Plain History: The Smoot-Hawley Tariff and the Great Depression

Summary

**Plain English with Derek Thompson: Episode Summary
Episode: Plain History: The Smoot-Hawley Tariff and the Great Depression
Release Date: April 11, 2025

In this compelling episode of Plain English, host Derek Thompson delves into one of the most infamous pieces of American legislation—the Smoot-Hawley Tariff Act of 1930—and its profound impact on the Great Depression. Joined by Douglas Irwin, an esteemed economist and historian from Dartmouth University, Thompson explores the economic motivations, political maneuvers, and lasting legacy of this pivotal law.

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1. Introduction to Infamous American Laws

Derek Thompson sets the stage by contextualizing the Smoot-Hawley Tariff among other notorious American laws, highlighting its unique place in history due to its unintended consequences.

“So what about the American law that most infamously backfired?” (00:44)

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2. The Economic Landscape of the 1920s

The 1920s, often referred to as the "Roaring Twenties," were a period of significant economic and technological growth in the United States. However, beneath the surface lay deep-seated anxieties and disparities, particularly in the agricultural sector.

• Technological Advancements:
  “America was rich even compared to other rich countries. According to the historian Bill Bryson, every year in the 1920s, America added more new phones than Britain possessed.” (02:29)

• Agricultural Decline:
  Despite economic prosperity, agriculture was declining as a share of employment. Farmers faced plummeting prices and mounting debts following World War I.

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3. Herbert Hoover: From Secretary of Commerce to President

Herbert Hoover, renowned for his efficiency and managerial prowess, transitioned from a celebrated Secretary of Commerce to the U.S. President in 1929. His extensive experience in managing large-scale relief efforts during and after World War I positioned him as a capable leader, albeit not the most charismatic.

“He was one of the best secretaries of commerce and the most influential.” (09:59)

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4. The Genesis of the Smoot-Hawley Tariff

As the agricultural sector struggled, the Republican Party, led by Representative Willis C. Hawley of Oregon, sought to aid farmers through protectionist measures. The initial proposal aimed to create an import tax to shield American farmers from foreign competition.

“This tiny measure to increase tariffs on farm goods.” (14:01)

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5. Transformation from Narrow Bill to Comprehensive Tariff

Originally a targeted initiative to support agriculture, the Smoot-Hawley Tariff expanded dramatically through congressional negotiations. This expansion was driven by the need to garner broader political support, leading to a tariff encompassing approximately 20,000 different goods.

• Examples of Tariff Expansion:
  “...goldfish producers... clothespins.” (17:18)

• Log Rolling and Vote Trading:
  The process involved extensive vote trading, where representatives secured tariff increases on specific goods relevant to their constituencies in exchange for support on the broader bill.

“It's like a Christmas tree that collects more ornaments.” (15:26)

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6. Absence of Consumer and Exporter Opposition

A striking aspect of the Smoot-Hawley debate was the lack of opposition from consumer groups or exporters. Unlike today, where consumer advocacy and export interests play significant roles in trade discussions, the 1920s Congress primarily echoed protectionist sentiments without substantial pushback.

“There was not a representative of the consumer interest in Congress.” (19:42)

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7. Reed Smoot: The Man Behind the Tariff’s Name

Senator Reed Smoot of Utah, a devout Mormon known as the "sugar senator," was instrumental in shaping the tariff. His interests extended beyond economic protectionism to cultural concerns, such as banning obscene materials, reflecting the intertwined nature of policy and personal values.

“Smoot, Smite... they are smuggling smut from [certain locations].” (23:48)

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8. The Stock Market Crash’s Influence on the Tariff Debate

The October 1929 stock market crash heightened the urgency of economic measures. As the Depression began to take hold, the Smoot-Hawley Tariff gained traction as a perceived solution, leading to its swift passage through the House but entangling the Senate in protracted debates over individual tariff lines.

“It took up almost a year of the Senate's time.” (26:21)

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9. Herbert Hoover’s Role in Enacting the Tariff

Despite signatories from the economic community opposing the tariff, President Hoover signed the Smoot-Hawley Act. His decision was influenced by party loyalty and the political landscape, prioritizing legislative directives over economic advisement.

“He said, it's not a perfect piece of legislation... This is what we're going to go with.” (28:13)

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10. Immediate International and Domestic Consequences

The enactment of the tariff spurred immediate negative reactions internationally. European nations, burdened with debt repayments to the U.S., retaliated by imposing their own tariffs, leading to a detrimental trade war that exacerbated the global economic downturn.

• European Retaliation:
  “They're smuggling smut from [certain locations].” (31:46)

• Impact on Canada:
  Canadian exports to the U.S. dwindled, influencing political shifts within Canada and fostering a trade bloc excluding the United States.

“They found their exports very much adversely affected by these tariffs.” (33:52)

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11. Evaluating the Tariff’s Role in the Great Depression

Douglas Irwin adopts a balanced perspective on the Smoot-Hawley Tariff’s impact. While it did not cause the Great Depression, it significantly worsened the economic situation by triggering retaliatory tariffs and stifling international trade.

“It's somewhere in the middle. It certainly didn't cause the Great Depression, but it was a harmful measure.” (34:34)

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12. The Tariff’s Ineffectiveness in Helping Farmers

Contrary to its intended purpose, the tariff failed to alleviate the struggles of American farmers. By targeting a narrow range of agricultural products and inviting international retaliation, it inadvertently harmed the very sector it aimed to protect.

