Friday, June 17, 2005

In honor of Ben Stein - 75th Anniversary of Smoot-Hawley

Any chance to honor a great American like Ben Stein should be taken early and often. If you have not gone by his website and bought one of his books, shame on you.

I'll let you bask in Ben on your own time, but lets get back to the title. 75th Anniversary of Smoot-Hawley.

Yep, I said it, Smoot-Hawley. To quote a great movie for my generation (and one of Ben's best lines), Anyone know what this is? Class? Anyone? Anyone? Anyone seen this before?

Harumph. Thought not.
The Smoot-Hawley Tariff Act of June 1930 raised U.S. tariffs to historically high levels. The original intention behind the legislation was to increase the protection afforded domestic farmers against foreign agricultural imports. Massive expansion in the agricultural production sector outside of Europe during World War I led, with the postwar recovery of European producers, to massive agricultural overproduction during the 1920s. This in turn led to declining farm prices during the second half of the decade. During the 1928 election campaign, Republican Presidential candidate Herbert Hoover pledged to help the beleaguered farmer by, among other things, raising tariff levels on agricultural products. But once the tariff schedule revision process got started, it proved impossible to stop. Calls for increased protection flooded in from industrial sector special interest groups and soon a bill meant to provide relief for farmers became a means to raise tariffs in all sectors of the economy. When the dust had settled, Congress had agreed to tariff levels that exceeded the already high rates established by the 1922 Fordney-McCumber Act and represented among the most protectionist tariffs in U.S. history.

The Smoot-Hawley Tariff was more a consequence of the onset of the Great Depression than an initial cause. But while the tariff might not have caused the Depression, it certainly did not make it any better.
Such policies contributed to a drastic decline in international trade. For example, U.S. imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934.
Mmmmm, and the international economic implosion of The Great Depression gave us what? Fascism and empowered Socialism. Joy. ECON 202 is complete for today.

ps: Why am I posting about the Smoot-Hawley? 1)I like saying Smoot-Hawley. 2) I like Ben Stein. 3) Ferris. 4) Economics is at the center of almost everything. 5) Protectionism is the hobgoblin of small minds. 6) The mythology of The Great Depression does not give this enought time. 7) Like you need more proof that many politicians will do the most stupid things just to get short term feel-good positive press. 8) That was done at the last high-water mark of Republican power. 9) You really do not want me to post about what Senator Turbin said. Honestly, in words I can't. I'm not retired. And if you still do not get the Ben-Ferris-Smoot connection, go here.

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