Is protectionism a big part of the Great Depression, as Ben Sasse said? | PolitiFact
Turns out we've seen the pendulum swing between free trade and Irwin, author of “Peddling Protectionism: Smoot-Hawley and the Great Depression. . It's a global marriage of Chinese labor, European customers and. The Great Depression was a breeding ground for protectionism. Eichengreen and Irwin offer an important trade-policy corollary: without the flexibility to that there is a strong relationship between the change in the exchange rate and the. Protectionism was a result of the Depression, not a cause. Rising tariffs didn't even play a large role in the initial trade contraction; like the . The only difference was that our elected Officials REFUSED to stick their noses in.
One that keeps resurfacing again and again, no matter how many times it is discredited, is the idea that protectionism caused the Great Depression. One occasionally even hears that the same protectionism -- specifically the Smoot-Hawley tariff of -- was responsible in significant part for World War Two!
This is nonsense dreamed up for propaganda purposes by free traders, and can easily be debunked. Let's start by reminding ourselves of a basic fact: The Federal Reserve had allowed the money supply to balloon excessively during the late s, piling up in the stock market as a bubble.
The Fed then panicked, miscalculated, and let the money supply collapse by a third bydepriving the economy of the liquidity it needed to breathe. Trade had nothing to do with it. The Smoot-Hawley tariff was simply too small a policy change to have so large an effect as triggering a Depression.
Protectionism Didn't Cause the Great Depression | HuffPost
For a start, it only applied to about one-third of America's trade: One point three percent! America's average tariff on goods subject to tariff went from America's tariffs were higher in almost every year from to Our tariffs went up in,and without producing global depressions, and the great recessions of and spread worldwide without needing the help of any tariff increases.
If Smoot-Hawley had caused a global trade disaster, it would necessarily have been by triggering a sharp decline in American imports of goods subject to the increased tariff.
The data say no. In the words of economic historian, former member of the U. International Trade Commission, and avowed free trader Prof. Eckes, Official data show that higher U.
From toimports 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.
Controversial, devout, nativist Smoot was a devout Mormon but also was a devout protectionist. This was not unusual for the time, an era when protecting domestic industries was the norm.
Smoot-Hawley and the Great Depression. The Mormon church had established sugar beet farming in the western U. Smoot fought for high tariffs on foreign sugar, often from Cuba, to help the domestic sugar beet business thrive. The Mormon Church controlled the company in the early 20th century.
Reed Smoot tried to protect American sugar from foreign competition by advocating for high tariffs. Cheap corn syrup eventually wiped it out. But a few of the abandoned sugar factories still remain. An old beet processing factory still stands in Spanish Forks, Utah, a small town that hugs the snow-capped Wasatch Mountains, just south of Provo off Interstate The factory floor where they once sliced the beets and ground them into a pulp is now a dusty, abandoned space. The light coming in from the window spaces and pigeons flying at the top.
But to think of the power of this place and the industrial might that it represented at the time.
Protectionism Didn't Cause the Great Depression
When bad economics happens to good intentions So Smoot, along with his House cohort Hawley, began crafting a tariff bill in Washington, which made for very good politics and very bad economics. American farmers in were struggling, but the problem was not foreign competition; it was depressed agriculture prices.
Tariffs would not solve this, yet farmers still wanted relief. But that was considered a new idea. So they came to the tariff as sort of an indirect way of helping out farmers by stopping imports of farm goods. Congress started holding hearings on tariffs inat which point all kinds of lobbyist and industry groups showed up to piggyback on the farm tariffs.
Ball bearings, steel, textiles, shoes, bricks, collapsible tubs, bottle caps, sprinkler tops, you name it. Even the goldfish industry joined the protectionist exuberance. Our Mormon protagonist wanted to restrict the import of bawdy books, including D. What are you doing, reading them? Ogden Nash, a noted humorist at the time, mocked the senator with this poem: A rooty toot toot for Senator Smoot of Ute, And his reverential occu-poot.
Not to be bribed with pelf. He guards our homes with erotic tomes, By reading them all himself. In fact, 1, economists sent a letter of protest, arguing that protectionism would harm the economy and cause a trade war. But Congress blew them off, dismissing them as clueless intellectuals.
This is a key to why protectionism is so often a political winner, even today: The masses who stand to pay more for sugar or shoes or sauerkraut are not in the conversation. Consumers who suffer from protectionism pay a nickel more here, a nickel more there. Its Fall and Rise in the Twentieth Century.
By then, the Great Depression had already begun. The stock market was in shambles, having crashed in October as the Senate debated its version of the bill.