Grossman wrong; nine economic policy disasters and what we can learn from them (2013)

WRONG This page intentionally left blank WRONG Nine Economic Policy Disasters and What We Can Learn from Them Richard S Grossman 1 Oxford University Press is a department of the University of Oxford It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Oxford is a registered trademark of Oxford University Press in the UK and certain other countries Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016 © Richard S Grossman 2013 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by license, or under terms agreed with the appropriate reproduction rights organization Inquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Library of Congress Cataloging-in-Publication Data Grossman, Richard S Wrong : nine economic policy disasters and what we can learn from them / Richard S Grossman p cm Includes bibliographical references and index ISBN 978–0–19–932219–0 (alk paper) Financial crises—Case studies Economic policy—Case studies I Title HB3722.G76 2013 339.509'04—dc23 Printed in the United States of America on acid-free paper For Ruth, with love Du, meine Freundin, mein Zuhaus, Mein Weg zurück, mein Blick voraus, Mein Jetzt, mein Damals, mein Inzwischen Mein Aufbruch, meine Wiederkehr, Du, mein Wohin und mein Woher Reinhard Mey This page intentionally left blank The problem with any ideology is it gives the answer before you look at the evidence So you have to mold the evidence to get the answer that you’ve already decided that you’ve got to have It doesn’t work that way BILL CLINTON, September 20, 2012 This page intentionally left blank CONTENTS Preface | xi Prologue | xiii Introduction | 1 How to Lose an Empire without Really Trying: British Imperial Policy in North America | 18 Establish, Disestablish, Repeat: The First and Second Banks of the United States | 34 The Great Hunger: Famine in Ireland, 1845–1852 | 54 The Krauts Will Pay: German Reparations after World War I | 68 Shackled with Golden Fetters: Britain’s Return to the Gold Standard, 1925–1931 | 82 Trading Down: The Smoot-Hawley Tariff, 1930 | 101 Why Didn’t Anyone Pull the Andon Cord? Japan’s Lost Decade | 121 ix 252 Index gold standard (Cont.) and tariffs, 203n unraveling of, in interwar period, 97–98 use of, in 19th c., 86–87, 199n WWI and, 89 Gore, Al, 206n Goulbourn, George, 60 government bank [term], 191n government policy, private interests and, government regulation, importance of, 147–148 grain See also corn distilleries/distillation, in Ireland, during potato famine, 61 exports, from Ireland, during potato famine, 61, 64, 195n imports to Ireland, in potato famine, 60, 62–64 trade in, Corn Laws and, 106–107 grain [term], 195n Great Depression, xxi, 15–16, 82–83, 178 banking crises of, government response to, and containment of damage, 130 effect on German reparations after WWI, 78 gold standard and, 99 Smoot-Hawley tariff and, 115– 116, 118 social safety net enacted after, 17 Great Hunger See Irish famine Great Leap Forward, famine associated with (1959–61), 55–56, 194n Great Recession (early 21st c.), 16 Greece adoption of euro, 164 attitude toward paying debts in, 187n austerity measures in, 167–168 bailouts by EU and IMF, 167 credit rating (2011), 208n elections (2012), xvi, 153 exit from euro See Grexit financial deterioration in, euro crisis and, 152–153 political instability in, euro crisis and, 153 public finance data, 187n sovereign debt crisis (2009– ), xiv–xxi, 166–167 tax evasion in, xv ten-year bonds, yield on (2009– 2012), xv, 166–167 Greenspan, Alan, xx, 143 on central banks’ role, 134 Gregory, T E., 92 Gresham’s Law, 85–86, 210n Grexit, 170–172 Grigg, P J., 175–176 gross domestic product of developed nations, growth of, of Japan, after WWII, 122 groupthink, 180–181 Hamilton, Alexander and Bank of New York, 45 and Bank of the United States, 42–43 Report on Manufactures, 105, 110 