Also, how could something (Trade) that was but 6% of GNP cause a 20 % decline in GNP...it couldn’t and didn’t.
Here is your critique: Also, how could something (Trade) that was but 6% of GNP cause a 20 % decline in GNP...it couldn’t and didn’t.
I said nothing about a decreases in trade causing 20% decline in GNP. I described the maximum portion of the two year decline in REAL GDP may be attibutable to the trade war Smoot-Hawley engendered. So your critique is correct - Trade did not cause a 20% decline in GDP. But I never said that. You should read a little more carefully Professor.
Real GDP declined by about 16.5% between 1929 and 1931. Over the same period of time, Real Exports declined $5.9 bln to $4.1 bln. This Real Exports decline amounts to about 1.7% of 1929 Real GDP.
I will grant you that not all of this cane be laid at the feet of Smoot-Hawley retaliation, because as deflation takes hold, and incomes in Canada and England decrease, exports decrease. However it is telling that Real Exports decreasing rapidly at first, $1 bln year over year 1929-1930, and then slow, to $.8 bln 1930-1931. The data therefore supports that retaliation had an immediate effect. This correlates with the anecdotes appearing on the timeline in my original post listing the Spanish WAIFF Tariff Act, the Canadian Emergency Tariff Act, etc., all of which follow the implementaiton of Smoot-Hawley.
Because decline in real exports measures an aggregate expenditure, you need to apply a multiplier to account for the velocity of money. In this case, the most reasonable multiplier is 2. So the 30% decline in Real Exports from 1929 to 1931 probably accounts for a real GDP decline of 3.4% from 1929 to 1931. So, 21% of the 1929-1931 Real GDP decline is attributable to declines in Real Exports.
Just to put some emphasis on the impact of the 1929 decline in real exports, consider what the evaporation of .97% of 2008 GDP, or 138.647 billion, would bring.