Smoot-Hawley: A Victim of Socialist Economic Propaganda


Level The Playing Field

It’s time to give Smoot-Hawley another chance.  A “level playing field.”  Smoot-Hawley was blamed as a depression-era failure when the economy was already failing for other, now well understood reasons:  A credit contraction due to irrational investor exuberance and lax credit creation standards.

No other regulatory or tax policy of the time can truly be branded failure or success during mass credit contraction or expansion, because the credit changes dominate the economic indicators, for reasons explained below and detailed in “Atlas Shouts” (currently the #3 of 7000 rated money policy books on Amazon).

What was Smoot-Hawley?

Smoot-Hawley was a US Congressional tax bill which created new US import taxes.   These taxes were enacted by congress in order to create on-shore, domestic jobs during the early part of the Great Depression. Smoot-Hawley was deemed a failure by the liberal press because it correlated with:

• imports decreased 66% from $4.4 billion (1929) to $1.5 billion (1933)
• exports decreased 61% from $5.4 billion to $2.1 billion
• Overall, world trade decreased by some 66% between 1929 and 1934.
• Unemployment was at 8% in 1930 when the Smoot–Hawley tariff was passed, but the new law failed to lower it. The rate jumped to 16% in 1931

So, in light of modern understanding about what happens in a credit contraction, did Smoot-Hawley “cause” more problems than it solved?

Flying Blind – Credit Bubbles and Credit Collapses Hide Regulatory Evaluation

We now know the current crisis re-confirms the depression-era “solutions”, like stimulus, were failures. Stimulus was FDRs #1 weapon, too – but it did NOT solve the Great Depression.  (Keynesian Con Game)  So, other policies must be assumed as primarily culpable for causing the depression to worsen, not Smoot-Hawley.

Consider how stimulus blinds policy makers and observers alike, to the political advantage of both groups:

The federal government’s “stimulus” of the depression era blinded the policy makers to the failing, underlying intrinsic free market economy.  How do we know?  Because when they finally raised tax rates in 1936 – thinking “the depression is over” – the economy collapsed.

Just like when the FED just raised interest rates in December, all policy priests expect the economy to slow.   By now you see the pattern: No stimulus or artificial government-created “demand” policy has ever created intrinsic, consumer-driven, private economy demand, this is thoroughly proven in “Atlas Shouts“.  Stimulus and other credit expansion schemes hide the underlying decay in consumer purchases with fake, unbacked credit-based demand, then create a trough of lower demand later.

While the unbacked credit, stimulus, is expanding, it is inherently impossible to conclusively isolate success of failure of any policy.   Why?

  • Because the effect of two or more concurrently implemented, counter-opposing demand and regulatory inputs cannot determined.  

And even if it could, the vote-buying upside of stimulus will be used the politicians to only tout the positive statistics, for their reelection needs.    See Campbell’s Law.

And, let’s not forget the “stimulus” money finds it’s way into profit created for very unhealthy reasons – like paying off corporate insurance industry executives to go along with Obamacare:  Obamacare Bribes Insurance Executives

Where Was The Job Creation?

Mainly, Smoot-Hawley was considered a failure because it didn’t create jobs – but as we see now, the current economic policies don’t create jobs or increase trade either, indeed the private economy is shrinking, similar to what happened with the FDR stimulus policies of the Great Depression.  So we cannot blame Smoot-Hawley for exhibiting what has been exhibited even without import taxes, because employment is falling anyway.

Retaliation Is Expected Behavior

After Smoot-Hawley, other countries “retaliated” by raising their own import taxes, but what else would we expect? That’s not a “failure”, that’s expected downside of such actions.  If a country raises taxes to protect on shore jobs, and another country raises their import taxes, that means the other country really did not need what the US was making, either.  And since the other countries are massively printing money, we know they are subsidizing their product prices to the deceptive advantage of their workers, and disadvantage of US workers.

For The Green Movement and Big Labor

Many other countries have little or no environmental law that US companies have to bear the cost of, so Smoot Hawley II will be a move that will enhance the environment of the entire earth – making products under more strict, sustainable, U.S. environmental standards.  The environmental and labor factions, if they are authentically pro-environment and pro-job, should be strong supporters of both increased on-shore work and less pollution per unit of product manufactured under US environment law.


Time to give Smoot Hawley another chance.


John D. Lofgren

Author of “Atlas Shouts”, the #3 rated book on Amazon about money policy:
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John Lofgren spent over 10 years researching US economic history, identifying best practices, and exposing findings in public forums in researching his well reviewed book, "Atlas Shouts". John earned degrees from the University of Florida and the University of Central Florida. A computer engineer, he holds five patents and has thirty years of design experience in electronics and design automation. He is also an accomplished lead singer and guitarist in a Motown/Classic Rock band.