Hancock, John, 30 Index Hanwa Bank, failure, 134 Harper, Lawrence, 28–29 Hawley, Willis C., 114 hemp, as enumerated good for colonial trade, 25 Henry IV of France, 154, 208n Herriot, Edouard, 155 hides, as enumerated good for colonial trade, 25 historical perspective advantages of, and policy making, 183 history predictive power of, Twain on, Hitler, Adolph, 81, 154 Hokkaido Takushoku Bank, failure, 134–135 Hoover, Herbert, 78, 80, 113–116 housing market and euro crisis, 166 Lehman Brothers bankruptcy and, xiv housing prices, and subprime meltdown, 143 Hugo, Victor, 152 Hume, David, 23, 33 Hungary Credit Anstalt collapse and, 97 return to gold standard after WWI, 92 hyperinflation, 39 in Austria, after WWI, 90 in Germany, after WWI, 75–76, 79–80, 83, 90 inflationary expectations and, 197n 253 ideologue(s) anti-tax, 182 economic hazards of, xviii–xix, 182 ideology destructive effects of, 176–177 and policy blunders, xvii–xix, xxi, 5, 33, 53, 67, 99, 119– 120, 176, 179–180, 182 import(s), prices of, factors affecting, 102 income tax, 182 Indian soldiers’ rebellion, 22, 189n indigo as enumerated good for colonial trade, 25 production of, bounty paid for, 27 industrial production, in Great Depression, 82–83 infant industry, free trade and, 104–105 inflation, 39, 48 See also hyperinflation demise of 2BUS and, 50 and exchange rates, 127–128 WWI and, 75, 89 insurance, and colonial trade, 22 interest rate(s), in national banking era, 52 International Coffee Agreement (ICA), 12–13, 15 International Coffee Organization (ICO), 12–13 International Convention for the Protection of Industrial Property (1883), 155 254 Index International Metric Convention, 155 International Monetary Fund (IMF) and bailouts of eurozone countries, 168 and rescue of Greece, xv–xvi, 167 international policy, 10 International Postal Union, 208n international relations, in interwar period, 156 International Telecommunications Union, 208n International Telegraph Union, 155 investment banks, capital ratios, SEC and, 149, 207n Iraq, war in, 142, 206n Ireland adoption of euro, 164 bailout by EU and IMF, 168 debts, early 21st c., xvi emigration from, famine and, 54, 56, 66 financial deterioration in, euro crisis and, 152–153 food imports, in response to potato famine, 60 population trends in, 56 real estate market in, and euro crisis, 166 Irish famine, xxi, 15, 107, 174–176 cultural perspective on, 54 excess mortality due to, 56, 194n as genocide, 55, 66 as humanitarian tragedy, 55 long-term effects of, 56 mortality rate for, 54–56, 194n political perspective on, 54–55 Italy adoption of euro, 164 banking crises in Great Depression, government response to, and containment of damage, 130 central bank of, historical perspective on, 34, 40, 191n debts, early 21st c., xvi financial deterioration in, euro crisis and, 152–153, 168 gold standard in, 87, 93 and Latin Monetary Union, 162 political instability in, euro crisis and, 153 reparations imposed on, post WWII, 72–73 retaliation for Smoot-Hawley tariff, 117 Jackson, Andrew, 48–50, 53 Japan See also Ministry of Finance (MoF), Japan Big Bang, 134 bond market liberalization, 128–129 boom-bust crises in, in 19th and 20th c., 140 “bubble economy” in late 20th c., 127–128 budget deficits in late 20th c., 128 central bank of See Bank of Japan Cooperative Credit Purchasing Corporation (CCPC), 133 Index expansionary monetary policy in 1990s, 129 financial reforms, in 1990s, 134 Financial Services Agency, 136 financial system, after WWII, 123–124 gold standard in, 87, 98 inflation in, in 70s, 128 insurance industry, in 1990s, 133 lost decade of the 1990s, 16, 122–123, 135–136, 175, 178 Minister for Financial Services, 136 real estate boom in 1980s, 129 reparations imposed on, post WWII, 72–73 securities market liberalization, 128–129 standard of living in, after WWII, 122–123 stock prices in 1990s, 129 Japanese banking system capital injection, in 