1920s, 1930s, calvin coolidge, economics, economy, free trade, gdp, great depression, herbert hoover, jake huneycutt, keynes, Keynesian, laissez-faire, mcnary-haugen, milton friedman, politics, smoot-hawley, trade, world war i, world war ii, wwi, wwii
I’ve been doing a lot of research into economic policies of the 1920’s. I’m really surprised at how much reality diverges from the traditional narratives. Far from embracing non-interventionist economic policies, the Republican Party of the 1920’s consistently supported price engineering in the agricultural sector, in order to try to return to the glory days of World War I pricing.
The Republican Congress passed a “farm relief bill” (McNary-Haugen Farm Relief Act) five times that attempted to create a massive Federal bureaucracy to control farm prices. Fortunately, Calvin Coolidge vetoed the monstrosity all five times! Once Herbert Hoover got into office, however, many of the forces that had pushed the “farm relief bill”, began to push the Smoot-Hawley Tariff.
This started almost immediately after Hoover assumed office. While the tariff wasn’t officially passed until 1930, threats of retaliation from US trading partners began immediately. Hoover opposed the tariff initially, but eventually gave in to pressure by his party, showcasing a start contrast between himself and his predecessor, Coolidge.
Is it possible that the Congressional obsession with Smoot-Hawley and agricultural price controls actually helped create the initial Wall Street crash? I’m not sure, because Milton Friedman’s theories on monetary policies being to blame also make a lot sense. But it’s very clear that once the act was passed, exports plunged. For this reason, it’s safe to say that the recession of 1930 was dramatically exacerbated by the tariff. And indeed, the Great Depression may be more accurately termed “the Great Protectionist Debacle”.