Did you know you can see shit political economy from space?

 

Auckland: Eden Terrace's workers' cottages on the right, Mt Eden's California Bungalows 

beginning over the railway line lower left. (Photo showing the area before the Dominion Rd flyover,

from the Sir George Grey Special Collections, Auckland Libraries, 580-9498']

Did you know you can see shit political economy from space? Here below is the Black Hole of North Korea at night, too poor to have enough lights to switch on.

And you can see shit political economy in Auckland too, in aerial photographs. To be accurate: you can see shit political economy in the form of the effect of tariffs. ...

Let me explain.

Workers' cottage, Freeman's Bay

Victorian Villa, Grey Lynn

The first houses built here en masse were workers' cottages and then villas. When you fly over the city, you can see a ring of these villas around the inner parts of the city — especially so in Ponsonby and Grey Lynn — built right up until the First World War.

But after that war, something changed. It seemed to some that the United States had rescued Europe from its Great War, and had a lifestyle to which an increasingly prosperous population could aspire. It was the Jazz Age — the age of radio, electrification, automobiles, and the mass production (Fordism!) that made them affordable. In love with Americanism, in housing here it became the decade of the California Bungalow.

California Bungalow, Mt Eden

A villa is not a bungalow.  Like the California lifestyle it aped (and which the world would fully fall in love with after another war), the California Bungalow was freer than the more uptight Victorian villa, and reached out for sun and air. Their broad spreading gables form a second ring around the city in what we now call the "tram suburbs," a ring from Pt Chev through Mt Albert, Sandringham, Mt Eden, Greenlane, Ellerslie, and right around to the border of Meadowbank/Remuera.

Their popularity was immense. 

Their takeover seemed unstoppable. 

Until something happened.

That something involved a tariff. Brought in by US Senators Smoot and Hawley, their Smoot Hawley Tariff Act raised tariffs on imports by an average of twenty percent. Their intention (we're told) was to quarantine American manufacturers from the effects of the 1929 stock market crash. What it did do instead was to spread the misery and contagion around the globe, kicking off the Great Depression and all but shutting down international trade for nearly two decades.

John Bell Condliffe's "wagon wheel" showing the dramatic death spiral of world trade
following the disastrous implementation of the 1930 Smoot-Hawley Tariff Act

New Zealand economist J.B. Condliffe has a world-famous diagram describing the accelerating downward spiral of trade as every country and trading bloc in the world put up their own tariff walls in response. It was one of the most successful acts of intentional self-destruction in all modern history.*

Almost at a stroke, we fell out of love with the US.  In Britain, still the head of something called an Empire, an Imperial Preferences Act was swiftly passed making trade within the Empire roughly tariff-free — allowing many Commonwealth countries to escape the Depression first. (Not so the US of A, which had to wait until the death of a President and the end of a war to boom again.)

And trade amongst the Empire, rather than outside it, meant many more British goods replacing the previous love affair with American. Not least in housing. If the twenties was the decade of the California Bungalow, then the thirties was the decade of the English Cottage/English Revival. We can see these crabby, restrained offerings around the outer parts of the tram suburbs. (And you can see all these styles described in the Auckland Council's 'Style Guide,' pp 14-24)

In insulating itself from the world, America had not only shot itself in the foot economically, it also lost its influence with the rest of the world. 

Turned out it was a not-so-great way to Make America Go Away Again.

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* Until April 2, 2025, that is, with what Johan Norberg calls "the longest suicide note in economic history."

UPDATE 1: David Farrar notes that our average two-percent tariff rate (world's second-lowest after Singapore) becomes in the mind of the Toddler-in-Chief a twenty-percent tariff. (I use the word "mind" loosely.)

Johan Norberg has more on the effects of what he jokingly calls '"Liberation Day June 17 1930":

As he says, " I think the US was heading for trouble even before, but it certainly deepened the depression and spread it around the world, with devastating effects for European democracies. We would have had a depression anyway, but perhaps not a great one."

