Skip to comments.Protectionism Did Not Cause the Great Depression
Posted on 06/06/2010 8:50:52 AM PDT by SeekAndFind
Official data show that higher U.S. tariffs had little impact on American imports. From 1929 to 1932, imports of dutiable and duty-free goods fell almost the same percentage, suggesting that higher tariffs had little impact on most trading partners ... The sharpest drop in exports involved commodity-exporting countries, including some like Brazil, largely unaffected by higher U.S. tariffs.
Between 1929 and 1932, real GDP fell 17 percent worldwide, and by 26 percent in the United States, but most economic historians now believe that only a miniscule part of that huge loss of both world GDP and the United States' GDP can be ascribed to the tariff wars. ... At the time of Smoot-Hawley's passage, trade volume accounted for only about 9 percent of world economic output. Had all international trade been eliminated, and had no domestic use for the previously exported goods been found, world GDP would have fallen by the same amount -- 9 percent. Between 1930 and 1933, worldwide trade volume fell off by one-third to one-half. Depending on how the falloff is measured, this computes to 3 to 5 percent of world GDP, and these losses were partially made up by more expensive domestic goods. Thus, the damage done could not possibly have exceeded 1 or 2 percent of world GDP -- nowhere near the 17 percent falloff seen during the Great Depression. ... The inescapable conclusion: contrary to public perception, Smoot-Hawley did not cause, or even significantly deepen, the Great Depression.
With the exception of discriminations in France, the extent of discrimination against American commerce is very slight ... By far the largest number of countries do not discriminate against the commerce of the United States in any way.
Tariffs might not have started the Great Depression, but they sure didn’t help. Tariffs introduce market inefficiency and are a net detractor on a nation’s economy.
No one argues Tariffs CAUSED the Great Depression, what they point out is that tarffis did lengthen and deepen the effects of the Depression.
"In 1930, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the... Anyone? Anyone?... the Great Depression, passed the... Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act? Which, anyone? Raised or lowered?... raised tariffs, in an effort to collect more revenue for the federal government. Did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression."
Well, whenever a discussion turns to dealing with some of the gamesmanship that occurs in Intl trade the very first thing Globalists do is wave “Smoot Hawley CAUSED THE GREAT DEPRESSION!!!” flag.
Now where this author is incorrect is in the idea that since S&H did not cause the Depression, then it would be okay to implement such across the board tariff increases and American in 2010 is very different from America 1931.
We exported most of the World’s oil in that era, today we imported far more than we export.
So many straw men! I agree with the poster who pointed out that Hawley-Smoot didn’t cause, only exacerbated what should have been a cyclic downturn—probably a bit deeper than recent ones had been because an underlying agricultural downturn coincided with a major market correction (the Crash of ‘29).
The WWII argument is a strawman, too. No one argues that American trade policy caused the European war. But there is a strong argument to be made that Hawley-Smoot together with trade measures specifically aimed at Japan pushed the Japanese to adopt a more aggressive policy of colonialism in East and South East Asia, defense of which prompted the preemptive attack on Pearl Harbor.
(D*mn good thing that Yamamoto wasn’t regarded as sufficiently bushido. If he had been, they’d have carried out his whole plan, which was to attack Pearl and land a large force of marines in Hawaii to seize it. Our nearest deep-water port to the Japanese home islands would then have been San Francisco, and the Imperial Navy would have had a forward port from which to harass our forces in the eastern Pacific.)
The closest I've seen to that was a 1987 book that said Black Thursday was the same day that President Hoover said he would sign the Smoot-Hawley bill.
President Madison advocated a mild protectionism for industries America needed to develop. That would be wise for America now that our industrial base is severely eroded.
What about retaliatory tariffs?
More than depression is at stake. If we had depleted our manufacturing skills and plant then relied on importing production from Germany, Japan and China, we would have lost WW II.
They'd never do anything like that. /s
Well free trade will be the death of America as we know it
Sorry the tariff really did make a difference. The Smoot-Hawley tariff was followed by a predictable cascade of international retaliatory actions among all nations. The bill exacerbated similar damage done by the Fordney- McCumber tariff of 1922.
The United States had the only sizeable economy not devastated by WW I, which could restart national economies through international trade. When the American Thinker article points to a minimum impact of international trade on the Great Depression they in fact highlight the absence of a countervailing economic process to other factors, such as our stock market collapse. There was just too little activity happening worldwide.
Another, but related, point is nonlinearity, awareness of which the author does not exhibit either. When the economy is not well and you produce tariffs on top of that, those tariffs could break the "camel's back." A post-surgery pneumonia may kill a patient that would survive were he not weakened by surgery. Adding things up and discarding their JOINT effects is fallacious.
The conclusions reached by the author may still be correct, but they certainly don't follow from his simplistic arguments. "Thing should be made as simple as possible," as Einstein asserted, "but not simpler."