Samuel Miller Breckinridge Long was born in St. Louis, Missouri on May 16, 1881, a member of the storied Breckinridge family (who earlier spelled it "Breckenridge," but that's neither here nor there). Notable Breckinridges include:
-Robert Breckinridge: Virginia militia captain during the French & Indian War.
-Alexander Breckinridge: Son (John Floyd) was the 25th governor of Virginia.
-Robert Breckinridge, Jr.: Ratifier of the Constitution and later Speaker of the Kentucky House of Representatives.
-John Breckinridge: Senator from Kentucky and later Thomas Jefferson's Attorney General (1805-1806).
-James Breckinridge: Virginia House delegate (1789-1802, 1806-1808), member of the House of Representatives (1809-1817), Virginia House delegate (1819-1821, 1823-1824).
-Letitia Breckinridge: Second husband was Peter B. Porter, twice New York representative to the House and U.S. Secretary of War (1828-1829).
-John Cabell Breckinridge: U.S. Army Major, U.S. Representative from Kentucky (1851-1855), Vice-President under James Buchanan (the youngest ever VP), Candidate for President in the 1860 Election.*
*Breckinridge, a native Kentuckian, had the support of the Southern Democrats thanks to his stance on preserving slavery. He split the Democratic vote with Stephen Douglas (see previous "When did Republicans/Democrats switch platforms?" post), who favored Popular Sovereignty, or letting each state make their own decision on slavery. This split paved the way for Lincoln to take 180 electoral votes and the presidency, and for the South to secede from the Union.
-William Campbell Preston Breckinridge: U.S. Representative from Kentucky (1885-1895). Married Lucretia Hart Clay, granddaughter of Henry Clay.
-Ethelbert Dudley Warfield: President of Miami University, Lafayette College, and the director of Princeton Theological Seminary.
-John Cabell Breckinridge II: New York attorney, married Isabella Goodrich, daughter of B.F. Goodrich, founder of the B.F. Goodrich Company.
-Henry Skillman Breckinridge: One of Charles Lindbergh's lawyers during the Lindbergh kidnapping trial. Henry S. Breckinridge was the only serious (though not, like serious serious) challenger to Franklin D. Roosevelt in the 1936 Republican primaries, running against the New Deal.
That's a lot of family history, but the Breckinridges are a storied family in American political history.
Charles Lindbergh's involvement with the family is somewhat notable, as Lindbergh would go on to be the face of the America First movement, advocating for the U.S. foreign policy of "leave Nazi Germany alone." Henry Breckinridge, a longtime friend of Lindbergh and his personal attorney, was the first person Lindbergh called when he discovered that his son had been kidnapped. Lindbergh would later write Breckinridge after touring Germany, in regards to Nazi Germany:
(There is) a spirit in Germany which I have not seen in any other country. There is certainly great ability, and I am inclined to think more intelligent leadership than is generally recognized. A person would have to be blind not to realize that they have already built up tremendous strength.
It's hard to determine how close Henry Breckinridge was with Breckinridge Long, but they were only five years apart in age, and both involved in government affairs.
Anyhow, to Breckinridge Long. Long graduated from Princeton in 1904, Washington University School of Law, and got a Master's from Princeton in 1909. Long was admitted to the Missouri bar and opened a law office in St. Louis. Long supported Woodrow Wilson (and is credited with coining Wilson's successful 1916 re-election campaign slogan, "He kept us out of war," which Wilson did...for about another year). Shortly after Wilson won re-election, Long joined the State Department as Third Assistant Secretary of State but left in 1920 to unsuccessfully run for Senate (and took another L in 1922). While working for Wilson, Long became familiar with Franklin D. Roosevelt, then Wilson's Assistant Secretary of the Navy (it was not lost on FDR that his 5th cousin, Theodore Roosevelt, was also Assistant Secretary of the Navy in McKinley's administration.).
Long supported FDR's candidacy for president in 1932 and was rewarded with an ambassadorship to Italy in 1933. While in Rome, Long wrote back to Washington praising Mussolini and his regime for their "well-paved streets," the "dapper" black-shirted stormtroopers, and their seemingly always on-time trains.
He returned to private life in 1936, but still had some Opinions. Long said of the Anschluss (the German annexation of Austria in 1938), that it was cool because "the Germans were the only people with the intelligence and courage to bring peace between the Rhine and Black Sea."
Doris Kearns Goodwin wrote in her Pulitzer Prize-winning book "No Ordinary Time: Franklin & Eleanor Roosevelt: The Home Front in World War II" that Long kept a diary "filled with invectives against Jews, Catholics, New Yorkers, liberals, and, in fact, anyone who was not of his own particular background."
In 1939 FDR asked Long to return to the State Department. Long oversaw the Immigrant Visa Division, essentially formulating the policy of allowing immigrants into the United States as well as transfer visas in foreign consulates. This is where Long's history becomes problematic.
Long basically promoted U.S. National Security over humanitarian concerns. After the Anschluss, and then Kristallnacht in 1939, over 300,000 Germans (mostly Jews) applied for an immigration visa to the United States. Even as Hitler ramped up his efforts to dominate Europe throughout the 1930s, the United States - still reeling from the Great Depression - maintained the immigration quotas established by the Johnson-Reed Act.
The Johnson-Reed Act (passed in 1924) was an extremely restrictive immigration policy that targeted immigrants of specific "undesirable" countries or origins. Visas were limited to 2% of the total population of a given country according to their population in the United States as of the 1890 census.
Oh and wouldn't you know it, on January 10, 1921 a fire in the Commerce Building destroyed 25% of the 1890 census, with another 50% "destroyed by water, smoke, and fire." So...there wasn't exactly a back-up on a floppy disk. Census Bureau Clerk T.J. Fitzgerald:
(The records were) certain to be absolutely ruined. There is no method of restoring the legibility of a water-soaked volume.
