Posted on 03/23/2009 1:25:44 PM PDT by Scott Martin
While free trade yields a net positive to every nation that participates in it to any degree, tough economic times call for even more robust worldwide trade. With a failing economy it becomes all the more important for a country to maximize the use of its own resources and minimize the cost of the resources it brings in. But, following the shining example of the Great Depression, things are once again going the other way - according to a New York Times article.
After repeated pledges by world leaders to avoid erecting trade barriers, protectionism is on the march, provoking nasty trade disputes and undermining efforts to plot a coordinated response to the deepest global economic downturn since World War II.
From a looming battle with China over tariffs on carbon-intensive goods to a spat over Mexican trucks using American roads, barriers are going up around the world. As the recession’s grip tightens, these pressures are likely to intensify, several experts said.
For a little history on how well protectionism works, especially in an economic downturn, we need just look at the Hawley-Smoot Tariff Act of 1930...
(Excerpt) Read more at patriotroom.com ...
You just offended the anti-freedom, pro-depression, Smoot-Hawley supporting, protectionist, uncompetitive, whining Freepers.
Watch your back!
Does anyone hire editors or even proofread anymore?
This protectionism stifles employment which is contrary to popular belief.
It was taught as Hawley-Smoot in my history class a couple decades ago. Think it goes both ways.
Yeah, I'm sure they'll be here soon, with their "free traitor" rhetoric.
Interestingly, I saw a graph the other day that showed the annual rate of US manufacturing. Since NAFTA took effect in 1994, US manufacturing almost DOUBLED between then and the beginning of the current recession/depression.
Free trade works on competitive advantage. That presumes non-predatory government interference, where a country decides an industry is strategic and invests in capturing it from another country which might have a competitive advantage without that interference.
Further, the model also assumes free mobility of labor and virtually frictionless and costless retraining of displaced workers. Its not that economists don’t want to consider these things. The models get... messy.
BTTT.
Trade means we buy from you and you buy from us. It should not be a one way street.
As for Smoot Hawley protection, we sure would have been in bad shape in WW II if we were dependent on Germany, Japan and China for our war producing factories.
That is, unless you are one of 300 Alabama workers that “used to make rubbers for the U.S. govt. but just lost their jobs to the Chinese who agreed to sell them for 2 cents a piece. How much rubber can you buy for 2 cents? Apparently enough to blow off some more American jobs in the name of free trade.
Yeah, Smoot-Hawley, the most ballyhooed and overrated aspect of the years of the Great Depression. The GD was caused and aggravated and extended by the Feds monetary policy which shrunk the money supply 30% from 1929 - 1933, and further contracted the money supply in subsequent years.
The Fed's Depression and the Birth of the New Deal
The Great Depression According to Milton Friedman
The GD is not the prime example of anything to do with free trade, but the prime example of how the Fed's monetary policy can caused economic disaster.
I’ve been waiting for the opportunity to label my opponents on Free Trade. The “Free Traitor” label has earned them my response.
"Free trade works on competitive comparative advantage."
An absolute competitive advantage may not guarantee that a country should produce a thing. For the purposes of elucidation, I will proceed with an off-the-cuff description of the distinction for the edificaiton of the gathered folks.
For example, I think America at one time had a competitive advantage in producing textiles (go with me on this for a minute in spite of the possible historic innacuracy). However, all those good people in New England had better things to do with their time, like create financial products on Wall Street. So, while they could produce textiles better and cheaper than anyone in the world, their opportunity cost of doing something else was so high, that they chose to work on Wall Street, and buy textiles from the competitively disadvantaged Turks. The Turks may have had higher total costs, but it was still better to let the Turks produce cloth and New Englanders to produce Initial Public Offerings.
That's the difference between competitive advantage and comparative advantage. The U.S. could have a competitive advantage in producing something and still choose not to produce it, because comparatively it makes more sense to produce something of higher value and TRADE.
If you had all this in mind already, apologies.
Smoot Hawley is over rated as the main cause of the great depression. We have stupidly sold our factories, and became an importer of our most important commodities that our defense depends on. Not a real smart move in my opinion, but I guess we will soon know.
While S/H could not have CAUSED the Great Depression (since it followed the initial crash), it is generally assigned a portion of the blame for continuing the length and exacerbating the effects of the Depression.
I quite agree on the monetary policy front. On the alternate hand, what would Uncle Miltie say about monetary policy in the last decade? Proabably he is spinning in his grave about now. Bernanke will not repeat the monetary restriction error of the Depression Era Fed, but he seems perfectly happy to implement the opposite error: infinite monetary profligacy.
I knew it at one time. Got sloppy.
The role of Smoot-Hawley in the Great Depression is greatly overrated for specific purposes. Even John McCain learned to say SH. I don’t believe it is even mentioned in those two excellent links I provided. Everyone who loves to talk about SH should be required to read them both.
I agree Bernanke is going wildly in the opposite direction of the GD era Fed. I mostly agree with the often heard statement that we’re in uncharted territory. No one really knows what might happen over the next few years with these incredible borrowings, and Fed injections and projected deficits.
I don’t expect the catastrophe some expect, and that Obama loves to scaremonger about, but there might be some tough times for many.
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