the 1930 smoot-hawley act has been bandied around by a number of people, including publisher rupert murdoch. the financial times writes that barack obama’s campaign pledged to fiddle with NAFTA and address the china trade imbalance is raising the spectre of smoot-hawley.
what is smoot-hawley? the smoot-hawley act of 1930 raised u.s. tariffs on over 20,000 imported goods coming into the u.s. in response, foreign governments increased tariffs on american products. (since the u.s. barely manufactures anything these days, who knows how much this would affect u.s. businesses).
economists believe the political discussion leading up to the passage of the act is one factor that caused the stock market to crash and the passage was a factor in deepening and prolonging the great depression.
it had a similar affect as what the democrats arguably have done to the u.s. economy. back in the day when we were forced to endure the first round of political debates, the fundamentals of the u.s. economy were sound. but if you spend 18 months talking about what a horrible state the middle-class is in….this obviously has had a psychological affect on the american people. american optimism has completely vanished. but oprah winfrey would argue that it’s all been replaced by hope. but without the fireworks.
the original intention of smooth-hawley was to protect farmers. massive expansion in the agricultural production sector outside of europe during world war I led, with the post-war 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.but hoover and the congress at that time were convinced to seek protection for a wide range of products. smooth-hawley raised tariffs, created an international trade war, which in turn hurt american businesses. it was the high-water mark of u.s. protectionism in the 20th century. and has been credited with making a bad situation worse. as obama hasn’t actually been sworn in, it is too early for anyone to raise the spectre of smooth-hawley. but perhaps by doing this, it might lead the democratic party down a more moderate path.