What records did remain were destroyed in 1935.
The Johnson-Reed Act excluded all Asian countries as well as significantly limiting visas for prospective immigrants from Southern & Eastern European countries while increasing available visas for Northern & Western Europe. As a result, only 27,370 visas from Germany would be approved each year. There was about an 11-year waiting list to get into the United States in 1939 from Germany. A Hungarian applying for an immigrant visa faced a 40-year wait.
Eleanor Roosevelt once remarked of Long to FDR: "Franklin, you know he's a fascist." To which FDR responded, "I've told you, Eleanor, you must not say that."
Emanuel Celler, a Democratic representative from Brooklyn from 1923-1973, described Long as
Cold and austere, stiff as a poker, highly diplomatic in dress and in speech...and anti-Semitic.
Long reviewed Hitler's terrible book Mein Kampf as "eloquent in opposition to Jewry and Jews as exponents of Communism and chaos." In a 1940 diary entry, Long said that those sympathetic to the plight of those targeted by the Nazis were "largely concentrated along the Atlantic seaboard, and principally around New York" who had "joined up with the small element in this country which wants to push us into this war."
Long's views on Jews and basically all non-Americans reflected what was actually a popular opinion in the United States at the time. Two weeks after Kristallnacht, 72% of respondents to a Gallup Poll said the United States should not allow larger numbers of German Jews into the United States. 54% of respondents said the treatment of the Jews by the Nazis was their own fault. 67% of Americans opposed a bill proposed in Congress to admit child refugees from Germany, and the bill never made it to the floor for a vote. A lot of Americans thought Germany and the Soviet Union were using Jewish refugees as spies. Let's not forget that there was another recession in the Great Depression. Unemployment hit 20%. "Economic Anxiety" has been around for a while.
A June 26, 1940 memorandum from Breckinridge Long detailed the following regarding potential immigrants from the United States:
We can delay and effectively stop for a temporary period of indefinite length the number of immigrants into the United States. We could do this by simply advising our consuls to put every obstacle in the way and to require additional evidence and to resort to various administrative devices which would postpone and postpone the granting of the visas. However, this could only be temporary. In order to make it more definite, it would have to be done by suspension of the rules under the law by the issuance of a proclamation of emergency - which I take it we are not yet ready to proclaim.
The State Department - remember this is Long's doing - "cautioned consular officials to exercise particular care" in screening applicants for visas. In June 1941, the State Department issued a "relatives rule," which denied visas to immigrants with close family still in Nazi territory which, by June 1941, was pretty much all of Western Europe. And by that point, most American consulates in German-occupied territories were closed (under German orders, to which the United States complied). On June 22, 1941 the Nazis launched Operation Barbarossa - the German invasion of the Soviet Union.
On July 1, 1941 the State Department centralized all alien visa control in Washington. All applicants needed to be approved by a review committee in Washington, and then were required to submit additional paperwork, including a second affidavit proving their finances were in order. Basically after July 1941 it was virtually impossible to leave Nazi-occupied Europe for the United States.
This was Long's goal, as he was terrified of "radicals" and "the Jewish press" for his efforts to prevent immigration to the United States. He saw himself besieged by "communists, extreme radicals, Jewish professional agitators, and refugee enthusiasts...all woven together in the barrage of opposition against the State Department which makes me the bull's eye."
Emanuel Celler, on Long:
Long said that he refused to grant visas for security reasons. Well, what is meant by security reasons - he felt that if he granted a visa to a refugee, the relative of the refugee might be held as a hostage in Germany and...they might force him to behave in a way that involved the security of the United States and therefore he would not grant him a visa. Which was a lot of hooey.
Eleanor Roosevelt found Long "not only unsympathetic but also opposed to the policies she supported and, as much as possible, she tried to work around Long."
For many applicants trying to escape the Nazis, many of the documents the State Department required were simply impossible to acquire. One of these applicants was Otto Frank, who wrote to his old college buddy Nathan Straus, Jr. asking him to put up $5,000 (just over $87,000 in today's dollars). It was a good ask: Straus was the son of a Macy's co-owner, head of the U.S. Housing Authority, and a close friend of Eleanor Roosevelt. Otto Frank and his family, including his daughter Anne, would never make it to the United States.
FDR could have removed Long. He didn't. Ultimately, only 10% of the immigration quota from Germany was filled under Long. Most of those who didn't receive visas died during World War II.
Emanuel Celler said of the State Department's division under Long:
There unquestionably were a number of anti-Semites in the State Department, and I know that personally...The normal attitude of the State Department in those days, and I suspect it still exists, that you don't do anything to rock the boat. You keep things calm. And the fact that the millions of Jews were being murdered while they were delaying, I don't think that troubled most of them, frankly.
Breckinridge Long came from a rich, political family with a history of turning its back on pretty much anyone who didn't look like them. In that way, they represented most of America. Breckinridge Long is a wide-angle view on how things don't change all that much.
