The Great Depression

  • Benjamin Roth: The Great Depression: A Diary

    Benjamin Roth: The Great Depression: A Diary
    It's all here, times change people don't -the endless govt programs that fail to stimulate the private sector -the ups and downs of the economy, the veterans pension stimulates just as the housing credit did, until of course the money runs out -Roth is a attorney in Youngstown Ohio who kept a diary regarding the economy from 1930 until WW II breaks out, he is objective, candid, and forthright which is more than we get from Washington DC now or then highly recommended

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February 24, 2018

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James Murphy

“That weekend I warned that President Trump was dangerously close to repeating the folly of the 1930 Tariff Act otherwise known as the Smoot Hawley Tariff Act”

From 1930-1932 as tariffs (Smoot-Hawley) went up the economy went down. The problem with blaming Smoot-Hawley is that in all other tariff increases the economy went up. For example, after World War I the nation went into a deep depression. Congress responded with the Fordney–McCumber Tariff of 1922. The resulting economic boom is generally referred to as the Roaring Twenties.

Tariffs also have failed to improve the economy. Grover Cleveland’s Wilson-Gorman Tariff of 1894 reduced tariffs slightly but did not fix the Panic of 1893 costing Cleveland reelection.

From the Tariff of 1816 until the Kennedy Round of Tariff Reductions in 1967 the United States was the most tariff protected nation on earth. From the Morrill Tariff of 1861 until 1900 tariffs averaged 45 percent. Behind that wall of protective tariffs good things happened including eclipsing free trade advocate Great Britain. The Boogie Man didn’t get us.

With respect to the Smoot-Hawley tariff bear in mind that two things happening at the same time does not mean one causes the other. As my statistics professor put it correlation does not equal causation. International trade peaked in June 1929 and started going down. A year later Smoot-Hayley became law in June 1930. By then much of the trade decline had already happened. However, Smoot-Hawley did not become effective until a year later in June 1931. Smoot-Hawley can only be blamed for the trade decline that happened after June 1931.

The irony is that the whole purpose of Smoot-Hawley was to drive down trade. That is why it was passed. Given the history of the previous 100 years the Congress, Senate, and the President had every reason to believe it would improve the economy. I suggest you have no hard data other than that the tariff increase and the Depression happened at the same time to prove they were wrong.

Free trade is an Ivory Tower Theory that has never worked in the real world to produce prosperity for citizens but rather concentrates wealth in the few. After suffering a hundred years from free trade the British voted for socialism. The Chinese who had free trade forced on them by Great Britain after the Opium Wars went whole hog with communism.

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