"Protectionism did not cause the Great Depression, but it sure helped to make it “Great.” From 1929 to 1934, world trade plunged by more than 60 percent — and we were all worse off." Thomas Friedman, NYTimes columnist and author

Okay lets try some Econ 101. This is an oft-cited refrain BUT it is incorrect if NOT put in context. That is an INCORRECT answer in certain situations where tariffs are beneficial to a country which enacts them.

(1) Trade barriers enacted by a nation that is a CREDITOR nation harm its economy. The nations that owe it money (be it the governments or private business) can not repay the debt owed to it if they can not sell their goods to and in the creditor nation.

(2) Trade barriers enacted by a DEBTOR nation help its internal economy. Such barriers keep the creditor nation(s) to whom it owes money from flooding it with cheap goods and draining it of money.

(3) Trade barriers enacted by a Net-Exporting nation hurt its internal economy as the importing nations who wish to sell their goods in the net-exporting nation retaliate by enacting trade barriers against its goods.

(4) Trade barriers enacted by a Net-Importing nation HELP its internal economy by raising the cost of imported goods which discourages its residents from purchasing imported goods in preference to domestically produced goods and keeps money from flowing out of the Net-Importing nation to the exporting-seller nation.

Okay - you got that now? Fine lets move on.

(5) In 1929, the US was a CREDITOR nation and a NET-EXPORTING nation. Smoot-Hawley was enacted under Hoover which he was pressured into signing. (Republicans of that time were as knee-jerk on tariffs and trade barriers as the current ones are on tax cuts. Those were the Republican panacea and answer to every problem in the early 1/2 of the 20th century & imposed without thought in every situation possible just like tax cuts today.)

See rules #1 & 3 for the results. That made the Great Depression worse because a large number of the bank failures were due to the default on bonds issued on behalf of foriegn governments. (The CDOs and SIVs of their day.)

(6) England in 1929 was a CREDITOR nation and a NET-IMPORTER nation. In about 1930 or so, it enacted tarriffs and trade barriers to all goods that did NOT come from within the Empire. (That means no tariffs on things from Australia etc but tariffs on things from France or the US.)

It WORKED in assisting the British economy to be less damaged from the Great Depression and to recover faster. It stimulated the British economy by encouraging domestic production.

See Rules #2 & 4 above.

(7) This is NOT 1929. The US is NOT a creditor nation. The US is NOT a Net-Exporter nation.

(8) In right now - 2009 - the US is the biggest debtor nation in the world. It is one of the biggest, if not the biggest net-importer nations in the world.

And for those who haven't noticed, we import over 4 times the amount of goods from China than we sell to them. In total we import nearly twice as much as we export. That sucking sound is MONEY flowing out of the US at a faster rate than it is coming in.

If Mr. Friedman is so enamoured of his 'free market global econmy', I suggest he put his money where his mouth is. Gobal economy means a leveling of incomes among the entire world. Add up the populations of the US, China & India; multiply the population of each of those countries by the per capita income of the country in question; then add up how much income there is in all 3 countries; and finally divide that total dollar amount by the total population of all 3. That number you get is what happens when there is an equalization of income through outsourcing, shipping out manufacturing and his precious global economy. To save you all the trouble of looking up the data, the answer is that for incomes to equalize, the US per capita income must fall by 75%.

I hereby nominate Mr. Friedman to be the first reduce his personal per capita income to $9,650. I'm certain he will manage just fine - although he may want to go live in India until the rest of the US falls to the same level.

All this prat from the 'free marketers' about how individuals should be 'self-reliant' gets very tiresome in view of how they find shipping US jobs and manufacturing overseas so wonderful. If individuals should be self-reliant, so should nations and that means having its own industrial and manufacturing base so it does not depend upon other countries or foreign businesses to supply it with the goods needed for survival ranging from clothing to computer chips to building tanks (ie: auto plants in WWII.) A nation needs to be self-reliant for manufactured goods if for no other reason than national security and protection. Just ask Japan and Germany how well WWII turned out for them when they did not have essential materials or plants within their own borders. And yes, Virginia, such a war can happen again and the US could be isolated.

— AnnS, MI

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