Thursday, March 12, 2009

Smoot point

Further to my blog on the demonization of protectionism
by the likes of Federated Farmers president Don Nicolson,
I find this in The Collapse of Globalism by John Ralston
Saul: 'Whenever anyone wants to say something that
sounds knowledgeable about the Depression, they trot out
the villainy of Smoot-Hawley.' Well, that’s exactly what
Nicolson did in the New Zealand Herald opinion piece he
wrote, though I have a horrible feeling it was probably
written for him by someone like Roger Kerr. He said, and
I quote, ‘It was not the 1929 crash that created the Great
Depression but a protectionist response following in its
wake. The United States Smoot-Hawley Tariff Act of 1930
was a template for economic suicide.’

I’ve already chided Don for alarmist hyperbole; Saul utterly
refutes him by pointing out that a study by American trade
historian Alfred Eckes ‘found no convincing evidence that
Smoot-Hawley caused the stock market crash or made the
Depression worse.’ It’s hard to see how it could have, since
the tariffs imposed by the act left two-thirds of American
imports untouched. The real reason for the 30s Depression
is the same as for the one we're in now: unregulated
financial activity, excessive bank lending, a quasi-religious
belief in the ‘free’ market. Saul is very instructive on that
last point, tracing the origins of the faith back to at least the
1840s, when British free-trade evangelist Richard Cobden
declared that to legislate against free trade was to
'interfere with the wisdom of the Divine Providence.'

There's nothing wrong with free trade as such, provided
that it really is free, which it rarely is; in any case, like
protectionism with its bagful of subsidies, tariffs and taxes,
it's just one of several tools in the international trade
toolbox. You use the right tool in the right context. And you
don't—Don—get hysterical when some nation in the grip of
depression reaches for the odd subsidy or tariff. Frankly,
we'd all be better off if Fed Farmers stopped squealing
about free-trade heresies and did something more useful,
like depolluting rural waterways and curbing the carbon
emissions their stock produce.

1 comment:

Truth Seeker said...

I'm always amazed how people justify allowing the tsunami of cheap imports of often low-quality goods from China as preserving free trade.

Trade with China is anything but free. They have extensive controls and regulations and tariffs around almost everything. They also don't allow majority foreign ownership of pretty much anything....with perhaps a few rare and recent exceptions proving the rule.

China trade is about *exporting* products made for the world's multi-nationals who hunger for the low wages guaranteed by cut-throat competition in a virtually unregulated internal market. Melamine anyone?

It's been a deceit all along that our lack of tariffs for cheap Chinese goods had anything to do with free trade.

Far from it.