“It was fundamentally flawed... it wasn't really going to help agriculture.” (35:38)

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13. Shifting the Trade Paradigm: From Congress to the Presidency

The fiasco of the Smoot-Hawley Tariff led to a significant shift in U.S. trade policy. Recognizing the inefficacy of congressional deliberations on tariffs, future trade negotiations were delegated to the executive branch, culminating in the Reciprocal Trade Agreements Act of 1934 under President Franklin D. Roosevelt.

“We authorize the president to negotiate with other countries to reduce our tariff.” (42:37)

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14. Long-Term Legacy and the Decline of Protectionism

The detrimental effects of the Smoot-Hawley Tariff ingrained a lasting aversion to protectionism in American politics. This legacy influenced future leaders, including Ronald Reagan, who consistently favored free trade policies, wary of repeating the mistakes of the 1930s.

“We don't want to go down the road of protectionism because we have to learn the lessons of the 1930s.” (44:17)

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15. Modern Parallels and Lessons Learned

Thompson and Irwin draw parallels between the 1930s protectionist measures and contemporary debates over tariffs and trade policy. The episode underscores the complexities and unintended consequences of using tariffs as economic tools, emphasizing the need for nuanced and forward-thinking approaches to trade.

“Tariffs are a very blunt instrument... they really can't help reverse the declining fortunes of a particular sector of the economy in the long run.” (46:51)

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Conclusion

In Plain English's exploration of the Smoot-Hawley Tariff, Derek Thompson and Douglas Irwin provide a nuanced understanding of how well-intentioned policies can spiral into economic disasters. The episode serves as a cautionary tale on the perils of protectionism and the importance of informed economic policymaking.

“Douglas Irwin, thank you very much.” (47:06)

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Key Takeaways:

• Protectionism’s Double-Edged Sword:
  Tariffs intended to protect specific industries can lead to widespread economic repercussions, including retaliatory measures from trading partners.

• Policy and Political Dynamics:
  Effective policymaking requires balancing the interests of various economic sectors while anticipating broader impacts.

• Historical Lessons for Modern Policy:
  The legacy of Smoot-Hawley informs contemporary trade debates, highlighting the need for informed and strategic approaches to economic challenges.

Notable Quotes:

• “It's like a Christmas tree that collects more ornaments.” – Derek Thompson (15:26)
  Illustrating how the tariff bill grew more complex and expansive through legislative debates.

• “Tariffs are a very blunt instrument... they really can't help reverse the declining fortunes of a particular sector of the economy in the long run.” – Douglas Irwin (46:51)
  Emphasizing the inefficacy of tariffs in addressing deep-seated economic issues.

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This episode offers a thorough examination of the Smoot-Hawley Tariff, its context within the 1920s economy, the political maneuvers that shaped it, and its enduring legacy on American trade policy. Whether you're a history enthusiast or seeking to understand the complexities of economic legislation, Plain English provides valuable insights into one of America's most consequential legislative acts.

Transcript

[Derek Thompson]

All right, my birdie buddies, my par.

[Douglas Irwin]

Saving pals, my Eagle enthusiasts, it's Joe House here. Major season is finally upon us. The Masters, the PGA Championship, the US Open, the Open Championship, and Fairway.

[Derek Thompson]

Rowan is here to break down all of the storylines.

[Douglas Irwin]

Offer a little help on those betting cards for every single major this golf season.

[Derek Thompson]

Join me and our incomparable accomplice, Arthur.

[Douglas Irwin]

Boots on the ground Nathan Hubbard, as.

[Derek Thompson]

We guide you from Augusta all the.

[Douglas Irwin]

Way to Northern Ireland Royal Port Rush. Away we go.

[Derek Thompson]

When we think about the most infamous laws in American history, that list is unfortunately not short. The Alien and sedition Acts of 1798 Criminalized forms of political criticism. The Indian Removal act forcibly removed and directly killed thousands of Native Americans. America's history of slavery and racism, from the Three Fifths Compromise to the Jim Crow laws, is a long scroll of shame. But the complicated reality is that these laws in many cases achieved their goals as sordid or hateful as those goals may have been. So what about the American law that most infamously backfired? The 1920s seemed like a good decade to scrutinize here. The decade began with the prohibition of alcohol, which led to an explosion in crime and bootlegging and corruption. And the 1920s ended with a very different law, an effort to protect American farmers from foreign competition, which failed so spectacularly it's now practically a joke. Here's Ben Stein in Ferris Bueller's Day off past the Anyone?

[Douglas Irwin]

Anyone?

[Derek Thompson]

