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Protectionism and the Great Depression:

Here's a nice video about the Smoot-Hawley tariff, the Great Depression, and protectionism generally. I should note that the idea that protectionism was a substantial cause of the Great Depression is not universally shared. But watch the video anyway, which has good history and good analysis of the ill effects of protectionism. From the folks at Freedom To Trade. (h/t: Tom Palmer)

Tucker (mail):
The idea that the Earth is round is "not universally shared", but thanks for the warning.
5.6.2009 10:05am
Sasha Volokh (mail) (www):
No, I mean there's credible opinion out there that yes, the tariff was harmful, but wasn't of sufficient magnitude to account significantly for the Depression. That is, if you're looking to list "causes" of the Depression, monetary policy ranks high on the list, protectionism much lower. I don't know for sure whether that's true, but I've heard it from respectable economists (Mankiw, Bernanke). I just didn't feel like dredging up the evidence in this case, because it's not my field. The more important point is that protectionism generally is bad for many people, and this video illustrates that.
5.6.2009 10:12am
Tucker (mail):
Yes, I know. Thanks for the response. I was just amused by your attempt to head off the likely flood of contrary comments. ;)
5.6.2009 10:29am
Melancton Smith:

The idea that the Earth is round is "not universally shared", but thanks for the warning.


I don't share the notion that the Earth is round. I'm one of the nutty few that think it is an oblate spheroid. Fair warning.
5.6.2009 10:30am
Tracy Johnson (www):
It was quoted as incantation "Hawley-Smoot" in Harvard Lampoon's bored of the rings.

So I'm curious, what portions of the country speak the dialect as "Hawley-Smoot" and which parts of the country call it "Smoot-Hawley"?

Sounds like a research job for an intern!
5.6.2009 10:33am
Connie:
I thought conservatives referred to it as Hoot-Smalley . . .
5.6.2009 10:34am
Joseph Slater (mail):
I loved "Bored of the Rings" when I was young. . . .
5.6.2009 10:42am
Jake 1979 (mail):
S-H probably didn't help. But it passed in mid-1930, after the forces that caused the Great Depression were already in motion. It's true that unemployment had not yet topped 10% when S-H passed, but that's a lagging indicator.

It would be like claiming that Obama's stimulus package caused the financial collapse of 2008. After all, unemployment didn't really start to get worrisome until after 2/09! But the idea that S-H caused the Depression will always attract the kind of loons who believe global warming is a Gore conspiracy, dinosaurs played with humans, and fiat currency causes the business cycle.
5.6.2009 11:30am
Tucker (mail):
OED: Round, "A spherical or globular body; a sphere, globe, planet. Somewhat rare."

Under this usage, round would include oblate spheroid. I did not, you'll note, use the phrase 'perfectly round' which would imply only a sphere.

In fact, Melancton Smith, the Earth isn't even an oblate spheroid, if you must be pedantic.

"Our globe, however, is not even a perfect oblate spheroid, because mass is distributed unevenly within the planet. The greater a concentration of mass is, the stronger its gravitational pull, "creating bumps around the globe," says geologist Joe Meert at the University of Florida in Gainesville."

Scientific American

Sorry.
5.6.2009 11:33am
Melancton Smith:

I loved "Bored of the Rings" when I was young. . . .


Ditto. I'll never forgive myself for losing my paperback copy.
5.6.2009 11:34am
Joseph Slater (mail):
Melancton: I just found my old copy in my mother's attic a few weeks ago. I was really happy. Weird that "Bored of the Rings" would come up in my life twice in the last month. . . .
5.6.2009 11:38am
Melancton Smith:

I did not, you'll note, use the phrase 'perfectly round' which would imply only a sphere.





"Our globe, however, is not even a perfect oblate spheroid, because mass is distributed unevenly within the planet. The greater a concentration of mass is, the stronger its gravitational pull, "creating bumps around the globe," says geologist Joe Meert at the University of Florida in Gainesville."


I did not, you'll note, use the phrase 'perfect oblate spheroid'...

