Hawley Smoot Tariff Quotes

But the deepest problem was the intervention, the lack of faith in the marketplace. Government management of the late 1920s and 1930s hurt the economy. Both Hoover and Roosevelt misstepped in a number of ways. Hoover ordered wages up when they wanted to go down. He allowed a disastrous tariff, Smoot-Hawley, to become law when he should have had the sense to block it. He raised taxes when neither citizens individually nor the economy as a whole could afford the change. After 1932, New Zealand, Japan, Greece, Romania, Chile, Denmark, Finland, and Sweden began seeing industrial production levels rise again—but not the United States.

The real cause of the beginning of the Great Depression was the Smoot-Hawley Tariff Act. This shocking and totally unprecedented legislation ended up imposing an average 60 percent tax on more than 3,000 import items. It was the equivalent of exploding a bomb that devastated the global trading system.

Both the immigration legislation and the draconian regime of high tariffs (the Ford–McCumber tariff of 1922 and the Smoot–Hawley tariff of 1930) converted the U.S. into a relatively closed economy during the three decades between 1930 and 1960. The lack of competition for jobs from recent immigrants made it easier for unions to organize and push up wages in the 1930s. The high tariff wall allowed American manufacturing to introduce all available innovations into U.S.-based factories without the outsourcing that has become common in the last several decades. The lack of competition from immigrants and imports boosted the wages of workers at the bottom and contributed to the remarkable “great compression” of the income distribution during the 1940s, 1950s, and 1960s.36 Thus the closing of the American economy through restrictive immigration legislation and high tariffs may indirectly have contributed to the rise of real wages in the 1930s, the focus of innovative investment in the domestic economy, and the general reduction of inequality from the 1920s to the 1950s.