Posted on 12/14/2002 10:22:42 AM PST by arete
Also, as a percentage of the economy, international trade was much smaller in 1930 than it is now. Just how influencial were the Smoot-Hawley ripple effects, really? No doubt it hurt Europe, but its effects on the American economy were small: we simply were not that dependent on, or effected by, the world economy in 1930. Of course, that is no longer the case, today.
If you want to blame the Smoot-Hawley Tariff for destabilizing Europe and helping Hitler take power in Germany, you have a point. If you want to blame the continuance of the Great Depression in the USA on the tariff, you are on weaker ground. Many times in the 19th century, we had depressions and stock market crashes, all whilst operating under protectionist tariffs. What was different in the 1930's? Well, we had the Federal Reserve System, and, after 1933, we had the New Deal. Maybe without those, we would have recovered faster, or maybe not.
P.S. Almost all sane economists agree it greatly exacerbated the problem.
Translation: all economists who agree with me.
The percentage of the American economy dependent on foreign trade was tiny; it may have been bad for the European economy, but on the other hand, the bad European economy brought American investment dollars back home to be reinvested in the USA. Believe it or not, the USA had a nearly self-sufficient economy back then.
They crushed the demonstrators and threw them in work camps as slaves to make cheap goods for you. Yah the lesson of Tienanmen Square, how wonderful.
Haven't you got the memo that these redacted parts of American history are not to be posted on public forums. They tend to make people freak out.
We are dealing with the "New and Improved" model and these unpleasant reminders tend to make their little bellies ache.
I was questioning the law on the idea that if it is acceptable to use slaves outside of our country or purchase goods made by slaves outside our country then why not inside?
Telling me that we can vote with our dollars does not respond to the problem. If it was left to that we would still have slavery in America today. Why would another's enslavement be left to my vote depending on whether I want the cheaper goods or not?
Our constitution and form of government is of no significance to you. You are unable to acknowledge the society it forms or value of the protections it gives. That is not me putting words in your mouth. Got that?
Which is why you run circles around these people trying to get them to acknowledge a point.
http://www.korpios.org/resurgent/Timeline.htm
http://www.korpios.org/resurgent/SmootHawley.htm
The Smoot-Hawley Tariff passes on June 17. With imports forming only 6 percent of the GNP, the 40 percent tariffs work out to an effective tax of only 2.4 percent per citizen. Even this is compensated for by the fact that American businesses are no longer investing in Europe, but keeping their money stateside. The consensus of modern economists is that the tariff made only a minor contribution to the Great Depression in the U.S., but a major one in Europe. (More)
WHAT ROLE DID THE SMOOT-HAWLEY TARIFF PLAY?
For conservatives, the greatest economic disaster in history needs a villain, and not just any villain. Only a rapscallion the size of Big Government will suffice, and in this respect, the Smoot-Hawley Tariff of 1930 suits their needs perfectly.
According to this story, the Smoot-Hawley Tariff raised taxes on imported goods as high as 60 percent. Not only did this burden American consumers with another tax, but it effectively killed international trade. Soon all nations were raising tariffs and rushing behind the walls of protectionism. The subsequent collapse of international trade caused the Great Depression.
For a complete myth, it is astounding how much this one gets repeated. Sharp observers have probably already noticed there is a problem with dates. The stock market crashed in October, 1929, but Hoover did not sign the tariff into law until June 17, 1930. So more sophisticated conservatives have refined the story: the tariff turned an otherwise ordinary recession into a full-blown depression.
But even this is a gross exaggeration, and top economists reject it out of hand. Peter Temin, an economic historian at MIT, told The Wall Street Journal on February 22, 1996 that this historical revisionism is "wrong," according to the consensus of the nation's most respected economists. Paul Krugman, one of the world's top international trade economists, and one who is expected to win a Nobel Prize for his revolutionary theories in favor of free trade, calls the Smoot-Hawley theory "incredible."
The Smoot-Hawley Tariff only slightly worsened the depression, which was already gaining considerable momentum. Here are the reasons why:
Imports formed only 6 percent of the GNP. With average tariffs ranging from 40 to 60 percent (sources vary), this represents an effective tax of merely 2.4 to 3.6 percent. Yet the Great Depression resulted in a 31 percent drop in GNP and 25 percent unemployment. The idea that such a small tax could cause so much economic devastation is too far-fetched to be believed.
