
“The only new thing in the world,” we are told, “is the history we do not already know.” Certainly that is true when trying to assess the latest economic news.
Being told that this is just the normal boom-bust cycle no longer answers all of our questions. The free market laissez-faire approach is no longer completely accurate or adequate. What we need to be told is that government policy is partly to blame for our economic woes.
Ideas have consequences. More so, government policy has consequences.
Let history be your teacher.
Understanding our single greatest economic decline, the Great Depression of the 1930s, is complicated. What is not complicated, however, is that government policy was partly to blame.
Two government policies considered to help at the time of their passage went on to damage the economy greatly. Both involved protectionist tariffs.
In 1922, the U.S. Congress passed the Ford-McCumber Tariff. With hopes of averting an economic slide following World War I, this protectionist legislation only made worse the impending depression in Europe. The economic downturn in Europe only exacerbated what would be our longest depression. The global marketplace, reeling from their own difficulties, could not help to bale us out.
Unfortunately, the lesson was not learned. In 1930 the Smoot-Hawley tariff was passed. At a time when trade should have been encouraged, this protectionist policy closed down potential markets. The Great Depression, in part, was government induced.
Though explaining the Great Depression is complicated, it is not difficult to understand the fact that the U.S. government made choices that hurt the economy at a time they thought they were helping.
As we face the facts of our own impending recession, how much damage has been self inflicted?
Perhaps this is why our recession will be so painful . . . again.