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Steve Bannon’s bad economic history….. – Publications – AEI

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AEI Steve Bannon’s bad economic history….. …. is a slight variation of the title of Dartmouth economist Doug Irwin’s op-ed in yesterday’s Wall Street Journal. Here are some key excerpts below (emphasis added) of that excellent op-ed (ht/Don Boudreaux): The economic nationalists, and the president himself, believe protectionism will strengthen the American economy. “Look at the 19th century,” said former White House chief strategist Steve Bannon in his recent “60 Minutes” interview. “What built America’s so called ‘American system,’ from Hamilton to Polk to Henry Clay to Lincoln to the Roosevelts? A system of protection of our manufacturing, financial system that lends to manufacturers, OK, and the control of our borders.” In the nationalists’ narrative, high tariffs were responsible for

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AEI
Steve Bannon’s bad economic history…..

…. is a slight variation of the title of Dartmouth economist Doug Irwin’s op-ed in yesterday’s Wall Street Journal. Here are some key excerpts below (emphasis added) of that excellent op-ed (ht/Don Boudreaux):

The economic nationalists, and the president himself, believe protectionism will strengthen the American economy. “Look at the 19th century,” said former White House chief strategist Steve Bannon in his recent “60 Minutes” interview. “What built America’s so called ‘American system,’ from Hamilton to Polk to Henry Clay to Lincoln to the Roosevelts? A system of protection of our manufacturing, financial system that lends to manufacturers, OK, and the control of our borders.”

In the nationalists’ narrative, high tariffs were responsible for America’s growth and industrialization in the 19th century. This is not only a misreading of history, it’s a bad policy prescription for the 21st century. A return to high tariffs would sap America’s economy today.

Mr. Bannon’s simple story is historically and economically off base. As Treasury secretary, Alexander Hamilton wanted moderate tariffs, not protectionist duties. In his day, tariffs accounted for nearly all federal revenue. He wanted to keep imports flowing so he could finance the federal government’s Revolutionary War debt and secure the young nation’s credit. President Polk, far from being a protectionist, was a small-government Democrat. He slashed tariffs dramatically in 1846.

……

Economic nationalists always conveniently skip the story of the 1930 Smoot-Hawley tariff, probably because it doesn’t fit their narrative. Smoot-Hawley—passed by Republicans and signed by a Republican president—didn’t cause the Great Depression, but the trade wars it inspired certainly damaged the world economy and backfired badly against the United States.

More important, America didn’t boom during the 19th century because it was a closed economy. The U.S. industrialized rapidly between 1833 and 1860, when tariffs were being cut. While tariffs were high after the Civil War, the U.S. was open to foreign capital inflows. It was also open to the best industrial technology from Britain and Germany, and—importantly given Mr. Bannon’s assertion that the U.S. had control of its borders back then—to massive immigration. The textile mills and steel furnaces of the late 19th century were largely staffed by foreign-born workers. As in our own era, many native-born Americans weren’t interested in doing tedious and grinding jobs at low wages.

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Economic nationalists say their protectionist program will ignite an economic boom. In fact their poor understanding of history will damage the American economy and leave the country weaker.

MP: It just defies economic logic and common sense for economic nationalists and protectionists to think that imposing taxes (tariffs) on Americans, raising prices, restricting consumer choice and reducing competition could somehow make America better off and stronger?

Steve Bannon’s bad economic history…..
Mark Perry

Mark Perry
Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan’s Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for American.com and the AEIdeas blog.

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