Report Card for Donald Trump

[Warren Dew]

(12-17-2016, 09:02 AM)Mikebert Wrote:

Warren Dew Wrote:If you think Smoot Hawley and the resultant retaliations helped the US economy, you're ignoring all of the empirical evidence about it.

I didn't say it was good for the economy.  You said it destroyed the economy. I said that was horseshit. That is, there is little evidence that the tariff was a significant factor in the downturn over 1929-30.  I believe it had a mildly negative impact because of this identity:

GDP = Aggregate demand - trade deficit.

Since we had a trade surplus back then, trade volume added (modestly) to GDP.  So an effort to reduce the volume of trade (which is what Smooth Hawley was intended to do) would have a modest negative impact on GDP, all else being the same.  Today we have a large trade deficit and so reducing trade volume will make GDP modestly larger, all else being the same.  But the impact is secondary to the larger impact from tax and monetary policy.  The Fed response to the Credit Anstalt collapse was a more important factor than Smoot Hawley  Similarly part of our economic problems stem from the "October revolution" in Fed policy.

You're ignoring the effect of dividing the world economy on the dominance of existing elites.  As Turchin notes, expanding the economy has the effect of diluting the elites.  What passes for an elite in a smaller economy - for example with the market power to manipulate prices - may not have the power to act as an elite in a larger economy.

Dividing the world economy into pieces exacerbated the problem of elite dominance within each of those pieces.  In the context of the times, that was a big part of the disaster.