‘The Triumph of Economic Freedom’ Review: A Few Lessons From History

Economic nationalists insist that tariffs were central to the economy’s takeoff in the late 19th century. The evidence suggests otherwise.

By Samuel Gregg. He is the president of the American Institute for Economic Research. He reviewed the book The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism by Phil Gramm and Donald J. Boudreaux. Excerpts:

"When making their case for protectionism, for example, today’s economic nationalists insist that tariffs were central to the U.S. economy’s takeoff in the late 19th century. Critics of that position (Douglas A. Irwin of Dartmouth, among others) contend, with better evidence, that America’s explosive growth in those decades had little to do with tariffs. If anything, tariffs retarded growth in the sectors in which they were highest."

"The writing of American economic history, they argue, has long been dominated by skeptics of capitalism peddling myths that nonetheless retain potency and, predictably, populate high school and college textbooks."

"Far from being the laissez-faire dogmatist portrayed by historians such as Arthur Schlesinger Jr. and economists such as John Kenneth Galbraith and Paul Samuelson, President Herbert Hoover was, the authors contend, effectively a proto-New Dealer who tried to beat the Depression with the heavy hand of government. Hoover’s attempts to keep prices and wages from falling, and his willingness to sign the Smoot-Hawley Tariff Act in 1930—which taxed some 20,000 imported goods—did nothing to promote growth and much to impede it."

"The 1933 National Industrial Recovery Act . . . allowed the federal government effectively to cartelize American industry with, Messrs. Gramm and Boudreaux state, “the objective of preventing prices and wages from falling.” Combined with Roosevelt’s empowerment of unions and his demonization of business, the U.S. government compromised the economy’s capacity to adjust and recover. Contrary to popular wisdom—and what our children read in U.S. history classes—aggressive interventions turned what would have been a recession into a decadelong economic cataclysm."