When most Americans think of the Smoot-Hawley Tariffs, they think of economic disaster. But if you ask why, most Americans may need a short refresher course. Below, you will find just that. Appearing on Derek Thompson’s Plain History podcast, Douglas Irwin (an economist and historian at Dartmouth) revisits the 1930 Smoot-Hawley Tariff Act, which raised tariffs on over 20,000 products imported into the United States. The law was passed despite warnings from executives like Henry Ford (who called the tariff act “an economic stupidity”) and a petition signed by 1,028 American economists, who argued that the tariffs would raise prices and spark a trade war, leaving the United States isolated. Their concerns were ultimately well-founded. The Smoot-Hawley Tariffs, supported by a Republican president and Congress, had the unintended consequence of deepening, not ending, the Great Depression.
Mark Twain allegedly said that “History doesn’t repeat itself, but it often rhymes.” But sometimes history may well repeat itself or come very close, and that’s where we seem to be headed right now. As in 1930, we have Republicans implementing new tariffs, but this time with the hope of re-engineering the world economy and bringing manufacturing back to America. Meanwhile, economists (even conservative ones) warn that these policies risk repeating the mistakes of Smoot-Hawley.
Below you can hear the assessment of the economic historian Niall Ferguson, who, in speaking with Bari Weiss, explains why Donald Trump’s tariffs will fail to re-industrialize America. The golden age of manufacturing in America is long gone, and it’s not coming back, partly thanks to automation. (Morgan Housel has more to say on that.) But even worse, the chaotic implementation of these policies risks triggering a trade war, “a major financial crisis comparable in scale to 2008,” or even a military crisis that an isolated America would be ill-equipped to handle. Speaking on Meet the Press this weekend, investor Ray Dalio ominously voiced very similar concerns, saying “something worse than recession” may be on the horizon.
For another take, you can hear Preet Bharara’s conversation with Justin Wolfers, where the Australian economist warns that Trump’s tariffs may have few benefits and mostly costs, some quite profound. By launching a trade war, America will trade less and find its global influence diminished, leaving a void that China can fill. Echoing Niall Ferguson, Wolfers also cautions that you can’t turn back the economic clock. He notes:
A hundred years ago, we had actually the same debate, but it was because we were moving from the land, from a predominantly agricultural economy, to a manufacturing-based economy. And we moved from an enormous share of the population working in agriculture to working in manufacturing, and that raised the American middle class.
There was a lot of nostalgia. Why aren’t we back on the land? And the subsequent stage of economic development is we move out of the factories, and we move and become engineers and computer scientists and software designers. And we’re in a much more cognitive economy.
And we are not inhaling black soot in our mines or in our factories during the day. And that’s the future of the American economy. And it’s one that speaks well to the skills that Americans have.
We’re the most educated workforce in the world. And so presumably the jobs of the future are those, the jobs we want are those that cater to the extreme productivity and education of American workers.
How have we reached the point where we’re running the same failed experiments again, all to reclaim an illusory bygone economic age? It’s a hard question to contemplate, but I ask that question again. Anyone? Anyone? Anyone?
Prada, Alfa Romeo, Pellegrino, Ferrari, Illy, Lamborghini, Gucci: these are a few Italian corporations we all know, though we don’t necessarily know that they’re all from the north of Italy. The same is true, in fact, of most Italian brands that now enjoy global recognition, and according to the analysis presented in the RealLifeLore video above, that’s not a coincidence. More than 160 years after the unification of Italy, the south remains an economic and social under-performer compared to the north, reflected in measures like the Human Development Index, GDP per capita, and even voter turnout. At this point, the disparity between the two halves of the country looks starker than that between the former East and West Germany.
The reasons begin with geography: besides its obvious proximity to the rest of Europe, northern Italy is home to the highly navigable Po River and its surrounding valley, the freshwater (and hydroelectric power) sources of the Alps, and the deep-water ports at Trieste and Genoa. What’s more, it doesn’t much overlap with the fault zone under the Apennine Mountains of central and southern Italy, and thus isn’t as exposed to the earthquakes that have taken such a toll over the centuries. Nor are any of the country’s active volcanoes — including Mt. Vesuvius, which destroyed Pompeii in the year 79 and killed thousands of Neapolitans in 1631 — located in the north.