Showing posts with label Germany. Show all posts
Showing posts with label Germany. Show all posts
Wednesday, July 10, 2019
Wednesday, June 13, 2018
Reed Smoot, Willis Hawley, Retaliatory Tariffs, and 1930
It is generally regarded as fact that there were four MAIN causes of World War I. Handily, they spell out "main:"
Militarism
Alliances
Imperialism
Nationalism
As the world escaped the War To End All Wars (for about 20 years), the United States grew to be one of the more dominant - if not the world's most dominant - economies of the world. Post-War giddiness gave way to the Roaring '20s, a stretch of unbridled economic advancement that, in a lot of ways, was fake. More and more Americans were investing in the stock market, which just kept going up. Regard, the Dow Jones as of September of the respective year:
1921: 1017.65
1922: 1465.83
1923: 1281.46
1924: 1511.50
1925: 2203.23 (October value - September 1925 wasn't available for some reason)
1926: 2264.81
1927: 2616.73 (again, October)
1928: 3437.74
1929: 4973.84
With the exception of a minor blip in 1923 the Dow Jones increased from September-to-September of every year. As Herbert Hoover accepted the Republican nomination for the presidency during the campaign in August 1928, he famously (and short-sightedly) declared:
Unemployment in the sense of distress is widely disappearing...We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poor-house is vanishing from among us. We have not yet reached the goal, but given a change to go forward with the policies of the last eight years, and we shall soon with the help of God be in sight of the day when poverty will be banished from this nation.
Cool prediction, Herb. Hoover's election over New York Governor Al Smith (who suffered politically from being Catholic, being anti-Prohibition, and his connections to Tammany Hall) in 1928 accelerated the growth of the stock market.
As more of the United States plugged in, a new Industrial Revolution occurred. But things weren't all aces. As this history professor describes, the October 1929 stock market crash and the resulting Great Depression was a perfect storm of economic calamities. Among them:
-The Immigration Act of 1924 put a quota on the number of immigrants allowed into the United States. The unintended result was that immigrants tend to need a place to live once they arrive, and once that market slowed to a trickle, it created a housing bubble. That bubble burst in Florida in 1925 with the Florida Land Boom, foreshadowing a growing economic crisis. Construction slowed in 1928.
-Goods were too durable. You didn't need to buy a radio every year if the radio never broke. Same with your car, vacuum cleaner, iron, etc. This slowed down purchasing in America.
-Wages for workers rose, but not as quickly as productivity, so the demand wasn't meeting the output of the goods.
-What goods most Americans did buy was on credit. Installment plans, which had been around for almost 100 years by that point, were decidedly becoming A Thing. This included investment in the stock market, a process known as buying on margin.
Buying on margin meant that Americans were buying stock with borrowed money. As long as the price of the stock increased (and it had for much of the previous decade heading into that fateful October 1929), then you could sell and cover your loan. But if the bottom dropped out of the stock market, not only did you lose your investment but you also had to pay the money you no longer had back to the bank. And then that's exactly what happened. The price of the stock wasn't equal to the actual value of the stock - their P/E (price-to-earnings) ratio was out of whack. And we haven't even gotten into what happens when the stock is manipulated - buy enough stock to raise the price, short it, and then buy it back after it falls in order to make money at every stage of the manipulation.
But that's not why we're here. We're here to talk about tariffs, which are simply taxes on imported goods. A protective tariff is one in which you drive up the price of foreign goods, which generally makes the buyer go with the cheaper, home-made option. Why by an avocado from Mexico for $1.25 when you can buy one from California for $1? This is where there is overlap.
Whenever there's some sort of economic downturn, the rallying cry is to Buy American! Spend money on American goods and it will help the American economy. Everybody wins, right? Enter Reed Smoot (R-Utah) and Willis Hawley (R-Oregon).
Reed Smoot had an interesting political history, winning Utah's senate seat in 1903. However, given that Smoot was an Apostle in the Church of Jesus Christ of Latter Day Saints, Utah's history with Mormonism and the condition that the Mormon Church renounce the practice of polygamy as a criteria for Utah's admittance to the Union. The result was the 1890 Manifesto, a document that officially "advised against" Mormons practicing polygamy. Utah was admitted as the 45th state in the Union. Smoot was not the first Mormon to be elected to Congress - that distinction belongs to B.H. Roberts, elected to the House of Representatives in 1898. The House of Representatives refused to seat Roberts on account of his three wives. Smoot had only one wife, but that didn't stop the Senate from debating - for four years - Smoot's viability. The Salt Lake Tribune reported that Mormon leaders (one of which Smoot certainly was) secretly approved of polygamy following the adoption of the 1890 Manifesto. Senators opposed to Smoot's seating argued that Smoot could not take the oath of office if he subscribed to a religion that approved of breaking the law. Finally, in 1907, Smoot prevailed. Though the majority of the investigative committee recommended that Smoot be expelled, there weren't enough of the 2/3 majority required to actually get rid of Smoot. Re-elected in 1908, Smoot stayed in the Senate he was defeated in the 1932 election, when a Democratic wave rebelled against the Republicans - whom the public felt hadn't done enough to stop, or at least slow, the Great Depression.
Willis Hawley had a much less dramatic political history than his partner in legislative history. He was born in Oregon in 1864 and was the president of Willamette University from 1891-1902 and was a professor of history and economics from 1891-1907, a position he resigned when he was elected to the House of Representatives. Hawley was elected every two years until the Democratic wave got him, too.
Anyhow, Smoot became Chairman of the Senate Finance Committee in 1923. Hawley was the Chairman of the House Ways and Means Committee from 1927-1931. Together they would come up with a plan that almost nobody who knew anything about politics approved of, yet was passed anyway.
A drought hit the Plains in the late 1920s (which would peak in the Dust Bowl). In an effort to cover their losses, farmers over-extended themselves to plant more crops, which meant buying equipment to plant them. There had been a robust worldwide market for American wheat, particularly in European countries which had been jacked up during World War I. By the end of the 1920s those countries started to get back on their feet, decreasing the demand for American crops. Still they planted, trying to cover their losses. This was of course made worse by the stock market crash, in which bank runs led to bank closures. Even if you hadn't invested a penny in the stock market, you could get wiped out.
