As the figure shows the depression was marked by extraordinarily large price decreases. Consumer prices fell After that consumer prices were relatively constant and actually fell slightly from to and from to Wholesale prices show greater variation. The depression hit farmers very hard. Prices had been bid up with the increasing foreign demand during the First World War.
As European production began to recover after the war prices began to fall. Though the prices of agricultural products fell from to , the depression brought on dramatic declines in the prices of raw agricultural produce as well as many other inputs that firms employ. In the scramble to beat price increases during firms had built up large inventories of raw materials and purchased inputs and this temporary increase in demand led to even larger price increases.
With the depression firms began to draw down those inventories. The result was that the prices of raw materials and manufactured inputs fell rapidly along with the prices of agricultural produce—the WPI dropped The price changes probably tend to overstate the severity of the depression. Wholesale prices in the rest of the s were relatively stable though they were more likely to fall than to rise. Despite the depression and the minor interruptions in and , the American economy exhibited impressive economic growth during the s.
Though some commentators in later years thought that the existence of some slow growing or declining sectors in the twenties suggested weaknesses that might have helped bring on the Great Depression, few now argue this.
Economic growth never occurs in all sectors at the same time and at the same rate. Growth reallocates resources from declining or slower growing sectors to the more rapidly expanding sectors in accordance with new technologies, new products and services, and changing consumer tastes.
Economic growth in the s was impressive. Ownership of cars, new household appliances, and housing was spread widely through the population. New products and processes of producing those products drove this growth. The combination of the widening use of electricity in production and the growing adoption of the moving assembly line in manufacturing combined to bring on a continuing rise in the productivity of labor and capital.
Though the average workweek in most manufacturing remained essentially constant throughout the s, in a few industries, such as railroads and coal production, it declined. Whaples New products and services created new markets such as the markets for radios, electric iceboxes, electric irons, fans, electric lighting, vacuum cleaners, and other laborsaving household appliances.
This electricity was distributed by the growing electric utilities. The stocks of those companies helped create the stock market boom of the late twenties. RCA, one of the glamour stocks of the era, paid no dividends but its value appreciated because of expectations for the new company.
Like the Internet boom of the late s, the electricity boom of the s fed a rapid expansion in the stock market. Fed by continuing productivity advances and new products and services and facilitated by an environment of stable prices that encouraged production and risk taking, the American economy embarked on a sustained expansion in the s. At the same time that overall production was growing, population growth was declining.
As can be seen in Figure 3, from an annual rate of increase of 1. These changes in the overall growth rate were linked to the birth and death rates of the resident population and a decrease in foreign immigration. Though the crude death rate changed little during the period, the crude birth rate fell sharply into the early s.
Figure 4 There are several explanations for the decline in the birth rate during this period. First, there was an accelerated rural-to-urban migration. Urban families have tended to have fewer children than rural families because urban children do not augment family incomes through their work as unpaid workers as rural children do. Immigration also fell sharply. A new act in lowered this to 2 percent of the resident population at the census and more firmly blocked entry for people from central, southern, and eastern European nations.
The limits were relaxed slightly in The American population also continued to move during the interwar period. Two regions experienced the largest losses in population shares, New England and the Plains. For New England this was a continuation of a long-term trend. The population share for the Plains region had been rising through the nineteenth century. In the interwar period its agricultural base, combined with the continuing shift from agriculture to industry, led to a sharp decline in its share.
The regions gaining population were the Southwest and, particularly, the far West. During the s the labor force grew at a more rapid rate than population. This somewhat more rapid growth came from the declining share of the population less than 14 years old and therefore not in the labor force. In contrast, the labor force participation rates, or fraction of the population aged 14 and over that was in the labor force, declined during the twenties from This was entirely due to a fall in the male labor force participation rate from The primary source of the fall in male labor force participation rates was a rising retirement rate.
Employment rates for males who were 65 or older fell from With the depression of the unemployment rate rose rapidly from 5. The recovery reduced unemployment to an average rate of 4. The unemployment rate rose to 5. Otherwise unemployment remained relatively low.