Thanks for playing.
5.6.2009 11:40am
Uh_Clem (mail):
I was a huge fan of National Lampoon (early 70's anyway, until PJ took over as editor ) I never really got "Bored of the Rings", despite attempting to read it at least three times. Maybe I'd find it funny now...
5.6.2009 12:07pm
ShelbyC:
Connie:

I thought conservatives referred to it as Hoot-Smalley . . .


I'm not sure what FDR called it when he went on TV in 1929, but it was an important provision to protect workers in the 57 states.
5.6.2009 12:09pm
G Boyd (mail):
Dear Jake 1979,

Unemployment was at 7.8% in 1930 when the Smoot-Hawley tariff was passed, but it jumped to 16.3% in 1931, 24.9% in 1932, and 25.1% in 1933.[Source: U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1957 (Washington, D.C., 1960), p.70.}

S-H passed the House in May 1929 and the Senate passed it in March 1930 (not mid-year). Retaliation from other countries started before S-H was signed into law in June, 1930.

S-H did not directly cause the stock market crash of September but most economists attribute a substantial part of the worsening world economy, the fall into depression from a recession, to the depression. Fiscal policy certainly played a major part, too, but S-H shouldn't be dismissed.

And, BTW, I think AGW is greatly overblown.
5.6.2009 12:18pm
G Boyd (mail):
SHB - "to the effects of S-H" rather than "to the depression." Got a phone call and had a train of thought wreck.
5.6.2009 12:20pm
Tucker (mail):
Melancton: Very funny.
5.6.2009 12:28pm
JakeCollins:
@Gboyd
By "passed" I meant "signed into law," but that's just quibbling.As I said above unemployment is a lagging indicator. By your reasoning, Obama's stimulus will be responsible for the 11-13% unemployment we're likely to see over the next 12 months... not the financial panic that happened last fall.
S-H exacerbated the problem, but there still would have been a worldwide depression without it.
5.6.2009 12:30pm
JakeCollins:
P.S. If we both live to a 150, I'll make a bet that in 2100 revisionist conservative "economists" will be blaming the stimulus for the 2008 Quasi-Depression.
5.6.2009 12:32pm
Hal O'Brien (mail) (www):
"And, BTW, I think AGW is greatly overblown."

From a business point of view, does that matter? If it's what our export customers want, why not satisfy them and respond to market forces? Why not make a buck?

*^*^*

Re: the video, I love Shlaes' born-again Keynesian statement that the Depression lasted until WWII. Such a statement implies the problem with the New Deal was that it wasn't big enough, and it was only with the huge state intervention of the war that the economy did get started. Notably, her argument also ascribes the end of the Depression solely to state forces, with no private-sector input at all.
5.6.2009 12:36pm
JDS:
Jude Wanniski's The Way The World Works traces the daily [downward] movements of the stock market as the Smoot-Hawley tariff bills made their way through the legislative process. The day-by-day correlation convinced me of a causal relationship, and subsequent events suggest that the markets got it right for once.

Markets anticipate economic activity, hence the market movements in the fall of 2008...
5.6.2009 12:51pm
RPT (mail):
Ah, the time displacement causation explanation. That is, any bad events which occur during a Republican administration are the fault of either the delayed effect of acts of (a) the prior Democratic administration, or (b) the anticipation of not yet committed acts of the incoming Democratic administration. Pretty neat.
5.6.2009 12:58pm
Hal O'Brien (mail) (www):
"Markets anticipate economic activity, hence the market movements in the fall of 2008..."

What economy activity did the crash of 1987 predict?

The Dow fell throughout 1981 and most of 1982, or the first year and a half of a different new president -- was this also predictive?

What did the run-up from 1970-1972 predict?
5.6.2009 1:04pm
Bruce Hayden (mail):
Ah, the time displacement causation explanation. That is, any bad events which occur during a Republican administration are the fault of either the delayed effect of acts of (a) the prior Democratic administration, or (b) the anticipation of not yet committed acts of the incoming Democratic administration. Pretty neat.
Not really. All they had to do was actually listen to what candidate Obama was saying, and not what they wanted him to be saying, and look to the probabilities that he would have an almost veto proof majority in the Senate and total control in the House.
5.6.2009 1:13pm
Hal O'Brien (mail) (www):
"...an almost veto proof majority in the Senate and total control in the House."

