THE RED FLAG PRESENTS: DONALD TRUMP--HE'S A BUSINESSMAN TOO--BETTER LOOK OVER YOUR SHOLDER

I have to laugh when Trumpsters insist that because Donald Trump is a businessman, he can "fix" America and "make America great again."  These predominantly White working-class voters and the few dark others who voted for President Donald J. Trump showed their ignorance of American 20th century history.  Few, if any Trumpsters--if any, seemed to realize that Trump is not the first successful businessman and "media star" to be elected to the Office of the President: Herbert Clark Hoover, U.S. President, 1929-1933, who like Trump campaigned and won as "America's great rescuer."

Amity Shalaes in The Forgotten Man: A New History of the Great Depression (2007) writes a critique of "The Beneficent Hand" of the market.  Shalaes writes that in January 1927, floods changed the course of history, and the flood of 1927 was no exception.  [This is the flood featured in Zora Neale Hurston's Their Eyes Were Watching God].  When the waters of the Mississippi broke through banks and levees that spring, the disaster was enormous.  A wall of water pushed down the river, covering the area where nearly a million lived.  Commerce Secretary Herbert Hoover raced to Memphis and took command. 

Hoover, like Trump, knew how to make deals.  He talked railroads into transporting the displaced for free and carrying freight at a discount.  He commandeered private outboard motors and built motorboats of plywood.  He urged the people who were not yet flooded out, such as the population around the Bayou des Glaises levee, to evacuate early, then rescued with the trains those tens of thousands who had ignored his warning.  He helped the Red Cross launch a fund drive; within a month the charity had already collected promises of more than $8 million, an enormous figure for the time.

Several hundred thousand ended up in new refugee camps, many planned, right down to the latrines, by Hoover and his team.  Hoover asked governors of each state to name a dictator of resources--he used the word "dictator"-- and the governors complied.  The dictators then managed the dysentery and the hunts for the missing along the flood-waters in their states hour by hour.  He and the Red Cross sent the refugees to concentration camps--a phrase not so frightening then as it is today--at Vicksburg, Delta, and Natchez.  One hundred thousand blankets from army warehouses were shipped to warm the refugees.

Things felt calmer on Hoover's watch.  By mid-May, though the flooding was far from over, anecdotes began to compete in the news with the reports of tragedy.  Hoover, [like Trump used the media], wired or broadcast his analyses of the meaning of the disaster.  Such flooding, he said, "is a national problem and must be solved nationally and vigorously."  [Like Trump] the commerce secretary also spent a lot of time reassuring.  The waters might hide the land, the crops might be lost, but the mood was now hopeful.  More than any single figures, Hoover was succeeding in making Americans feel that the South would be all right again.

Hoover, although not a pop-star like Trump, was already so famous that his name was a verb--to Hooverize, after the efforts in food rationing that he had led from a post as Washington's food administrator at the end of World War I.  Americans recalled that he had led the humanitarian drive to feed occupied Belgium during the war.  Now Hoover had outdone himself--and on a home territory whose geography covered more than Belgium's.  What the public liked about Hoover was their sense of him as guardian, that he would protect them and their property.  If Hoover could win the presidential election the following year, then he might hold back whatever waters of adversity threatened. 

Hoover was a Republican, like the sitting president, Calvin Coolidge, [Silent Cal as Ronald Reagan idolized as hero and savior].  He would pick-up where Coolidge left off--though he might update things, for everyone knew that Hoover, a mining engineer, could do amazing things with technology.  One of Hoover's neatest feats--and he pulled it off right around the time of the flood--was to acquaint the public with an early version of television.

"Herbert Hoover made a speech in Washington yesterday afternoon.  An audience in New York heard and saw him," the New York Times wrote in awe, adding that Hoover had "annihilated" geographic distance and commenting in a headline: "Like a Photo come to Life."  It was not yet modern television [which Trump benefited from], but wired images and the telephone combined.  Still, the idea took hold in the minds of the reporters.  Under Hoover, it was easy to believe that the 1920s [like the 2000s] were merely the American beginning.

In the summer of 1927, Coolidge issued a short statement: "I do not choose to run for president in 1928."  It was another of Coolidge's acts of refraining, his last and greatest.  And it opened a door for Hoover.

The election of 1927 went to Hoover, who polled more than 20 million of the 36 million odd votes cast, taking 444 electoral votes to the Democrats' 87, even more electoral votes than Coolidge had in 1924.  The Republicans also gained strongly in Congress, so that they now held a ten-seat lead in the Senate and nearly a hundred more seats than Democrats in the House.