The onset of the Great Depression from the summer of on brought the unemployment rate from 4. Figure 5. Earnings for laborers varied during the twenties. Table 1 presents average weekly earnings for 25 manufacturing industries. For these industries male skilled and semi-skilled laborers generally commanded a premium of 35 percent over the earnings of unskilled male laborers in the twenties.
Unskilled males received on average 35 percent more than females during the twenties. Real average weekly earnings for these 25 manufacturing industries rose somewhat during the s.
For skilled and semi-skilled male workers real average weekly earnings rose 5. Real average weekly earnings for females rose on 1. Real weekly earnings for bituminous and lignite coal miners fell as the coal industry encountered difficult times in the late twenties and the real daily wage rate for farmworkers in the twenties, reflecting the ongoing difficulties in agriculture, fell after the recovery from the depression.
The s were not kind to labor unions even though the First World War had solidified the dominance of the American Federation of Labor among labor unions in the United States. The rapid growth in union membership fostered by federal government policies during the war ended in A committee of AFL craft unions undertook a successful membership drive in the steel industry in that year. When U. Steel refused to bargain, the committee called a strike, the failure of which was a sharp blow to the unionization drive.
Brody, In the same year, the United Mine Workers undertook a large strike and also lost. These two lost strikes and the depression took the impetus out of the union movement and led to severe membership losses that continued through the twenties. Figure 6.
The AFL officially opposed any government actions that would have diminished worker attachment to unions by providing competing benefits, such as government sponsored unemployment insurance, minimum wage proposals, maximum hours proposals and social security programs.
But Irving Bernstein concludes that, on the whole, union-management cooperation in the twenties was a failure. Some firms formed company unions to thwart independent unionization and the number of company-controlled unions grew from to between and Until the late thirties the AFL was a voluntary association of independent national craft unions. Craft unions relied upon the particular skills the workers had acquired their craft to distinguish the workers and provide barriers to the entry of other workers.
Most craft unions required a period of apprenticeship before a worker was fully accepted as a journeyman worker. The skills, and often lengthy apprenticeship, constituted the entry barrier that gave the union its bargaining power. The AFL had been created on two principles: the autonomy of the national unions and the exclusive jurisdiction of the national union.
Representation in the AFL gave dominance to the national unions, and, as a result, the AFL had little effective power over them. The craft lines, however, had never been distinct and increasingly became blurred. The AFL was constantly mediating jurisdictional disputes between member national unions. Because the AFL and its individual unions were not set up to appeal to and work for the relatively less skilled industrial workers, union organizing and growth lagged in the twenties.
As agricultural production in Europe declined, the demand for American agricultural exports rose, leading to rising farm product prices and incomes. In response to this, American farmers expanded production by moving onto marginal farmland, such as Wisconsin cutover property on the edge of the woods and hilly terrain in the Ozark and Appalachian regions.
They also increased output by purchasing more machinery, such as tractors, plows, mowers, and threshers. The price of farmland, particularly marginal farmland, rose in response to the increased demand, and the debt of American farmers increased substantially.
This expansion of American agriculture continued past the end of the First World War as farm exports to Europe and farm prices initially remained high. However, agricultural production in Europe recovered much faster than most observers had anticipated.
Even before the onset of the short depression in , farm exports and farm product prices had begun to fall. During the depression, farm prices virtually collapsed. From to , the consumer price index fell Real average net income per farm fell over Figure 7 Farm mortgage foreclosures rose and stayed at historically high levels for the entire decade of the s.
Figure 8 The value of farmland and buildings fell throughout the twenties and, for the first time in American history, the number of cultivated acres actually declined as farmers pulled back from the marginal farmland brought into production during the war. Rather than indicators of a general depression in agriculture in the twenties, these were the results of the financial commitments made by overoptimistic American farmers during and directly after the war.
The foreclosures were generally on second mortgages rather than on first mortgages as they were in the early s. Johnson, ; Alston, A major difficulty in analyzing the interwar agricultural sector lies in separating the effects of the and depressions from those that arose because agriculture was declining relative to the other sectors. A relatively very slow growing demand for basic agricultural products and significant increases in the productivity of labor, land, and machinery in agricultural production combined with a much more rapid extensive economic growth in the nonagricultural sectors of the economy required a shift of resources, particularly labor, out of agriculture.