In the late 1910s/early 1920s the "Protectionists" (Republicans who wanted to, well, protect the American economy at all costs) argued that the United States' economy had grown because Europe wasn't exporting anything and had to import all their goods from...somewhere, and it just happened to be the United States. With the War over, exports would increase and imports would naturally decrease. Thus, the Protectionists argued, Congress - because Congress could make this call back then - should raise the tariffs on imported goods. Protectionism worked hand-in-hand with Isolationism as the Republicans voted against joining the League of Nations.
Democrats were against a protective tariff. That little recession in the early 1920s? Protectionists argued that it would end with higher tariffs by protecting American factories and workers. Thus the Fordney-McCumber Tariff was passed in 1923, which raised the average tariff on taxable imports to 38.5%. That tariff really marked the end of prosperity for the American farmer. As a result, foreign nations issued their own retaliatory tariffs, placing higher duties on American exports. The League of Nations got involved in an effort to draw a truce between the United States (who was not a member of the League of Nations) and the rest of the world, but no agreement could be achieved. Both domestic and international economies were weakened.
Despite campaigning through 1928 to revise the tariff, President Herbert Hoover kept on keeping on. Smoot and Hawley went to work. Hawley's version in the House raised tariff rates on 845 imported goods and cut the rates on 82. By the time Smoot got done with it in the Senate, it had increased tariff rates on an additional 177 and cut rates on 254. The final bill from the Senate, after compromising with the House, raised tariff rates on 890 dutiable imports. It was deeply unpopular.
Senator Robert LaFollette (R-Wisconsin) was a weird guy. He was a Republican isolationist who supported FDR's New Deal and formed the new Progressive Party advocating for workers' rights and would be a co-founder of the America First Committee. Still, the isolationist LaFollette railed against the Smoot-Hawley Tariff, calling it:
The product of a series of deals, conceived in secret, but executed in public with a brazen effrontery that is without parallel in the annals of the Senate.
Plot twist: It wasn't unparalleled in the annals of the Senate (see: Abominations, Tariff of) but that's neither here nor there.
Check the New York Times from May 1930:
1,028 economists from across the country signed a petition asking Hoover to veto the bill, which had only passed 44-42 in the Senate, nowhere near the votes needed to override Hoover's veto. Thomas Lamont, a partner at J.P. Morgan, related that he "almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley-Smoot Tariff. That Act intensified nationalism all over the world." Henry Ford told Hoover that the tariff was "an economic stupidity." About sixty nations sent formal protests to Hoover and the government begging him not to sign it.
Hoover signed it anyway, though in private he called it "vicious, extortionate, and obnoxious." Immediately the New York Stock Exchange lost $1 billion in value - the second crash in eight months. By making it more difficult for foreign nations (mainly Europe) to sell their goods to the United States, it made it harder for them, specifically Germany, to repay their war reparations. Pretty much everyone in American government was betting on the punished countries remaining passive. They didn't.
Spain enacted the Wais Tariff a month after the Smoot-Hawley Tariff was signed, which raised the tariff on American automobiles in Spain. Three months after Hoover signed the Tariff, Canada - long an extensive trading partner with the United States - raised tariffs on textiles, agricultural tools, electrical apparatuses, meat, gasoline, shoes, jewelry, and fertilizer. In 1932 Great Britain signed the Ottawa Agreements which placed high tariffs on American goods.
These retaliatory tariffs were part of a tactic known as the Beggar-Thy-Neighbor policy, in which countries attempt to address its own economic problems by worsening the economic issues in other countries. U.S. exports in 1929 stood at about $7 billion. By the end of 1932 U.S. exports were about $2.4 billion. With the U.S. engaging aggressively in protectionist and isolationist economic policies, the rest of the world followed suit, deepening the economic crisis. World trade fell by about two-thirds from 1929 to 1934.
Economists generally agree that the Smoot-Hawley Tariff did not cause the Great Depression - that was undertaken by the aforementioned perfect storm of factors, of which the Fordney-McCumber Tariff was one. But I think we can safely assume that the Smoot-Hawley Tariff did not prop up American industry or agriculture and, by extension, worsened European economies, which were already in bad shape.
Germany's exports (which they would use to repay their WW1 debt) fell by 20% from 1930 to 1931. So in 1933, after years of depression and hyper-inflation that saw Germany's currency become "utterly worthless,"
To be fair, it's not like the Smoot-Hawley Tariff created Germany's economic problems. It just deepened them and pushed Germany to a breaking point. Germany's unemployment in the early 1930s was 30%. Economic uncertainty - of which there was plenty in Germany in the early 1930s - meant that there wasn't a majority party in the Reichstag. The National Socialist German Workers' Party used the crisis to their advantage and allied with other right-leaning parties to build a coalition that eventually led President Paul von Hindenburg to name Adolf Hitler chancellor in an effort to keep the Communists out of power. When the Reichstag burned down, Hitler blamed the Communists and used that to consolidate his power over Germany. Again, is the Smoot-Hawley Tariff responsible? Not directly, but it did help create an economic climate that led to Hitler's ascension to power. Like Thomas Lamont said, the Tariff intensified nationalism around the world.
So when President Trump says that "Trade wars aren't so bad," he might want to ask a historian or an economist. Already we're seeing reaction to the (since suspended) rise in tariffs on aluminum and steel on Canada, Mexico, and Europe. China has announced tariff increases on American pork, wine, and nuts. Mexico has delivered the most pointed tariff rates against the Trump Administration, raising tariffs on goods exported from Republican leaders' home bases - steel from Indiana (VP Mike Pence) and bourbon from Kentucky (Senate Majority Leader Mitch McConnell). Speaker of the House of Representatives Paul Ryan's home state of Wisconsin exports 90% of its cheese outside of the United States, exports which have recently been targeted for tariff increases by Canada and Mexico, and by tariff increases on Harley-Davidson motorcycles, also headquartered in Wisconsin.
