POLI 346 Lecture Notes - Roaring Twenties, Pound Sterling

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Published on 14 Oct 2012
Course
Professor
Signs of Leadership?
US Foreign Economic Policy Evolves (Following WWI)
USD becomes as attractive as the British pound
trade expansion during WWI… then adjustment woes
- pretty much everything the US produced was in demand
during the war, during peace time production demand drops
off
followed by the “Roaring Twenties”
stock market crashes on October 29, 1929
- borrowed money used to purchase stocks, stock prices get
too high, bubble bursts, rush to unload stocks as people can‟t
afford to payback loans without stock yield
- the banks are in trouble
- economy slows down, workers are laid off, demand drops
further… downward spiral
Response to the Crisis: Raising the Tariff
demands for assistance from farmers
other groups more organized than before (WWI mobilized firms to
make bids on contracts, etc.) now well mobilized to go make
demands
Smoot-Hawley Tariff (1930) wide range of products, very high
tariffs
- manufactured, agricultural, etc.
one of two things will happen (if not both):
- intended to stimulate demand, or at least ensure that US
market is left for American producers (protectionism)
- also will encourage American employment
the SH tariff fails to stop slide and triggers retaliations
- other countries stop importing American goods, hurting
export industry
- thousands of economists signed a petition to block SH, they
were ignored
- Pres. Hoover pays the price
Why this Response to the Crisis?
rival arguments concerning the tariff:
- constructivist
o emphasize republican ideology Hoover was a
republican, republicans supported higher tariffs
- analytical liberals
o stress domestic interests and institutions
o a number of groups find protectionism appealing as
they can‟t face competition like they used to
o classic bottom-up political process
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Document Summary

Usd becomes as attractive as the british pound. Trade expansion during wwi then adjustment woes. Pretty much everything the us produced was in demand during the war, during peace time production demand drops off followed by the roaring twenties . Stock market crashes on october 29, 1929. Borrowed money used to purchase stocks, stock prices get too high, bubble bursts, rush to unload stocks as people can t afford to payback loans without stock yield the banks are in trouble. Economy slows down, workers are laid off, demand drops further downward spiral. Other groups more organized than before (wwi mobilized firms to make bids on contracts, etc. ) Now well mobilized to go make demands. Smoot-hawley tariff (1930) wide range of products, very high tariffs. One of two things will happen (if not both): intended to stimulate demand, or at least ensure that us market is left for american producers (protectionism) The sh tariff fails to stop slide and triggers retaliations.

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