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Thursday, March 22, 2018

Mailvox: Stupid cons and Smoot-Hawley

Sean asks about an old conservative trade chestnut:
The Conservatives on talk radio keep screaming about Smoot-Hawley. Those tarriffs if I remember right, the prevailing wisdom made the depression worse. What is the counter argument to that and how does it apply to what is going on now? Just curious. I have a hard time grasping arguments, and I know Vox is right but I would just like to better understand why the Levin's are wrong.
I really do not understand why conservatives insist on continuing to pay attention to ignorant and deceitful posers like (((Ben Shapiro))) and (((Mark Levin))). These guys simply do not know what they are talking about and it is absolutely and eminently clear to everyone who does that they neither know the basic facts involved nor understand the core conceptual issues that make those facts important.

Every single talking head who makes any reference whatsoever to Smoot-Hawley is a poser and a fraud who knows nothing about economics or economic history. This is basically a variant of the "Um, Ricardo?" pseudo-rebuttal to an argument for tariffs or other forms of protectionism. It is proof that the speaker has heard about the subject, but doesn't actually know the subject at all.

The point is so trivial that I dealt with it in a single paragraph in The Return of the Great Depression ten years ago and haven't seen the need to mention it again since.

For many years, it was supposed that the Smoot-Hawley tariff of 1930 played a major role in the economic contraction of the Great Depression. As more economists are gradually coming to realize, this was unlikely to have been the case for several reasons. First, the 15.5 percent annual decline in exports from 1929 to 1933 was less precipitous than the pre-tariff 18.3 percent decline from 1920 to 1922. Second, because the amount of imports also fell, the net effect of the $328 million reduction in the balance of trade on the economy amounted to only 0.3 percent of 1929 GDP. Third, the balance of trade turned negative and by 1940 had increased to nearly ten times the size of the 1929 positive balance while the economy was growing.

Unless Levin is concocting some new and highly improbable mathematical scenario based on chaos theory and the Smoot-Hawley butterfly, he's flat-out wrong. To put it in more simple terms, there was nowhere nearly enough international trade taking place at the time to cause or account for the Great Depression. Whoever originally came up with that idea didn't know what they were talking about and didn't understand economics. And neither does anyone who still takes the ridiculous idea seriously.

The reason the Great Depression happened was the same reason that the financial crisis of 2008 happened. Everyone was overleveraged and the total amount of money being borrowed collapsed. That is why an average of 1,287 banks failed every year from 1930 to 1933. The historical credit collapse had vastly more impact on the economy than a smaller annual decline in exports than had been experienced seven years before as a result of the Fordney–McCumber tariff act.

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37 Comments:

Blogger Al From Bay Shore March 22, 2018 5:40 AM  

The more I learn about the Great Depression the more I learn about the "squid-ink" method of discourse used by the Left/ Progressives/ Collectivists/ Socialists. In my opinion, identifying the cause/causes of that crisis are often subjected to a hail of data that is intentionally misrepresented in order to confuse.

Blogger Aeoli March 22, 2018 6:18 AM  

Al, to understand the squid ink discourse just look at what they accuse others of doing.

And while it is true that many stories are delivered impartially, this selective impartiality appears to be a strategic ploy. According to Ben Nimmo of the Atlantic Council, an American international affairs think-tank: ‘[RT’s] job in quiet times is to build up an audience, so it can propagandise to them in crises. You must not confuse RT with bona fide journalism: not all its output is propaganda, but its purpose is.’

Blogger Aeoli March 22, 2018 6:20 AM  

Hell, I might try to patch together a full book about the left by tying a bunch of their quotes about Russia together. That would be hella funny.

Blogger Aeoli March 22, 2018 6:23 AM  

I really do not understand why conservatives insist on continuing to pay attention to ignorant and deceitful posers like (((Ben Shapiro))) and (((Mark Levin))).

This is a question worth answering. I think it's the form of conflict without the function.

Blogger Rocklea Marina March 22, 2018 6:48 AM  

"I really do not understand why conservatives insist on continuing to pay attention to ignorant and deceitful posers like (((Ben Shapiro))) and (((Mark Levin)))."

Conservatives want to believe that the not-Americans will be okay, once they stop the silly identity politics. Then everyone can be American, just like (((Ben))) and (((Mark))), and the meritocratic free trade utopia can continue.