A tariff bill. The Hawley Smoot Tariff act, which anyone raised or lowered raised tariffs in an effort to collect. In the film, the Smoot, Hawley Tariff is played for laughs. But for reasons I don't think I have to spell out for this audience, the motivations and outcomes of America's most infamous tariff have special resonance today. The 1920s and the 2000s share a kinship. 100 years ago, the US was grappling with a mix of technological splendor and profound anxiety. A familiar cocktail, albeit from an era where cocktails were illegal. The era's young people felt uniquely besieged by by global forces. My whole generation is restless, F. Scott Fitzgerald wrote in this side of Paradise. A new generation dedicated more than the last to the fear of poverty and the worship of success, grown up to find all gods dead, all wars fought, all faiths in man shaken. It was an era of significant media innovation, especially for that periodical called the magazine. Advertising revenues for magazines increased 500% in the 1920s, and the decade's new publications included Reader's Digest in 1922 Time magazine in 1923 and the New Yorker. America was rich even compared to other rich countries. According to the historian Bill Bryson, every year in the 1920s, America added more new phones than Britain possessed. In total, America made 80% of the world's movies and 85% of its cars. The state of Kansas alone in 1927 had more cars than the nation of France. Our kitchens and our houses were changing as much as our garages. Demand was surging for new devices called refrigerators and washing machines and vacuum cleaners and radio sets. In another historical echo, it was a golden age of young men. Gambling. Stock investing took off, and many young people, especially men, bought stocks on margin, borrowing cash to speculate. Their fortunes rose and rose until, in the crash of 1929, they collapsed. America was changing, and change always implies a kind of loss. We were moving toward cars and cities and manufacturing, and that meant we were moving away from horses, from farmland, from agriculture. Farming was left behind in the Roaring Twenties economically, but that is very different from saying that it was left behind politically. And so in 1929, just months before the stock market collapse that would kick off the Great Depression, a small group of congressmen led by Willis C. Hawley of Oregon got thinking about a new piece of legislation that would help restore farmers to the glory that they deserved. The idea was to create a great big import tax that would protect American farmers and help them compete in the modern economy. One year later, Hawley's name would be emblazoned on one of the most infamous pieces of legislation in American history. And so the Smoot Hawley Tariff was born. Today's guest is Douglas Irwin, an economist and historian at Dartmouth University and a great expert on the economic debates of the Depression. We talk about the economic motivations of the Smoot Hawley Tariff, the congressional debates that shaped it, the president who signed it, and the legacy it left. And we talk about the economic instinct to preserve the past, an instinct that has never gone away in American history, and the profound irony that some efforts to return America to its former glory can have the unintended effect of robbing America of a richer future. I'm Derek Thompson. This is plain Douglas Irwin. Welcome to the show.

[Douglas Irwin]

Thanks. It's very nice to be here.

[Derek Thompson]

So let's get settled. In the 1920s, the economy is experiencing significant sectoral shifts. America was born as a farming economy, but agriculture is fading as a share of employment in the 1920s. The manufacturing sector is surging. Construction is surging. The stock market is surging. What should we know about the US on the eve of the October 1929 market crash. That really prepares us for the story of the Smoot Hawley Tariff.

[Douglas Irwin]

When we think of the 1920s, we think about the roaring twenties. We think about the jitterbug, we think about electrification. Cars are proliferating in the economy. Things seem dynamic, but not all is well, of course. And you pointed your finger on exactly the sector that's not doing well. It was still a large sector of the US Economy at the time. I think about a third of the labor force was in agriculture. And this was a holdover or hangover from World War I. So during World War I, obviously, there's a great conflict in Europe. The US is sort of the breadbasket of the world. We're exporting a lot of our farm produce. Farmers are borrowing a lot of money to expand their operations, to buy new equipment, to get new land under cultivation. And the war suddenly comes to an end. Commodity prices fall because commerce is restored in Europe. They don't need our imports quite as much. They go take the battlefields and put them back into agricultural production. And farmers are stuck. They're stuck with these huge debts, lower farm prices. And throughout the 1920s, they're really lagging. It's sort of a shrinking sector of the economy still. The migration from the rural countryside into cities for work. And the story of Smoot Hawley is a story that starts with agriculture.

[Derek Thompson]

There are at least three figures that I want to introduce in this story. President Herbert Hoover, Congressman Willis Hawley, and Senator Reed Smoot. And I want to introduce them in that order. Let's start with Hoover, whose modern reputation really belies his stellar reputation. In the late 1920s, Herbert Hoover was kind of like the Forrest Gump of 1920s American politics. You mentioned the fact that American farmers were exporting all of this food to. To Europe during World War I. Who oversaw that effort? It was Herbert Hoover. He led the effort to evacuate Americans out of Europe in 1914. During the war, he oversaw the distribution of food relief in Europe. He sent millions of tons of American food to our European allies. So much that the historian Bill Bryson wrote that by 1917, it was reckoned that Herbert Hoover had saved more lives than. Than any person in history under Calvin Coolidge. In the 1920s, Herbert had so many jobs that he was known as the Secretary of Commerce and undersecretary of all other departments. He led the federal response to the Great Mississippi flood of 1927. Like it is hard to imagine somebody whose resume was more perfectly suited to the presidency. On top of all of that, or maybe just filling out the muscle on the bones of what I just laid out there. Doug, what should we know about Herbert Hoover to set us up for the big tariff debate of 1929, 1930?

[Douglas Irwin]

He had a stellar reputation. He was known as being super smart. He was one of the best secretaries of commerce and the most influential. And his fingerprints are all over a lot of the good things that happened in the 1920s. So it seemed like sort of an obvious thing for the Republican party to put him up for the presidency after Calvin Coolidge. He's sort of a natural for the role. He was smart, he knew how to manage, he knew how to delegate and get things done. And so even though he's not the most charismatic of, it seemed like he would sweep into the presidency and do a great job and manage the federal government well. And so that's what happened. He runs for office in 1928, Republican landslide. They do very well, and he's elected president.

[Derek Thompson]

So 1929, Herbert Hoover becomes president. His fame is built in part on the way that he has overseen the export of all of this food from America to Europe. He must know intimately the ten year fortunes or misfortunes of the agricultural sector, from the boom in the 1910s to their struggles, the 1920s. What attitudes does Hoover pull into the presidency with regard to America's farming sector?

