The British Tariff and Industrial Protection in the 1930s: An A Iternative Model1

Abstract

I n his recent article, Dr Capie used an effective protection model to derive conclusions about the resource flows induced by industrial protection in the I 930s.2 The Building Industry, widely believed to be a major stimulus to the upswing of economic activity in the thirties, was surprisingly found to have been adversely affected by the I 932 tariff, and the Iron and Steel Trades, previously thought to have greatly benefited from protection, were shown to be among the industries least effected. The purpose of this note is to question some of Capie's revisionist conclusions by drawing attention to some omissions and inadequacies of the model used. In section I evidence is adduced to suggest an implicit assumption of Capie's method is inconsistent with historical experience. The second section proposes an alternative model of the substitution effects of the tariff, which is not open to the same objection. It is also shown that Prof. Richardson's earlier method of assessing the impact of the tariff is a special case of the analysis presented here.3 Section III supplements the substitution effects model of the tariff with an assessment of the influence of protection on aggregate income and employment.