Jewish World Review June 16, 2005 / 9 Sivan,
A happy birthday?
Only a few economic historians are likely to notice that June 17th
marks the 75th anniversary of the signing of the Hawley-Smoot tariff bill,
and even economic historians are unlikely to be nostalgic about that
Why not leave the bad news of the past in the past? After all, we have
our own problems today.
Unfortunately, the same kind of thinking that led to the Hawley-Smoot
tariffs is still alive and well and in full youthful vigor in the
media and in politics today.
At the heart of past and present arguments for restricting imports that
compete with American-made products is the notion that these imports will
cost Americans their jobs. That fear was even more understandable back in
1930, when the Great Depression was getting under way and unemployment was
at 9 percent.
The Hawley-Smoot bill raised American tariffs to record high levels, in
an attempt to protect existing jobs and in hopes of helping the unemployed
find work producing things that the United States had previously been
importing from other countries. Many businesses were in favor of the new
tariffs, hoping to retain or expand their markets, and farmers were
especially big supporters of the Hawley-Smoot tariffs.
Who was opposed?
Most of the leading economists in the country were opposed. A
front-page headline in the New York Times of May 5, 1930 read: "1,028
Economists Ask Hoover to Veto Pending Tariff Bill." Those signing this
public appeal against the new tariffs included many of the top economists of
the day 25 professors of economics at Harvard, 26 at the University of
Chicago, and 28 at Columbia.
But, to a politician, what do 1,028 votes matter in a country the size
of the United States? Congressman Hawley and Senator Smoot both ignored
them, as did President Herbert Hoover, who signed the legislation into law
the next month.
The economic reasons for not restricting international trade then were
the same as they are today. The only difference is that what happened then
gives us a free home demonstration of what can be expected to happen if we
go that route again.
The economists' appeal spelled it out: "The proponents of higher
tariffs claim that the increase in rates will give work to the idle. This is
not true. We cannot increase employment by restricting trade."
If 9 percent unemployment was troublesome in 1930, when the
Hawley-Smoot tariff was passed, it was nothing compared to the 16 percent
unemployment the next year and the 25 percent unemployment two years after
that. The annual rate of unemployment in the United States never got back
down to the 9 percent level again during the entire decade of the 1930s.
American industry as a whole operated at a loss for two consecutive
years. Farmers, who had given strong support to the Hawley-Smoot tariffs,
saw their own exports cut by two-thirds as countries around the world
retaliated against American tariffs by restricting their imports of American
industrial and agricultural products.
Many factors, of course, affected the Great Depression of the 1930s.
But later economists looking back have seen the Hawley-Smoot tariff as one
of the factors needlessly prolonging the economic disaster.
How much wiser are we today? Not much, if at all.
Talk about import restrictions or complaints about "outsourcing" today
proceed with the same mindless disregard of what other nations are doing and
People who throw around statistics about how many American jobs have
been outsourced don't even mention how many Americans have jobs that have
been outsourced from other countries, much less how many Americans will lose
those jobs if we start a new round of international trade restrictions.
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