[Douglas Irwin]

Well, he had campaigned on farm relief, that we're going to do something to help farmers. And the question is, what do you do? The Republicans had tried throughout the 1920s a couple of things to help out farmers. So Congress twice in the 1920s passed price supports, I.e. subsidies for farmers, help them directly with their debts, help them directly with the prices they're facing. Twice those bills were vetoed by President Calvin Coolidge. So the idea of using price supports or direct subsidies had some traction, but never passed through, got through the presidency. So they changed tac. If subsidies were not going to work or subsidies were not politically viable, the idea was, well, we'll go for tariffs, tariff equality. So tariffs were pretty high on manufactured goods, but they were lower on farm goods. So the idea was, and the farmers actually had demanded this for some time because they were purchasers of manufactured goods whose prices were inflated because of the tariff, should either lower the tariff on manufactured goods or raise the tariff on farm goods to get that tariff equality. And so that's where the idea in the 1928 campaign came about. We're going to help you farmers. We're here for you. The Republican Party stands for you. And we're going to pass a tariff in your interests.

[Derek Thompson]

There's something there that I think is really important for the general conversation around tariffs. We were tariffing manufactured goods, which had a first order effect of helping to grow the American manufacturing industry. But manufactured goods were an input to agriculture. And so it's raising the cost basis of farming, which on top of the shifts in the European market in the 1920s, is squeezing profit margins, it sounds like, for American farmers. Is that right?

[Douglas Irwin]

Exactly. So their costs are going up because of the tariff. The prices were going down because of the reconstruction in Europe. And so they were getting squeezed, forcing farmers to foreclose, forcing farmers off the farms and to move into other sectors of the economy.

[Derek Thompson]

And I'm sure there's lots of American politicians who are saying that farming is America's true identity. This is the Jeffersonian ideal of America. If we can't protect American farmers, we can't protect what's best about America. And this sets us up for Willis C. Hawley in the House Ways and Means Committee Chairman Willis C. Hawley of Oregon. Who is this man? What does he want?

[Douglas Irwin]

Well, he is a representative from the state of Oregon in the west, and he was actually a former economics professor. So to have an economics professor, you know, introduce a tariff bill is sort of an unusual thing. Not many economists make it into Congress, and not many economists would support higher tariffs in Congress. But there you have it in him.

[Derek Thompson]

He's truly one of one.

[Douglas Irwin]

Right. But, you know, he wasn't unique. It wasn't his idea. This was the Republican Party platform. This is the Republican Party position. And this goes back to well before the Civil War, when the Republican Party was founded in the 1850s. For more than. For many, many decades, throughout the late 19th century into the 20th century, the Republican Party stood for high tariffs and protectionism to ostensibly help out American workers. And now they're going to extend that principle to the farm sector. And so that was the goal of the tariff as it was originally introduced and considered by the House Ways and Means Committee in January of 1929.

[Derek Thompson]

I want to make sure I understand the TikTok here. So Hawley introduces this tariff to the House Ways and Means committee in early 1929, basically even before the beginning of the Hoover administration. He introduces the tariff, and as you write in the book, it starts off relatively narrow, but as it winds its way through the House and more representatives get their fingerprints on it, the tariff is like a Christmas tree that collects more ornaments. And your book is really great on this. So take us inside the congressional chambers of 1929. How does this initially narrow bill to help American farmers grow to become the Smoot Hawley tariff that we know today?

[Douglas Irwin]

Well, it's all behind closed doors. So it's the House Ways and Means Committee that is the sort of central locus of where all these decisions are being made. The Republicans made the decision to exclude Democrats from having any say in the deliberations over what the tariff schedule is going to look like. But of course the members of the committee are communicating with the broader House about what could possibly pass. What do you want? And of course, here's where the concept of log rolling comes in. And the idea is, gee, if we're just throwing up a few tariffs on farm goods, how do we get more political support for this measure? And the question is, you have to bring in members from states that don't have a big farm community such as Pennsylvania, where it's more. It was more steel oriented textiles around Philadelphia and what have you, you have to win more states. And so more and more Republicans were saying, gee, if you want us to vote for this farm bill that's going to help the Midwest, you have to help us too by having higher tariffs on manufactured goods as well. I'll scratch your back if you scratch mine. That's basically what it comes down to. And log rolling is just vote trading. So when they finally unveil the legislation to the whole House, it's not just this measure to increase tariffs on farm goods. It's a measure that increases tariffs across the board.

[Derek Thompson]

Do you have top of mind and truthfully you can even research this or go back dip into your book. Is there an example of the most random thing that was tariffed in order to build support for this? Because I remember from going through your book that there were some very, very specific types of wool that they had to tariff in order to build district by district support for this bill give us a sense of just how broad and how esoteric the ornaments on the Christmas tree of this tariff bill actually got.

[Douglas Irwin]

Well, actually I have a copy of the tariff bill right here in front of me. And through it it's about 300 pages long. It's got a very long index. But the tariff code had expanded to many, many pages with all sorts of very list of specific commodities. And behind every commodity there was a representative whose producers were in his state or her state and they wanted high tariffs to help that producer. So the two that come to mind immediately are gold goldfish producers. Now there we don't really produce goldfish but we farm goldfish. You raise goldfish. And apparently there was some in Ohio that wanted a high tariff on imported goldfish so that their fishery could do better. The other one is clothespins. Now, here's a mundane little item. How many clothespin producers are in the United States? I have no idea. They're probably located in certain parts of the country. So if someone in their district has clothespin producers, they were facing some foreign competition or they wanted to squeeze out the remaining imports that were impeding their sales domestically. So they demanded a high price of or high tariff on clothespins. And so once again, you get all these different interest groups demanding from their representatives in the House, help us out, allow us to expand the number of jobs we have by keeping out imports in our particular narrow product segment.

