GREAT DEPRESSION: Trade

I have started examining the Great Depression of the 1930s because I think I may learn something from that time in our history that may be of value in handling our present economic predicament.

I am reading the new book THE FORGOTTEN MAN; A NEW HISTORY OF THE GREAT DEPRESSION by Amity Shlaes, a senior fellow in economic history at the Council on Foreign Relations and a syndicated columnist for Bloomberg.

Obama is getting ready to unleash his $800 Billion stimulus package among other actions to get us out of our depression which is very similar to what FDR (Franklin Delano Roosevelt) did when he took office in 1933. Please remember that Herbert Hoover was elected president in 1929 and was president during the first four (4) years of the Depression period and is responsible for some government actions that impacted the U.S. economy.

One of the first big economic errors committed in the 30s was the Smoot-Hawley Tariff Act signed by Hoover in 1930. It basically killed international trade by raising tariffs on imports. Countries responded to the U.S. action by raising tariffs on American goods. Yes, Congressmen at that time thought they were protecting American jobs by eliminating foreign competition but they were actually blocking free trade and with it, the overseas demand for American goods which hurt American manufacturers and exporters which worstened the depression and made it global.

Today, we run a trade deficit and have for many years but our exports are a huge part of our economy especially in the last few years when the dollar has been down versus other currencies.
To repeat the tariff mistake of the 30s by hindering today’s import / export market would be totally irresponsible.

I say this because Obama is a Democrat and the unions feel he owes them for his victory, and what the unions want is to protect domestic jobs which they feel are threatened by "outsourcing" them overseas where labor and overhead are much cheaper. They want free trade agreements like NAFTA overturned and they do not want anymore free trade agreements (like the one with Colombia) enacted. In essence, the unions want to curtail free trade because they see it as anti-union.

You can see that this is basically heading in the same direction and will do the same thing to our economy as the tariff act did to the economy in the 1930s.

I have reason to believe that Obama, even though appearing as union friendly, would not harm our economy by giving in to union demands to protect jobs at home by limiting free trade. The lessons from the Great depression are quite clear; lets make sure we learn from them.