A Tariff War which leads to retaliation against the United States, could have broader consequences than the economic impact of the Smoot-Hawley Tariff. Back in 1920, exports accounted for 5% of the U.S.'s Gross Domestic Product. Today's exports account for about 13% of our GDP. Again, was the Smoot-Hawley Tariff responsible for the Great Depression and World War II? Not directly. There were plenty of reasons that had to come together for both to occur. Still, we currently see this administration embracing protectionism and isolationism, when most economists explain that it doesn't really work. Ultimately the Smoot-Hawley Tariff was an unnecessary flame, the match that over a thousand economists begged not be struck, near the tinderbox of a rough generation in world history.
Militarism
Alliances
Imperialism
Nationalism
As the world escaped the War To End All Wars (for about 20 years), the United States grew to be one of the more dominant - if not the world's most dominant - economies of the world. Post-War giddiness gave way to the Roaring '20s, a stretch of unbridled economic advancement that, in a lot of ways, was fake. More and more Americans were investing in the stock market, which just kept going up. Regard, the Dow Jones as of September of the respective year:
1921: 1017.65
1922: 1465.83
1923: 1281.46
1924: 1511.50
1925: 2203.23 (October value - September 1925 wasn't available for some reason)
1926: 2264.81
1927: 2616.73 (again, October)
1928: 3437.74
1929: 4973.84
With the exception of a minor blip in 1923 the Dow Jones increased from September-to-September of every year. As Herbert Hoover accepted the Republican nomination for the presidency during the campaign in August 1928, he famously (and short-sightedly) declared:
Unemployment in the sense of distress is widely disappearing...We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poor-house is vanishing from among us. We have not yet reached the goal, but given a change to go forward with the policies of the last eight years, and we shall soon with the help of God be in sight of the day when poverty will be banished from this nation.
Cool prediction, Herb. Hoover's election over New York Governor Al Smith (who suffered politically from being Catholic, being anti-Prohibition, and his connections to Tammany Hall) in 1928 accelerated the growth of the stock market.
As more of the United States plugged in, a new Industrial Revolution occurred. But things weren't all aces. As this history professor describes, the October 1929 stock market crash and the resulting Great Depression was a perfect storm of economic calamities. Among them:
-The Immigration Act of 1924 put a quota on the number of immigrants allowed into the United States. The unintended result was that immigrants tend to need a place to live once they arrive, and once that market slowed to a trickle, it created a housing bubble. That bubble burst in Florida in 1925 with the Florida Land Boom, foreshadowing a growing economic crisis. Construction slowed in 1928.
-Goods were too durable. You didn't need to buy a radio every year if the radio never broke. Same with your car, vacuum cleaner, iron, etc. This slowed down purchasing in America.
-Wages for workers rose, but not as quickly as productivity, so the demand wasn't meeting the output of the goods.
-What goods most Americans did buy was on credit. Installment plans, which had been around for almost 100 years by that point, were decidedly becoming A Thing. This included investment in the stock market, a process known as buying on margin.
Buying on margin meant that Americans were buying stock with borrowed money. As long as the price of the stock increased (and it had for much of the previous decade heading into that fateful October 1929), then you could sell and cover your loan. But if the bottom dropped out of the stock market, not only did you lose your investment but you also had to pay the money you no longer had back to the bank. And then that's exactly what happened. The price of the stock wasn't equal to the actual value of the stock - their P/E (price-to-earnings) ratio was out of whack. And we haven't even gotten into what happens when the stock is manipulated - buy enough stock to raise the price, short it, and then buy it back after it falls in order to make money at every stage of the manipulation.
But that's not why we're here. We're here to talk about tariffs, which are simply taxes on imported goods. A protective tariff is one in which you drive up the price of foreign goods, which generally makes the buyer go with the cheaper, home-made option. Why by an avocado from Mexico for $1.25 when you can buy one from California for $1? This is where there is overlap.
Whenever there's some sort of economic downturn, the rallying cry is to Buy American! Spend money on American goods and it will help the American economy. Everybody wins, right? Enter Reed Smoot (R-Utah) and Willis Hawley (R-Oregon).
Reed Smoot had an interesting political history, winning Utah's senate seat in 1903. However, given that Smoot was an Apostle in the Church of Jesus Christ of Latter Day Saints, Utah's history with Mormonism and the condition that the Mormon Church renounce the practice of polygamy as a criteria for Utah's admittance to the Union. The result was the 1890 Manifesto, a document that officially "advised against" Mormons practicing polygamy. Utah was admitted as the 45th state in the Union. Smoot was not the first Mormon to be elected to Congress - that distinction belongs to B.H. Roberts, elected to the House of Representatives in 1898. The House of Representatives refused to seat Roberts on account of his three wives. Smoot had only one wife, but that didn't stop the Senate from debating - for four years - Smoot's viability. The Salt Lake Tribune reported that Mormon leaders (one of which Smoot certainly was) secretly approved of polygamy following the adoption of the 1890 Manifesto. Senators opposed to Smoot's seating argued that Smoot could not take the oath of office if he subscribed to a religion that approved of breaking the law. Finally, in 1907, Smoot prevailed. Though the majority of the investigative committee recommended that Smoot be expelled, there weren't enough of the 2/3 majority required to actually get rid of Smoot. Re-elected in 1908, Smoot stayed in the Senate he was defeated in the 1932 election, when a Democratic wave rebelled against the Republicans - whom the public felt hadn't done enough to stop, or at least slow, the Great Depression.