[Derek Thompson]

I have a question about the political economy of America in the 1920s that made a bill like this possible. I feel like today, if there were going to be a piece of legislation that had to get a bunch of different congressmen and congresswomen and senators behind it that represented a broad tariff on a bunch of American goods, at some point you would hear from a lobbying organization or group that represented consumers. America is an enormous consumer economy today, and we've been running a trade deficit for decades now. In the 1920s, we didn't have a trade deficit. We had a trade surplus. We were becoming the biggest manufacturing economy in the world. We had just fed the entire continent of Europe for the entire 19 teens throughout World War I. Were there any groups that represented consumer interests that raised a lonely hand in 1929 and said, hey, by the way, if you tariff 20,000 different new goods, you're probably going to end up raising prices for Americans.

[Douglas Irwin]

What's remarkable is no. The answer is no. There was not a representative of the consumer interest in Congress. There was not pressure from any consumer groups on members of Congress to temper how much they're going to raise tariffs? And there even was even was a lack of representation among exporters, exporters who would be indirectly hurt by tariffs. You think they would be the ones that would be clamoring for some sort of restraint on this process? They were largely absent as well. So there's a famous political scientist, E.E. schachneider, who wrote a book called Politics and the Tariff. And it's all about how things worked out in the committee and how the committee was hearing very few voices, just the voices that wanted higher tariffs and were not hearing voices that were saying something else. Keep the tariffs low, help out consumers, help out exporters.

[Derek Thompson]

Tariffs are sometimes called fairly or unfairly, a form of economic protectionism. They exist to protect specific industries. How were the politicians of the 1920s talking about farming and agriculture? Why did they think this sector was so important to protect?

[Douglas Irwin]

So in the course of the research, I read a lot of the congressional debates in the Congressional Record, long, long speeches on this particular commodity or the importance of this sector for my state or region. And what you find is a lot of people invoking heartland values, saying that we have to save the farm sector because it's so important, so central to American identity. And these are the true Americans. This is the backbone of society, and these are the moral uprigh people, and the people in the cities are corrupt and, you know, money grubbing. And that's not the true America. And so that debate was being held at the time, exactly on those grounds.

[Derek Thompson]

We talked about. Holly, let's talk about Smoot. Who is Reid Smoot? How does he get involved and earn his surname's attachment to this bill?

[Douglas Irwin]

Well, he is a senator from the state of Utah. He was a Mormon and very high up in the Mormon Church, so very devout. He was known as the sugar senator because one of the things that they produced in Utah, it wasn't just all desert, is sugar beets. And that's because the US had typically kept out foreign sugar. So the domestic price of sugar was very high, as it is today. And one thing that happens when you develop that or have that is substitutes grow up. And so if you don't grow, if you're growing sugar cane in Louisiana and Florida, you'll also raise the price and allow sugar beet producers to become profitable in the upper Northwest and in, of all places, Utah. So he was very much determined. He cared about that one line and most importantly for him, that one line on sugar. And so we wanted those rates higher. But once again, a typical Republican believes in higher tariffs, takes the House bill and says, we're going to fix it in certain ways, but the general principle, we're all on board with it.

[Derek Thompson]

And Smoot was a kooky guy, as I understand it. He wasn't just interested in tariffing sugar. He also had a particular interest, interest in tariffing pornography as well. Can you explain this part?

[Douglas Irwin]

Right. He was, as I mentioned, very devout, and he was concerned about the importation of obscene material. And so it led to a very famous newspaper headline that said, smoot, Smut Smite. He wanted to ban importation of books such as D.H. lawrence's later Chatterley's Lover, because it has these very risque scenes between a man and a woman. And that offended his sensibility. And there were even poems written about him or verse. Ogden Nash, who was a famous poet at the time, was writing in the New Yorker, and he wrote this verse with respect to Smoot. Senator, Smoot is an institute not to be bribed with pelf. He guards our homes from erotic tomes by reading them all himself. Smite, Smoot, smite for you. They're smuggling smut from balt to bute strongest and sternest of your sex. Scatter the scoundrels from Canada to Mex.

[Derek Thompson]

So this Smoot, he really was a protectionist of porn. He believed that he was America first when it came to pornography. He wanted it to be made here. He didn't want to import this stuff from the UK in France. I understand that he was a patriot and we respect his position. I want to make sure that we think about this TikTok about the tariff bill, which is happening at the same time that the market is starting to wobble. So it's October 1929, right, seven, eight months after the beginning of deliberations on this tariff bill that we have the infamous market crash. How does the collapse of the stock market affect the debate around this bill?

[Douglas Irwin]

Well, in some sense it made it more urgent because now members of Congress begin to realize that, ooh, we're slipping into a recession. And it was just a recession at this point. Yes, there have been the stock market crash, but a lot of the banking failures came later. So the idea was the economy softening and now manufacturers, we really do have to help them out because if we keep out imports, we'll keep them more profitable, they'll keep their workers. And that's a sort of an anti recession device. So it sort of empowers the Republicans or emboldens them to say, yes, this is the right legislation for the time. It's something we should move forward with. So after the House passes, the House passes it very fast. This House Ways and Means Committee, they present it, it's an up or down vote. There's a lot of party discipline. There's very little debate about the provisions. They're set by the House Ways and means Committee. Boom, it passes by the House. The Senate procedures are very different. Every senator is powerful. So whatever the Senate Finance Committee reports, when it goes to the Senate floor, it's opened up. This is where the Christmas tree really happens. It opens up for individual votes on the Senate floor on individual lines. Tariff code. And this is where the Senate was Exposed to a lot of ridicule by the press of the day because they would vote one day for a higher sugar tariff, and then a couple weeks later, they'd vote on the same provision and move it down. And then a couple weeks later, because Smoot didn't want that, they'd vote on it a third time and raise the tariff back up again. So can you imagine a bill without hundreds of commodities where each. Each individual one is getting its own floor debate about the tomato tariff, about the roof tile tariff, about the aluminum tariff. It took up so much time. It took up basically from the late summer of 1929 until June of 1930, almost a year of the Senate's time, sort of wasted going line by line through the tariff code.

