Harsh results of Smoot-Hawley should not be forgotten
No
HEAD: How 'Protectionist' Became An Insult
SUB-HEAD: As Congress dawdles on trade agreements, the harsh results of the Smoot-Hawley tariff should not be forgotten.
By DOUGLAS A. IRWIN, professor of economics at Dartmouth, author of "The Smoot-Hawley Tariff and the Great Depression," to
be published next year by Princeton University Press.
Eighty years ago, on June 17, 1930, President Herbert Hoover signed the infamous Smoot-Hawley tariff, significantly raising
the duties on imported goods. Hoover and his congressional allies thought that reducing imports would strengthen the economy.
Instead, it contributed to a collapse in world trade and the spread of protectionism around the globe. The lessons from this
policy mistake are unfortunately all too relevant today.
The Smoot-Hawley tariff, conceived as a Republican ploy to gain the farm vote in the 1928 election, was a bad idea from the
start. A tariff could not help farmers cope with low prices because most of them depended on exports. The nation sold
one-half of its cotton, one-third of its tobacco, and one-fifth of its wheat and flour abroad. Their prices were set on the
world market. The farmers who did compete against imports�sugar and wool�were already protected with high duties.
And once politicians opened the door to duties on farm goods, the result was a log-rolling, pork-barrel free for all in which
the interests of consumers and exporters were ignored. When Colorado demanded a higher tariff on animal hides, Massachusetts,
home of the shoe industry, insisted on a higher tariff on leather shoes.
Every congressman had some producer interests he wanted to protect. For Utah's Sen. Reed Smoot it was sugar beets. As
humorist Will Rogers put it: 120 million Americans eat sugar, 1,200 raise sugar, but Smoot "had dedicated his entire
political career to make sugar not only sweet but dear to the 120 million."
More than a thousand American economists signed a petition against the tariff bill. Prominent journalist Walter Lippmann
criticized it as "a wretched and mischievous product of stupidity and greed." No matter. Proponents such as New York
Republican Congressman Frank Crowther pooh-poohed fears of reprisals and claimed the tariff would "raise the standard of
American labor and American wages."
While most economists do not hold the Smoot-Hawley tariff responsible for the Great Depression itself, it contributed to a
sharp decline in world trade. The tariff slashed U.S. dutiable imports by about 15%, for example. Even worse, it spawned
protectionism abroad.
America's trading partners, notably Canada, did not turn the other cheek. Outraged at being kicked out of the U.S. market,
the pro-American Canadian government retaliated against U.S. exports. Anti-American sentiment allowed the pro-British
Conservatives to win a general election there just weeks after the tariff took effect. They retaliated again.
To illustrate the blowback: U.S. imports of eggs from Canada dropped to 8,000 dozen from 13,000 dozen after Smoot-Hawley. But
U.S. egg exports to Canada dropped to 14,000 dozen from 920,000 dozen as a result of Canada's retaliation.
Canada also led the charge to create a trade bloc within the British Empire that discriminated against U.S. goods. As a
result, U.S. exports fell faster than U.S. imports during the Depression, even though the slump was more severe in the U.S.
than elsewhere. There were other adverse political effects. The tariff helped ruin Cuba's sugar economy, which led to the
overthrow of Cuba's pro-American government.
The damage wrought by this tariff had only one silver lining. Ever since, the ghosts of Reed Smoot and Willis Hawley (a
Republican congressman from Oregon) have stood in the way of anyone arguing for higher trade barriers. They almost
singlehandedly made the term "protectionist" an insult rather than a compliment.
The most important lesson of the Smoot-Hawley fiasco is that any protectionist move by the U.S. will be counterproductive if
it leads to foreign retaliation. And there can be no doubt there will be such retaliation if the U.S. breaks world trade
rules.
Another lesson is that active commercial diplomacy is needed to keep trade open. If the U.S. trade agenda remains inactive,
other countries will move ahead and pursue trade agreements that put U.S. exporters at a competitive disadvantage in world
markets.
On this score, the Obama administration should work to end the stalemate in Congress on the trade agreements with Colombia
and South Korea. These agreements should be no-brainers because they are one-sided: The U.S. is already open to their goods,
but this is not reciprocated. All the agreements do is level the playing field. And just as Smoot-Hawley had bad political
effects abroad, trade agreements could have good ones�something to keep in mind as South Korea faces North Korea and Colombia
struggles with Venezuela.
++++++++++++++++
SOME COMMENTS FROM THE SITE
Modern efforts to "save American jobs" by restricting global access to the American market will have exactly the same
effects as Smoot-Hawley. "Those who fail to learn from history are condemned to repeat it."