After the fall of the Roman Empire, the political fates of what would become northern and southern Italy also diverged. Large parts of the south experienced rule by Greeks, Arabs, Normans, Spaniards, and Austrian Habsburgs. As the video’s narration tells the story, “The long reign of foreign powers throughout southern Italy established a culture of absentee landlords, large land holdings worked by peasants, and feudalism that persisted for much longer than it did in the north, which for centuries after the Middle Ages was controlled by various thriving, independently governed communes and city-states that built up large amounts of trust, or social capital, between the people who lived there and the institutions they built.”
Even at the time of unification, southern Italy had less infrastructure than northern Italy, a difference that remains painfully obvious to any travelers attempting to make their way across the country today. It also had quite a lot of catching up to do with regard to industrial output and literacy rates. Though certain gaps have narrowed, the north-south divide has actually become more pronounced in certain ways since, not least due to the recrudescence of Mafia influence since the Second World War (a major factor in the persistent lack of a bridge to Sicily, as recently featured here on Open Culture). Not to say that each half is homogeneous within itself: spend enough time in any of the regions that constitute either one, and it will come to feel like a distinct nation unto itself. Eventually, you may also find yourself in agreement with the Italians who insist that Italy never really unified in the first place.
Based in Seoul, Colin Marshall writes and broadcasts on cities, language, and culture. His projects include the Substack newsletterBooks on Cities and the book The Stateless City: a Walk through 21st-Century Los Angeles. Follow him on the social network formerly known as Twitter at @colinmarshall.
If you’ve lived or traveled in Japan, you know full well how much of daily life in that cash-intensive society involves the use of thousand-yen bills. Once considered the equivalent of the American ten-spot, the yen’s lately having fallen to its lowest value in decades means that it’s now worth closer to six U.S. dollars. This is good news for tourists, and especially so for tourists who appreciate the woodblock-print art of Hokusai, whose famous Great Wave off Kanagawa adorns the brand new ¥1000 banknote. Issued just yesterday by the Bank of Japan, it also bears the image of bacteriologist Kitasato Shibasaburō, who co-discovered the infectious agent of a bubonic plague outbreak in 1894.
The last revision of the ¥1000, twenty years ago, also featured a bacteriologist: Noguchi Hideyo, who identified syphilis as the cause of progressive paralytic disease. Before Noguchi, it bore the image of Natsume Sōseki, one of the most celebrated writers in the history of Japanese letters.
The Bank of Japan tends to roll out banknote designs for each official era, which begins whenever a new emperor ascends to the throne; the current one began in May of 2019, after Emperor Akihito stepped down and his son Naruhito stepped up. Other historical figures pictured on the currency of this Reiwa era, as it’s called, include Tsuda University founder Tsuda Umeko and “father of Japanese capitalism” Shibusawa Eiichi.”
A not just respected but popular and commercially successful artist, Hokusai knew a thing or two about capitalism himself. Yet he also had an uncommon eye for the beauty of Japan, his distinctive perceptions of which have been highly influential in both Eastern and Western art for nearly two centuries now. Japanese banknotes have previously featured images of Mount Fuji, Ogata Kōrin’s six-panel painting of irises, and a scene from the Tale of Genji. But this is the first time any has drawn from ukiyo‑e, the “pictures of the floating world” of which Hokusai was one of several masters who worked from the seventeenth through the nineteenth century. A Great Wave bill is something to celebrate, but given that today happens to be the Fourth of July, let it be said that the pyramid with the eye is also pretty cool.
Based in Seoul, Colin Marshall writes and broadcasts on cities, language, and culture. His projects include the Substack newsletterBooks on Cities and the book The Stateless City: a Walk through 21st-Century Los Angeles. Follow him on Twitter at @colinmarshall or on Facebook.
This past week, the influential psychologist and economist Daniel Kahneman passed away at age 90. The winner of the 2002 Nobel Prize in Economic Sciences, Kahneman wrote the bestselling book Thinking, Fast and Slow where he explained the two systems of thinking that shape human decisions. These include “System 1,” which relies on fast, automatic and unconscious thinking, and then “System 2,” which requires attention and concentration and works more slowly. And it’s the interplay of these two systems that profoundly shapes the quality of our decisions in different parts of our lives, including investing.