Willis Hawley had a much less dramatic political history than his partner in legislative history. He was born in Oregon in 1864 and was the president of Willamette University from 1891-1902 and was a professor of history and economics from 1891-1907, a position he resigned when he was elected to the House of Representatives. Hawley was elected every two years until the Democratic wave got him, too.
Anyhow, Smoot became Chairman of the Senate Finance Committee in 1923. Hawley was the Chairman of the House Ways and Means Committee from 1927-1931. Together they would come up with a plan that almost nobody who knew anything about politics approved of, yet was passed anyway.
A drought hit the Plains in the late 1920s (which would peak in the Dust Bowl). In an effort to cover their losses, farmers over-extended themselves to plant more crops, which meant buying equipment to plant them. There had been a robust worldwide market for American wheat, particularly in European countries which had been jacked up during World War I. By the end of the 1920s those countries started to get back on their feet, decreasing the demand for American crops. Still they planted, trying to cover their losses. This was of course made worse by the stock market crash, in which bank runs led to bank closures. Even if you hadn't invested a penny in the stock market, you could get wiped out.
In the late 1910s/early 1920s the "Protectionists" (Republicans who wanted to, well, protect the American economy at all costs) argued that the United States' economy had grown because Europe wasn't exporting anything and had to import all their goods from...somewhere, and it just happened to be the United States. With the War over, exports would increase and imports would naturally decrease. Thus, the Protectionists argued, Congress - because Congress could make this call back then - should raise the tariffs on imported goods. Protectionism worked hand-in-hand with Isolationism as the Republicans voted against joining the League of Nations.
Democrats were against a protective tariff. That little recession in the early 1920s? Protectionists argued that it would end with higher tariffs by protecting American factories and workers. Thus the Fordney-McCumber Tariff was passed in 1923, which raised the average tariff on taxable imports to 38.5%. That tariff really marked the end of prosperity for the American farmer. As a result, foreign nations issued their own retaliatory tariffs, placing higher duties on American exports. The League of Nations got involved in an effort to draw a truce between the United States (who was not a member of the League of Nations) and the rest of the world, but no agreement could be achieved. Both domestic and international economies were weakened.
Despite campaigning through 1928 to revise the tariff, President Herbert Hoover kept on keeping on. Smoot and Hawley went to work. Hawley's version in the House raised tariff rates on 845 imported goods and cut the rates on 82. By the time Smoot got done with it in the Senate, it had increased tariff rates on an additional 177 and cut rates on 254. The final bill from the Senate, after compromising with the House, raised tariff rates on 890 dutiable imports. It was deeply unpopular.
Senator Robert LaFollette (R-Wisconsin) was a weird guy. He was a Republican isolationist who supported FDR's New Deal and formed the new Progressive Party advocating for workers' rights and would be a co-founder of the America First Committee. Still, the isolationist LaFollette railed against the Smoot-Hawley Tariff, calling it:
The product of a series of deals, conceived in secret, but executed in public with a brazen effrontery that is without parallel in the annals of the Senate.
Plot twist: It wasn't unparalleled in the annals of the Senate (see: Abominations, Tariff of) but that's neither here nor there.
Check the New York Times from May 1930:
1,028 economists from across the country signed a petition asking Hoover to veto the bill, which had only passed 44-42 in the Senate, nowhere near the votes needed to override Hoover's veto. Thomas Lamont, a partner at J.P. Morgan, related that he "almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley-Smoot Tariff. That Act intensified nationalism all over the world." Henry Ford told Hoover that the tariff was "an economic stupidity." About sixty nations sent formal protests to Hoover and the government begging him not to sign it.
Hoover signed it anyway, though in private he called it "vicious, extortionate, and obnoxious." Immediately the New York Stock Exchange lost $1 billion in value - the second crash in eight months. By making it more difficult for foreign nations (mainly Europe) to sell their goods to the United States, it made it harder for them, specifically Germany, to repay their war reparations. Pretty much everyone in American government was betting on the punished countries remaining passive. They didn't.
Spain enacted the Wais Tariff a month after the Smoot-Hawley Tariff was signed, which raised the tariff on American automobiles in Spain. Three months after Hoover signed the Tariff, Canada - long an extensive trading partner with the United States - raised tariffs on textiles, agricultural tools, electrical apparatuses, meat, gasoline, shoes, jewelry, and fertilizer. In 1932 Great Britain signed the Ottawa Agreements which placed high tariffs on American goods.
These retaliatory tariffs were part of a tactic known as the Beggar-Thy-Neighbor policy, in which countries attempt to address its own economic problems by worsening the economic issues in other countries. U.S. exports in 1929 stood at about $7 billion. By the end of 1932 U.S. exports were about $2.4 billion. With the U.S. engaging aggressively in protectionist and isolationist economic policies, the rest of the world followed suit, deepening the economic crisis. World trade fell by about two-thirds from 1929 to 1934.
Economists generally agree that the Smoot-Hawley Tariff did not cause the Great Depression - that was undertaken by the aforementioned perfect storm of factors, of which the Fordney-McCumber Tariff was one. But I think we can safely assume that the Smoot-Hawley Tariff did not prop up American industry or agriculture and, by extension, worsened European economies, which were already in bad shape.
Germany's exports (which they would use to repay their WW1 debt) fell by 20% from 1930 to 1931. So in 1933, after years of depression and hyper-inflation that saw Germany's currency become "utterly worthless,"
To be fair, it's not like the Smoot-Hawley Tariff created Germany's economic problems. It just deepened them and pushed Germany to a breaking point. Germany's unemployment in the early 1930s was 30%. Economic uncertainty - of which there was plenty in Germany in the early 1930s - meant that there wasn't a majority party in the Reichstag. The National Socialist German Workers' Party used the crisis to their advantage and allied with other right-leaning parties to build a coalition that eventually led President Paul von Hindenburg to name Adolf Hitler chancellor in an effort to keep the Communists out of power. When the Reichstag burned down, Hitler blamed the Communists and used that to consolidate his power over Germany. Again, is the Smoot-Hawley Tariff responsible? Not directly, but it did help create an economic climate that led to Hitler's ascension to power. Like Thomas Lamont said, the Tariff intensified nationalism around the world.
