Today marks the 81st anniversary of the passage of the Smoot–Hawley Tariff Act. Actor and economist Ben Stein famously explained this legislation in Ferris Bueller’s Day Off, the classic John Hughes movie that was released 25 years ago this month:
In 1930, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the…Anyone? Anyone? The Great Depression, passed the—Anyone? Anyone? The tariff bill?
The Hawley–Smoot Tariff Act, which—Anyone? Raised or lowered? Raised tariffs in an effort to collect more revenue for the federal government.
Did it work? Anyone? Anyone know the effects?
It did not work, and the United States sank deeper into the Great Depression.
A more scholarly analysis of the Smoot–Hawley Tariff is provided by the U.S. Department of State:
Scholars disagree over the extent of protection actually afforded by the Smoot-Hawley tariff; they also differ over the issue of whether the tariff provoked a wave of foreign retaliation that plunged the world deeper into the Great Depression. What is certain, however, is that Smoot-Hawley did nothing to foster cooperation among nations in either the economic or political realm during a perilous era in international relations. It quickly became a symbol of the “beggar-thy-neighbor” policies of the 1930s.
As is the case today, economists who disagreed on a wide range of issues were nearly unanimously opposed to trade barriers then. A petition warning against the Smoot–Hawley Tariff was signed by 1,028 economists. According to one of the petition’s organizers:
Economic faculties that within a few years were to be split wide open on monetary policy, deficit finance, and the problem of big business, were practically at one in their belief that the Hawley-Smoot bill was an iniquitous piece of legislation.
Today we have a similar debate over trade policy. Instead of increasing tariffs, legislators have the opportunity to reduce trade barriers and strengthen the economy. Congress should act immediately on this opportunity by implementing pending trade agreements with Colombia, Panama, and South Korea.