--------------
All the world has an industrial policy, save the United States. And, we are suffering terribly for it. Our trade deficit is
enormous, and our unemployment rates are horrendous. Japan's unemployment rate is between 4.9% - 5.1%. China is around 4.2%.
Germany, around 7.7% (and falling). The United States -- just under 10%. And, we game our numbers a heckuva lot more than do
other countries.
The countries doing the best in this Great Recession are the most protectionist. Facts are facts, and it's time that we tell
the "free traders" to go take a hike and do what's right by our countrymen. Other countries do it, and so should we!
-----------------
What a foolish comment. The US has a trade policy. Our Dear Leader has been explicit. It is to denigrate and demonize various
industrial sectors until companies are hectored into relocating elsewhere. It has been a reasonably successful policy. The
increased unemployment is not necessarily a bad thing either. It frees up workers for newly created government jobs, which
have better pay and benefits than the private sector. It's a win-win for everyone. Our Dear Leader keeps telling me so.
----------------------
The only industrial policy our nation needs is allow businesses to make decisions free from coercion and free from subsidy.
No nation can produce everything it wants or needs by itself, which is why Smoot-Hawley failed. If we have a policy by
dictating what to make, how to make it, and what to pay those who produce it, we will just end up making the wrong choice and
destroying the ability of the economy to function.
You may want to look at it a different way. The reason for those huge trade deficits, unemployment, and outsourcing is
because our government is attempting to create an industrial policy. America became the world's #1 economic power by 1873
because we didn't have a policy.
No national policy is the best national policy. Let the market decide.
*****************
Hear, hear!
"Government cannot give anything to anybody that it doesn't first take from somebody else. You don't multiply wealth by
dividing it."-Author Unknown
"Government doesn't spread wealth, it destroys wealth' and it spreads misery."-Mark Levin
"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to
their own interest." -Adam Smith Scottish philosopher and economist (1723-1790)
Remember, capitalism has done more to create wealth, drive the progress of technology, improve the world's living standards,
and reduce poverty than any other political-economic system the world has ever seen. It rewards the productive, while evil
socialism enslaves the productive to subsidize the indolent.
I fight for my republic.
No surrender!
Dionysus
Michael Coburn
> FROM WSJ
From the major beneficiary of off shored jobs we have the following lies:
> HEAD: How 'Protectionist' Became An Insult
>
> SUB-HEAD: As Congress dawdles on trade agreements, the harsh results of
> the Smoot-Hawley tariff should not be forgotten. By DOUGLAS A. IRWIN,
> professor of economics at Dartmouth, author of "The Smoot-Hawley Tariff
> and the Great Depression," to be published next year by Princeton
> University Press.
REAL HEAD: Republicans drag out the great lie about the Great Depression
_AGAIN_
> Eighty years ago, on June 17, 1930, President Herbert Hoover signed the
> infamous Smoot-Hawley tariff, significantly raising the duties on
> imported goods. Hoover and his congressional allies thought that
> reducing imports would strengthen the economy. Instead, it contributed
> to a collapse in world trade and the spread of protectionism around the
> globe. The lessons from this policy mistake are unfortunately all too
> relevant today.
Yes... And those lessons are that knee jerk reactions (a Republican
mainstay) and tariffs of 60% when you are a net exporter are pretty
stupid. And that moderate tariffs and common sense will be rejected by
the people deriving huge incomes from the current "free trade".
> The Smoot-Hawley tariff, conceived as a Republican ploy to gain the farm
> vote in the 1928 election, was a bad idea from the start. A tariff could
> not help farmers cope with low prices because most of them depended on
> exports. The nation sold one-half of its cotton, one-third of its
> tobacco, and one-fifth of its wheat and flour abroad. Their prices were
> set on the world market. The farmers who did compete against
> imports—sugar and wool—were already protected with high duties.
It is rather important to understand that the US ran a trade _SURPLUS_ at
the time the moron Republicans started the Smoot-Hawley trade wars. But
it was done to win the elections. Just like everything else the
Republicans have done or will ever do, it was designed to appeal to
people that have no understanding of economics but for the ability to run
a small business or be an employee running a household. It was a
demonization of the foreign governments that were conspiring to drive
down prices. The farmers and the morons ate it up.
But the _FACTS_ are that trade wars hurt exporters and help importers.
Countries with trade surpluses are harmed while importing countries turn
to local producers improving domestic economies. If the USA had been in
the horrendous position it is in today in 1930 then the Smoot-Hawley
trade wars would have made a lot of sense.
> The damage wrought by this tariff had only one silver lining. Ever
> since, the ghosts of Reed Smoot and Willis Hawley (a Republican
> congressman from Oregon) have stood in the way of anyone arguing for
> higher trade barriers. They almost singlehandedly made the term
> "protectionist" an insult rather than a compliment.