1990s, 135 capital shortage, in 1990s, 130–135 convoy operations, 124, 131, 134 interest income for, 124 lending, in 1980s-90s, 129 losses to bad loans, 1992–2006, 135 Ministry of Finance and, 125–126 as policy instrument, 123–124 regulation of, 123–124 tax breaks for, in 1990s-2000, 133–134 Japanese economy after WWII, 122–123 in 1970s, 128 in 1990s, 123 255 Japan premium, 134–135 Jefferson, Thomas, 30, 50–51, 53, 190n and Bank of the United States, 43–44 Jeffords, James, 206n Jobbik party, Hungary, euro crisis and, 153 Job Creation and Worker Assistance Act of 2002, 142 jobless recovery, 143 Jobs Growth and Tax Relief Reconciliation Act of 2003, 142 Joint Chiefs of Staff Directive 1067 (JCS 1067, May 1945), 157 Jones, William, 46–47 Kant, Immanuel, 154 Keating, Thomas, 58 Key Industries Act (1919, Britain), 112 Keynes, John Maynard, xiii on Carthaginian peace after WWI, 69 on changing one’s mind, 185 The Economic Consequences of the Peace, 68, 79 estimates of Germany’s ability to pay reparations, 72 on gold standard, 82 Mantoux’s rebuttal of, 198n opposition to reparations demands after WWI, 79, 197n opposition to return to gold standard after WWI, 93–94, 99, 175–176, 180 Khan, Genghis, 18 Klobuchar, Amy, 188n on 2008 farm bill, 14–15 256 Index Klotz, Louis-Lucien, 68 Krugman, Paul, 101, 121 Latin America, gold standard in, 92, 97 Latin Monetary Union, 162–163 League of Nations establishment of, 155 on international trade in interwar period, 116–117 on Smoot-Hawley tariff, 116–117 World Economic Conference (1927), 113 legislation, and economic policy, Lehman Brothers bankruptcy, xiii–xiv, xvii lenders of last resort central banks as, 38, 52–53, 193n J P Morgan as, 193n Second Bank of the United States (2BUS) as, 48 Leopold II (King of Belgium), 19 Liechtenstein, monetary authority for, 191n Lloyd George, David, 79 loan defaults, boom-bust crises and, 139 lobbying, and economic policy, 6, 11–12 log-rolling, 115 London Schedule of Payments, 72–73, 80 Long Term Credit Bank (Japan), 134 lumber, as enumerated good for colonial trade, 25 Luxembourg, currency of, 209n Maastricht Treaty, 163–164 Mackenzie King, William Lyon, 117 macroeconomics, 82 Madison, James, 46, 53 and Bank of the United States, 43–44 Mantoux, Étienne, 198n manufacturing, colonial American, 26 British imperial policy and, 30, 32 mark, German, devaluation after WWI, 75–76 Marshall, Alfred, 205n Marshall Plan, 81, 157 McKenna, Reginald, 93, 175–176 McKenna duties, 112 McKinley Tariff (1890), 112 Mencken, H L., on Coolidge, 121 mercantilism, 33 classic works on, 189n definition of, 20, 189n origins of, 20–21 and statecraft, 22–23 and state involvement in economy, 21 in 17th and 18th c., 22 merchants, colonial American, British imperial policy and, 29–32 Methuen Treaty (1703), 22–23 Micronesia, monetary authority for, 191n Middle East, personnel deployed in, in 21st c., 206n Mieno, Yasushi, 131 military policy, and economic objectives, Index Mill, John Stuart, 205n Ministry of Finance (MoF), Japan, 175 bank examinations, 127 Banking Bureau, 126–127, 132–133 and banking sector, 125–126 changes in, after 1990s crisis, 135–136 and Diet, 126 influence of, 124–125 response to banking crisis of 1990s, 131–135 Mitchel, John, 54 model(s), and policy making, 183 Mofutan, 126–127 molasses, as enumerated good for colonial trade, 25 Molasses Act (1733), 26 Monaco, currency of, 209n monetary authority(ies), 191n monetary policy, 10 See also expansionary monetary policy central banks and, 36–39 ideologically based, 138, 150 mercantilism and, 21 recent trends in, monetary union(s) See also euro benefits of, 160–161 costs of, 161–162 examples of, 162–163 multinational, 162–163 national, 162 problems of, xx–xxi and regional adjustment mechanisms, 162, 169 money supply(ies), WWI and, 89 monopoly(ies) Adam Smith on, 103 257 government intervention in, xvii–xviii mercantilism and, 21 Monroe, James, 47 