"Total control"? Hm. Have you considered the Will Rogers factor?

"I am not a member of any organized political party. I am a Democrat."
5.6.2009 1:23pm
Hal O'Brien (mail) (www):
And, hey, RPT... Did you notice Mr. Hayden isn't actually disagreeing with you, he's just rephrasing what you said?
5.6.2009 1:27pm
Hal O'Brien (mail) (www):
Speaking of the insistence of the market sometimes to not make a buck: Why hasn't there ever been a Bored of the Rings movie? I mean, they had three years while the "authorized" version was going on, and a sure thing of an audience. With that kind of lead time, it should have been a doddle.
5.6.2009 2:17pm
Randy R. (mail):
just curious: I heard that both Smoot and Hawley were Republicans. And if it passed the congress in 1929 or 1930, what was the make up of congress? Who controlled the house and the senate?
5.6.2009 2:23pm
Randy R. (mail):
just curious: I heard that both Smoot and Hawley were Republicans. And if it passed the congress in 1929 or 1930, what was the make up of congress? Who controlled the house and the senate?
5.6.2009 2:23pm
road2serfdom:
Protectionism hurts the economy. I don't think political parties have anything to do with that concept.
5.6.2009 3:10pm
Arkady:
Over at OTB, someone suggested that McCain run an ad against Obama featuring the S-M tarrif and it's consequences. Somebody else replied:

That was a joke, right? I can see the commercial now:


Deep Voice: The Great Depression.

[pictures of breadlines]

Deep Voice: The Smoot-Hawley Tarrif--a bad idea that led to bad times.

[more pictures of breadlines]

Deep Voice: And now, Barack Obama's trade policies -- a replay of the Smoot-Hawley tarrif.

[still more pictures of breadlines]

Deep Voice: Another bad idea that will lead to more bad times.



Joan to Joe Sixpack: "I thought Smoot Hawley was playing in Brandon this weekend."
5.6.2009 5:25pm
corneille1640 (mail):
<blockquote>
just curious: I heard that both Smoot and Hawley were Republicans. And if it passed the congress in 1929 or 1930, what was the make up of congress? Who controlled the house and the senate?
</blockquote>
I don't know if Smoot and Hawley were Republicans, but I believe that Congress was cotrolled by Republicans when it was passed. However, I'm too lazy to look it up.
5.6.2009 5:37pm
Harry Eagar (mail):
For the 40% of Americans who were primary producers or directly dependent on primary producers, the Great Depression began in 1922.

Neither Smoot nor Hawley was implicated.

Hal, your take on Shlaes is a hoot.
5.6.2009 8:30pm
Fub:
corneille1640 wrote at 5.6.2009 5:37pm:
I don't know if Smoot and Hawley were Republicans, but I believe that Congress was cotrolled by Republicans when it was passed. However, I'm too lazy to look it up.
You just saved yourself about 3 seconds of relaxation:
The act was originated by Senator Reed Smoot, a Republican from Utah, and Representative Willis C. Hawley, a Republican from Oregon.
5.6.2009 8:39pm
Randy R. (mail):
Thanks for the info. Then I guess we should fear the Republicans on this issue more than the Democrats, at least from an historical viewpoint.
5.6.2009 8:50pm
Hal O'Brien (mail) (www):
"Hal, your take on Shlaes is a hoot."

Thanks, Harry. Although, given the structure of the "not the New Deal but WWII," argument, it has the added benefit of being factually accurate.

So, yes, it is funny. But it's funny because Shlaes hasn't thought her premises through.
5.6.2009 8:59pm
Desiderius:
Randy,

If that's your game, I don't think you really want to Google "Klanbake".
5.6.2009 10:18pm
Paleoboy:
Both of the experts in the video are Council On Foreign Relations goons...
5.7.2009 9:59pm

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