UPDATE 2: 

"Thomas Rustici identified the role of the Smoot-Hawley Tariff Act in exacerbating the Great Depression, particularly through its effects on trade, banking failures, and economic contraction. His seminal work, *Smoot-Hawley and the Great Depression: A General Equilibrium Analysis* (2005), presents a compelling argument that Smoot-Hawley initiated a trade war, triggered mass bankruptcies, destabilized the banking system, and led to deflation and depression. ... 

"Conclusion Rustici’s work provides one of the most comprehensive and rigorous explanations of how the Smoot-Hawley Tariff Act triggered a trade war, bankrupted farmers and businesses, destabilized the banking system, and created deflationary collapse. His analysis is central to understanding how protectionist policies can create economic catastrophe by disrupting credit, trade, and monetary liquidity. His insights remain critical in debates over trade policy and economic crises."

Fortress New Zealand: Losers Picking Losers

Remember the Trekka?

Winston Peters does. David Parker does. Grant Robertson does. Or at least you'd think so, given their talk over recent weeks about how they're going to be "picking winners" to get New Zealand back off the economic canvas -- Peters to bring back the local manufacturing he likes; Parker to make his preferred picks get easier resource consents; Robertson to pick on whom he starts spraying helicopter cash.

Or perhaps they're still trying to forget the Trekka. And who wouldn't want to?

It was New Zealand's only production vehicle (if either word can be used in its full sense) -- a New Zealand body built over Soviet-era Skoda motor and running gear; a two-wheel-drive dog of a vehicle that only saw the light of day because of a loophole in the arcane maze of New Zealand's tariffs, subsidies, import-licensing and "picking winners" regime that throttled life down here the later-middle decades of the last century.

The thing was a dog. Intended for use on farms, its communist two-wheel drive system could barely perform on the road. So it looked best simply sitting on the lawn rusting into the weeds. Which was easy, because to save time money, the body was never painted on the inside, which meant they rusted from the inside out. And don't try cornering. Not at any speed. Perhaps the only good thing that can be said about it is that, even in wartime Vietnam (where five were sent) black-market thieves didn't even think it was worth stealing. So there's that.

This is the sort of local manufacturing that "flourished" here from the fifties to the seventies -- as we gradually made ourselves poorer. Selling here only because everything else we could buy was made so goddamn expensive, just to punish us for the temerity of buying offshore, that NZers would buy any damned thing because that's all that was available to buy. To "protect jobs."  To "keep it local." To keep lack-lustre local manufacturing going back then, New Zealanders at the time were paying around 50% more for a car than they needed to because of tariffs (which is a tax on consumers) --- and that's if you had and were granted permission to use your precious "overseas funds." Meanwhile, those taxes were paying a subsidy to locals here to assemble junk like this of around 100%. (See figures below.)

Just so New Zealanders were able to put their ingenuity into producing shitty stuff reassembled from godawful overseas stuff that was so bad it wouldn't even be stolen in a war zone.

Lunacy.

Bring back local manufacturing, eh!

To paraphrase Don Boudreaux,

free traders oppose government using tariffs and subsidies to pick winners and losers for at least two reasons, neither of which Peters/Parker/Robertson grasps. First, economics offers solid theory – and history offers solid evidence – to show not that government cannot pick winners and losers (of course it can), but, instead, that government too often picks as winners losers, and as losers winners.
    Second, Peters/Parker/Robertson seems unaware that when government prevents trade from destroying the jobs of some New Zealanders it thereby destroys the jobs of other New Zealanders  For example, tariffs that protect New Zealanders steel workers destroy jobs for New Zealanders working in industries that export, that use steel as an input, and that are buoyed by foreign investments. (It’s a wonder that people such as Peters et al apparently never pause to ask ‘What do foreigners do with the dollars they earn by selling their exports to New Zealanders?’)
    Unlike Peters/Parker/Robertson  who apparently see only the jobs that protectionism saves, free traders see also the jobs – and the economic growth – that protectionism destroys. 

