September 18, 2008

HERE'S THE GREAT THING...:

Free Market To The Rescue (Donald J. Boudreaux 09.18.08, Forbes)

Compared to the Great Depression, America today is far more integrated into the global economy. Consequently, our economic eggs--our customers, suppliers and investments--are in a greater number of baskets. We're not as dependent now as we were 75 years ago on a recovery starting in America.

And despite the heated protectionist rhetoric of late by some prominent politicians, the post-World War II trend of increasing free trade is unlikely to be reversed. This fact is vital. One of Uncle Sam's first moves following the market crash of 1929 was to enact the Smoot-Hawley tariff. This unprecedented hike in tariff rates told the world "America is closed for business!" Less able to sell products to Americans, foreigners earned fewer dollars with which to buy products from Americans.

The resulting contraction of cross-border trade, combined with the waste of keeping inefficient domestic producers in business, only deepened and prolonged the Depression.

Perhaps the greatest difference between now and then, though, is something simultaneously nebulous and quite real: the prevailing ideology. From the late 19th century until the 1970s, a dangerous idea took hold of the minds of intellectuals and opinion-makers throughout the world: socialism. And the grip of this disastrous, economic-growth-killing idea was strongest during the 1930s.

It's easy to blame the Depression for fueling socialist sympathies. But in his important book Depression, War and Cold War, economic historian Robert Higgs argues that socialist sympathies were responsible for the depth and length of the Depression. Higgs' case is persuasive.


...the only way the current economic kerfuffle could get serious is if Barrack Obama were serious about the protectionism, class warfare, and other "economic populism" he runs on. But no one thinks he is serious except the far Right and the Left.


Posted by Orrin Judd at September 18, 2008 8:07 PM
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