In the interview above, Steve Forbes asks why individual investors persist in believing that they can pick stocks successfully over time, despite ample evidence to the contrary. Drawing on his research, Kahneman describes the “illusion of skill,” where investors “get the immediate feeling that [they] understand something,” which is much “more compelling than the knowledge of statistics that tells you that you don’t know anything.” Here, System 1 creates the “illusion of skill,” and it overwhelms the slower analytical thinking found in System 2—the System that could use data to determine that stock picking is a fool’s errand. When Forbes asks if investors should ultimately opt for index funds instead of individual stocks, Kahneman replies “I am a believer in index funds,” that is, unless you have very rare information that allows you to pick stocks successfully.
Later in the interview, Kahneman touches on another important subject. In his mind, the first question every investor should ask is not how much money should I plan to make, but rather, “How much can I afford to lose.” Every investor should assess their risk tolerance, in part so that you can handle turbulence in the market and stick with your initial investment plan. If you are not aware of your risk tolerance, “when things go bad, you will want to change what you are doing, and that’s the disaster in investing… Loss aversion can kill you.” He continues, “Emotions are indeed your enemy. The worst thing that could happen to you … is to make a decision and not stick with it, so that you bail out when things go badly, so that you sell low and buy high. That is not a recipe for doing well in the stock market, or anywhere.” Ideally, you should figure out upfront how much you want to put in the stock market, and how much you want to keep out, so that you can psychologically manage the ups and downs of investing.
From here, Kahneman comes to his most important piece of advice for investors: Know yourself in terms of what you could regret. If you are prone to regret, if investing makes you feel insecure and lose sleep at night, then you should adopt a “regret minimization strategy” and create a more conservative portfolio to match it. Read more about that here. Also see Chapters 31 (Risk Policies) and 32 (Keep Score) in Thinking, Fast and Slow where Kahneman talks more about investing.
This post originally appeared on our sister/side-project site, Open Personal Finance.
Why must we all work long hours to earn the right to live? Why must only the wealthy have access to leisure, aesthetic pleasure, self-actualization…? Everyone seems to have an answer, according to their political or theological bent. One economic bogeyman, so-called “trickle-down” economics, or “Reaganomics,” actually predates our 40th president by a few hundred years at least. The notion that we must better ourselves—or simply survive—by toiling to increase the wealth and property of already wealthy men was perhaps first comprehensively articulated in the 18th-century doctrine of “improvement.” In order to justify privatizing common land and forcing the peasantry into jobbing for them, English landlords attempted to show in treatise after treatise that 1) the peasants were lazy, immoral, and unproductive, and 2) they were better off working for others. As a corollary, most argued that landowners should be given the utmost social and political privilege so that their largesse could benefit everyone.
This scheme necessitated a complete redefinition of what it meant to work. In his study, The English Village Community and the Enclosure Movements, historian W.E. Tate quotes from several of the “improvement” treatises, many written by Puritans who argued that “the poor are of two classes, the industrious poor who are content to work for their betters, and the idle poor who prefer to work for themselves.” Tate’s summation perfectly articulates the early modern redefinition of “work” as the creation of profit for owners. Such work is virtuous, “industrious,” and leads to contentment. Other kinds of work, leisurely, domestic, pleasurable, subsistence, or otherwise, qualifies—in an Orwellian turn of phrase—as “idleness.” (We hear echoes of this rhetoric in the language of “deserving” and “undeserving” poor.) It was this language, and its legal and social repercussions, that Max Weber later documented in The Protestant Ethic and the Spirit of Capitalism, Karl Marx reacted to in Das Capital, and feminists have shown to be a consolidation of patriarchal power and further exclusion of women from economic participation.
Along with Marx, various others have raised significant objections to Protestant, capitalist definitions of work, including Thomas Paine, the Fabians, agrarians, and anarchists. In the twentieth century, we can add two significant names to an already distinguished list of dissenters: Buckminster Fuller and Bertrand Russell. Both challenged the notion that we must have wage-earning jobs in order to live, and that we are not entitled to indulge our passions and interests unless we do so for monetary profit or have independent wealth. In a New York Times column on Russell’s 1932 essay “In Praise of Idleness,” Gary Gutting writes, “For most of us, a paying job is still utterly essential — as masses of unemployed people know all too well. But in our economic system, most of us inevitably see our work as a means to something else: it makes a living, but it doesn’t make a life.”
