From ancient Rome to modern America, the impulse to wall off economies in times of crisis has proven consistently disastrous. Whether through tariff wars, currency debasement, or autarkic fantasies, economic nationalism has repeatedly triggered collapse — not recovery
Politicising structural economic fundamentals always leads to chaos, as history tells us. In the early 1930s, American President Herbert Hoover faced an agonising decision.
The global economy, already reeling from the crash of 1929 and the calamity of the Great Depression, presented Hoover with mounting demands from his supporters for protectionism as a means of shielding the American economy from further harm. Consequently, Hoover signed the Smoot–Hawley Tariff Act into law in 1930 — a move that would intensify the already dire global economic conditions.
This decision, widely criticised in hindsight, set off a catastrophic chain reaction, exemplifying the dangerous allure of economic nationalism during times of crisis. The lessons drawn from this historic episode offer a sobering reminder of the long-term dangers of such policies, yet our leaders often fail to learn from the past.
The Smoot– Hawley Tariff Act, enacted in 1930, was meant to protect American industries — particularly agriculture and manufacturing — from foreign competition. Yet, as Charles Kindleberger documented in The World in Depression 1929–1939, the tariff’s effects were disastrous. While it was designed to support domestic production, it ignited a trade war in which other nations retaliated by imposing their tariffs on U.S. goods. The resulting collapse in global trade exacerbated the suffering of millions.
U.S. exports, which were once a vital source of income for American farmers and manufacturers, fell precipitously. In 1929, exports stood at $5.2 billion; by 1933, they had plummeted to just $1.7 billion. This shift not only deepened the economic recession in the United States but also reverberated around the globe, extending the depression far beyond America’s borders.
The hidden story behind this decision is that Hoover’s political and economic advisers ignored the advice of economists who foresaw the catastrophic repercussions.
A petition signed by more than 1,000 economists warned that increasing tariffs would lead to a trade war, stifling the global economy and exacerbating unemployment. Yet, Hoover prioritised his political stability.
The Smoot–Hawley Act was a symptom of a broader failure to understand the interconnectedness of the world economy. Similarly, the global recession following World War I revealed the limitations of protectionism. In the 1920s, to stabilise war-torn economies, many European countries embraced tariffs to protect their nascent industries from cheap imports.
This short-term solution, while intended to stabilise national economies, set the stage for a vicious cycle of retaliation and economic isolation. As Eric Hobsbawm noted in The Age of Extremes: The Short Twentieth Century, 1914–1991, “The interwar years were a period of economic chaos, made worse by the fragmentation of the global economy into protectionist blocs.”
What we continue to see is that history repeats itself — not out of inevitability, but through the irony of humanity’s failure to learn from its past. One of the earliest examples of economic collapse, though rarely discussed today, can be found in the fall of the Roman Empire.
As the Roman Empire expanded in the 2nd century CE, its need for resources grew exponentially. To fund its vast military and political apparatus, the Empire engaged in what was effectively an early form of debt accumulation and currency debasement.
Roman coins were frequently alloyed with cheaper metals, diluting their value and triggering inflation. The inability to stabilise the monetary system contributed to the destabilisation of the Empire’s economy, leading to a systemic collapse that weakened its ability to resist external pressures. Edward Gibbon, in The History of the Decline and Fall of the Roman Empire, described this economic turmoil as a result of “extravagance in the public and private sectors.”
This pattern of financial mismanagement, he suggested, undermined the very foundations of the Empire, which could no longer bear the weight of excessive spending, unsustainable taxation, and an inflated currency.
Similarly, the economic troubles of ancient Greece offer a parallel cautionary tale. During the Peloponnesian War (431–404 BCE), Athens, to fund its war effort, levied excessive taxes and imposed strict trade restrictions. This, combined with the city’s overreliance on its navy and the weakening of its internal markets, led to an economic crisis that eventually contributed to Athens’ defeat. Donald Kagan, in The Peloponnesian War, asserts that Athens’ failure to maintain a balanced and open economic system, while succumbing to protectionist pressures, accelerated its downfall.
He describes the policy shifts as being rooted in “economic myopia,” where short-term political goals trumped long-term economic health —much as Hoover’s short-term political calculations led to the deterioration of the global economy in the 1930s.
While these ancient economies were not directly connected in the same way that today’s globalised world is, their struggles show that the same principles were at play. Protectionist policies, whether in the form of excessive tariffs, debt accumulation, or restrictive trade practices — repeatedly led to economic fragility.
In the 1980s, the global economy once again found itself ensnared in a series of crises, including the oil shock, stagflation, and the collapse of the Bretton Woods system of fixed exchange rates. The United States, under President Richard Nixon, imposed wage and price controls in a bid to address inflation — a policy that proved ineffective and harmful to the economy.
Meanwhile, the oil embargo imposed by OPEC countries pushed the price of oil to unprecedented levels, leading to a global recession.
In the wake of these crises, countries once again turned to protectionist policies in an attempt to shield their domestic industries from the effects of global instability. However, this cycle of protectionism and economic isolation only served to exacerbate the global economic challenges — much as it had in the 1930s.
In this context, President Trump’s trade war with China and other nations, although they were given a 90-day grace period, unlike China — mirrors Hoover’s protectionist actions and serves as a stark reminder of the dangers of economic isolationism. The pursuit of autarky (economic self-sufficiency) is the most destructive economic goal in recent history. As former Secretary of the US Treasury, Larry Summers told Ian Bremmer, American political scientist and author, it is the “worst, most consequential self-inflicted wound in US economic policy” since World War II.
The escalating tariffs, which aim to address trade imbalances and protect American industries, could have far-reaching consequences not just for the US, but for the entire global economy. Paul Krugman has pointed out that protectionist measures often lead to a “race to the bottom,” where countries retaliate with their tariffs, stifling trade, increasing prices, and ultimately harming consumers.
The Great Depression, the oil crises of the 1970s, the global debt crisis of the 1980s, and the ancient economic collapses of Rome and Athens serve as grim reminders of the dangers of economic isolationism and the failure to recognise the interconnectedness of global systems. These historical episodes accentuate a bitter reality: societies are often destroyed not by external forces, but through their internal failings.
This recurring theme of self-destruction, driven by short-sighted political decisions and economic nationalism, highlights the failure to learn from history. To avoid repeating past mistakes, global economic policies must shift away from protectionism and embrace cooperation. However, political short-termism today ensures we risk repeating the errors that led to the collapse of past civilisations.
(The writer is a Colombo based journalist. Views expressed are personal)