Monti, Mario, 153 Moody’s, and subprime crisis, 145–146 Morgan, J P and Britain’s return to gold standard post-WWI, 92 as lender of last resort, 193n on stock market, 149 Morgenthau, Henry, Jr., 81, 156–157 Morris, Robert, 30, 42 mortgage(s) conforming, 145 defaults/delinquencies, xiv subprime, 144, 150 mortgage-backed security (MBS), and subprime crisis, 144– 145, 147 mortgage interest, tax deductibility of, and subprime crisis, 144 most favored nation (MFN) status, 108, 112, 118 MRI, reading of, outsourcing of, 119 Mundell, Robert, 160 Napoleon, 39, 154 Napoleonic Wars, 72 effects on trade, 106–107, 110 national banking, and banking crises of 19th and early 20th c., 52 National Banking Acts (1862, 1863), 51–52 258 Index National Bureau of Economic Research, 141 nationalistic interest See also protectionism curbing, 178 and policy blunders, 6, 177, 183–184 Navigation Acts, 15, 20, 175 and American Revolution, 27–30, 32–33, 190n burdens of, distribution of, 30–33 consequences of, 26–29 damaging effects of, 27–29 and favorable treatment of colonists, 27 financial burden of, to colonists, 28–29 origins/enactments of, 23–24 provisions of, 24–25 repeal of, seen as weakness, 33 and shipping, 24–26, 190n and trade with colonial North America, 25–29 neo-Nazi Golden Dawn party, in Greece, euro crisis and, 81, 153 Netherlands adoption of euro, 164 central bank of, historical perspective on, 34, 41 colonial empire of, 22 gold standard in, 87, 92, 98 independence from Spain, 23 public opinion on eurozone in, 153 real estate market in, and euro crisis, 166 Nettels, Curtis, 28 network externality effects, 87 Newton, Isaac, 84–85 New Zealand, gold standard in, 92, 97 Niemeyer, Otto, 175 Nippon Credit Bank, 134 Nishimura, Yoshimasa, 132–133 “no new tax pledge,” 182, 211n Norman, Montagu, 91–92, 96, 98, 100 Norman Conquest of $4.86, 92 Norquist, Grover, 182 North America British imperial policy toward, 20 and England, colonial trade between, 25 European colonization of, 19–20 exports from, as enumerated goods for colonial trade, 25 land mass of, compared to European colonial powers, 19 mineral resources of, compared to European colonial powers, 20 natural resources of, compared to European colonial powers, 19–20 North American Free Trade Agreement, 179 Norway central bank of, 34, 40, 53, 192n financial crises of 1987–94, 136 and Scandinavian Monetary Union, 162 use of gold standard, in 19th c., 87 Nullification Crisis, 111 Index oatmeal, imports to Ireland, in potato famine, 60 Obama, Barack, 137 O’Brien, William Smith, 67 Ó Gráda, Cormac, 57 Okurasho, 124, 135 optimal currency area, 160, 164–165 Orange County, California, bankruptcy of, 149 Organization of Petroleum Exporting Countries (OPEC), 12–13 oil embargo, and inflation, 127–128 Ottoman Empire, 21–22 outsourcing, 119 Pan-European Union, 155–156 panic(s) of 1814, 45–46 of 1819, 47 of 1837, 50 of 1839, 50 historical perspective on, Payne-Aldrich Tariff (1909), 112 Peel, Robert and Corn Law repeal, 62, 107–108 response to Irish potato famine, 59–64, 175 Penn, William, 154, 208n Perot, H Ross, 179 pet banks, 49 Phythophthora infestans, 58 See also Potato blight Pigou, A C., 90–91 Pitt, William the Elder, 26 Poland, return to gold standard after WWI, 92 259 policy making diversity of opinion and, 181–182 guidance for, 183 transparency in, 6, 184 political corruption, and economic policy, political philosopher(s), power of, xiii Poor Law(s), in Irish potato famine, 60–61, 65–66 Poor Relief (Ireland) Act of 1838, 60–61 Portugal adoption of euro, 164 bailout by EU and IMF, 168 central bank of, historical perspective on, 34 colonial empire of, 22 debts, early 21st c., xvi financial deterioration in, euro crisis and, 152–153 use of gold standard, in 19th c., 86–87 potash, as enumerated good for colonial trade, 25 potato crop failures, consequences of, 58–59 cultivation of, in Ireland, 57–58 European consumption of, 