By no stretch of the imagination could Americans of the time be called heavily taxed. In 1930, 80 percent of all workers paid no federal taxes at all. The rich paid a record low 25 percent. By contrast, after the war, the top tax rate zoomed up to 91 percent, and the middle class started paying taxes as well. What followed was the boom times of the 50s. Seen in this light, blaming the Great Depression on a tariff tax of only a few percentage points is absurd.
Even an effective tax of 2.4 to 3.6 percent is overstating the effects of the tariff. The tariff rates were already high to begin with. One source reveals that Smoot-Hawley raised rates from 26 to 50 percent; another source from 44 to 60 percent. In that case, we are talking about an effective tax increase of 1.4 percent at most.
The trade war following Smoot-Hawley did not entirely shut down trade. For the U.S., it fell from 6 to 2 percent of the GNP between 1930 and 1932. This does not mean, of course, that Americans necessarily "lost" that 4 percent. It merely means that they had 4 percent more to spend on their own domestic products.
The Smoot-Hawley tariff was partially offset by a $160 million tax cut in the same year, which went entirely to the rich.
The tariff was also partially offset by the money saved by Americans no longer investing in or loaning to Europe. In 1928, investments alone amounted to $119 million. The Europeans heavily depended on this financial aid, and its loss was considered disastrous. But for Americans it represented increased savings.
As you can see, the drag of the Smoot-Hawley Tariff on the U.S. economy was minor. One could even argue that if the tariff had not been passed at all, the Depression would have hit with the same intensity anyway. Why? Because the Great Depression was a chain reaction. Just one example was the public run on banks; when one bank failed, panicked investors rushed to withdraw their deposits from the next. The process started in the United States, but it eventually spread to Europe. The central bank of Austria was the first domino to fall.
The Smoot-Hawley Tariff may have hastened this process, but it is doubtful it added to its severity. In the mid-20s, Americans stopped investing in Europe to take advantage of the raging Bull Market on Wall Street. Between 1924 and 1928, investments in Europe fell 78 percent, from $530 million to $119 million. Loans to Germany collapsed from $277 million in 1928 to $30 million in 1929. Thus, long before the tariff even passed, a credit squeeze, bank failures, and deflation were already working to contract European economies.
In sum, the Smoot-Hawley Tariff's impact on the U.S. economy was small, and probably did not result in more damage to Europe than was inevitable anyway.
Return to Timeline
Don't blame me, or call me names. Prove this guy wrong. I think he (elsewhere) greatly diminishes the negative roll of FDR's New Deal on the economy, but I think he is closer to the truth in pointing out the fallacies of the Smoot-Hawley myth. Of course, conditions today are different: we are literally at the mercy of the global economy, so anything similar to Smoot-Hawley today would have a much more obviously negative effect on the American economy.
Now, it is an interesting thing that the Free Traders, in their zeal to prevent another Smoot-Hawley, have effectively gutted national sovereignty in the name of internationalist treaties and regulatory bodies that are stuffed to the gills with socialists, liberals, and central planners of all sorts. Ah, the folly of the free traders; in their eagerness to cut the tariff-loving nationalists off at the knees, they empower their own worst enemies in the internationalist community. They can't win!
I lament the loss of "hard" manufacturing - but maybe a sizeable chunk of what we are seeing is the "creative destruction" inherent in a capitalistic economy. While it is painful....it is necessary and results in a new highest and best use of capital.
Anybody got figures on these numbers?
They already got all the weapons technology they need real cheap thanks to the Clinton administration.
Anyway, in some cases the the money we save buying certain products from China, is subsequently free to go toward supporting other areas of our economy, where the ultimate benefit to us is greater than it is to them.
Let's face it, paying near slave labor wages to people is not going to produce a vibrant economy, or large scale growth.
But buying their cheap products gives us more disposable cash, and raises our standard of living, and keeps the jobs we really want here.
Works out well.
