Economics

Republican Tariffs vs. Free Trade

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Writing in today's Wall Street Journal, historian James Grant reviews the new book Peddling Protectionism: Smoot Hawley and the Great Depression, which looks back on the days when the Republican Party was openly hostile to free trade:

As every schoolboy used to know, the tariff was the workhorse of the U.S. Treasury before the 20th-century income tax. But it did more than finance the government. It also fattened the profits of the manufacturers who succeeded in lobbying for tariff rates high enough to keep out foreign competition.

Interestingly, [author Douglas] Irwin reminds us, Smoot-Hawley was no Depression measure. Enacted in June 1930, it was conceived as a political gambit intended to win struggling farmers over to the Republican Party in the elections of 1928. While the GOP wanted no part of overtly subsidizing agricultural prices, it was only too happy to legislate a rise in the duties on imported farm products (of which there were actually precious few), as well as a broad-based upward revision in tariffs on manufactured goods. "Equality for agriculture" was the unpersuasive slogan.

Most of us, though not Mr. Irwin, forget that the Republican Party was once the citadel of protectionism. High tariffs, the party of Lincoln had claimed from its founding, were the basis of American prosperity. "Free trade" was then the political epithet that "protectionist" has now become.

Read the whole thing here.

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  1. As every schoolboy used to know, the tariff was the workhorse of the U.S. Treasury before the 20th-century income tax. But it did more than finance the government. It also fattened the profits of the manufacturers who succeeded in lobbying for tariff rates high enough to keep out foreign competition.

    It was also the reason for the Civil War (NOT secession, the war itself), as the Southern States were not willing to levy the tariff against the very needed foreign imports, whereas the Washington Republicans (and Lincoln) wanted the loot.

    So the looters won. End of story.

    1. No, that’s the neverending story.

    2. so slavery + southern tariffs = no war? that’s as screwy as old mex’s meme that american weapons werent purchased for the cartels.

      1. I dunno. Did the North invade the South for noble purposes only? I find that doubtful.

        1. Though whether the real motive or not, ending slavery was a good thing. Too bad so much statist crap had to spring from that war. Probably just having a war to force union on unwilling people was the problem.

          If it had been all about liberating the slaves, the North should’ve either offered to buy them all or invaded, freed the slaves, and left.

          1. What? That wouldn’t last, unless they either armed the slaves and gave them their own state, a la Israel, or brought them all up North. I don’t see either approach flying with the North, let alone the defeated South.

        2. Re: Pro Libertate,

          Did the North invade the South for noble purposes only? I find that doubtful.

          That’s because Lincoln had no intention of freeing ANY slaves. The government had assured slavist states that remained in the Union that slavery would not be abolished in THEIR states. The war was about the tariff, nothing more.

          SECESSION was, in part, because of slavery, as many Northern states were nullifying the Fugitive Slave act and because the Southern states felt that Lincoln was anti-slavery (he only said he was.) But slavery had NOTHING to do with starting the war – it was gold.

          1. The secession crisis was the proximate cause of the Civil War. To the extent that the southern states seceded was due to their desire to preserve slavery is the extent that slavery was the cause of the war. You cannot say that slavery had nothing at all to do with it while admitting that secession happened because of slavery.

      2. Re: Double Asshole,

        so slavery + southern tariffs = no war?

        Yes. Next question?

      3. I understood that to mean (charitably) that either would have probably been a sufficient cause for secession, and that the North had enough to gain both economically from the tariff and politically from sovereignty over Southern territory that war was an inevitable consequence of secession.

        Abolition, being a moral rather than self-interested motivation, would have led to secession, but probably not to war in and of itself. It was, however, useful as a tool to lend the war moral credibility and demonize the enemy, much as Saddam Hussein’s documented atrocities and tyranny helped in the push to war with Iraq.

    3. I would like to see you try to make the case for this.

      1. Re: Creech,

        I would like to see you try to make the case for this.

        Your wish is my command:

        http://www.theabsurdreport.com…..-told-you/

        The Un-Civil War Truths Your Teacher Never Told You

        UNDERSTANDING THE CAUSES OF THE UNCIVIL WAR
        A Brief Explanation of the Impact of the Morrill Tariff

        By Mike Scruggs for the Tribune Papers

        In May of 1860 the U. S. Congress passed the Morrill Tariff Bill (named for Republican Congressman and steel manufacturer, Justin S. Morrill of Vermont) raising the average tariff from about 15% to 37% with increases to 47% within three years. Although this was remarkably reminiscent of the Tariffs of Abomination which had led in 1832 to a constitutional crisis and threats of secession and armed force, the U. S. House of Representatives passed the Bill 105 to 64. Out of 40 Southern Congressmen only one Tennessee Congressman voted for it.

        U. S. tariff revenues already fell disproportionately on the South, accounting for 87% of the total. While the tariff protected Northern industrial interests, it raised the cost of living and commerce in the South substantially. It also reduced the trade value of their agricultural exports to Europe. These combined to place a severe economic hardship on many Southern states. Even more galling was that 80% or more of these tax revenues were expended on Northern public works and industrial subsidies, thus further enriching the North at the expense of the South.