Figure 9 The market induces labor to voluntarily move from one sector to another through income differentials, suggesting that even in the absence of the effects of the depressions, farm incomes would have been lower than nonfarm incomes so as to bring about this migration. The continuous substitution of tractor power for horse and mule power released hay and oats acreage to grow crops for human consumption.
Though cotton and tobacco continued as the primary crops in the south, the relative production of cotton continued to shift to the west as production in Arkansas, Missouri, Oklahoma, Texas, New Mexico, Arizona, and California increased.
As quotas reduced immigration and incomes rose, the demand for cereal grains grew slowly—more slowly than the supply—and the demand for fruits, vegetables, and dairy products grew. Refrigeration and faster freight shipments expanded the milk sheds further from metropolitan areas.
Wisconsin and other North Central states began to ship cream and cheeses to the Atlantic Coast. Due to transportation improvements, specialized truck farms and the citrus industry became more important in California and Florida. Parker, ; Soule, The relative decline of the agricultural sector in this period was closely related to the highly inelastic income elasticity of demand for many farm products, particularly cereal grains, pork, and cotton. As incomes grew, the demand for these staples grew much more slowly.
At the same time, rising land and labor productivity were increasing the supplies of staples, causing real prices to fall. Table 3 presents selected agricultural productivity statistics for these years. Those data indicate that there were greater gains in labor productivity than in land productivity or per acre yields. Per acre yields in wheat and hay actually decreased between and These productivity increases, which released resources from the agricultural sector, were the result of technological improvements in agriculture.
In many ways the adoption of the tractor in the interwar period symbolizes the technological changes that occurred in the agricultural sector. The adoption of the tractor was land saving by releasing acreage previously used to produce crops for workstock and labor saving. At the same time it increased the risks of farming because farmers were now much more exposed to the marketplace. They could not produce their own fuel for tractors as they had for the workstock. Rather, this had to be purchased from other suppliers.
Repair and replacement parts also had to be purchased, and sometimes the repairs had to be undertaken by specialized mechanics. The purchase of a tractor also commonly required the purchase of new complementary machines; therefore, the decision to purchase a tractor was not an isolated one. These changes resulted in more and more farmers purchasing and using tractors, but the rate of adoption varied sharply across the United States.
Technological innovations in plants and animals also raised productivity. Hybrid seed corn increased yields from an average of 40 bushels per acre to to bushels per acre. New varieties of wheat were developed from the hardy Russian and Turkish wheat varieties which had been imported.
The U. For example, in the Columbia River Basin new varieties raised yields from an average of Shepherd, New hog breeds produced more meat and new methods of swine sanitation sharply increased the survival rate of piglets. An effective serum for hog cholera was developed, and the federal government led the way in the testing and eradication of bovine tuberculosis and brucellosis. Prior to the Second World War, a number of pesticides to control animal disease were developed, including cattle dips and disinfectants.
The cattle tick, which carried Texas Fever, was largely controlled through inspections. Schlebecker, ; Bogue, ; Wood, The problems that arose in the agricultural sector during the twenties once again led to insistent demands by farmers for government to alleviate their distress. Though there were increasing calls for direct federal government intervention to limit production and raise farm prices, this was not used until Roosevelt took office. In Congress passed the Capper-Volstead Act to promote agricultural cooperatives and the Fordney-McCumber Tariff to impose high duties on most agricultural imports.
Hoffman and Liebcap, The revenues were to come from taxes imposed on farmers. This act committed the federal government to a policy of stabilizing farm prices through several nongovernment institutions but these failed during the depression.
Federal intervention in the agricultural sector really came of age during the New Deal era of the s. Agriculture was not the only sector experiencing difficulties in the twenties. Other industries, such as textiles, boots and shoes, and coal mining, also experienced trying times.
However, at the same time that these industries were declining, other industries, such as electrical appliances, automobiles, and construction, were growing rapidly. The simultaneous existence of growing and declining industries has been common to all eras because economic growth and technological progress never affect all sectors in the same way.