In far too many cases in fact, the work we must do to survive robs us of the ability to live by ruining our health, consuming all our precious time, and degrading our environment. In his essay, Russell argued that “there is far too much work done in the world, that immense harm is caused by the belief that work is virtuous, and that what needs to be preached in modern industrial countries is quite different from what has always been preached.” His “arguments for laziness,” as he called them, begin with definitions of what we mean by “work,” which might be characterized as the difference between labor and management:
What is work? Work is of two kinds: first, altering the position of matter at or near the earth’s surface relatively to other such matter; second, telling other people to do so. The first kind is unpleasant and ill paid; the second is pleasant and highly paid.
Russell further divides the second category into “those who give orders” and “those who give advice as to what orders should be given.” This latter kind of work, he says, “is called politics,” and requires no real “knowledge of the subjects as to which advice is given,” but only the ability to manipulate: “the art of persuasive speaking and writing, i.e. of advertising.” Russell then discusses a “third class of men” at the top, “more respected than either of the classes of the workers”—the landowners, who “are able to make others pay for the privilege of being allowed to exist and to work.” The idleness of landowners, he writes, “is only rendered possible by the industry of others. Indeed their desire for comfortable idleness is historically the source of the whole gospel of work. The last thing they have ever wished is that others should follow their example.”
The “gospel of work” Russell outlines is, he writes, “the morality of the Slave State,” and the kinds of murderous toil that developed under its rule—actual chattel slavery, fifteen hour workdays in abominable conditions, child labor—has been “disastrous.” Work looks very different today than it did even in Russell’s time, but even in modernity, when labor movements have managed to gather some increasingly precarious amount of social security and leisure time for working people, the amount of work forced upon the majority of us is unnecessary for human thriving and in fact counter to it—the result of a still-successful capitalist propaganda campaign: if we aren’t laboring for wages to increase the profits of others, the logic still dictates, we will fall to sloth and vice and fail to earn our keep. “Satan finds some mischief for idle hands to do,” goes the Protestant proverb Russell quotes at the beginning of his essay. On the contrary, he concludes,
…in a world where no one is compelled to work more than four hours a day, every person possessed of scientific curiosity will be able to indulge it, and every painter will be able to paint without starving, however excellent his pictures may be. Young writers will not be obliged to draw attention to themselves by sensational pot-boilers, with a view to acquiring the economic independence for monumental works, for which, when the time at last comes, they will have lost the taste and capacity.
The less we are forced to labor, the more we can do good work in our idleness, and we can all labor less, Russell argues, because “modern methods of production have given us the possibility of ease and security for all” instead of “overwork for some and starvation for others.”
A few decades later, visionary architect, inventor, and theorist Buckminster Fuller would make exactly the same argument, in similar terms, against the “specious notion that everybody has to earn a living.” Fuller articulated his ideas on work and non-work throughout his long career. He put them most succinctly in a 1970 New York magazine “Environmental Teach-In”:
It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest…. We keep inventing jobs because of this false idea that everybody has to be employed at some kind of drudgery because, according to Malthusian-Darwinian theory, he must justify his right to exist.
Many people are paid very little to do backbreaking labor; many others paid quite a lot to do very little. The creation of surplus jobs leads to redundancy, inefficiency, and the bureaucratic waste we hear so many politicians rail against: “we have inspectors and people making instruments for inspectors to inspect inspectors”—all to satisfy a dubious moral imperative and to make a small number of rich people even richer.
What should we do instead? We should continue our education, and do what we please, Fuller argues: “The true business of people should be to go back to school and think about whatever it was they were thinking about before somebody came along and told them they had to earn a living.” We should all, in other words, work for ourselves, performing the kind of labor we deem necessary for our quality of life and our social arrangements, rather than the kinds of labor dictated to us by governments, landowners, and corporate executives. And we can all do so, Fuller thought, and all flourish similarly. Fuller called the technological and evolutionary advancement that enables us to do more with less “euphemeralization.” InCritical Path, a visionary work on human development, he claimed “It is now possible to give every man, woman and child on Earth a standard of living comparable to that of a modern-day billionaire.”