57 historical perspective on, 57 Irish consumption of, 57 and Irish famine, 57 potato blight, 58–59 in Ireland, 59–60 precious metal(s) See also Gold; Silver as money, 83 price control(s), xviii 260 Index prices British, interwar gold standard and, 95 credit restriction and, 94 in Germany, after WWI, 75 WWI and, 89 private interest(s) harmful influence of, 6, 183–184 and policy blunders, 177 and Smoot-Hawley tariff, 116 protectionism, 119, 138 arguments for, 102, 105 definition of, 101 in interwar period, 102, 112 in retaliation for Smoot-Hawley tariff, 117 in United States, 110 Providence Bank, 45 Prussia customs union (1818), 208n internal tolls in, historical perspective on, 106 Prussian State Bank, 191n public interest, vs private interest, Public Law 110–246, 14–15 public policy mistakes, lessons gleaned from, public works projects, in Ireland, during potato famine, 60, 62, 64–65 Punic Wars, 68–69 quota(s), as impediment to free trade, 101 Randolph, Edmund, and Bank of the United States, 43 Rapid Recapitalization Act (Japan, 1999), 135 rationing, xviii Reagan, Ronald, on banking industry, 137 real estate and euro crisis, 166 speculation in, and subprime meltdown, 143 recession See also Great Recession (early 21st c.) in United States, early 21st c., xiv Reciprocal Trade Agreements Act (RTAA, 1934), 118 Reconstruction Finance Corporation, 130 regulatory policy(ies), 10 Reichsbank, German See also Germany, central bank of historical perspective on, 40 reorganization of, after WWI, 76–77 rentenmark, 76 Reparation Commission, 71 reparations imposed on France, after 19th c defeats, 72 imposed on Germany, after WWI, 16, 69–78, 80–81, 138, 156, 177–178 See also London Schedule of Payments lessons learned from, 179 post-World War I, 179 post-World War II, 72–73, 179 Republican Party, ideologically based policy, 119–120 reserve(s), banking, 38–39 Revere, Paul, 30 Index Ricardo, David, On the Principles of Political Economy and Taxation, 104 rice colonial production of, Navigation Acts and, 30–31 as enumerated good for colonial trade, 25 Robinson, Mary, 54 Roman Empire, 18–19, 21, 154 Romer, Christina, 137 Roosevelt, Franklin Delano, 118 Rousseau, Jean Jacques, 154 Royal Giro and Loan Bank, 191n Ruhr valley Allies’ administration of, after WWII, 157, 209n occupation of, after WWI, 74, 77, 80, 156 Russell, John, response to Irish potato famine, 62–67, 175–176 Russia colonization of Alaska, 188n and inter-Allied debt after WWI, 73 Saar basin, foreign administration of, after WWI, 156–157, 209n Safeguarding of Industries Act (1921, Britain), 112 sales tax, 201n Samuelson, Paul, on economic forecasting, San Marino currency of, 209n monetary authority for, 191n Sanyo Securities, failure, 134–135 261 Scandinavia, banking crises in 1990s, government response to, and containment of damage, 130 Scandinavian Monetary Union, 162–163 Schattschneider, E E., 101, 114 Schuman, Robert, 157–158 Schwarzenegger, Arnold, on taxes, 18 Scotland, 189n and colonial trade, 24 internal tolls in, historical perspective on, 105–106 Second Bank of the United States (2BUS), 177 Baltimore branch, collapse of, 47 and banknote issues, 49–50 charter, 46–47 and credit creation, 49–50 demise of, 49–50 and dollar value stabilization, 48 establishment of, 46 functions of, 48 Jackson’s opposition to, 49 as lender of last resort, 48 and monetary supply, 48 opponents of, 46 supporters of, 46 Securities and Exchange Commission (SEC) and investment banks’ capital ratios, 149, 207n and subprime crisis, 151 securities markets boom-bust crises and, 139 in 18th-c U.S., 41 262 Index securitization definition of, 144 and subprime crisis, 144–146 security(ies) central banks and, 38 mortgage-backed, xiv new types of, boom-bust cycles and, 140 service sector, globalization of, 119 Sherman, William Tecumseh, 68 shipping and colonial trade, 22 Navigation Acts and, 24–26, 190n Shortbridge, Samuel, 115 