Only a few economic historians are likely to notice June 17 marks the 75th anniversary of the signing of the Hawley-Smoot tariff bill, and even economic historians are unlikely to be nostalgic about that disastrous legislation.
Why not leave the bad news of the past in the past? After all, we have our own problems today.
Unfortunately, the same kind of thinking that led to the Hawley-Smoot tariffs is still alive and well — and in full youthful vigor — in the media and in politics today.
At the heart of past and present arguments for restricting imports that compete with American-made products is the notion these imports cost American jobs. That fear was even more understandable in 1930, when the Great Depression was getting under way and unemployment was at 9 percent.
The Hawley-Smoot bill raised American tariffs to record highs, in an attempt to protect existing jobs and in hopes of helping the unemployed find work producing things the United States previously imported from abroad. Many businesses favored the new tariffs, hoping to retain or expand their markets, and farmers were especially big supporters.
Who was opposed? Most of the leading economists. A Page One headline in the New York Times of May 5, 1930, read: “1,028 economists ask Hoover to veto pending tariff bill.” Those signing this public appeal against the new tariffs included many top economists — 25 professors of economics at Harvard, 26 at the University of Chicago, and 28 at Columbia.
But, to a politician, what do 1,028 votes matter in a country the size of the United States? Rep. Hawley and Sen, Smoot both ignored them, as did President Herbert Hoover, who signed the legislation into law the next month.
The economic reasons for not restricting international trade then were the same as they are today. The only difference is what happened then gives us a free home demonstration of what can be expected if we go that route again.
The economists’ appeal spelled it out: “The proponents of higher tariffs claim that the increase in rates will give work to the idle. This is not true. We cannot increase employment by restricting trade.”
If 9 percent unemployment was troublesome in 1930, when the Hawley-Smoot tariff was passed, it was nothing compared to the 16 percent unemployment the next year and the 25 percent unemployment two years after that. The annual U.S. unemployment rate never got back down to 9 percent again during the entire decade of the 1930s.
American industry as a whole operated at a loss for two consecutive years. Farmers, who had strongly supported the Hawley-Smoot tariffs, saw their own exports cut by two-thirds as other countries retaliated against U.S. tariffs by restricting imports of American industrial and agricultural products.
The economists’ appeal had warned of “retaliatory tariffs” setting off a wave of international trade restrictions that would hurt all countries economically. After everything these economists had warned of came to pass, tariffs began to be reduced. But throughout the 1930s they remained above the pre-Hawley-Smoot levels — and so did unemployment.
Many factors, of course, affected the Great Depression of the 1930s. But later economists have seen the Hawley-Smoot tariff as one factor needlessly prolonging the economic disaster.
How much wiser are we today? Not much, if at all.
Talk about import restrictions or complaints about “outsourcing” today proceed with the same mindless disregard of what other nations are doing and will do.
People who throw around statistics about how many American jobs have been outsourced don’t even mention how many Americans have jobs that have been outsourced from other countries, much less how many Americans will lose those jobs if we start a new round of international trade restrictions.
Thomas Sowell is a nationally syndicated columnist.