[Derek Thompson]

Just to pause you there before we return to Herbert Hoover is a reasonable interpretation of the story you just told, that the cost of this tariff was not just what was in the legislation itself, but also the fact that it occupied so much of the Senate's time that they couldn't pass legislation that might have actually directly ameliorated the Great Depression that was just settling in.

[Douglas Irwin]

That's a great point, and I think you're right because the Senate is focused on these little individual micro parts of the tariff code, individual items, when the economy is collapsing. This is taking up a lot of time. And this is one reason even Congress at the time recognized, is this the right thing we should be doing? Should we be even talking about this? Is there another method for settling what the tariff rates would be? And so there's a dimming recognition at the time that, gee, maybe Congress doesn't do tariff policy very well. This is not the way to go about things. And I think the economic collapse that was unfolding before their very eyes sort of convinced them that's the case.

[Derek Thompson]

Were there other ideas in the ether where you think, if not for all the time occupied by this tariff, the Senate could have considered these other measures that might have been much more responsive to the crisis that was being created?

[Douglas Irwin]

Well, they were considering banking legislation that eventually became known as the Reconstruction Finance Corporation and other things to directly ameliorate the downturn in the economy. But once again, this unfolding in time. And so they're observing things, but once again, not acting quickly the way we'd expect the Federal Reserve or the treasury to act today. And so the response was very meek and muted in terms of governments in Washington's response to the unfolding Depression.

[Derek Thompson]

I want to return to Herbert Hoover here. This is a bureaucrat extraordinaire someone who understands economics, someone who understands international economics. He was responsible for overseeing millions of tons of food exports during the 1910s. We're in the middle of 1930 now. The Senate has passed the tariff. Why does Hoover sign this bill?

[Douglas Irwin]

In some sense, there was almost no debate that he would. And here the political system is very different than it was today. Congress is the Article 1 authority under the Constitution. Congress has the authority over tax rates and the tariff at the time, and this is very much respected. Congress was the institution that was supposed to decide what tariffs are going to be. Presidents from the 19th century right up to Herbert Hoover always took a back seat with respect to the tariff. They were supposed to reflect your party's position. You were not to presuppose what Congress would come up with. You were not to propose legislation. So what's ironic about this is as we're going into the Depression, the presidency is actually a sort of passive figure. But that's the way it had always been. It was really Congress's control. So when the bill comes to Hoover, this is a party measure. He had campaigned on it in 1928. The best and leading lights in the Senate and House said, this is what we agreed upon. And for a Republican president to have vetoed a Republican piece of legislation at that point would have been outrageous. It would have been very odd. And so, of course, the default position was. In fact, he admitted this when he signed it. He said, it's not a perfect piece of legislation. I would have done something maybe a little bit different. This is what our party's come up with, and this is what we're going to go with. So we signed it before we get.

[Derek Thompson]

Into the fallout of this tariff going into law. The bill had opponents, most notably in the field of economics. In early 1930, the depression is beginning to bite, and more than 1,000 economists from across the sign a petition begging Hoover to veto the Smoot Hawley Bill. If the bill passes, they say the US Is going to see, number one, higher consumer costs, number two, foreign retaliation against US Exports, number three, deepened economic slump. What do the economists get right about this prediction? What did they get wrong?

[Douglas Irwin]

You know what's remarkable about that petition is how much attention it got at the time it was printed on the front page of the New York Times, above the fold, right in the center. It got a lot of attention at the time. Had over, as you mentioned, over a thousand signatories. And when you read it, there's no numbers in there. They didn't have a quantitative model, but they reasoned through what the impact of the tariff would be and surprisingly they really nailed it. Just about everything they said in that petition came true later on. You mentioned a number of things that they got right, that there would be foreign retaliation that really wouldn't help out industry. And they noted that for many producers they were already serving the full domestic market. Imports weren't really surging in. Imports weren't a real threat to the domestic producers. There's no trade crisis and they really wouldn't be able to expand much with the tariff that would justify imposing these high rates.

[Derek Thompson]

Herbert signs the law, it goes into effect. How did other countries react initially in Europe, Canada, let's say. What was the international reaction?

[Douglas Irwin]

Well, as you might expect, it was very negative. Europe were affecting the ability of other countries to export to the United States. And the grievances were widespread. European countries in particular were very upset because they had borrowed a lot of money from the US during World War I. Germany had to pay reparations. They have to pay back their loans, they have to pay back their reparations in dollars. How do you earn those dollars? Through exports. So here we are in a problematic world economy with financial problems creeping in. And now we're saying we're going to hinder your ability to repay your debts to us. And that hurt their financial system, hurt their economies, and possibly even hurt the US banking system by interfering with the loans that they were expecting to be paid. Our closest neighbor Canada was very much affected once again, just as today. Back then we had a lot of bilateral trade with Canada. They always thought they were a friendly nation, that we were a friendly nation to them. There was a Liberal Party which was pro American party in control in Canada and they found their exports very much adversely affected by these tariffs. So much so that they retaliated against the US So much so that actually an election was coming up in Canada in which the pro American party found its support slumping and the British party suddenly finding a resurgence in the polls. In fact, there's been studies by economic historians saying that there's enough of the retaliatory. There have been studies by economic historians that show that the anti American sentiment was enough to swing that election towards the pro British Conservative Party that then want to shift Canadian trade away from the United States towards the United kingdom and the U.K. canada and the other dominions sort of formed this trade bloc to exclude the U.S. since the U.S. was no longer open for business. So much so there was some retaliation in Europe, certainly retaliation by Canada that adversely affected U.S. exports. And more importantly, we had this alliance system against the US in terms of trade being formed by the British Commonwealth.

