By Will Weissert | Associated Press
Washington – At the start of the Great Depression, representative Willis Hawley, an Oregon republican, and the republican senator from Utah Reed Smoot thought that they had landed in a way to protect farmers and American manufacturers of foreign competition: prices.
President Herbert Hoover signed the Smoot-Hawley prices law in 1930, even as many economists have warned that samples would cause reprisals from other countries, which has happened precisely. The American economy plunged deeper into a devastating financial crisis that it would not withdraw before the Second World War.
Most historians look at Smoot-Hawley as an error that has worsened a bad economic climate. But the prices have a new champion of President Donald Trump.
Like Trump, Hoover was largely elected because of his business sense. International, financial and humanitarian mining engineer, he took office in 1929 as an energetic CEO, eager to promote public-private partnerships and use government levers to promote economic growth.
“Anyone not only can be rich, but should be rich,” he said in his inaugural speech before convening a special congress session to better protect American farmers with “limited changes in the price”.
Instead, the 31st president obtained the great depression.
Trump, now defending his own radical rates that have sent global markets to a fall, argues that the United States has been based on high import taxes on goods from abroad.
But the country began to abandon them when it created a federal income tax in 1913, said the president. Then, “in 1929, everything ended very abrupt with the great depression. And that would never have happened if they had stayed with pricing policy,” said Trump, announcing his pricing plan last week.
Referring to Smoot-Hawley, he added: “They tried to bring prices to save our country, but he had disappeared. He had disappeared. It was too late. Nothing could have been done – took years and years to get out of this depression. ”
However, the history of the high prices of America continued well after 1913, and Trump’s point of view on what sparked the great depression – and Washington’s response from the Hoover era – does not reflect what really happened.
Gary Richardson, professor of economics at the University of California in Irvine, said that the United States had long had high prices “helped change industry here. But we got rid of it because, as a country at the cutting edge of technology, we did not think they were useful.”
“When we were our most powerful, just after the Second World War, we forced a low price regime on most of the world because we thought it was to our advantage,” said Richardson, also a former historian of the Federal Reserve system. “Now we are going back to something else.”
The prices date from 1789
George Washington signed the prices law of 1789, the first major legislation approved by the congress, which imposed a tax of 5% on many goods imported into the United States without federal income tax, the policy aimed to find sources of income for the government while protecting American producers from foreign competition.
After the War of 1812 disrupted American trade with Great Britain, the United States approved more prices in 1817 intended to protect domestic manufacturing from potentially cheaper imports, in particular textiles.
High prices have remained for decades, especially since the government sought to increase its income and reimburse the debt contracted during the civil war.
The 1890 prices law increased taxes to 49.5% on more than 1,500 items. The “Napoleon of protectionism” defended the “Napoleon of protectionism”, William McKinley, a member of the Ohio Republican Congress who was elected president in 1896 and one of Trump’s heroes.
But this decision has caused a price increase and the drop in the American economy. He worsened after the panic of 1893, when unemployment reached 25%. Historians have described the period as “great depression” until it was replaced by the great real depression.
An income tax replaces prices
A national income tax did not become permanent until the congress adopted the 16th amendment in 1909, and it was ratified four years later. Despite what Trump suggests, what has followed was continuous economic growth – fueled by technological advances such as the phone and an increase in consumption spending after the First World War.
A construction boom and an increase in manufacturing production – in particular for consumer goods which included the automobile – helped to trigger the “20 years”. The industrial average of Dow Jones increased by six times – from 63 points in August 1921 to almost 400 in September 1929.
It was the era of prohibition and the age of jazz, an urbanization period even if agriculture remained a key economic engine. The working conditions were often poor, but the standard of living climbed for the middle class, which appreciated innovations such as radio and washing machines.
The high tariff policy has also persisted, the Congress approving the 1922 Fordney-McCumber Act, which raised samples to the highest in the history of the United States from many imported goods in order to strengthen domestic manufacturing. This has caused reprisal rates from the main American trade partners – reflecting the reactions of contemporary China and other countries to the new Trump samples.
‘Black Mardy’ and the Great Depression
The economy began to slow down when the Fed increased interest rates in 1928 and the following year.
The idea was mainly to relieve a stock market bubble by reducing loans to brokers or companies buying shares. But that sparked higher interest rates in Great Britain and Germany, which has helped to slow down the spending and global consumer production, and began an American recession in the summer of 1929.
The great depression started with “Black Tuesday” on October 29, 1929, when a panic sale sparked a collapse of the stock market, destroying thousands of investors who had borrowed a lot. While consumer demand has decreased, manufacturing companies have dismissed workers and factories in slow motion.
In the following years, the American unemployment rate reached 25%, while economic production plunged almost 30%. There have been thousands of banking failures and generalized commercial closures, while millions of Americans have lost their house.
Smoot-hawley
With self -taught wealth and global sympathies, Hoover has cut a very different figure from Trump.
Hoover was an orphan at 9 am and led the human food help efforts of the First World War while living in London. He was also secretary to trade before running for the presidency. It could be dynamic with small groups but reserved in public.
“There is no theater at Herbert Hoover,” said David Hamilton, history professor at the University of Kentucky.
Trying to keep his campaign promise to protect farmers, Hoover pushed the congress at higher agricultural prices. But a main objective was to encourage farmers to produce new types of cultures, and Hoover does not consider higher American rates as incompatible with world trade, said Hamilton.
“He does not stop the arms trade in the way we see today,” said Hamilton, author of “From New Day to New Deal: American Farm Policy from Hoover to Roosevelt, 1928-1933”.
Hawley, president of House Ways and Means Committee, initially asked for agricultural protections. But the finished bill went much further, using high prices to protect manufacturing. He spent the house in May 1929.
Smoot, which chaired the Senate finance committee, helped to supervise the adoption in March 1930. Reconcilia the legislation which became the law on the prices of Smoot-Hawley finally authorized the Congress in June.
Hoover was in conflict, especially after more than 1,000 American economists signed a letter urging a veto. But he signed the act, saying in a press release: “No pricing bill has never been promulgated, or never adopted, within the framework of the current system which will be perfect.”
All this is from another businessman who became president, Trump, who grew up rich and was a real estate magnate and a reality TV star who had never served the government before winning the presidency in 2016.
Trump has long defended prices as a way to protect the economy and manufacture of the United States to the detriment of its global business partners. And he bypassed the congress potentially modifying the extent of his policy of objectives by declaring an “economic emergency” to institute rates unilaterally.
Smoot-Hawley has increased import prices on average by 20% over thousands of goods, which rippled many best American business partners. International cooperation on non -traditional issues has also decreased, in particular on defense issues, helping to open the way to the rise of Hitler, said Richardson.
“There were industries where they made profits,” said Richardson about Smoot-Hawley. “But overall, people in the United States and people of the world were losers.”
American manufacturers have seen foreign markets for their evaporating products and production and consumer expenses have still flowed. Hawley lost the Republican primary of Oregon of 1932 in its district, and Smoot was defeated in November, while the democrat Franklin D. Roosevelt beat Hoover for the presidency.
Smoot, Hawley and Hoover have largely continued to defend their tariff policies in the following years, blaming international trade policies and external monetary forces – as well as Democrats – for America’s economic misfortunes. The economy would not start its recovery until the trigger for the Second World War increased the demand for factory production in 1939.
“Economic depression cannot be cured by legislative action or the declaration of leaders,” said Hoover in December 1930. “Economic injuries must be healed by the action of the cells of the economic organization – producers and consumers themselves.
Originally published:
California Daily Newspapers
