A wild return to the ‘Roaring Twenties’?

The beggar-thy-neighbor policy of America First increases the chance of a global demand shortage and economic collapse.

SUNGJAE FRANCIS KIMThe author is a professor at Furman University and the author of “Fed Signal: How Do the Fed’s Flutters Become a Typhoon in Seoul?”

Donald Trump won the presidential election by a landslide. Moreover, the Republican Party took control of both the House and Senate. Trump is making exporters to the United States nervous by branding tariffs “the most beautiful word in the dictionary.”

Democrats are devastated and can’t understand the re-election of someone like Trump. But a very similar thing happened in the country 100 years ago.

At the time of the 1920 presidential election, Woodrow Wilson was the incumbent president. His accomplishments included the creation of the Federal Reserve System and the antitrust laws. He led the World War I victory, initiated the creation of the League of Nations and won the Nobel Peace Prize.

But things were not favorable at the end of his term. The Spanish flu spread around the world, killing more than 17 million people. Economic conditions also worsened. Many workers lost their jobs and suffered from financial hardship. Strikes became commonplace and anarchism and riots were rampant. Wilson, who had to deal with the situation, suffered an ischemic stroke in 1919.

James Cox became the Democratic presidential candidate and tried to maintain Wilson’s policies. Republican candidate Warren Harding advocated a “return to normalcy” aimed at abolishing idealistic policies. He penetrated the public sentiment that had grown tired of being involved in the First World War. Americans who suffered the scars of the war and the aftermath of the pandemic missed their peaceful daily lives. Harding won the 1920 election with more than 60 percent of the votes. The Republican Party also swept the House and Senate elections.

Having achieved the “Red Sweep,” the Republican Party started drafting a new frame — easing regulations and rebuilding diplomatic isolationism. In 1922, the Republicans passed the Fordney-McCumber Tariff Act aimed at raising import tariffs to around 40 percent. European countries also imposed retaliatory tariffs. France raised tariffs on U.S. automobiles to 100 percent. Spain also levied tariffs of 40 percent on imports from the United States.

Then, prices of daily necessities such as groceries started to rise. But the U.S. economy boomed in the 1920s. Industrial output increased and the size of the economy grew by nearly 40 percent, while the number of the unemployed plunged. As women’s suffrage was granted, the economic participation of women also increased. New technologies such as radio, automobiles, film and aviation drove productivity innovation. The stock market also soared to a record. The entertainment and culture of dancing to jazz and wearing short dresses spread. It was the time that was called the “Roaring 20s.”

Trump wants to recreate the great 1920s by raising tariffs and promoting innovative technologies, including AI. But the Roaring 20s in the last century ended with the stock market collapse and the Great Depression. The beggar-thy-neighbor policy of America First only increases the chance of a global demand shortage and economic collapse.