Blogger Stilicho March 22, 2018 7:49 AM  

Tldr: never trust anyone who learned about Smoot-Hawley from Ferris Bueller's Day Off.

Blogger Uncle John's Band March 22, 2018 7:52 AM  

I suspect Ben has an inkling of his limits; if he were completely confident in his ignorance, he'd be more willing to debate, like the smug midwits who turn up here from time to time before being pummeled into gamma rage. He seems to be a run of the mill liar, content to spout his CoC talking points and enjoy his rapidly fading "edginess" for a paycheck and unearned exposure.

@ 5

"Conservatives want to believe that the not-Americans will be okay, once they stop the silly identity politics."

Racism is a western concept. Elsewhere, noticing is called culture.

Blogger Ominous Cowherd March 22, 2018 8:14 AM  

In the 1920s and '30s, credit was your relationship with your banker. When your bank went broke, you had no credit, and cascading cross-defaults meant you went broke with him.

Some female Canadian economist estimated that the failure of thousands of country banks was a large factor in the Great Depression. Smoot-Hawley wasn't even in her picture, as I recall. Her name will come to me eventually.

Blogger Mr.MantraMan March 22, 2018 8:21 AM  

Smoot-Hawley and Depression is rhetoric so all those true principled cons cannot say they are above rhetoric.

Blogger c0pperheaded March 22, 2018 8:22 AM  

Aeoli wrote:I really do not understand why conservatives insist on continuing to pay attention to ignorant and deceitful posers like (((Ben Shapiro))) and (((Mark Levin))).

This is a question worth answering. I think it's the form of conflict without the function.


Boomers love them. My dad (a Boomer) was talking about this guy he saw debating liberals at a college and making them look like idiots. I showed him a picture of the littlestchickenhawk. Of course it was him. I told my dad that I wasn't mad, but I was disappointed.

Blogger freddie_mac March 22, 2018 8:29 AM  

"Whoever originally came up with that idea didn't know what they were talking about and didn't understand economics."

Smoot-Hawley and the depression have become so firmly coupled together in average understanding of the depression that it's hard to move against the tide. I grudgingly took US history classes in college, and certainly recall the Smoot-Hawley/depression linkage being presented as gospel truth that no one even thought about challenging.

Vox's simple explanations of economics have demystified many things, and I find myself questioning more of those "truths".

Blogger bosscauser March 22, 2018 8:46 AM  

They get paid to shill this nonsense!

Blogger Josh (the sexiest thing here) March 22, 2018 9:16 AM  

The Hoot-Smalley tariff was far far worse

OpenID Überdeplorable Psychedelic Cat Grass March 22, 2018 9:40 AM  

Latest Voxiversity video was great! It helped refresh concepts I hadn't used since a single economics class in college. Thanks Vox! I passed it to a few friends, too.

Blogger Solaire Of Astora March 22, 2018 9:42 AM  

Levin wants his audience to believe that he mastered economics by obsessively studying the constitution. He's alright on that one subject (the constitution) but his lack of self-awareness, neurotic tendencies and consequent dishonesty makes him completely untrustworthy. And he treats his audience like garbage when they call, even his fans. Not sure what his appeal is. Maybe people are desperate for something intellectual and he's all they are capable of finding. Lord knows this blog is infinitely superior in terms of information but it requires you to put effort into reading so maybe talk radio is just the easy road for people. That being said, Levin typifies what I hate about main stream right wing 'economics'. All the vast majority of them can do is parrot what they've read and pretend that equals comprehension. Their blithe dogmatism indicates looks to be a defense mechanism indicating a lack of depth.

Blogger tz March 22, 2018 9:44 AM  

(((Ben))) is a very public example of the Midwit and the Dunning-Kruger effect.

He can dispence Cato (Koch) talking points, and rote repeat Ricardo and Smoot-Hawley but can't think one level deeper.

Bob Murphy could at least present a reasonable case.

Spencer Morrison at American Greatness has been having a serial debate of the articles which exposes the shallowness.

There is a confusion by libertarians and cuckservatives about government non-interference uber alles. My usual counter is that laws against shoplifting, burglary, and fencing stolen merchandise are also anti-free-trade. Because they want a smaller government in this area, they don't look past that.

And why don't (((they))) fix Israel that has all kinds of restrictions and tariffs - we could stop our aid to them because they shouldn't need it with all the newfound prosperity. Let their homeland be the test case.