silk, as enumerated good for colonial trade, 25 silver banknote redemption in, in 19th-c America, 39 mercantilism and, 22 as monetary metal, 83–84, 86, 193n silver standard, 86–87 slave trade, Navigation Acts and, 25 Smith, Adam as free trade advocate, 103–104 Wealth of Nations, 103 Smoot, Reed, 114 Smoot-Hawley tariff, 16, 101– 120, 138, 178 consequences of, 116–118, 202n detrimental effects of, 116 effect on American economy, 116, 118 effects on trade, 116, 118 and Great Depression, 115– 116, 118 opponents of, 115 passage of, 114–115 provisions of, 114 retaliation for, 116–117 supporters of, 114 “snake,” exchange rate plan, 163 “snake in the tunnel,” exchange rate plan, 163 soup kitchens, in Irish potato famine, 65–66 South Africa, return to gold standard after WWI, 92 Soviet bloc, centrally planned economies of, xvii Soviet Union, seen as threat, 156 Spain adoption of euro, 164 bailouts in, 168 central bank of, historical perspective on, 34 colonial empire of, 22 debts, early 21st c., xvi Dutch independence from, 23 financial deterioration in, euro crisis and, 152–153, 168 real estate market in, and euro crisis, 166 retaliation for Smoot-Hawley tariff, 117 tariff policy in interwar period, 113 speculation boom-bust cycles and, 140, 143 in real estate, and subprime meltdown, 143 Stability and Growth Pact (1997), 164 Index Standard and Poor’s eurozone bond ratings (2011), 153, 208n Global Portal, 208n and subprime crisis, 145–146 steel, European market for, after WWII, 157–158 stock market boom-bust crises and, 139 Lehman Brothers bankruptcy and, xiii–xiv stock prices, and economic forecasting, Samuelson on, strategic industry, tariffs as defense of, 105 Stresemann, Gustav, 155 strike(s) coal miners’ (Britain, 1926), 95 general, in Britain (1926), 95 in Germany, after WWI, 74 Strong, Benjamin, 91–92, 96 subprime crisis, xiii–xiv, xvii, xxi, 16, 137–151, 177, 180 consequences of, economic boom preceding, xix and eurozone, 152–153, 165–166 historical perspective on, origins of, xix, policy mistakes behind, 137–138 run-up to, 141 villains of, 150–151 subsidy(ies) agricultural, 14–15 and deadweight loss, 188n as impediment to free trade, 101 sugar, as enumerated good for colonial trade, 25 263 Sweden banking crises in Great Depression, government response to, and containment of damage, 130 colonial aspirations in North America, 188n copper coinage in, 84 decline to join euro, 164 financial crises of 1987–94, 136 paper money in, 84 and Scandinavian Monetary Union, 162 use of gold standard, in 19th c., 87 Swedish Riksbank charter and charter renewals, 44 historical perspective on, 34, 39–41 as lender of last resort, 53 Switzerland gold standard in, 87, 92 and Latin Monetary Union, 162 retaliation for Smoot-Hawley tariff, 117 Taggart, Samuel, 45 tariff(s), 178 See also average tariff rate ad valorem assessment, 109 agricultural, in interwar period, 113 Corn Laws and, 62 domestic effects of, 102, 189n gold standard and, 203n historical perspective on, 105–106 as impediment to free trade, 101 in interwar period, 112–113 264 Index tariff(s) (Cont.) mercantilism and, 22 Navigation Acts and, 26–27 as protectionist device, 104– 105, 110 as revenue source, 110 revisions and changes (1925– 29), 113 as specific duties, 109 Tariff Act of 1824, 110 Tariff Act of 1828, 111 Tariff Act of 1930 See SmootHawley tariff Tariff of 1883, 112 tariff rate(s) See also average tariff rate characterization of, difficulty of, 108–109 tariff truce, attempts at, in interwar period, 113 tax(es) aggregate cost of, 14 on cigarettes, 14 and deadweight loss, 13–14 on gasoline, 14 in Germany, after WWI, 75 mercantilism and, 21 Schwarzenegger on, 18 tax cuts, Bush Administration, xix, 141, 176 tax increase(s), ideologues’ opposition to, xviii–xix, 182, 211n Tea Party, 182 theory, and policy making, 183 Thomas, Robert Paul, 29 tobacco as enumerated good for colonial trade, 25 Navigation