[Derek Thompson]

There's a very strong interpretation of the Smoot Hawley tariff that says that it caused the Great Depression not only because of what was in the legislation, or not only because of the effect of the legislation, but also because fear of the incoming tariffs contributed to the stock market crash in October 1929. So that's the strong, strong interpretation. There's also what you could call the weak interpretation, which is that, yeah, the tariff wasn't very good, but it didn't really do anything. The Great Depression was already great, and it would have been great, tariff or no tariff. Where do you come down in this debate? What do you think is the appropriate way to think about the economic fallout?

[Douglas Irwin]

I sort of take the Goldilocks approach. It's not one extreme or the other. Not too hot, too cold. It's somewhere in the middle. So it certainly didn't cause the Great Depression. We were already in the slump, and the slump continued despite the tariff. So this tariff certainly didn't constrain or mitigate the impact of the Depression. But at the same time, it seems like the Depression was not accelerated either right after the passage of the tariff. So it was a harmful measure. It probably exacerbated. The Great Depression certainly led to this trade war that led to this implosion of world trade, and that was not good for the world economy, and that was not good for the United States. But the question is, given the monetary policies of the time, given the financial policies at the time, and we were on a gold standard at the time as well, and that was a very important component here, too. It was clear that the Depression was going to be this worldwide phenomenon. Things were not going to be good. And this trade war is just layering on another problem that we had to confront at the time.

[Derek Thompson]

I want to bring back the farming economy. Was agriculture, in fact helped by these tariffs?

[Douglas Irwin]

Well, agriculture was harmed by the tariffs for two ways. First of all, just as today, other countries retaliated against U.S. farm exports. It was one of our major exports at the time, food crops. That's a very tempting area in which to retaliate, because if you don't buy American wheat, you can always buy Canadian wheat. You don't buy American wheat, you can always buy Spanish or Australian wheat. In other words, there are substitutes around. And when other countries retaliate, they want to retaliate against commodities where the cost on them is not very high. They just switch suppliers. But more Fundamentally, there's a flawed premise behind the tariff in the first place, and this goes back to the 1920s and the problems that the farm sector was facing. The United States was a net exporter of farm goods. We exported corn, we exported wheat, we exported soybeans. And these crops were not going to be affected by import tariffs. You're not going to help out the pricing position of domestic farmers who get the world price by raising the tariff, because we're not importing much of this stuff. Now, the only sectors that were affected by imports were wool and sugar, but those had already been tariffed at fairly high levels. So the whole idea that you could help out the whole agricultural sector by raising tariffs on goods that we're not really importing much of, so your price is not going to go up, namely wheat producers and corn producers, is fundamentally flawed. So even from the get go, it wasn't really going to help agriculture.

[Derek Thompson]

And this is where I do want you to bring us inside the minds of these 1920s legislators. These people weren't stupid, but they passed a bill that not only exacerbated the economic crisis they sought to fix, but also, more ironically, directly damaged the one industry on whose behalf they were trying to fix it. So we're all shaped by the ideas that swirl around us. What ideas were swirling around the 1920s that made this law possible? Was there a mind virus of voodoo economics in the air? Was there a psychology of desperation like farming is struggling? Something must be done. This is something, therefore it must be done. How did the entire Republican Party get behind an economic idea that enjoyed practically zero percent support among the community of economists?

[Douglas Irwin]

Well, once again, the farmers wanted relief of some sort, and they wanted subsidies, they wanted debt relief, something along those lines. The Republicans from up top in some sense, were saying, we want to help you, your constituents vote for us, we will help you. We're not going to consider those remedies that you're proposing, but we'll give you a tariff and we'll tariff equality. So you'll either reduce the tariff on manufactured goods or raise yours up, and the farmers bought it. It was sort of the best option they had at the time. We'll get something out of this. But even farmers, when it was going towards final passage, William Bora, a famous progressive senator, was saying, this is a fraud. We're not being helped by this. We should vote against it. But still, farmers and the farm community and the senators and representatives that wanted their support pushed it through anyway, despite the fact that it was sort of revealed at the Time what was realized at the time that this is not going to provide the relief necessary to help farmers in the long run.

[Derek Thompson]

And it's almost like you're saying that an economic industry deeply associated with America's historical identity was in a state of long decline, and it created not only an economics of nostalgia, but also a sense of policy desperation. Politicians were willing to sacrifice consumer benefit to narrowly support this one declining sector. But the tool they used, a tariff, ironically hurt the very sector that it was supposed to help. Is it something like that?

[Douglas Irwin]

That's a great way of putting it. And once again, you can sort of see the echoes of today. When we have certain sectors that want help, there's one policy instrument that the politicians are willing to provide them, or at least one politician, and that's not the instrument that will really help that sector in the long run.

