In my latest reading of The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy, Pat Buchanan disputes the idea that the Smoot-Hawley tariff during the Hoover Administration exasperated the Great Depression. I thought it was cool (and funny) that Buchanan quoted the Ben Stein character’s promulgation of this idea in the movie Ferris Bueller’s Day Off (see here for the scene).
Buchanan does not think that Smoot-Hawley significantly impacted enough of the economy for it to be blamed for the deepening of the Great Depression. He states on page 247: “…how much adverse affect could Smoot-Hawley have had on the U.S. economy as a whole, when total imports in 1930 added up to only 4 percent of the GNP and Smoot-Hawley applied to only a third of that, or to 1.3 percent of the GNP? Is it conceivable that an increase in tariffs on 1.3 percent of the GNP triggered the collapse of five thousand banks, wiped out five-sixths of the stock market, caused a drop of 46 percent in the GNP, and sent unemployment souring to 25 percent?”
Buchanan does not cite sources for these statistics, as far as I could tell. But he does have charts that are based on the Historical Statistics of the United States and the Statistical Abstract of the United States, and these show that the Smoot-Hawley tariff was not as high as many other tariffs in U.S. history, tariffs that (Buchanan argues) coincided with economic prosperity. Buchanan also refers to economist Ravi Batra’s claim that, from 1929-1933, domestic demand fell by a far greater percentage of GNP (98.5 percent) than net exports (1.5 percent). According to Batra, it’s absurd to blame the deepening of the Great Depression on trade policy, when the vast bulk of the problem was in the area of domestic demand. And Buchanan refers readers to Alfred Eckes, Jr.’s Opening America’s Markets, which (according to Buchanan) presents evidence against the anti-Smoot-Hawley rhetoric. Eckes was chairman of the International Trade Commission during the Reagan Administration.
But did not other countries retaliate against American exports due to the Smoot-Hawley tariff? According to Buchanan, countries in Europe, Japan, India, Australia, and New Zealand were going protectionist way before Smoot-Hawley. Buchanan refers to The Growth of the International Economy, 1820-1960, by A.G. Kenwood and A.L. Lougheed, and Corelli Barnett’s The Collapse of British Power. Buchanan notes, however, that the League of Nations helped bring about a lowering of tariffs “in almost all developed countries in 1928 and 1929” (page 250). That makes me wonder: couldn’t the countries have reinstated protectionism after the Smoot-Hawley tariff, in response to it?
According to Buchanan, the Great Depression was deepened by at least three factors: the effects of the stock market crash in 1929, which included the wipe-out of people’s savings and the disappearance of one-third of the United States’ money-supply; the Federal Reserve doing “nothing to stop the hemorrhaging or to replace the lost lifeblood of the American economy” (page 249); and Herbert Hoover’s dramatic tax increases.
See here for another perspective on Smoot-Hawley.