Acts and, 27, 30, 32 Tokyo City Bank, failure, 134–135 Torrens, Robert, An Essay on the External Corn Trade, 104 Toyota Motor Corporation andon signboard, 204n size of, 121 Total Production System (TPS), 121 trade liberalization of, 178–179 restrictions, recent trends in, 211n trade barriers, domestic effects of, 102 trade policy lessons learned in, 178–179 mercantilism and, 22 trade war, in interwar period, 102 tranches, 145–146 Treaty of Paris, and European Coal and Steel Community, 158 Treaty of Rome (1957), 158–160 Treaty of the European Union See Maastricht Treaty Treaty of Versailles, 155–156, 196n provisions of, 69–71, 80 U.S failure to ratify, 72 Troubled Asset Relief Program (TARP), xiv Tuvalu, monetary authority for, 191n Twain, Mark, 153 on history, Tyler, John, 51 Underwood-Simmons Act (1913), 111–112, 114 unemployment, credit restriction and, 94 Index unemployment rate(s) European, in 21st c., 153 in Great Depression, 83 in Greece (2012), xv, 168 in Japan, 122–123 in U.S., early 21st c., xiv United Kingdom, 189n See also Britain; England; Scotland decline to join euro, 164 United States bank capital in (18th-19th c.), 45 bank density in 19th c., regional differences in, 46 banking expansion in, in 18th-19th c., 45–46 bimetallic system, in 19th c., 85–86 boom-bust crises in, in 19th and 20th c., 140 central bank of, historical perspective on, 35, 41 See also Bank of the United States Consumer Financial Protection Bureau, 184 customs revenue, in 18th c., 41 debt, in 18th c., 41 failure to ratify Treaty of Versailles, 72 gold standard in, 87, 90, 92, 98, 199n and inter-Allied debt after WWI, 73, 78 military spending, in 21st c., 142 state-chartered banks (18th-19th c.), 42, 44–45 tariff policy in 19th c., 110–111 tax revenue, in 18th c., 41 US Bank of Pennsylvania, 49 265 US Mint historical perspective on, 41 regulation against melting of pennies and nickels, 85, 199n value added tax, 201n Vatican City currency of, 209n monetary authority for, 191n Venetian-Turkish war (1645–69), 23 Volstead Act (1919), 113 vote trading, 115 war(s), defeat in, consequences of, 68–69 financing, and gold standard, 89 military deaths in, 196n War of 1812, 45 effects on trade, 110 Washington, George, 26, 30 and Bank of the United States, 43 wealth, of developed nations, growth of, Weimar Republic, stability of, reparations and, 74 Werner, Pierre, 160 Whig Party (Britain) and Corn Laws, 175 and Irish potato famine, 62–63, 67 Wicksell, Knut, 205n wildcat banks, 51 Wilde, Oscar, 177 William III, 191n Wilson-Gorman Act (1894), 111–112 266 Index Wisselbank (Amsterdam), 41 wool, as enumerated good for colonial trade, 25 workhouses, in Ireland, during potato famine, 60–61, 66 World Bank, 17 world trade damage to, by Smoot-Hawley tariff, 118 in Great Depression, 82–83 World Trade Organization (WTO), 16–17, 118, 203n World War I civilian casualties in, 69 “direct” and “indirect” costs of, 69–70 and gold standard, 89 inter-Allied debt from, 73–74, 78, 112, 138 material cost of, 69–70 military casualties in, 69 World War II, 156 reparations imposed on Germany, Japan and Italy after, 72–73, 81 X-rays, reading of, outsourcing of, 119 Yamaichi Securities, failure, 134–135 Young, Owen D., 78 Young Plan, 78, 80, 197n Youngson, A J., 90 Zaimusho, 135 Zollverein, 106, 154–155, 208n ...WRONG This page intentionally left blank WRONG Nine Economic Policy Disasters and What We Can Learn from Them Richard S Grossman 1 Oxford University Press is a department of the University... other form and you must impose this same condition on any acquirer Library of Congress Cataloging-in-Publication Data Grossman, Richard S Wrong : nine economic policy disasters and what we can learn from. .. governments and the private sector Most importantly, both crises were the result of bad economic policy And not just minor errors in implementing sound economic strategies during the weeks and months