Great Depression Warning: You are not logged in. Your IP address will be publicly visible if you make any edits. If you log in or create an account, your edits will be attributed to your username, along with other benefits.Anti-spam check. Do not fill this in! === The Smoot–Hawley act and the breakdown of international trade === {{Main|Smoot–Hawley Tariff Act}} [[File:Smoot_and_Hawley_standing_together,_April_11,_1929.jpg|thumb|left|[[Willis C. Hawley]] (left) and [[Reed Smoot]] in April 1929, shortly before the Smoot–Hawley Tariff Act passed the House of Representatives]] The [[Smoot–Hawley Tariff Act]] was passed in the United States on 17 June 1930, having been proposed the year prior. Ostensibly aimed at protecting the American economy as the Depression began to take root, it backfired enormously and may have even caused the Depression. The consensus view among economists and economic historians (including Keynesians, Monetarists and Austrian economists) is that the passage of the Smoot–Hawley Tariff exacerbated the Great Depression,<ref>{{Cite journal |last=Whaples |first=Robert |author-link=Robert Whaples |date=March 1995 |title=Where Is There Consensus Among American Economic Historians? The Results of a Survey on Forty Propositions |journal=[[The Journal of Economic History]] |publisher=[[Cambridge University Press]] |volume=55 |issue=1 |page=144 |doi=10.1017/S0022050700040602 |jstor=2123771 |s2cid=145691938}}</ref> although there is disagreement as to how much. In the popular view, the Smoot–Hawley Tariff was a leading cause of the depression.<ref>[https://krugman.blogs.nytimes.com/2009/11/30/protectionism-and-the-great-depression/ "Protectionism and the Great Depression"] {{Webarchive|url=https://web.archive.org/web/20210225033620/https://krugman.blogs.nytimes.com/2009/11/30/protectionism-and-the-great-depression/|date=February 25, 2021}}, [[Paul Krugman]], ''[[New York Times]],'' November 30, 2009</ref><ref name="eichenirwin">Barry Eichengreen, Douglas Irwin (March 17, 2009). [https://voxeu.org/index.php?q=node/3280 "The protectionist temptation: Lessons from the Great Depression for today"] {{Webarchive|url=https://web.archive.org/web/20120524215509/http://voxeu.org/index.php?q=node%2F3280|date=May 24, 2012}}. VOX.</ref> In a 1995 survey of American economic historians, two-thirds agreed that the [[Smoot–Hawley Tariff Act]] at least worsened the Great Depression.<ref name="ReferenceB" /> According to the U.S. Senate website, the Smoot–Hawley Tariff Act is among the most catastrophic acts in congressional history.<ref name="Senate_On_Smoot-Hawley Act">{{cite web |title=The Senate Passes the Smoot-Hawley Tariff |url=https://www.senate.gov/artandhistory/history/minute/Senate_Passes_Smoot_Hawley_Tariff.htm |url-status=live |archive-url=https://web.archive.org/web/20211020163037/https://www.senate.gov/artandhistory/history/minute/Senate_Passes_Smoot_Hawley_Tariff.htm |archive-date=October 20, 2021 |access-date=May 3, 2020 |website=United States Senate }}</ref> Many economists have argued that the sharp decline in international trade after 1930 helped to worsen the depression, especially for countries significantly dependent on foreign trade. Most historians and economists blame the Act for worsening the depression by seriously reducing international trade and causing retaliatory tariffs in other countries. While foreign trade was a small part of overall economic activity in the U.S. and was concentrated in a few businesses like farming, it was a much larger factor in many other countries.<ref>{{cite web |title=The World in Depression |url=https://www.mtholyoke.edu/acad/intrel/depress.htm |url-status=dead |archive-url=https://web.archive.org/web/20080310145946/https://www.mtholyoke.edu/acad/intrel/depress.htm |archive-date=March 10, 2008 |access-date=May 22, 2008 |publisher=[[Mount Holyoke College]]}}</ref> The average ''[[ad valorem]]'' (value based) rate of duties on dutiable imports for 1921–1925 was 25.9% but under the new tariff it jumped to 50% during 1931–1935. In dollar terms, American exports declined over the next four years from about $5.2 billion in 1929 to $1.7 billion in 1933; so, not only did the physical volume of exports fall, but also the prices fell by about {{frac|1|3}} as written. Hardest hit were farm commodities such as wheat, cotton, tobacco, and lumber.{{Citation needed|date=October 2022}} Governments around the world took various steps into spending less money on foreign goods such as: "imposing tariffs, import quotas, and exchange controls". These restrictions triggered much tension among countries that had large amounts of bilateral trade, causing major export-import reductions during the depression. Not all governments enforced the same measures of protectionism. Some countries raised tariffs drastically and enforced severe restrictions on foreign exchange transactions, while other countries reduced "trade and exchange restrictions only marginally":<ref name="Eichengreen">{{cite journal |last1=Eichengreen |first1=B. |last2=Irwin |first2=D. A. |year=2010 |title=The Slide to Protectionism in the Great Depression: Who Succumbed and Why? |url=https://www.nber.org/papers/w15142.pdf |url-status=live |journal=Journal of Economic History |volume=70 |issue=4 |pages=871–897 |doi=10.1017/s0022050710000756 |archive-url=https://web.archive.org/web/20190514111715/https://www.nber.org/papers/w15142.pdf |archive-date=May 14, 2019 |access-date=February 18, 2022 |s2cid=18906612}}</ref> * "Countries that remained on the gold standard, keeping currencies fixed, were more likely to restrict foreign trade." These countries "resorted to protectionist policies to strengthen the [[balance of payments]] and limit gold losses." They hoped that these restrictions and depletions would hold the economic decline.<ref name="Eichengreen" /> * Countries that abandoned the gold standard allowed their currencies to [[Currency appreciation and depreciation|depreciate]] which caused their balance of payments to strengthen. It also freed up monetary policy so that central banks could lower interest rates and act as lenders of last resort. They possessed the best policy instruments to fight the Depression and did not need protectionism.<ref name="Eichengreen" /> * "The length and depth of a country's economic downturn and the timing and vigor of its recovery are related to how long it remained on the [[gold standard]]. Countries abandoning the gold standard relatively early experienced relatively mild recessions and early recoveries. In contrast, countries remaining on the gold standard experienced prolonged slumps."<ref name="Eichengreen" /> Summary: Please note that all contributions to Christianpedia may be edited, altered, or removed by other contributors. If you do not want your writing to be edited mercilessly, then do not submit it here. You are also promising us that you wrote this yourself, or copied it from a public domain or similar free resource (see Christianpedia:Copyrights for details). Do not submit copyrighted work without permission! Cancel Editing help (opens in new window) Discuss this page