Dallas Fed President: Protectionism Is 'Crack Cocaine' Of Economics
If it ever crossed your mind: "I wonder what Dallas Federal Reserve President Richard Fisher thinks about protectionism," then wonder no longer.
"Protectionism is the crack cocaine of economics," Fisher said on C-Span this morning.
"It provides an immediate high that leads to economic death. We cannot afford to go down that route," said Fisher, one of 12 Fed district bank presidents, all of whom are under Fed Reserve Chairman Ben Bernanke.
Fisher was warning against the "Buy American" provisions in President Obama's stimulus plan and urged him to avoid language that will antagonize trading partners.
Protectionism leads to high tariffs and those lead to retaliatory tariffs from other nations, driving up the cost of goods, shutting down the flow of goods and extending recessions.
Many economists point to the disastrous Smoot-Hawley Tariff of 1930, which not only prolonged the Great Depression in the U.S., it did the same to the rest of the world, thanks to a tariff-happy President Hoover and a Congress eager to try to help Americans at the expense of the rest of the world without thinking about the long-term consequences.
To quote the Encyclopedia Britannica: "In response to the stock market crash of 1929, however, protectionism gained strength, and, though the tariff legislation subsequently passed only by a narrow margin (44–42) in the Senate, it passed easily in the House of Representatives. Despite a petition from more than 1,000 economists urging him to veto the legislation, Hoover signed the bill into law on June 17, 1930.
Smoot-Hawley contributed to the early loss of confidence on Wall Street and signaled U.S. isolationism. By raising the average tariff by some 20 percent, it also prompted retaliation from foreign governments, and many overseas banks began to fail."
February 2, 2009; 12:36 PM ET
Categories: The Ticker | Tags: Obama, Smoot-Hawley, protectionism, tariffs, trade
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