Who says it's acceptable outside? Certainly not me - if you find foreign companies using slave labor, I strongly urge you not to patronize them. How many different ways do you want me to say it?
Our constitution and form of government is of no significance to you. You are unable to acknowledge the society it forms or value of the protections it gives. That is not me putting words in your mouth. Got that?
Garbage. It is precisely because I value that society that I don't want well-meaning folks who don't understand basic economics to flush it down the toilet. Got that?
I didn't dispute them.
" On the contrary to what?"
To the implication that the decline in unemployment had anything to do with NAFTA.
"This confuses absolute differences with relative differences."
I didn't confuse anything. I simply called attention to your tacit admission that the marginal return on free trade accruing to the US is much smaller than the marginal return accruing to those countries. Is it worth it? Not in my opinion.
That's what everyone is interested in. I don't make money because I like making money - I do it because of what money allows me to do and accomplish. You've discovered that the Chinese aren't so different from us after all.
The difference is to what use people want to put the money. You and I like to have nice things, enjoy life, have some security,e tc. - now some people with an idealogy would like to spread that idealogy. Now y ou have to admit that, if you don't you are living in a dream world. There really are people out there that do not like us. They like our dollars right now until they can build up their country - then they will have no use for us or our dollars because neither will be worth anything.
I personally like living in a relatively free, safe country with a certain standard of living. To do that, everyone has to do their part, or we end up with a ruling class and a bunch of serfs. NOw I don't know what you do, but I am quite sure the powers that be do not consider me one of the ruling class. In other words, those who are helping the elites sell this country one piece at a time are being used and are as disposable as the rest of us.
Fair enough. Sometimes I'm not as clear as I hope to be, but I'll try to clarify anything that is causing you headaches. I can't guarantee you'll be persuaded by it, but I am ever hopeful ;)
The difference is to what use people want to put the money. You and I like to have nice things, enjoy life, have some security,e tc. - now some people with an idealogy would like to spread that idealogy. Now y ou have to admit that, if you don't you are living in a dream world.
To an extent, I agree. But they also want the things we have - to have nice things, to enjoy life, and so forth. And I'll tell you the dirty little secret about why this is a poison pill for them, but you have to promise not to tell the Chinese. ;)
Here's the big secret - free trade and WTO and all that jazz, it's about more than making a couple of bucks. The secret is, by doing that, we are exporting an ideology to them. One that's based on things like open markets, the rule of law, individual initiative, and entrepreneurship. The dirty little secret that nobody else has figured out yet, is that the only way to be as rich as Americans is to become like Americans.
The Chinese communists think they've hit on some magic solution, where they can maintain their iron grip on their own country and build a country that's as wealthy as the US at the same time. But they're dead wrong - what they don't know is that it's a package deal. You can't have a wealthy country where the rule of law is non-existent, and party officials are free to change the rules on a whim. You can't have a wealthy country where markets are controlled by some central authority, instead of being free to operate as they will. They think they can keep that genie in the bottle, but they're so wrong it's not even funny - it's just a measure of how little they understand about what it takes to become rich like Americans. But they'll figure it out eventually.
That's what I meant when I said earlier that the only way to beat us is to become us. They don't know it yet, but free trade is a stealthy way of sneaking our ideology into China. And by the time they figure it out, it'll be too late - they'll have to choose between being authoritarian communists, or getting rich. Sooner or later, that's the choice they will inevitably face. I'm betting they'll choose "get rich" - choosing otherwise might just spark another revolution, and the party understands that, if nothing else - but if not, we'll be just fine. There are plenty of other countries in the world that understand the nature of that choice perfectly.
That's the big secret. They may very well believe that they can take from us, and use the wealth they build up to destroy us. But the thing is, the only way they can possibly become big enough and powerful enough to do that, is to become just like us.
You think competing against prison labor is tough? You ain't seen nothing yet - I worry about the day when they really embrace capitalism and and open markets and open political systems. Then we'll have something to worry about from the Chinese. Then competing with the Chinese will be something to keep us all awake at night. Until then, what I see is that they've started down a road that can only mean the end of communism in China.
And you heard it here first. ;)
This truly is worse than having the exact same conversation with someone from the old south, or who trades with the Nazi's. We should know better nowadays. Also we arent just talking about foreign companies and the abuse will be defined by American standards.