Yes... The vilification of these morons is deserved. Starting a trade
war when you are exporting a lot more than you are importing is typical
Republican fascist shit. The economics are irrelevant. What matters is
grabbing the news cycles and playing the crowd; filling the voting booths
with ignorant monkeys.
> The most important lesson of the Smoot-Hawley fiasco is that any
> protectionist move by the U.S. will be counterproductive if it leads to
> foreign retaliation.
BWAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAAHAHA!!!!!!!!!!!!!!!
If we have a 10% import duty on all imports and all other countries
reciprocate with a 10% import duty, then we make out like bandits. We
can subsidize our exports from the proceeds of the import duties and kick
ass all over the world.
> And there can be no doubt there will be such
> retaliation if the U.S. breaks world trade rules.
Bring it on!!! We (the middle class, the producer class) have lost our
butts on this deal.
> Another lesson is that active commercial diplomacy is needed to keep
> trade open. If the U.S. trade agenda remains inactive, other countries
> will move ahead and pursue trade agreements that put U.S. exporters at a
> competitive disadvantage in world markets.
Now all you have to do is ask your self exactly why we want to work our
butts off in order to send stuff out of the country. Why not produce
stuff for the people in this country? And China can do likewise.
> On this score, the Obama administration should work to end the stalemate
> in Congress on the trade agreements with Colombia and South Korea. These
> agreements should be no-brainers because they are one-sided: The U.S. is
> already open to their goods, but this is not reciprocated.
And the proper answer is to tax those imports and send the money out to
the American people as a stimulus check. We do not need to produce stuff
for other countries, nor do we want to continue to lose jobs to foreign
workers.
> All the
> agreements do is level the playing field.
And continue the assault on the middle class of America.
> And just as Smoot-Hawley had
> bad political effects abroad, trade agreements could have good
> ones—something to keep in mind as South Korea faces North Korea and
> Colombia struggles with Venezuela.
> ++++++++++++++++
> SOME COMMENTS FROM THE SITE
>
> Modern efforts to "save American jobs" by restricting global access to
> the American market will have exactly the same
> effects as Smoot-Hawley. "Those who fail to learn from history are
> condemned to repeat it." --------------
Yet the rightarded can't "learn from history" because they insist on
rewriting it to fit whatever morality trip they happen to be on in the
present.
> All the world has an industrial policy, save the United States. And, we
> are suffering terribly for it. Our trade deficit is enormous, and our
> unemployment rates are horrendous. Japan's unemployment rate is between
> 4.9% - 5.1%. China is around 4.2%. Germany, around 7.7% (and falling).
> The United States -- just under 10%. And, we game our numbers a heckuva
> lot more than do other countries.
>
> The countries doing the best in this Great Recession are the most
> protectionist. Facts are facts, and it's time that we tell the "free
> traders" to go take a hike and do what's right by our countrymen. Other
> countries do it, and so should we! -----------------
WHAT!!! A sane person commenting on a winger site!!! Call the Wire
Services!
> What a foolish comment. The US has a trade policy. Our Dear Leader has
> been explicit. It is to denigrate and demonize various industrial
> sectors until companies are hectored into relocating elsewhere.
Our "Dear Leader" did not create the current trade policy. This policy
was created by George Bush Senior, Bill Clinton, The Republican
Congresses, and George Bush junior. And there is no such thing as
permanent law. Import tariffs _STOP_ companies from relocating elsewhere
or off shoring production.
> It has
> been a reasonably successful policy. The increased unemployment is not
> necessarily a bad thing either. It frees up workers for newly created
> government jobs, which have better pay and benefits than the private
> sector. It's a win-win for everyone. Our Dear Leader keeps telling me
> so. ----------------------
The lying never stops.
> The only industrial policy our nation needs is allow businesses to make
> decisions free from coercion and free from subsidy. No nation can
> produce everything it wants or needs by itself, which is why
> Smoot-Hawley failed. If we have a policy by dictating what to make, how
> to make it, and what to pay those who produce it, we will just end up
> making the wrong choice and destroying the ability of the economy to
> function.
Yes... That is why import tariffs work and other tax mechanisms don't.
If we apply corporate income taxes then corporations move offshore. That
is not working very well.
> You may want to look at it a different way. The reason for those huge
> trade deficits, unemployment, and outsourcing is because our government
> is attempting to create an industrial policy. America became the world's
> #1 economic power by 1873 because we didn't have a policy.
LIE! More revisionist history. The USA had very high tariffs in the
1800's.
> No national policy is the best national policy. Let the market decide.
> *****************
> Hear, hear!
This is rich bitch pig shit at its finest from a real WSJ butt sucker.
--
"Senate rules don't trump the Constitution" -- http://GreaterVoice.org/60