[Derek Thompson]

Well, without going into too much modern political analysis, we'll skip right over that. But I do want to talk about the legacy of Smoot Hawley, because there's two pieces here that I think are really, really important. The first is the backlash to this tariff. Seems to me to have paved the way for a new trade paradigm, starting with FDR. If you look at average tariff rates after the 1930s until the last few weeks, it's basically a jagged line down. It's just down, down, down. Except for maybe a little blip in the middle of the 20th century from just looking at that graph. And you're the historian, and I'm just a guy who looked at one graph. But it seems like one ironic outcome of Smoot Hawley is that it so poisoned the case for protectionism in its time that it created a sustained period of significantly freer trade. Is that a fair summary of one part of its legacy?

[Douglas Irwin]

It actually is. It took a little bit of time to play out, but recall, President Hoover signs this of June of 1930. What happens in November of 1930? There's midterm elections. The Republicans are wiped out. In fact, Hawley loses his seat. Smoot lost his seat shortly thereafter. Tremendous backlash against the Republicans for not undertaking measures to alleviate the depression. That's the midterm election. Then there's the general election of 1932. Once again, Republican swept out. Franklin Roosevelt comes in. He'd campaigned actually sort of squeamishly against Smoot Hawley, but he was challenged by Hoover in the campaign saying, oh, so during a depression, you're going to get rid of the tariff? And what are you going to say to the workers who are thrown out of work because you're allowing more imports in. So Roosevelt really had to hedge his way through that campaign, but his heart was with the Democratic party, which is, we want to have lower tariffs, and importantly, we need to lower the tariff on our exports that has grown up around the world, partly in retaliation to the US but partly because we've had this trade war and this implosion with the Great Depression. So it's the democrats who in 19 after 19, after the 1933 legislation to improve the economy, the New Deal, in 1934, they passed the Reciprocal Trade Agreements act, which fundamentally shifts the whole nature of US Trade policy. It takes it out of the hands of Congress to some extent and puts it in the hands of the presidency and says, we authorize the president to negotiate with other countries to reduce our tariff in conjunction with other countries opening up their market and reducing their tariffs. And that's the Reciprocal Trade Agreements act. And that's almost the basis for the trade policy we've had until recently.

[Derek Thompson]

You just touched on the second Legacy piece. After 1932, Congress transfers Greater negotiating powers from the legislator to the presidency. And you could argue that this expands what the historian Arthur Schlesinger has called the imperial presidency, the growing, growing powers vested in the executive branch. Can you expand on that? How Smoot Hawley didn't just strengthen the case for freer trade, it also strengthened the seat of the presidency.

[Douglas Irwin]

So one of the legacies of Smoot Hawley was Congress realized it was completely irrational to spend a year and a half worrying about the tariff and fighting over the tariff when there's so many other more important problems. So that's one reason why Congress was willing to turn over the tariff problem, if you will, to the presidency and say, we authorize you to reach these trade agreements. And it was a very gradual process by which the President would reach these agreements. Initially, they did not have to return to Congress for approval. There's a limit on what the President could do in terms of declaring tariff rates. But the President was still kept on a very short leash with respect to authorization by Congress. The Reciprocal Trade Agreements act authority had to be renewed every three years. And so any agreement that the President would reach, he always wanted to make sure that it was appropriate and the Congress would agree to it, at least in principle. Because if the President reached some agreement that was so outside of the ballpark of what the American political system wanted to have, Congress could revoke that trade authority.

[Derek Thompson]

So what have we missed? How else did Smoot Hawley change American politics?

[Douglas Irwin]

So one of the other legacies of Smoot Hawley is that delegitimized the idea of using tariffs. For more than a generation of American politicians, and indeed among the public at large, it was viewed as an experiment. We tried raising tariffs as we were going into the Depression, and instead of helping pull us out of it, we sank further into it. And it made matters worse by having other countries retaliate against us. And there are a lot of very young politicians at the time who remembered that period and took it with them throughout their political careers, one of which was Ronald Reagan. So Ronald Reagan was president in the 1980s, and despite the fact that we had this very severe recession in the early 1980s, which we later came out of, he never really embraced protectionism as a doctrine. He always said he was in favor of free trade because of the legacy of the 1930s. There were other members of Congress. Sam Gibbons from Florida, a very elderly gentleman by the time it was in the 1980s and 90s in Congress. But he always hearkened back to the protectionism of the 1930s that made the world a worse place, that hurt the US Economically, diplomatically, strategically, may have paved the road to World War II because of all the frictions, both economic and military, that were arising during the 1930s. And Gibbons and others would always say, we don't want to go down the road of protectionism because we have to learn the lessons of the 1930s. Just as isolationism had been in disrepute as a result of the 1930s, so is protectionism. And that really was a major force in the 1960s, 70s and 80s in keeping the political system focused on trade agreements to open markets rather than protectionist measures to close markets.

[Derek Thompson]

That pendulum is still swinging today. The protectionist experiment of the 1930s was designed to help a declining farming sector, but it failed, and it set up decades of freer trade, and then decades of freer trade with the world, especially with China, have coincided with the erosion of America's manufacturing sector. And now many people in power, notably the President, want to fix that with protectionism. So we're dusting off the 1930s playbook, and the echoes could not be clearer to me. Manufacturing has declined as a share of employment over the last few decades, just as farming had declined as a share of employment over the decades prior to the 1930s. And so the tariffs today, just like the tariffs in the 1930s, are part of an effort to revive a version of the economy that was once core to the American identity.

[Douglas Irwin]

One of the lessons we might be learning today is that tariffs are a very blunt instrument in a very imprecise instrument that has a lot of collateral damage associated with it and really can't help reverse the declining fortunes of a particular sector of the economy in the long run.

[Derek Thompson]

Douglas Irwin, thank you very much.

[Douglas Irwin]

Thank you very much. It was a great pleasure to be here.

[Derek Thompson]

It.