Also economic disturbance and disruption is an externality like pollution. We even see it from technology when CNN displaced the old networks, and it is being displaced by the internet. But it is never the free traders advocating THEIR jobs be part of the "creative destruction". Replace the universities with the internet. Same with the "Think Tanks". Or hire H1-B professors, or do video-conf-lectues from Bangalore. Oh, no, I'm special!

Blogger Aeoli March 22, 2018 9:44 AM  

And he treats his audience like garbage when they call, even his fans. Not sure what his appeal is.

Sometimes the answer is in the question.

Blogger dienw March 22, 2018 9:54 AM  

Stilicho wrote:Tldr: never trust anyone who learned about Smoot-Hawley from Ferris Bueller's Day Off.

I must have missed that scene. Were Smoot and Hawley on the bus or at the parade?

Blogger Sean March 22, 2018 9:56 AM  

Thank You Vox!

Blogger Mr. Naron March 22, 2018 9:59 AM  

The most obvious problem with using the Smoot-Hawley comparison to Trump's protections is that the former raised and created new tariffs for over 20,000 goods. The latter was, what, two? Steel and aluminum. It's downright dishonest of any conservative to bring up such a comparison. Dishonest because they can't be THAT dumb.

Can they? (Answer: Yes)

Blogger cavalier973 March 22, 2018 10:08 AM  

It is the famous "Anyone, anyone? Bueller?" scene.

Blogger 罗臻 March 22, 2018 10:12 AM  

The Smoot-Hawley arguments are retarded. They fail on multiple levels.

First is the level Vox points out: they simply didn't have that large of an effect.

Second is the fact that China is the major trade surplus nation and creditor nation, as the U.S. was in the 1920s. If someone is screwed from a tariff driven recession/depression, it is China.

Third is the U.S. dollar was relatively undervalued in the 1920s because the Fed was helping prop up the pound. China's currency is grossly overvalued versus the inflation they've unleashed since 2008. China's inflation since 2008 far exceeds what the U.S. did during the 1920s.

Even if you believe the Smoot-Hawley narrative, it says China is screwed, not the U.S. People bringing up Smoot-Hawley are ignorant of history.

Blogger Zeroh Tollrants March 22, 2018 10:16 AM  

Thanks for the neat & concise explanation on S-H, Vox. I've tried to explain this in numerous Twitter threads to various BoomerCon right wingers & I tend to get overly wordy & add in unnecessary details.
I'm going to cut & paste your nice summation & pin it to my Twitter acct. Maybe some of the dopey Chickenhawk acolytes will finally get it.

Blogger pyrrhus March 22, 2018 10:23 AM  

The major factor in the deepening of the depression was the collapse of a Rothschild bank in Austria. That was thought to be impossible given the vast wealth of the Rothschilds. It resulted in a complete loss of confidence in the banking system.

Blogger Mr.MantraMan March 22, 2018 10:52 AM  

Smoot Hawley misdirection by the bankers.

Blogger Tars Tarkusz March 22, 2018 11:11 AM  

The US was a large net exporter at that time while today the US is a very large net importer.
Even if you grant that trade wars are bad for exporters, the US is a large net importer.
Chinese tariffs don't tend to hurt China. China has way overbuilt its steel capacity anyway.

Just because some policy may or may not have hurt the US at some point in the past does not automatically mean that same policy will hurt the US today. These guys are such good economists that they are talk radio hosts!

Blogger James March 22, 2018 11:24 AM  

Uncle John's Band wrote:I suspect Ben has an inkling of his limits; if he were completely confident in his ignorance, he'd be more willing to debate, like the smug midwits who turn up here from time to time before being pummeled into gamma rage. He seems to be a run of the mill liar, content to spout his CoC talking points and enjoy his rapidly fading "edginess" for a paycheck and unearned exposure.

Having an inkling of his limits is not characteristic of someone as arrogant as (((Shapiro))). And look who he stands up to and argues with. Young libtards that are lacking in intellectual skills and are smug in the knowledge that they are on the “right side of history” and infused with all the left’s easily disproven talking points. In fact, his college audience debaters may be plants that lob him softballs to let him show his “political acumen”. And you are right about the paycheck and the unearned exposure.

Solaire Of Astora wrote: Not sure what his ((((Levin's)))) appeal is. Maybe people are desperate for something intellectual and he's all they are capable of finding..... Their blithe dogmatism indicates looks to be a defense mechanism indicating a lack of depth.