Actually we've been hearing this for a very long time. Since then communist china has crushed any democratic movement and put their loot into a massive military buildup. I guess the meaning of this wont sink in until there is pain and suffering. That seems to be how America learns best nowadays. You would think that nuclear missiles pointed at us or the military aid of our enemies might be a give away but I guess not.
Huh? Did OSHA go out of business when I wasn't looking?
Since then communist china has crushed any democratic movement and put their loot into a massive military buildup.
To do what? They haven't got what they need to take Taiwan by force, let alone the US. The Chinese military is almost purely defensive at this point, with virtually no force-projection capability at all - they can't effectively fight anyone who isn't already inside China.
You would think that nuclear missiles pointed at us or the military aid of our enemies might be a give away but I guess not.
What do you propose to do about it? Invade? This will work itself out, and I'm comfortable waiting for them to figure that out too. Time is on our side. History is on our side. The only way the Chinese present a danger to us is if we take your approach and suddenly get confrontational. Until then, we're no threat to them, and they're no threat to us. Why are you in such a rush to plunge us into another arms race, particularly when we can easily get what we want peacefully?
The more they spread weapons around the more of a danger they are to us including a terrorist threat. They have been in Iraq improving the missile systems there what else have they done possibly? You say they dont have what it takes to invade taiwan yet just a few years ago people like you were saying china wouldnt have a nuke capable of hitting the USA for 20 years despite the technology that was stolen from America. I'm not worried about china invading America I'm worried about their assistance to those who are a threat to America.
What do you propose to do about it? Invade? This will work itself out, and I'm comfortable waiting for them to figure that out too. Time is on our side. History is on our side.
I propose we treat china as we treated the soviet union. History is not on our side and so far this is not working itself out it is a massive failure. But then you dont think turning a mass murdering communist country into a nuclear power is a failure.
The only way the Chinese present a danger to us is if we take your approach and suddenly get confrontational. Until then, we're no threat to them, and they're no threat to us. Why are you in such a rush to plunge us into another arms race, particularly when we can easily get what we want peacefully?
This the exact same crap that liberals said about Reagan's treatment of the soviet union. China is the one plunging us into another arms race. Communist china is doing a damn fine job of getting what they want peacefully. However I didnt want nuclear weapons pointed at my country.
So they have to choose between selling us calculators and shoes, or selling Iraq missile systems. They'll choose shoes - there's more money in it.
I propose we treat china as we treated the soviet union.
Bad idea. China isn't the Soviet Union. Unlike the Soviets, they want to trade, so let's trade. In the end, we'll get exactly what you want anyway - the collapse of the communists.
History is not on our side and so far this is not working itself out it is a massive failure.
How? We're richer now than we ever have been before? If this is "failure", sign me up for some more, please. They get rich, we get rich - everybody wins. The Soviets didn't think they had anything to gain by dealing with us, so they didn't deal with us. They got the stick. The Chinese want to deal, so let's deal - they get the carrot. And we win in the end.
Communist china is doing a damn fine job of getting what they want peacefully. However I didnt want nuclear weapons pointed at my country.
They can point them anywhere they like, so long as they keep those fingers off the triggers. What does it gain them to strike at us? They blow up the West coast, we annihilate a billion of them. Frankly, the balance of power is ridiculously stacked in our favor.
They're exactly as much of a threat as we make them, and if you have your way, you'll do nothing but insure that they become exactly what you fear they will.
----------------------------
This is condemned barnyard. Most of the people arguing this crap aren't conservatives or much of anything else except glorified high school kids trying to join a movement. One sees a number of airheads following or attempting to enter any organization. There is also associated with this view a type of strange distorted free-trade economic cult that has seized upon a principle they barely understand in desperation of some kind and have overextended it beyond all reason.
Some of these free traders are free traders in the same sense Nathan Monsanto was when he had one of the world's largest slave auction blocks in Memphis before the civil war. Was it free trade? In a very overrestricted sense from the perspective of one man, the buyers and sellers, yes. But it was built on suffering and slavery. That is a distinction many people here are unwilling or incapable of making.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.