Protectionism

Presented byRepresentatives ofDuzowia

World Economic Conference

• Held in Geneva in 1927

• Determined that:

• World economy grows through free trade

• Decreasing tariffs on products in order for fair economic

competition in the world market

• BUT soon afterwards, tariff acts are being imposed

Smooth- Hawley Tariff

• 1930• First introduced in the Spring • Took a year and a half to be passed• Countries protest against it• Foreigners slowly stop buying US products• Unemployment goes up (b/c jobs lost)• Stores, banks, factories close• Agricultural industries were handicapped by the foreign

trade barriers impose b/c of tariff

Smooth- Hawley Tariff (cont.)

 • Unemployment goes up (b/c jobs lost)• Stores, banks, factories close• Agricultural industries were handicapped by the foreign

trade bariers impose b/c of tariff• Increase in prices →  Avg. American became poorer.• Turned a bad reccesion into The Great Depression

 

Underwood- Simmons Tariff

• Named after Oscar W. Underwoodo He was a U.S. congress man from 1895-1927

• Underwood Tariff Act signed in 1913o The tariff sought to promote international trade, but also

to make up for the loss of revenue, it also enforced the first (small) federal income tax.

o The tariff created a reduction in tariff (taxes), and allowed manufacturers to create more products allowing for more international competition. 

o The loss of revenue created because of al the extremly low tariffs placed on items during the 1913's was a general cause to great depression.

Fordney McCumber Tariff

• Opposed by numerous democratso  Claimed it would raise revenue- but republicans were

no concerned•  Creator of the tariff blamed the recession irrelevant duty

rates fom the Underwood- Simons Tariff•  Imposed a 50 cent tax on wheat• Average duty on all imports was 14 percent Average on

dutiable imports was 38.5 percent • Agricultural prices dropped in the U.S.•  Added to the decline of international trade

 

 

The Gold Standard

• Def = monetary standard under which the basic unit of currency is defined by stated queantity of gold.

• It was suspending gold convertibility (or devaluing the currency in gold terms)

• Great Britain depleting gold reserves• In September 1931, the Bank of England stopped

exchanging pound notes for gold & the pound was floated on foreign exchange markets.

• This partly explains why the experience and length of the depression differed between national economies.

• Like inflation

Causes of Inflation?

1. The supply of money goes up.  2. The supply of goods goes down.  3. Demand for money goes down.  4. Demand for goods goes up.

The Beggar-thy-Neighbor policy

This was a protectionist policy  with a goal to increase demand for a country's exports (by devaluing the currency and making a country's goods less expensive in other countries) while also reducing demand for the countries imports (by making them more expensive through the tariff barriers).

Protectionism: A cause of war

• Tariff acts imposed by other nations as well• Improving own country at the expense of others• Lesser developed nations (like Malaysia) hit harder by

tariff acts• Who were dependent on exporting raw materials and cash

crops• Imports and exports decline• 1929-1934: World trade declined by 66% overall• Nations stop or can’t buy or sell products to each other• Tariffs grown too high for anyone to pay

Sources• http://www.voxeu.org/index.php?q=node/3280• http://www.gusmorino.com/pag3/greatdepression/ • http://eh.net/encyclopedia/article/kaplan.fordney• Investopedia.com• http://uspolitics.about.com/od/economy/tp/

what_caused_great_depression.htm• http://www.economicthought.net/wp-content/uploads/2009/12/smoot-

hawley-veto.jpg• http://www.economicthought.net/2009/12/did-protectionism-cause-the-

great-depression/