THE ACCIDENT

"CLOSING RALLY VIGOROUS," remarked the New York Times headline when the stock market crashed the last Tuesday in October 1929.

 

Right away--in November 1929--Hoover pushed to expand an existing public buildings program by the healthy sum of $423 million on the theory that the spending would boost the economy.  In Washington, builders put up great structures--a new agriculture department, for example.  He asked his secretary of commerce, the man who held his old job, to establish a national system of cooperation among the states in public works projects.  When Congress convened in December, the president called for "the expansion of the merchant marine, [as Trump has called for the army], the regulation of inter-State distribution of electric power, the consolidation of railroads, the development of public health services and departmental reorganization for greater economy." 

But this was only the beginning.  This time, he thought, perhaps the president could broker the recovery.  "Words are not of any great importance in times of economic disturbance," he announced.  "It is action that counts."  The problem with the economy at least as it was evolving, was mostly a monetary or an international one--Germany was already in depression, [which led to the election of Hitler and the Nazis].  Yet at first Hoover focused on fixing it with domestic fiscal tools.  And before a year would pass, Hoover had done damage that did matter on three fronts: by intervening in business, by signing into law a destructive tariff, and by assailing the stock market.

SMOOT-HAWLEY

By April 1930, the secretary of commerce would be able to announce that public works spending was at its highest level in five years.  At the same time, Hoover went to work on another front: farm prices.  These were at painful lows, in part because of production incentives programs advanced by Hoover himself earlier in the decade.  The government had lured farmers into overproduction.

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Looser money or credit policies could have limited the farmers' problems.  So in fact could have more orthodox adherence to the gold standard--giving up sterilization.  But Hoover chose to stick to the narrow challenge of price without regard to monetary factors.  If farm prices were too low, he would raise them.  Strengthening protection might bring them up.  Protectionism had in any case been part of the Republican Party platform in 1928, in which the Party had reaffirmed the tariff as a "fundamental and essential principle of the economic life of this nation."  And on April 15, 1929, well before the autumn siege, the president had as good as promised a new agricultural tariff: "such a tariff not only protects the farmer in our domestic market, but also stimulates him to diversify his crop."

With the farmers in need, the tariff idea gained momentum.  Lawmakers pushed for it.  In the House, the leader was Willis Hawley of Oregon; in the Senate, Reed Smoot of Utah.  In the end the legislation called for the highest tariffs in U.S. history.  As in the case of Trump's "Border Tariffs", the new law made sense on an emotional level: America was in trouble, so America's domestic producers must be protected with fresh advantage.  In the autumn of 1929, it became clear that a large new tariff would indeed pass the Congress--and that it would be up to Hoover whether to sign it.

CAUTION FALLING ON DEAF EARS

For the general economy the tariff was bad news.  As Benjamin Anderson of Chase Bank would point out in an address the next March, the preceding fifteen years, going back to 1914, had seen an excess of exports over imports of $25 billion.  America sold more than it bought in the international arena.  Others agreed.  A new tariff would shut U.S. sellers off from the world at a time when they badly needed customers.  It would deprive foreign governments of trade.  It would drive the prices of imports up for consumers at home.  It would hurt other nations, nations that the United States hoped would become its markets.  It would certainly hurt the worker.  It would also, in the long run, hurt the farmer, by offering yet more--and greater--incentives to continue doing something that was uneconomical.

Unemployment rose from 3 percent in 1929 to 9 percent in 1930.

Of the problems confronting the economy, the tariff threat seemed most urgent, and easiest to stop.  There were disputes but some said it was the heaviest tariff in American history.  Yet Hoover egged the lawmakers on to complete the legislation.  In May 1930, one thousand and twenty-eight economist signed and open letter urging the president to veto the tariff legislation--and published the letter in the New York Times.  Irving Fisher, a professor at Yale who had been a student of the great philosopher William graham Sumner, was among them.  So was James Bonbright, the expert in utilities finance.  And so was Rex Tugwell, whose name came after Bonbright's on the list.  The language of their protest was strong:

        We are convinced that increased restrictive duties would be a mistake.  They would operate, in general, to increase the prices they would encourage concerns with higher costs to undertake production, thus compelling the consumer to subsidize waste and inefficiency in industry.  At the same time they would force him to pay higher rates of profit to established firms.  Few people could hope to gain from such a change.

