by Rodrigue Tremblay
May 28, 2009
“I almost went down on my knees to beg [President] Herbert Hoover to veto the asinine Hawley-Smoot Tariff.”…“That Act intensified nationalism all over the world.” — Thomas Lamont, banker and economic adviser, June 1930
“Now is a time where we have to be very careful about any signals of protectionism.” –President Barack Obama, February 19, 2009
“From the purely economic point of view nothing speaks against free trade and everything against protectionism.” — Ludwig von Mises (1881-1973), Austrian economist
When the economy is booming, foreign borrowings and imports of goods and services from other countries are most welcome. They allow for more spending without inflation and they raise living standards. It is a version of having your cake and eating it too. In an economic downturn, however, the political reflex of populist politicians is to turn protectionist and to become economic isolationists by raising trade barriers. In such an environment, foreign competition becomes a convenient scapegoat for the crisis, even though the causes of such crisis are most often purely domestic in nature.