Pat Toomey of the Club for Growth reminds us that the stock market crash was not the primary culprit for the Great Depression as is often asserted:
Though many associate the Great Depression with the stock market crash on Oct. 29, 1929, the market actually rallied during the six months following Black Tuesday, while the defeat of Smoot-Hawley appeared likely. The market turned south again in April 1930 as those hopes of defeat gradually dimmed.
The Dow Jones Industrial Average sank a full 8%, from 250 to 230, over just two trading days in June 1930, in direct response to the Senate’s passage of Smoot-Hawley and Hoover’s announcement that he would sign it. Exacerbated by other flawed governmental policies, an international trade war continued to drive the market down until the Dow hit a low of 41 on July 8, 1932, having lost 89% of its value from its September, 1929 high. It would be 25 years before the market recovered its 1929 peak.
And despite the damaging effects of protectionist trade tariffs, Democrats and a few Republicans are championing punitive tarrifs and other protectionist trade measures to “level the playing field.”
Toomy notes that:
The Club for Growth is disseminating a petition advising Congress “against imposing retaliatory trade measures against China.” Like its historical counterpart, this petition is signed by 1,028 economists from the left and the right. They come from all 50 states and include four Nobel laureates, three former chairmen of the Council of Economic Advisors, former members of Congress, a former Treasury secretary, and economics professors from our country’s most prestigious universities.
If our Congressmen want to promote economic prosperity they should keep in mind Adam Smith’s observation that is still true today that:
“It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.”