Lessons of History? The Use and Misuse of Smoot-Hawley Tariff

A popular understanding of studying history is reflected in an attribution to the philosopher George Santayana: “Those who do not remember the past are condemned to repeat it.” The notion that history contains lessons that if only studied and remembered can prevent further reprises in the future is conventional wisdom. Yet many historians have warned that perhaps the opposite is also true: that applying “lessons” from the past to present problems may be using the wrong analogy to a present problem. History is a complicated business. We often know a collection of historical actors and a sequence of events and outcomes but not necessarily motivation, what knowledge was available at the time, what political/cultural/social baggage influenced outcome and numerous other variables. Typically, the study of past events allows one to have access to much greater information than actual participants and more importantly, the leisure element of time to thoughtfully examine and evaluate the information. Unlike the actual participants in the historical event dealing with issues in real time, a historian’s deadline is less demanding unless constrained by a book contract.

Most Americans have forgotten or never knew that the two largest sources of income running the federal government in the Nineteenth Century was the sale of federal lands and protective tariffs. That tariff policy could be cause for significant national debate seems almost antiquarian to modern sensibilities. Laura Ingalls Wilder in Farmer Boy recounts a debate at an annual July 4 celebration witnessed by her husband Almanzo as a boy: “Then the two men made long political speeches. One believed in high tariffs, and one believed in free trade. All the grown-ups listened hard, but Amanzo did not understand the speeches very well and he began to be hungry. He was glad when the band played again.” A national income tax passed in the early Twentieth Century, quickly replaced the diminishing income stream from tariffs. Few recall the average level of duties of the McKinley Tariff (1890) 49 percent; Wilson-Gorman Tariff (1894) 41 percent; Dingley Tariff (1897) 46 percent; Payne-Aldrich Tariff (1909) 40.7 percent; and the Fordney-McCumber Tariff (1922) 38.5 percent. But there is an obsession with the Smoot-Hawley Tariff (1930) that raised the average to 45.4 percent. Smoot-Hawley was neither the largest increase but what makes it notable is that was the last before a long era of trade agreements led by the President, not Congress, became the norm.

A previous blog post by archivist Spencer Howard provides a vivid description of Hoover’s objections to the Smoot-Hawley Tariff and his efforts to mitigate its most egregious elements. The process was driven by political not economic considerations, and members of Congress, both Republican and Democrats, were greatly influenced by interest groups in deciding what goods would receive tariff increases. Franklin Roosevelt decried the enactment of the Smoot-Hawley Tariff in the 1932 presidential campaign. Eight years after Roosevelt’s election, gloating Hoover supporters pointed out that the Smoot-Hawley Tariff was still on the statue books. Secretary of State Cordell Hull slightly modified some tariffs with the Reciprocal Trade Agreements, but not enough to produce the revenue expected to turn the economy around. Ultimately, the political interests in supporting tariffs prevented any meaningful reform until after World War II.

The Hawley-Smoot Tariff did not cause the Great Depression. Economists then and now argue that while unwise and counterproductive, its economic impact on the lasting duration of the Depression was slight. It continues, however, to remain in the popular imagination one of the leading factors in a discussion of the causes of the Great Depression as illustrated by the actor Ben Stein’s portrayal of a high school history teacher in the movie, “Ferris Buller’s Day Off.”