The economists went on to predict that "many countries would pay us back in kind."  As for unemployment, they reminded the Republicans, "we cannot increase employment by restricting trade."  They pointed out that farmers, the bloc whom the lawmakers were aiming to please, would also suffer from Smoot-Hawley.  "The vast majority of farmers would also lose.  Their cotton, pork, lard, and wheat are export crops and are sold in the world market."  Among the other signatories were seven professors from Hoover's Alma-mater, Stanford, including the dean of a business school that Hoover had helped to found--all warning that without free trade, the golden passport-less world would fade.

Herbert Hoover, an internationalist, should know this.  Thomas Lamont of J.P. Morgan was watching his bank shrink; it would lose half its net worth in the Hoover years.  "I almost went down on my knees to beg Herbert Hoover to veto the asinine 'Hawley-Smoot' tariff," Lamont recalled.

Washington received 106 wires from forty-nine General Motors overseas officers in fifteen counties.  GM's European director, Graeme K. Howard, sent a telegram whose message was as terse as it was clear: PASSAGE BILL WOULD SPELL ECONOMIC ISOLATION UNITED STATES AND MOST SERVERE DEPRESSION EVER EXPERIENCED.

Print medium worldwide wrote editorials asking similarly, "Can Mr. Hoover Limit the Catastrophe Which the American Protectionists Are Preparing?"  As the New York Times Carlisle MacDonald wrote.  French Prime Minister Aristide Briand had proposed a novel idea: a United Europe, including a common market, also then a new thought.  The author speculated that such an entity might not like the idea of Smoot-Hawley and would become a "medium for counteraction" at some point.

In the United States there was also another kind of concern-- that civilized Europe would be lost [to Communism] if the United States did not trade with her.

The medicine ball was in Hoover's hands, and this time he dropped it.  He announced that it was nationally important to have a tariff, and also important for the executive to play a key strategic role in formulating it.  He wanted to stop "congressional logrolling"--the congressional game of setting tariffs on specific industries to please specific constituencies.

The position he therefore ended up adopting was Hooveresque.  He would not oppose the new tariff but would battle to make it fairer.  He therefore advocated the engineering of a "flexible tariff" that would be controlled by a bipartisan commission made up of a precise fifty-fifty breakdown of commissioners from each party.  The commission would achieve an important goal of Hoover's: they would take tariffs as far away from politicians as he could get them.  It would be a "definite rate-making body acting through semi-judicial methods."  The commission would then set tariffs based on a rational review of costs and prices at home and abroad.  There was one other thing: the executive would then have the authority "to promulgate or veto the conclusions of the commission."  The progressive and engineer in him triumphed over the international merchant.

Congress gave Hoover what he wanted.  Hoover not only signed the legislation; he signed it ceremoniously, in June 1930, using six gold pens, one each for the Republican lawmakers Smoot, Watson, Shortridge, Hawley, Treadway, and Bacharach.  But by focusing on winning the battle of flexible tariffs, Hoover lost the more important struggle: to right the ship in a storm.

The economist proved right: Smoot-Hawley provoked retaliatory protectionist actions by nations all over the globe, depriving the United States of markets and sending the country into a deeper slump.  Dozens of nations acted, as it became clear the tariff would become law, or after the formal signature.  France imposed an auto tariff; so did Italy.  Australia and India legislated new duties.  Canada raised tariffs three times.  The first tariff, an emergency retaliation, hit 125 classes of U.S. products.  The Swiss, furious at a duty on watches, boycotted U.S. imports to their country.

There were indirect international consequences as well.  Foreign governments still owed considerable debts to the United States.  Some of those debts were denominated in gold.  To get the gold to pay those debts, the governments and their people had to be able to sell in the United States.  The tariffs made this necessary task more difficult.  At a time when the country could have pulled itself out of a slump through trade, Washington was buttressing the walls preventing that trade.

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Comment by mary gravitt on February 24, 2017 at 1:02pm

History tells all.  This is the reason that Americans are taught to ignore it as well as geography.  Without a knowledge of both subjects you are controlled by the Propaganda that politicians offer.  Living in fear is how the American people are controlled.

Of all the thing that are in the news, Smoot-Hawley is never mentioned.  It is Smoot-Hawley which sealed the US into the Great Depression and help to bring Hitler to Power.  So get out your history books and study both WWI and WWII, then read your future between the pages.

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