COMBINE RESTRICTIONS ON TRADE AND IMMIGRATION WITH TIGHT MONEY...:

Heavy Duty: In 1930, Willis Hawley predicted that his tariff bill would bring 'a renewed era of prosperity.' (JAMES GRANT, 3/15/11, WSJ)

Passage of the Republican-sponsored Fordney- McCumber tariff of 1922, which had lifted the average tariff rate by 64%, had approximately coincided with the start of the gorgeous prosperity of the 1920s. Smoot-Hawley, in contrast, raised the average dutiable rate by a mere 15%-18%, Mr. Irwin reckons. It wasn't the handiwork of Smoot and Hawley that brought down the world, in the author's opinion, "futile" though that bill was. "The magnitude of the tariff shock in the Smoot-Hawley legislation, which increased the domestic price of imports by 5% at a time when dutiable imports were just 1.4% of GDP, was simply not large enough to trigger the kind of economic contraction experienced after 1930," Mr. Irwin concludes.

If not the Smoot-Hawley tariff, then who or what put the "Great" in Great Depression? Mr. Irwin tosses out a number of possibilities, including the monetary arrangements of the day, which promoted lending and borrowing in ways that the pre-World War I monetary regime never did.

...and there's no other result you can get.

Posted by oj at March 16, 2011 5:45 AM
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