        In the 1860 election, Lincoln, a former Whig and great admirer of Henry Clay, campaigned for the high protective tariff provisions of the Morrill Tariff, which had also been incorporated into the Republican Party Platform. Lincoln further endorsed the Morrill Tariff and its concepts in his first inaugural speech and signed the Act into law a few days after taking office in March of 1861. Southern leaders had seen it coming. Southern protests had been of no avail. Now the South was inflamed with righteous indignation, and Southern leaders began to call for Secession.

        At first Northern public opinion as reflected in Northern newspapers of both parties recognized the right of the Southern States to secede and favored peaceful separation. A November 21, 1860, editorial in the Cincinnati Daily Press said this:

        “We believe that the right of any member of this Confederacy to dissolve its political relations with the others and assume an independent position is absolute.”

        The New York Times on March 21, 1861, reflecting the great majority of editorial opinion in the North summarized in an editorial:

        “There is a growing sentiment throughout the North in favor of letting the Gulf States go.”

        Northern industrialists became nervous, however, when they realized a tariff dependent North would be competing against a free trade South. They feared not only loss of tax revenue, but considerable loss of trade. Newspaper editorials began to reflect this nervousness. Lincoln had promised in his inaugural speech that he would preserve the Union and the tariff. Three days after manipulating the South into firing on the tariff collection facility of Fort Sumter in volatile South Carolina, on April 15, 1861, Lincoln called for 75,000 volunteers to put down the Southern rebellion. This caused the Border States to secede along with the Gulf States. Lincoln undoubtedly calculated that the mere threat of force backed by more unified Northern public opinion would quickly put down secession. His gambit, however, failed spectacularly and would erupt into a terrible and costly war for four years. The Union Army’s lack of success early in the war, the need to keep anti-slavery England from coming into the war on the side of the South, and Lincoln’s need to appease the radical abolitionists in the North led to increasing promotion of freeing the slaves as a noble cause to justify what was really a dispute over just taxation and States Rights.

        Writing in December of 1861 in a London weekly publication, the famous English author, Charles Dickens, who was a strong opponent of slavery, said these things about the war going on in America:

        “The Northern onslaught upon slavery is no more than a piece of specious humbug disguised to conceal its desire for economic control of the United States.”

        “Union means so many millions a year lost to the South; secession means loss of the same millions to the North. The love of money is the root of this as many, many other evils. The quarrel between the North and South is, as it stands, solely a fiscal quarrel.”

    4. You obviously have greater confidence in American schoolboys than I do.

  2. which looks back on the days when the Republican Party was openly hostile to free trade

    Sell a bag of weed. You’ll see that the hostility remains.

    1. Does the Republican Party still loath NAFTA?

    2. Hate to break the news to Damon, but Republicans in general are STILL against free trade.

  3. “…while the GOP wanted no part of overtly subsidizing agricultural prices…”
    _
    but the GOP soon got that good ol ag-religion since most farm states are red. and ag-subsidizes just cant be socialism.

  4. Painting in the broadest strokes possible, I oppose tariffs, but am not completely opposed (as a fan of fee-for-service government) to what I will call “port fees”. A rational

    *pauses, waits for audience guffaws to diminish*

    system of recapturing (in the absence of truly privatized facilities) infrastructure and operating expenses for government activities related to reliable shipping does not seem to me indefensible.

    Also- if the U S Navy is providing protection for shippers (and proselytizing yachtsmen) in the Indian Ocean they should receive payment for those services.

    1. Not touching this one.

    2. Perhaps, but surely any such system of fees would need be neutral regarding the items for which it is assessed to prevent corruption/protectionism — that is, it would have to be based either on weight, volume, or less feasibly, on market value.

    3. If you’re talking about libertopia, you just stated the ideal solution- shipping companies can construct there own infrastructure.

      As for the navy, just fund it with the general tax that the minarchist libertopian government will have anyway. And allow shippers to arm themselves up as well.

      Fuck a “user fee” government. If user fees can support something, then it might as well be private (like highways). User fees don’t automatically eliminate all the coercion when something is government run.

  5. any such system of fees would need be neutral

    Yes.

  6. I would rather have tariffs than the income tax!

  7. Fuck a “user fee” government.

    Why? If the government is going to do stuff, it should be made as plain as possible what the costs are.

    1. You’re giving big government a license to do whatever it wants so long as it breaks even. The things it does (like road building) still won’t be perfectly market based and will crowd out private alternatives (exactly like the “self sustaining” interstate system did).

  8. You’re giving big government a license to do whatever it wants so long as it breaks even.

    What I want to see, as nearly as possible, is the cost of government activity placed directly on the beneficiaries.

    If the government wants to operate high speed rail, the costs of doing so should be borne by the people who ride it. It won’t break even in a million years.

  9. If the government wants (leaving aside for the purposes of this discussion whether they should or not) to take up-front money from the broad taxpayer base to finance a stadium, there should be a whacking great tax on tickets to recapture the initial infusion of funds from the people who actually use it.

    1. You’d also have to include a tax on the TV broadcasts of the games too. A lot more people watch sports on tv than go to games, but the stadium is still necessary to play those sports.

    2. User fees are a bit of a con job — how do we know the government is charging a fair price? How much of the program is covered by the fee and how much by general taxes, which the gov’t can increase arbitrarily and force us to pay?

      1. But that said, it’s certainly preferable to not having user fees and just financing everything through taxes.

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