Welcome to paragraph 9, which we will tackle together with paragraph 10. So this will be it. Final post.
The topic is the Smoot Hawley Tariff. Rutner loves it. And that fool Rothbard just confuses correlation with causation, appeals to authorities that he has rejected in other places, forgets that other tarrifs did no damage to the United States, and just makes silly assertions while actually proving nothing.
OK, a pause while I read up. Here are Mr Rutner’s reservations:
- Rothbard takes the fact that the market broke after the tariff was signed into law as proof that the Smoot Hawley tariff contributed mightily to the Great Depression. But this is a big mistake. “The market’s having sunk is by itself not evidence. The old saw of, correlation is not causation is at work here.”
My rebuttal. Mr Rutner is setting up a straw man. Rothbard does not say what Rutner attributes to him. Here is the full quote on page 242: *"*The stock market broke sharply on the day that Hoover agreed to sign the Smoot–Hawley Bill. " That’s it. Mr Rothbard was writing a history in Part 3, of which this chapter is a part. The theory he dealt with in the other parts. No where does he mention that Smoot Hawley caused the market. Of course it might possibly have been a cause for the market to break sharply in 1930 [not 1929] when it was passed. But Rothbard does NOT claim it.
-
“The fact that many economists opposed the tariff is also not evidence.” Same straw man. Rothbard does not say it is, although it’s certainly curious, to say the least.
-
“Indeed, Rothbard did not accept stable prices as being a beneficial goal of monetary policy despite many economists having recommended it as policy.”
Firstly, in point 2 we showed how this is irrelevant. Second, there is a difference between many and all. " Hoover was urged to veto the
Smoot–Hawley Tariff by almost all the nation’s economists, in a remarkable display of consensus, by the leading bankers, and by
many other leaders. " [page 241].
- “Moreover, there was an earlier tariff, the Fordney-McCumber Tariff, which went into effect in 1922, and was just as onerous as Smoot-Hawley. Yet, it seems not to have caused any lasting real effects.”
Really? Here is Rothbard on that tariff, page 139**:**
" a mild
recession ensued, continuing until the middle of 1924. Bond yields
rose slightly, and foreign lending slumped considerably, falling
below a rate of one hundred million dollars per quarter during
1923. Particularly depressed were American agricultural exports to
Europe. Certainly part of this slump was caused by the Fordney–
McCumber Tariff of September 1922, which turned sharply away
from the fairly low Democratic tariff and toward a steeply protec-
tionist policy.3 Increased protection against European manufac-
tured goods delivered a blow to European industry, and also served
to keep European demand for American exports below what it
would have been without governmental interference.
To supply foreign countries with the dollars needed to purchase
American exports, the United States government decided, not sen-
sibly to lower tariffs, but instead to promote cheap money at home,
thus stimulating foreign borrowing and checking the gold inflow
from abroad. Consequently, the resumption of American inflation
on a grand scale in 1924 set off a foreign lending boom, which
reached a peak in mid-1928. It also established American trade,
not on a solid foundation of reciprocal and productive exchange,
but on a feverish promotion of loans later revealed to be unsound.4
Foreign countries were hampered in trying to sell their goods to
the United States, but were encouraged to borrow dollars. But
afterward, they could not sell goods to repay; they could only try
to borrow more at an accelerated pace to repay the loans. Thus, in
an indirect but nonetheless clear manner, American protectionist
policy must shoulder some of the responsibility for our inflationist
policy of the 1920s.
Who benefitted, and who was injured, by the policy of protec-
tion cum inflation as against the rational alternative of free trade
and hard money? Certainly, the bulk of the American population
was injured, both as consumers of imports and as victims of infla-
tion and poor foreign credit and later depression. Benefitted were
the industries protected by the tariff, the export industries uneco-
nomically subsidized by foreign loans, and the investment bankers
who floated the foreign bonds at handsome commissions."
- And finally, the last of Mr Rutner’s sallies, begins by quoting Rothbard: "it was at a precarious time of depression that the Hoover administration chose to hobble international trade, injure the American consumer, and cripple the American farmers’ export markets by raising tariffs higher than their already high levels."
Mr Rutner is not pleased*.*
"This is economics by assertion. It proves nothing."
To which I say: Huh? If there is a tariff, THE WHOLE POINT OF IT is to hobble international trade. This is to obvious to even talk about. Why are Americans forced to pay more for foreign products than local products, if not to stop them from buying the foreign stuff?
But it goes further. Them furriners are not going to take it lying down. They are going to set up tariffs of their own, sure as night follows day.
As for injuring the American consumer being a mere assertion, I don’t get it. If I have to pay double for sugar or whatever because of a tariff, is it mere “assertion” to say I have been injured? The mind boggles.
Last one, crippling the farmers’ export markets. Rothbard says on page 241, "Whereas we have seen that a policy of high tariffs cum foreign
loans was bound to hurt the farmers’ export markets when the
loans tapered off, Hoover’s answer was to raise tariffs still further,
on agricultural and on manufactured products. A generation later,
Hoover was still to maintain that a high tariff helps the farmer by
building up his domestic market and lessening his “dependence”
on export markets, which means, in fact, that it hurts him griev-
ously by destroying his export markets."
When he says “we have seen”, he is referring to his discussion of the harmless [according to Rutner] Fordney McCumber Tariff, which I quoted a little bit earlier.
OK, that’s it folks. What a long strange trip it’s been. Once again, anyone who can help out with Table 7’s botched arithmetic, please do. [EDIT: Black Numero came up with the answer here.]
Also with the alternate explanation of the increase in reserves, that everyone started hating gold for ten straight years, the common man and the banks.