Tariffs: here we go again. We understand that Mr Donald Trump may have his own reasons for imposing them. As the ruler of a proud and independent nation he has the right to do so. But, for the moment, we still have the right to comment on his action. Which we did in two blogs (LSS 19 5 20, 12 11 24) Being of a historical turn of mind we drew parallels with the famous Smoot-Hawley Tariff of 1930. Which in the view of most economists and historians not only deepened the gathering recession, but also lead more or less directly to World War Two.
In such circumstances it is questionable whether it is “nice” to find that minds far better educated and profound than ours agree with our insights. For today The Conversation publishes an article by Thomas Giffe and Micheal Pouffle which agrees with us in almost every detail [1] In fact it does the whole job rather better; and you must read it, gentle reader.
Because the article brings out the key psychological reasons for the decisions. And psychological they are, not economic. Here are three killer quotes from Trumps most earnest supporters
Congresswoman Claudia Tenney of New York told Fox News that she’s glad the US is “projecting strength for once on the world stage”. Senator Eric Schmitt of Missouri insisted that tariffs were “not a surprise,” emphasising that Trump had relentlessly campaigned on “improving our standing in the world.”
former adviser and populist nationalist Steve Bannon warned that America would no longer be “abused” by “unbalanced trade deals.” “Yes, tariffs are coming,” he said. “You will have to pay to have access to the US market. ………… the free market is over.”
Now these are proud and intelligent people. But their priorities lie in fields other than economics. They may be right. They may not. But we do remember a passage from our Gibbon about the declining years of the Empire. Wherein a particularly tyrannous but insecure Emperor, having arranged the murder of his best general. asked an ordinary Roman Citizen for his opinion of the deed:
“I am ignorant, sir, of your motives and intentions” replied the honest man “I only know you have acted like a man who cuts off his right arm with his left”
“Tear down your wall!” This was the gauntlet which US President Ronald Reagan threw down to the Communist bloc in the 1980s. It was a harbinger of times to come. Reagan was the leader of the Neoliberal programme, by which he meant that trade: the free flow of goods, services, capital and people would bring undreamed-of levels of prosperity and confine the memory of the restricted economies of Socialism to the dusty bookshelves of the History Faculty. Remember the 1990s and all those endless negotiations on GATT and the World Trade Organisation, as the good times rolled? The world was to follow the principle of Comparative Advantage, as advocated by David Ricardo, with each nation specialising in what it did best.
Yet the Neoliberal model contained the seeds of its own downfall, as we have noted before on these pages. The profound existential crisis it endured after 2008 has never ended. And now everyone, both ruled and rulers, has learned to turn away from its nostrums and the many problems which unrestricted movement has brought
Chief among these of course is immigration, which has incited a visceral fear of identity crisis among the native populations of countries where it runs high. Immigration was never a socialist thing, but a capitalist one. Donald Trump has recognised this, by using trade tariffs explicitly to control immigration(and the supply of stupefying drugs, (which similarly obeys the rules of a free market) As this Guardian article notes, he is simply the most powerful exponent of the spirit of our times. Free markets are out. Red Tape is in. What could be more Red Tape than immigration control? [1]
Of course everyone will follow suit. The first will be nations and trading blocs, retaliating against their American tormentor. Perhaps everyone will be poorer, but they may well live in more stable societies. However, once you throw over the market principle and prize stability above prosperity, you open the door to other innovations. Like higher taxes, which are also advocated to promote social good.. To restrictions on the buying and selling of second homes, lest they damage the fabric of local communities. To ever tighter restrictions on the use of cars, cigarettes and alcohol. Access to the internet and other sources of information. Trump and his supporters may not yest realise it fully, but they have already sold the pass.
Today we revived a post about the Roman Scholar Cassiodorus, or part of it. We did so because we thought his life might be relevant to the folly of our own times. While we shuffled through the process of writing, posting and so on, we noticed that a reader had picked up on another four year old post about the infamous Smoot Hawley Tariff. And so, without further ado, we reproduce below The Smoot Hawley Tariff:Another fine Mess…… Because we think it’s more relevant than ever. Thank you, that reader
It is the year 1930, and Republican Herbert Hoover is in his second year as President of the United States. Outside the White House, popular tunes on the radio include Embraceable You, by George and Ira Gershwin, and Ten cents a dance by Lorenz Hart and Richard Rogers. In cinemas Laurel and Hardy have made their transition to talking pictures with shorts like Hog Wild and Another Fine Mess. These would have supported new feature films such as Hells Angels and The Dawn Patrol, both evoking strong memories of the recent World War.
In May 1930 Hoover was a very worried man. In the previous autumn, the Wall Street Crash had sent shares into meltdown, triggering an avalanche of company closures and layoffs. By March 1930, US unemployment was already at 1.5 million. Now there was even worse news. On his desk lay a Bill called the Smoot-Hawley Tariff-and he, as President, was expected to sign it.
The Bill had been introduced into both Houses by Senator Reed Smoot (Rep, Utah) and Representative Willis C Hawley (Rep, Oregon). It was a response to cry from Republican heartlands to protect American jobs for American workers-and especially American Farmers. To this end, it introduced high tariffs on a vast range of imported manufactured and agricultural goods. Now it had passed both Houses of Congress, and so only needed the President’s signature to become law.
