output five to ten fold.
McKinley argued that protective tariffs had not restricted exports, and again the numbers supported him: “We sell to Europe $449,000,000 worth of products and buy $208,000,000 worth. We sell to North America to the value of $9,645,000 and buy $5,182,000. We sell South America $13,810,000 and buy $9,088,000.” McKinley was not alone in is his evaluation. Bismarck in 1882 had hailed the protective tariffs of America: “ Because it is my deliberate judgment that the prosperity of America is mainly due to its system of protective laws.” The McKinley tariffs were focused on building America, not restricting trade. They were applied in a manner that did not produce trade wars. Still, McKinley was clear that his tariffs were nationalistic: “The free-trader wants the world to enjoy with our citizens equal benefits of trade in the United States. The Republican protectionist would give the first chances to our people, and would so levy duties upon the products of other nations as to discriminate in favor of our own.”[2] McKinley’s extensive study had truly brought scientific management into tariff rates.
A tariff commission was also established to monitor the impact of the tariffs and assure that excessive profits were invested in plant expansion and American jobs. This regulatory committee helped limit the free traders’ the opposition assuring fairness and companies invested in jobs, not filling their pockets. Furthermore, the McKinley administration demanded trade reciprocity in all trade treaties, which also helped limit trade wars. And it wasn’t just heavy manufacturing that benefited. A 40 percent tariff on pickles had allowed the rise of the great Heinz Company of Pittsburgh as well as the American steel, electrical, rubber, and glass industries, which took world leadership. The tariff on imported ketchup (a major import) created a new ketchup making industry and tomato farming in the United States. The story is similar to that of China today, which is taking our industrial leadership.
