Only a few economic historians are likely to notice that June 17th 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 that these imports will cost Americans their jobs. That fear was even more understandable back 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 high levels, in an attempt to protect existing jobs and in hopes of helping the unemployed find work producing things that the United States had previously been importing from other countries. Many businesses were in favor of the new tariffs, hoping to retain or expand their markets, and farmers were especially big supporters of the Hawley-Smoot tariffs.
Who was opposed?
Most of the leading economists in the country were opposed. A front-page 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 of the top economists of the day — 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? Congressman Hawley and Senator 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 that what happened then gives us a free home demonstration of what can be expected to happen 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 rate of unemployment in the United States never got back down to the 9 percent level again during the entire decade of the 1930s.
American industry as a whole operated at a loss for two consecutive years. Farmers, who had given strong support to the Hawley-Smoot tariffs, saw their own exports cut by two-thirds as countries around the world retaliated against American tariffs by restricting their imports of American industrial and agricultural products.
The economists’ appeal had warned of "retaliatory tariffs" that would set off a wave of international trade restrictions which would hurt all countries economically. After everything that these economists had warned about happened, tariffs began to be reduced but throughout the 1930s they remained above where they were before the Hawley-Smoot tariffs — and so did unemployment.
Many factors, of course, affected the Great Depression of the 1930s. But later economists looking back have seen the Hawley-Smoot tariff as one of the factors 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.