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To: harpseal
Given that the tariff came after the Stock Market crash, it's clear that it didn't cause the Depression, but the consensus is that increased tariffs didn't make things any better. Our tariffs hurt European ability to sell goods here, so they raised tariffs against us which hurt our ability to get rid of our unsold inventories over there.

Whether the Depression would have been shorter or less severe without Smoot-Hawley has often been discussed from a variety of points of view. Defenders of the tariff point out, that foreign trade was less important in those days, but it can't be altogether ignored, either. Some have argued that whatever the international consequences of the tariff, the price rigidity it encouraged at home hurt recovery. Most sources I've seen do agree that the protectionist cycle hurt European economies, and this had dire political and military consequences for them -- and eventually for us.

In school, my textbooks and teachers were inclined to think that the tariff did make things worse. I don't know enough to say for sure that it did or that it didn't. But the political lesson drawn from the protectionism of the 1930s was that shutting economies off from one another produced the conditions that made Hitler and Tojo possible. A choice was made in favor of economic competition and political cooperation, rather than economic self-reliance and military conquest.

Whether this means that free trade is always better than tariffs is another question. Free trade agreements between two or countries usually involve protection against outsiders, so one doesn't wholly escape tariffs and protectionism. There may be problems with free trade, but from everything that I've read, there are also real dangers to carrying protectionism too far.

Countries may well want to avoid having living standards dragged down by foreign competition. But over time, protectionism makes those countries less efficient. And in times of recession or inflation, prices may well have to fall to save the economy.

324 posted on 07/29/2003 4:29:12 PM PDT by x
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To: x
But the political lesson drawn from the protectionism of the 1930s was that shutting economies off from one another produced the conditions that made Hitler and Tojo possible. A choice was made in favor of economic competition and political cooperation, rather than economic self-reliance and military conquest

This is definitely an unsupported conclusion. the rise of the Nazi Party had started before 1929. Musolini was already in power in the mid 1920's. The Japanese militarists became powerful after teh Russian Japanese war of 1903. japan was already in China before the Smoot Hawley tariffs were enacted. germany had already experienced the hypeer inflation and depression that allowed teh Nazi Party to gain its electoral viictory. your teachers are attributing a causative relationship to something that pretty much happened after the conditions it is said to have caused.

but from everything that I've read, there are also real dangers to carrying protectionism too far.

I tend to agree and I really am not defending the Smoot Hawley Tariffs. They combined the extreme agriculrural tariffs of one house of Congress (I think the Senate) with the extreme manufacturing tariffs of the other House (I may have mixed up which was the House version and which was the Senate version). Now the harm they did is very much open to debate. Now Milton Friedman published a thesis that teh Smoot Hawley tariffs which were enacted in response to European tariffs caused teh Depression. Other economists have tried to link some political statements by Senate and House leaders about the future enactment of tariffs to Black Tuesday but that I do not completely buy into either. there is absoluetly no way the level of protective tariffs could be predicted months before enactment.

329 posted on 07/29/2003 8:20:28 PM PDT by harpseal (Stay well - Stay safe - Stay armed - Yorktown)
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