So when President Trump says that "Trade wars aren't so bad," he might want to ask a historian or an economist. Already we're seeing reaction to the (since suspended) rise in tariffs on aluminum and steel on Canada, Mexico, and Europe. China has announced tariff increases on American pork, wine, and nuts. Mexico has delivered the most pointed tariff rates against the Trump Administration, raising tariffs on goods exported from Republican leaders' home bases - steel from Indiana (VP Mike Pence) and bourbon from Kentucky (Senate Majority Leader Mitch McConnell). Speaker of the House of Representatives Paul Ryan's home state of Wisconsin exports 90% of its cheese outside of the United States, exports which have recently been targeted for tariff increases by Canada and Mexico, and by tariff increases on Harley-Davidson motorcycles, also headquartered in Wisconsin.
A Tariff War which leads to retaliation against the United States, could have broader consequences than the economic impact of the Smoot-Hawley Tariff. Back in 1920, exports accounted for 5% of the U.S.'s Gross Domestic Product. Today's exports account for about 13% of our GDP. Again, was the Smoot-Hawley Tariff responsible for the Great Depression and World War II? Not directly. There were plenty of reasons that had to come together for both to occur. Still, we currently see this administration embracing protectionism and isolationism, when most economists explain that it doesn't really work. Ultimately the Smoot-Hawley Tariff was an unnecessary flame, the match that over a thousand economists begged not be struck, near the tinderbox of a rough generation in world history.
Sunday, March 11, 2018
How in the world does Daylight Saving Time exist?
We put a man on the daggum moon (allegedly). How is it that we still have to walk around like zombies every Spring because we lost an hour of sleep?
First off, it's "Daylight Saving Time," not "Daylight Savings Time." That "S" is as unnecessary as the concept itself. You're saving daylight, not savings daylight.
Benjamin Franklin wrote a satirical article in 1784 about "saving daylight," but it was more in the spirit of saving money by getting up, and going to bed, earlier to save money on candles and lamp oil, going so far as to suggest taxing shutters and placing guards at wax and tallow shops.
A New Zealand entomologist (insect guy) named George Hudson was taking advantage of his post office job to collect insects, and needed time later on in the day to study and analyze said bugs. In 1895 he earnestly proposed an idea to the Wellington Philosophical Society to shift time two hours forward for the summer and two hours back in the fall. It went over okay. But it was New Zealand, and all...
In 1907 a builder who loved riding horses (pretty much how every online dating bio begins) named William Willet was out early one morning doing what he loved: reader, he was riding a horse when he saw a bunch of closed curtains. It made him mad, as it does. He wrote a pamphlet called "The Waste of Daylight." However, he proposed four 20-minute advances every April, and four 20-minute decreases in September. David Lloyd George loved it. Winston Churchill - then on the Board of Trade - loved it. Sir Arthur Conan Doyle loved it, perhaps because the idea would give him more time to prove fairies existed. Prime Minister Herbert Asquith gave it a hard pass and a bill was narrowly defeated though Willet continued his march to Moar Daylight for Riding Horses until he was successful...in dying of influenza in 1915.
But there were some small, incremental successes in screwing up your body's circadian rhythms. Canadia, for instance. On July 1, 1908 the residents of what is now Thunder Bay, Ontario, where they get an average of 8h 19m of daylight on December 22 (on a clear day), started setting their clocks back an hour - probably to stave off the demons. Back when Thunder Bay - about a six-hour drive north of Minneapolis - was called Port Arthur, a local businessman petitioned the town council to adjust their clocks an hour later in the summer to let kids have a little more Vitamin D so they don't go insane as easily. It passed.
Six years later a town about 320 miles west of Thunder Bay, Kenora (near the Manitoba border), decided it would join in on the daylight-saving fun. Kenora is on the Lake of the Woods. Neighboring town Keewatin is about four miles away, but decided they were just gonna let the clock do what it do, and didn't adjust their clocks once a year. Problem was that a bunch of people lived in one and went to work/school in the other, so for a few months out of the year, towns four miles apart were actually an hour apart. The ferry had to show times in both places. It was confusing and only lasted the one summer.
In 1916, right about halftime in World War I, Germany and Austria decided to also set their clocks forward an hour as a wartime effort to conserve fuel for the war effort. Great Britain followed about two weeks later. It lasted until World War I was over, and didn't make an international appearance again until the sequel came out in 1939.
This time, Great Britain set their clocks forward two hours in what was called Double Summer Time. They tried it again in the late 1960s and saw longer days bring about a reduction in crime, reduction in road casualties, and a savings in fuel of about £35m. But of course, it was deeply unpopular, particularly in Scotland and was done away with in 1971.
And so for the United States, some states decided to move their clocks and some didn't. In a remarkable display of haphazard stupidity, author Michael Downing discovered that:
In 1965 there were 130 cities in the country with populations of 100,000 or more. 59 did not observe daylight saving. Of the 71 that did, there were at least 20 different adoption dates. In Minnesota, St. Paul was on one time, Minneapolis (12.4 miles away) was on a different time, and Duluth was on Wisconsin time. In fact, somebody even found a Minneapolis office building in which the different floors of the building were observing different time zones because they were the offices of different counties.