Sound utopian? Perhaps. But Fuller’s far-reaching path out of reliance on fossil fuels and into a sustainable future has never been tried, for some depressingly obvious reasons and some less obvious. Neither Russell nor Fuller argued for the abolition—or inevitable self-destruction—of capitalism and the rise of a workers’ paradise. (Russell gave up his early enthusiasm for communism.) Neither does Gary Gutting, a philosophy professor at the University of Notre Dame, who in his New York Times commentary on Russell asserts that “Capitalism, with its devotion to profit, is not in itself evil.” Most Marxists on the other hand would argue that devotion to profit can never be benign. But there are many middle ways between state communism and our current religious devotion to supply-side capitalism, such as robust democratic socialism or a basic income guarantee. In any case, what most dissenters against modern notions of work share in common is the conviction that education should produce critical thinkers and self-directed individuals, and not, as Gutting puts it, “be primarily for training workers or consumers”—and that doing work we love for the sake of our own personal fulfillment should not be the exclusive preserve of a propertied leisure class.
Note: An earlier version of this post appeared on our site in 2015.
Once the Secretary of Labor under the Clinton Administration, Robert Reich spent 17 years teaching at UC Berkeley. This past spring, he taught his final course there, and it’s now available online. Above, you can stream 14 lectures from “Wealth and Poverty,” a course “designed to provide students with a deeper understanding of both the organization of the political economy in the United States and of other advanced economies, and why the distribution of earnings, wealth, and opportunity have been diverging in the United States and in other nations.” Usually attended by 750 Berkeley undergraduates, the course is also “intended to provide insights into the political and public-policy debates that have arisen in light of this divergence, as well as possible means of reversing it.”
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Imagine two prisoners, each one placed in solitary confinement. The police offer a deal: if each betrays the other, they’ll both get five years in prison. If one betrays the other but the other keeps quiet, the betrayer will walk free and the betrayed will serve ten years. If neither say anything, they’ll both be locked up, but only for two years. Unable coordinate, both prisoners will likely betray each other in order to secure the best individual outcome, despite the fact that it would be better on the whole for both to keep their mouths shut. This is the “prisoner’s dilemma,” a thought experiment much-cited in game theory and economics since the middle of the twentieth century.
Though the situation the prisoner’s dilemma describes may sound quite specific, its general form actually conforms to that of a variety of problems that arise throughout the modern world, in politics, trade, interpersonal relations, and a great many others besides.
Blogger Scott Alexander describes the prisoner’s dilemmas as one manifestation of what Allen Ginsberg called Moloch, the relentless unseen force that drives societies toward misery. Moloch “always and everywhere offers the same deal: throw what you love most into the flames, and I can grant you power.” Or, as he’d put it to Chewy the gingerbread man, “Betray your friend Crispy, and I’ll make a fox eat only three of your limbs.”
Such is the situation animated in gloriously woolly stop-motion by Ivana Bošnjak and Thomas Johnson in the TED-Ed video at the top of the post, which replaces the prisoners with “sentient baked goods,” the jailer with a hungry woodland predator, and years of imprisonment with bitten-off arms and legs. After explaining the prisoner’s dilemma in a whimsical manner, it presents one proposed solution: the “infinite prisoner’s dilemma,” in which the participants decide not just once but over and over again. Such a setup would allow them to “use their future decisions as bargaining chips for the present one,” and eventually (depending upon how heavily they value future outcomes in the present) to settle upon repeating the outcome that would let both of them walk free — as free as they can walk on one gingerbread leg, at any rate.
Based in Seoul, Colin Marshall writes and broadcasts on cities, language, and culture. His projects include the Substack newsletterBooks on Cities, the book The Stateless City: a Walk through 21st-Century Los Angeles and the video series The City in Cinema. Follow him on Twitter at @colinmarshall or on Facebook.
Fridman prefaces the lengthy conversation by saying, “This is a heavy topic, in general, and for me personally, given my family history in the Soviet Union, in Russia and Ukraine. Today, the words Marxism, Socialism and Communism are used to attack and divide, much more than to understand and learn. With this podcast, I seek the latter. I believe we need to study the ideas of Karl Marx, as well as their various implementations throughout the 20th and 21st centuries.… We need to consider seriously the ideas we demonize, and to challenge the ideas we dogmatically accept as true, even when doing so is at times unpleasant and dangerous.”
You can listen to their engaging conversation above, or find it on various podcasts platforms. Along the way, Wolff underscores the glaring deficiencies of capitalism, and why populists on the left and right are now looking for alternatives. And Fridman asks whether capitalism, despite its faults, may still be the best option we have. Wolff and Fridman undoubtedly have different worldviews, but the conversation is civil and deep, and worth your time.
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