The trouble was that the whole rest of the world depended on trade with a thriving American economy. America was the only healthy economy left of any size after the Great War. A rise in US Tariffs would mean a collapse in trade for everyone else; and even the possibility that they might retaliate. 1,028 leading economists signed a petition asking the President to use his veto. The head of JP Morgan begged the President to reject this “asinine” legislation. Henry Ford spent an evening with the President in a last- ditch attempt to persuade him to use his veto. It didn’t work: Hoover knew that he needed the support of his Republican Party to govern at all. Not to have signed would have sparked a civil war inside the party. And so on 7 June 1930, the Smoot Hawley Tariff became Law.
The economic consequences unfolded at once. Over the next three years US imports decreased by 66%, and exports by 61%. An economy estimated at $103.1 billion in 1929 had fallen to $55.6 billion by 1933. The collapse in farm and other commodity prices brought starvation to the farming communities who had so strongly pressed for the Bill. In December 1931 US unemployment reached 9 million. By December 1932 it was 13 million.
The international consequences were disturbing. Led by Canada, all the major trading countries began putting up their own protectionist tariffs. Any hope of the world trading its way out of depression vanished. Unemployment rose to vertiginous heights, especially in Germany. There were consequences. In 1928 the Nazi Party had 12 seats and 2.6% of the vote. By 1932 they commanded 230 seats and 37.3%. Most worrying of all was Japan, which in despair abandoned the world community. Instead they looked for resources and markets by seizing Manchuria from China, initiating the eastern half of a war that would last until 1945.
What can we learn from all this, ninety years on? Never underestimate the power of ignorance and stupidity in human affairs. That nations have a right to defend their interests, but need to be very, very thoughtful about how they do it. And that the Talkies were here to stay.
By 1934 the new President, Democrat Franklin Roosevelt, was already starting to lower tariffs again. But the damage had already been done. Japan was by now so committed to China that only military defeat would get them out. In Germany, Hitler was consolidating his power by becoming Fuhrer. Some years of peace lay ahead, but the lines that led to war were already laid down.
Perhaps we should leave the last words to WH Auden, who wrote these memorable lines on 1st September 1939, as Germany marched into Poland, and the most terrible conflict in history got under way
Accurate scholarship can/Unearth the whole Offence/from Luther until now/That has driven a culture mad……………………….I and the public know/What all schoolchildren learn/That those to whom evil is done/Do evil in return
we apologise for being unable to find a royalty-free image of Messrs Smoot and Hawley
Hugh Brogan The Pelican History of the United States of America penguin 1985
Two days out from the US Presidential Election. For weeks now, our anxiety has been growing. Are they really going to elect That Man? Again? After all he did to their security, alliances, economy, health? Has Democracy itself failed? The mere fact he has got so far suggests Democracy is very, very poor at solving its problems.
And then the lightbulb moment saved us. We were listening to a BBC piece on Radio 4 about the attempts of various UK Governments to control illegal immigration. Onto the show they tipped an expert who warned “any attempt to control the people smuggler gangs will fail, because their leaders live mostly in the Middle East.” In other words people smuggling is a multinational business. Like IT, oil, fashion, fast food, transport, automotive manufacture. Some of these many giant businesses operate within the law(most of the time, anyway) Some like drug dealers and people smugglers tend stay outside it. But the economic and technological forces driving them are the same. The world is a very small place thanks to modern technology, and the rules of supply and demand are infallible. Economies of scale evolve that are far beyond the jurisdictions of nation states.
Which brings us back to the US elections. The people who will (probably) elect Donald Trump are not bad, mad or stupid. But they are frightened and bewildered. Because the very concept through which they view the world (the nation state) is now utterly inadequate to contend with the problems we face. Things like global warming, pandemics and the mass migrations of people are so obviously beyond the competence of even the largest national entities as to make their individual policies irrelevant. Suddenly a vote for a President, Prime Minister or whatever becomes like gripping the gear lever on a failing car. Whatever you do, it suddenly makes little difference. In that sense, the rise of Donald Trump is a sure and infallible signal of the utter failure of national politics everywhere. It states more clearly than anything that the time has come to look long and hard for an alternative. And, as that truth, it should be welcomed.
#donald trump #us elections #global warming #nation state #world government
“He’s going to be your President too.” These wise words were spoken to us by a much older cousin concerning the US Elections of 1968. And they have stayed with us ever since. Even if you are British, German, French or Australian, the forthcoming US Presidential election concerns you very closely. Which is why this article by Robert B Reich of Newsweek has caused us considerable disquiet. All the more so, because Newsweek has always been scrupulously neutral in its reporting, if anything leaning right of centre. [1]
It acknowledges just concerns about Biden‘s apparent physical frailty (well covered already), but then tuns to a considerable evidence list that suggests that the 45th President of the United States, and current Republican frontrunner has some substantial questions to answer about his own health, to say the least. Without stealing Robert’s thunder (we ‘ve given you the click) we will make this tiny crib as a taster
“………….In October, Trump warned his supporters that Biden will lead America into World War Two. He has also claimed that Hezbollah, the Iranian-backed militant group, is “very smart.” That whales are being killed by windmills.……….
World War Two?-uh, haven’t we sort of had that already? Whales and windmills? You don’t need a PhD in either Zoology or physics to question that one.
Yes, this blog is written in England, by persons who do not hold US citizenship. But we do share the planet with a country which holds a colossal nuclear arsenal, one which could destroy the world many times over if it were activated in a moment of narcissistic rage. We humbly beg our friends over the pond to please, please think very carefully, both now and in November.
Learning, Science and Society 