Wednesday, December 20, 2017

Did tariffs help growth in the 19th century US economy?

Douglas Irwin interview with Tim Taylor
""Did protectionism foster U.S. economic growth and development in the late 19th century? I’m not convinced that we can attribute America’s industrial advance in the 19th century to high tariffs or protection. There are a couple points to make on this. ... A lot of the industrialization occurred prior to the Civil War, between 1840 and 1860 when we had low and declining tariffs. ... In addition, there are so many other things going on. We had open immigration, so there was a lot of growth in the labor force. We revamped our banking laws during the Civil War, finance became very important, and we got capital deepening. That’s not because of the tariff; that’s because the whole financial system of the United States was really developing. Another point to be made is that when you look at the high productivity growth sectors in the U.S. economy in the late 19th century, John Kendrick and others have shown they’re mostly in the non-traded goods, service sector. Transportation and utilities were growing very rapidly. It’s hard to see how the tariff would help the nontraded goods, service sector of the economy improve its performance. Also, Steve Broadberry has done some work showing that increasing productivity in the service sector was very important to the United States catching up with Britain in the late 19th century. That, too, doesn’t seem to be tariff related. All of this doesn’t lend itself to an easy story where the tariffs are the key factor behind U.S. growth and industrialization."" 

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