There were other problems. In 1930 Joseph Stalin unilaterally decided the Soviet Union would spring forward, then forgot to tell everyone to fall back in October. Rather than just do it on their own, Soviets just left things as it was for 61 years when the new Russian government just told everyone to "go to bed as usual" when it was time to fix the clocks. When Yugoslavia's president - Marshal Tito - came to visit the US in 1963. His plane landed in a Virginia town that did its own thing in regards to time as compared to the rest of the state, and no one was there to welcome him. Also in 1963 Pentagon officials were two hours late to a meeting with the Soviet Union in Alaska because no one knew what time it was there.
The Uniform Time Act of 1966 changed that mess. Now, Congress or the Secretary of Transportation can change the time zone boundaries at their leisure. Fun, huh?
Arizona and Hawaii do not currently recognize Daylight Saving Time. But it's worth noting that, without DST, Boston's day would start at 4:06am local time. Seattle's sun would come up at 4:11am; Chicago? 4:14am. New York City at 4:24am, Minneapolis a minute later.
Do I have a solution? haha no. But I sure do like to complain about it without offering one.
First off, it's "Daylight Saving Time," not "Daylight Savings Time." That "S" is as unnecessary as the concept itself. You're saving daylight, not savings daylight.
Benjamin Franklin wrote a satirical article in 1784 about "saving daylight," but it was more in the spirit of saving money by getting up, and going to bed, earlier to save money on candles and lamp oil, going so far as to suggest taxing shutters and placing guards at wax and tallow shops.
A New Zealand entomologist (insect guy) named George Hudson was taking advantage of his post office job to collect insects, and needed time later on in the day to study and analyze said bugs. In 1895 he earnestly proposed an idea to the Wellington Philosophical Society to shift time two hours forward for the summer and two hours back in the fall. It went over okay. But it was New Zealand, and all...
In 1907 a builder who loved riding horses (pretty much how every online dating bio begins) named William Willet was out early one morning doing what he loved: reader, he was riding a horse when he saw a bunch of closed curtains. It made him mad, as it does. He wrote a pamphlet called "The Waste of Daylight." However, he proposed four 20-minute advances every April, and four 20-minute decreases in September. David Lloyd George loved it. Winston Churchill - then on the Board of Trade - loved it. Sir Arthur Conan Doyle loved it, perhaps because the idea would give him more time to prove fairies existed. Prime Minister Herbert Asquith gave it a hard pass and a bill was narrowly defeated though Willet continued his march to Moar Daylight for Riding Horses until he was successful...in dying of influenza in 1915.
But there were some small, incremental successes in screwing up your body's circadian rhythms. Canadia, for instance. On July 1, 1908 the residents of what is now Thunder Bay, Ontario, where they get an average of 8h 19m of daylight on December 22 (on a clear day), started setting their clocks back an hour - probably to stave off the demons. Back when Thunder Bay - about a six-hour drive north of Minneapolis - was called Port Arthur, a local businessman petitioned the town council to adjust their clocks an hour later in the summer to let kids have a little more Vitamin D so they don't go insane as easily. It passed.
Six years later a town about 320 miles west of Thunder Bay, Kenora (near the Manitoba border), decided it would join in on the daylight-saving fun. Kenora is on the Lake of the Woods. Neighboring town Keewatin is about four miles away, but decided they were just gonna let the clock do what it do, and didn't adjust their clocks once a year. Problem was that a bunch of people lived in one and went to work/school in the other, so for a few months out of the year, towns four miles apart were actually an hour apart. The ferry had to show times in both places. It was confusing and only lasted the one summer.
In 1916, right about halftime in World War I, Germany and Austria decided to also set their clocks forward an hour as a wartime effort to conserve fuel for the war effort. Great Britain followed about two weeks later. It lasted until World War I was over, and didn't make an international appearance again until the sequel came out in 1939.
This time, Great Britain set their clocks forward two hours in what was called Double Summer Time. They tried it again in the late 1960s and saw longer days bring about a reduction in crime, reduction in road casualties, and a savings in fuel of about £35m. But of course, it was deeply unpopular, particularly in Scotland and was done away with in 1971.
And so for the United States, some states decided to move their clocks and some didn't. In a remarkable display of haphazard stupidity, author Michael Downing discovered that:
In 1965 there were 130 cities in the country with populations of 100,000 or more. 59 did not observe daylight saving. Of the 71 that did, there were at least 20 different adoption dates. In Minnesota, St. Paul was on one time, Minneapolis (12.4 miles away) was on a different time, and Duluth was on Wisconsin time. In fact, somebody even found a Minneapolis office building in which the different floors of the building were observing different time zones because they were the offices of different counties.
There were other problems. In 1930 Joseph Stalin unilaterally decided the Soviet Union would spring forward, then forgot to tell everyone to fall back in October. Rather than just do it on their own, Soviets just left things as it was for 61 years when the new Russian government just told everyone to "go to bed as usual" when it was time to fix the clocks. When Yugoslavia's president - Marshal Tito - came to visit the US in 1963. His plane landed in a Virginia town that did its own thing in regards to time as compared to the rest of the state, and no one was there to welcome him. Also in 1963 Pentagon officials were two hours late to a meeting with the Soviet Union in Alaska because no one knew what time it was there.
The Uniform Time Act of 1966 changed that mess. Now, Congress or the Secretary of Transportation can change the time zone boundaries at their leisure. Fun, huh?
Arizona and Hawaii do not currently recognize Daylight Saving Time. But it's worth noting that, without DST, Boston's day would start at 4:06am local time. Seattle's sun would come up at 4:11am; Chicago? 4:14am. New York City at 4:24am, Minneapolis a minute later.
Do I have a solution? haha no. But I sure do like to complain about it without offering one.
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