(This is a guest post by Michael Davidson. He is an attorney by profession but has a degree in economics and loves the subject. He also has many friends in Canada, including many who spend considerable time at Fort Mac, and for whom he is really concerned.)
Those of you who did their undergraduate studies at BYU will likely remember a general education course called American Heritage. This course was a survey course that was one-third US History, one-third US government/politics and one-third US economics. It was a required course for every undergraduate, and so it tended to be taught in a large lecture hall with hundreds of students. This was not appealing to me, so I was delighted to find one section that was taught in a smaller classroom. The hitch was that it was intended for Canadian students. I signed up anyway, thinking that the worst thing that could happen would be that I would have to drop the class and enroll in one of the monster sections.
I am so glad I took this class. It was taught by a fellow named Delbert Palmer who I became good friends with by the end of the semester. He was an older gentleman, and had been a businessman in Lethbridge, Alberta for many years but had never gotten a university degree. (He had also been the first mission president in Chile in the early 1960’s, but that is another story entirely.) When he retired from his businesses, he decided to enroll at BYU and finally earn his degree, which he did. While he was there he further took it upon himself to teach this section of American Heritage for mostly Canadian students, and a few select Canada-philes (like myself) without pay as a hobby. It was American Heritage, but with a comparative twist. While learning about the US Constitution, we compared it with the Canadian Constitution for instance. It was an amazing course.
One day, we were discussing the Great Depression and the various causes of it. One of the many things touched on was the Smoot-Hawley Tariff Act.
Mr. Hawley was a member of the House of Representatives from Oregon, while Mr. Reed Smoot was a US Senator from Utah. This Act raised U.S. tariffs on tens of thousands of imported goods to never before seen levels, which effectively closed the US markets for those goods to foreign suppliers. This was very bad news for nearly every country that traded goods with the United States at the time. Then as now, the largest trading partner the US had was Canada, and these huge trade barriers meant considerable hardship for those Canadians whose livelihoods were largely tied to trade of their goods to the United States.
Readers of this blog will also recognize that Mr. Smoot was also Elder Smoot of the Quorum of the Twelve Apostles. In this capacity, he was assigned to preside at a stake conference in Cardston, Alberta, during the time that the Smoot-Hawley Act was working its way through congress. As it turns out, Prof. Palmer’s father was the stake president of the Cardston Alberta stake at that time. Prof. Palmer related to us that on the appointed Friday afternoon, his father took him on a drive to Lethbridge to pick up Elder Smoot from the train station, which drive took them nearly two hours, one way. Having collected Elder Smoot, Prof. Palmer, then a young boy, sat in the back seat for the drive back and listened to his father, the stake president, scream and yell at Apostle Smoot for the entire drive to Cardston regarding the horrible Tariff Act and the great harm it would do to Alberta and the world. He had never heard his father so animated before, and it left quite an impression. Upon arriving at their home, where Elder Smoot was to be a guest, not another word was said on the subject. However, at the end of the stay Prof. Palmer again accompanied his father as he drove Elder Smoot back to Lethbridge to catch his train. And again, his father, the stake president, spent every minute of that drive yelling and screaming at the apostle in the passenger seat. He said he had never seen his father so animated since.
Looking back on it, the Smoot-Hawley Tariff Act, and the ensuing retaliatory tariffs, is considered by most economists and historians to have been one of the major causes of the worldwide Great Depression. Prof. Palmer’s dad was right to oppose it, as the years following its passage saw nearly two-thirds of worldwide international trade evaporate. It not only raised prices on US consumers for tens of thousands of goods, it also closed markets to most US exporters as well. It should be pointed out that these were entirely foreseeable results of this bill. This coincided with other market weaknesses that resulted ultimately in the most profound economic disaster in modern history.
So why do I raise this now? Two reasons, really, the more minor of which being my friend, Delbert Palmer, passed away some time ago and enough time has passed that I don’t think that he would mind me sharing this story. It was never something he told me to keep secret, he shared it in class, but I never felt comfortable publishing it before. Secondly, and more importantly, we find that this election cycle has exposed a deep current of resentment of foreign companies and countries “beating” the US in trade, and a certain prominent idiot spouting off about how he is going to fix this “problem.” He tells us that US citizens are going to get bored because the US is going to start winning so much against these foreign interests as he goes in and renegotiates these trade deals.
Though his proposed solutions are so far very vague, one can assume that these changes will increase the cost of imported goods through some mechanism to the point of effectively closing or limiting access to the US market to those goods. The goals and means of accomplishing this will likely be very similar in effect to the goals and means of the Smoot-Hawley Tariff Act. When we close our doors to foreign goods, those countries will close the doors to our own exports as surely as the sun rises in the east. Does anybody really think that in this day and age, when the economy is a tenuous as it is now, that this is a good idea? No way, but it is popular amongst some who can’t or won’t foresee the problems. It gets votes. But it is also entirely foreseeable that if this man does what he says he will do, he will destroy a large percentage of international trade to the detriment not only of ordinary Americans, but also ordinary Canadians and ordinary folks living in nearly every country in the world. Smoot-Hawley is in the past, thankfully, and should stay there.