PS: Here's some of those figures for you of just how much we were made to suffer back then from politicians who put together the tariffs and subsidy regime on the basis that they were "picking winners." (They come from a report to the incoming 1984 government put together by the late great Conrad Blyth et al.)

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Mike Moore, 1949-2020

On Labour: "It was Nye Bevan ... who said that Labour used to be the cream of the working class. Now it is an intellectual spittoon for the middle class."
~ from his valedictory speech, 1999

"We're full now of people with [an] upper-class nature, [from] private schools, who now lecture to us [working-class people] about what we should do. I find that very funny."
    ~ from the 2017 interview for The Ninth Floor

"How many of those people on Country Calendar do you think vote Labour now? ... Because we’re not seen to be on the side of those who are strivers. I do think we’ve got trouble.”

    ~ from the interview for The Ninth Floor

On leaving parliament: "My friends wanted the best for me, and my enemies wanted to see me go. For once, I was able to please everyone. At last, I enjoyed the total support of my party."

On foreign investment: "The central purpose [of the Multilateral Agreement on Investment] is to ensure that foreign investors are not the subject of discriminatory or xenophobic behaviour on the part of governments in the host country... This is not a new wave of colonisation or the rise of corporatist world government. The Agreement is designed to PROTECT and ENCOURAGE foreign investment because it is such investment that has helped fuel global economic growth and the increasing globalisation of wealth... The MAI will be of the greatest long-term benefit to developing nations."

    ~ from his 1997 recommendation on the agreement to the Labour caucus 

On globalisation: "When the Berlin wall came down, when Nelson Mandela was freed, and when freedom has flourished elsewhere, the world celebrated. We celebrated the universal values of political and economic freedom. No one shouted, cursed and swore about the evils of globalization or common values then."

    ~ from a 2000 speech as Director-General of the WTO

On poverty: "Poor countries need to grow their way out of poverty. Trade is the key engine for growth... Open markets can play an important role in lifting billions of people out of abject poverty...

    "Liberalisation works. The multilateral trading system works. The last 50 years have seen unparalleled prosperity and growth and more has been done to address poverty in these last 50 years than in the previous 500."
    ~ from a 2001 speech as Director-General of the WTO

On freedom: "The more closed the economy, the more corrupt the practices.... We have learnt that freedom works, and as it grows, so do people’s living standards... "
    ~ from a 2002 speech as Director-General of the WTO

On peace and free trade: "Internationalism and globalisation will be to the 21st Century what Nationalism was to the 20th Century. Thus mankind has learnt the most profound lessons of this century from the great depression and the second world war."

    ~ from a 1997 address by Moore to a seminar on “International Liberalisation”

On Keynesianism: “The lesson of the last 25 years tells us that no individual country can anymore successfully prime an economic pump, even Mitterand discovered this in the 80s when, by priming the French pump, all he did was flood his country with imports from Italy and from Germany. He reversed that position."

    ~ from a 1997 address by Moore to a seminar on “International Liberalisation”

On protectionism: "The 1987 stock market crash was greater and deeper than the Wall Street crash of the 20s. But, the world did not plunge into lasting depressions. Leaders nerves held, there wasn’t an orgy of protectionism and tariff increases which exacerbated the 20s crash... We got through it, we have learnt.”

    ~ from a 1997 address by Moore to a seminar on “International Liberalisation”

On global institutions: "The World Bank and International Monetary Fund (IMF) have unearned reputations born of the Cold War of being anti-poor, anti-developing countries. The opposite should be the truth. [But] no one believes that any more, except a few deranged misfits on the edges of obscure universities, people who tuck their shirts into their underpants, the remnants of pressure groups and a few geriatrics who claim that Marxism, like Christianity, has not been tried yet.”

    ~ from his 1998 book A Brief History of the Future: Citizenship of the Millennium

On betrayal: "In the end, it's the silence of your friends you remember, not the misdeeds of those who dislike you."

    ~ from the 2017 interview for The Ninth Floor

On Moore: "Mike Moore was like the opposite of L&P: world-famous, just not in New Zealand."

    ~ attributed to Jane Clifton

Here's John Lennon:

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