I call it the Morton Downey, Jr, effect. Raising your voice and telling pukes to zip it is a cathartic effect for low brows and midwits.

Blogger Rashadjin March 22, 2018 11:25 AM  

The great flaw of the conservative mind is over-reliance on single factor analysis and becoming enamored with the extreme end results derived from it.

The dogmas around tarrifs and The Great Depression are expressions of that. A better example is the global warming hysteria where scientists made a game of seeing how much of the earth's temperature (rise) could plausibly be blamed on CO2, with hilariously inaccurate climate models being the end result.

The Anonymous Conservative and amygdala triggering would be another example. If GDP is basically just money flow as has been explained elsewhere, there's another good and relevant example.

Overcoming the economic stupidity of the right will be about dragging the conservative mind away from old and hilariously inaccurate models derived from single factor analysis of economic sub domains. So...you're going to be fighting laziness, basically. And sacred cows that benefit the very few who happen to be rich and powerful for those sacred cows. So laziness and sacred cash cows.

Good luck.

Blogger Jack Amok March 22, 2018 12:36 PM  

Whoever originally came up with that idea didn't know what they were talking about and didn't understand economics. And neither does anyone who still takes the ridiculous idea seriously.

I think the origin came from the (supposed?) impact on ag exports and farm bankruptcies. Farm supports led to overleveraged farmers (and their Bankster enablers), then supports ended and Smoot-Hawley killed off their export market which was the only thing keeping them solvent and suddenly all these noble dirt farmers went bankrupt and took the banks down with them...

Which of course makes for a nice story for the Banksters and Farm Lobby to deflect blame from their own Bob Rubin Trade culpability in the whole mess.



Blogger LES March 22, 2018 12:39 PM  

Funny, Pat Buchanan mentions “Ferris Bueller’s Day Off" in his book
The Great Betrayal
p. 244 In Buchanan’s book he shows that the Smoot-Hawley tariff was passed 8 months after the stock market crash and applied to only 1/3 of imports and was only 1.3% of GNP. “The list of duty free imports was the longest in history.” The Great Depression was caused by the disappearance of 1/3 of the money supply and income tax increases.
The Isolationist Myth

Blogger Thebrainfuggler March 22, 2018 1:10 PM  

Mark Levin must've read too many comic books as a kid because he really does view American foreign policy as like a caped superhero, when Peter Hitchens reminds us that even countries like the United States and Britain are nation-states with particular interests and act according to those interests.

Blogger bob kek mando - ( I love the smell of Autism on the internet. It smells like ... victoREEEEEEEEE ) March 22, 2018 2:28 PM  

15. Solaire Of Astora March 22, 2018 9:42 AM
He's alright on that one subject (the constitution)



is he, now?

perhaps you can link me to some of his articles wherein he demands the rehabilitation of the 9th and 10th Amendments and the impeachment of all of the Judiciary which has been violating them?

Blogger Thebrainfuggler March 22, 2018 4:38 PM  

This comment has been removed by the author.

Blogger Dirk Manly March 22, 2018 5:28 PM  

>> Tldr: never trust anyone who learned about Smoot-Hawley from Ferris Bueller's Day Off.


> I must have missed that scene. Were Smoot and Hawley on the bus or at the parade?


Ben Stein teaching history to a classroom of students who are absolutely bored to death.

Blogger John Best March 22, 2018 6:29 PM  

It is clear that if you have say an internal market of 1 trillion and trade worth 200 billion that the real economic driver is your internal market, not the external trade. We get this is Britain with the Neo-Liberals banging on and on about trade when it is a fraction of the size of the British internal market. I want to grow my internal market. Internal free trade and external protectionism seems to make more sense in reality. Unless you are Germany. They literally think that what works for one economy will work for all.

Blogger eclecticme March 22, 2018 10:58 PM  

David Stockman had a different take on things in his book The Great Deformation. He said that US manufacturing and agriculture ramped up to supply Europe during and after WWI. When Europe recovered their imports greatly declined.

Blogger bob kek mando - ( I love the smell of Autism on the internet. It smells like ... victoREEEEEEEEE ) March 23, 2018 1:45 AM  

36. eclecticme March 22, 2018 10:58 PM
He said that US manufacturing and agriculture ramped up to supply Europe during and after WWI. When Europe recovered their imports greatly declined.



well, yes. that's the downslope exit of Neighbor's Broken Window stimulation of the economy via War.

which is another reason why WW2 was necessary.

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