In general, in manufacturing there was a rapid rate of growth of productivity during the twenties. The rise of real wages due to immigration restrictions and the slower growth of the resident population spurred this. Transportation improvements and communications advances were also responsible. These developments brought about differential growth in the various manufacturing sectors in the United States in the s. Because of the historic pattern of economic development in the United States, the northeast was the first area to really develop a manufacturing base.
By the mid-nineteenth century the East North Central region was creating a manufacturing base and the other regions began to create manufacturing bases in the last half of the nineteenth century resulting in a relative westward and southern shift of manufacturing activity.
There was considerable variation in the growth of the industries and shifts in their ranking during the decade.
The largest broadly defined industries were, not surprisingly, food and kindred products; textile mill products; those producing and fabricating primary metals; machinery production; and chemicals. When industries are more narrowly defined, the automobile industry, which ranked third in manufacturing value added in , ranked first by the mids. Gavin Wright has argued that one of the underappreciated characteristics of American industrial history has been its reliance on mineral resources.
Wright argues that the growing American strength in industrial exports and industrialization in general relied on an increasing intensity in nonreproducible natural resources.
The large American market was knit together as one large market without internal barriers through the development of widespread low-cost transportation. As a result the United States became the dominant industrial force in the world s and s. In addition to this growing intensity in the use of nonreproducible natural resources as a source of productivity gains in American manufacturing, other technological changes during the twenties and thirties tended to raise the productivity of the existing capital through the replacement of critical types of capital equipment with superior equipment and through changes in management methods.
Soule, ; Lorant, ; Devine, ; Oshima, Some changes, such as the standardization of parts and processes and the reduction of the number of styles and designs, raised the productivity of both capital and labor. Modern management techniques, first introduced by Frederick W. Taylor, were introduced on a wider scale. One of the important forces contributing to mass production and increased productivity was the transfer to electric power.
Devine, By about 70 percent of manufacturing activity relied on electricity, compared to roughly 30 percent in Steam provided 80 percent of the mechanical drive capacity in manufacturing in , but electricity provided over 50 percent by and 78 percent by An increasing number of factories were buying their power from electric utilities.
In , 64 percent of the electric motor capacity in manufacturing establishments used electricity generated on the factory site; by , 57 percent of the electricity used in manufacturing was purchased from independent electric utilities. The shift from coal to oil and natural gas and from raw unprocessed energy in the forms of coal and waterpower to processed energy in the form of internal combustion fuel and electricity increased thermal efficiency.
After the First World War energy consumption relative to GNP fell, there was a sharp increase in the growth rate of output per labor-hour, and the output per unit of capital input once again began rising. These trends can be seen in the data in Table 3. Labor productivity grew much more rapidly during the s than in the previous or following decade. Capital productivity had declined in the decade previous to the s while it also increased sharply during the twenties and continued to rise in the following decade.
Alexander Field has argued that the s were the most technologically progressive decade of the twentieth century basing his argument on the growth of multi-factor productivity as well as the impressive array of technological developments during the thirties. However, the twenties also saw impressive increases in labor and capital productivity as, particularly, developments in energy and transportation accelerated.
Warren Devine, Jr. Electricity brought about an increased flow of production by allowing new flexibility in the design of buildings and the arrangement of machines. In this way it maximized throughput. Electricity made possible the use of portable power tools that could be taken anywhere in the factory. Electricity brought about improved illumination, ventilation, and cleanliness in the plants, dramatically improving working conditions.
It improved the control of machines since there was no longer belt slippage with overhead line shafts and belt transmission, and there were less limitations on the operating speeds of machines.
Finally, it made plant expansion much easier than when overhead shafts and belts had been relied upon for operating power. The mechanization of American manufacturing accelerated in the s, and this led to a much more rapid growth of productivity in manufacturing compared to earlier decades and to other sectors at that time.
There were several forces that promoted mechanization. One was the rapidly expanding aggregate demand during the prosperous twenties. Another was the technological developments in new machines and processes, of which electrification played an important part.
Finally, Harry Jerome and, later, Harry Oshima both suggest that the price of unskilled labor began to rise as immigration sharply declined with new immigration laws and falling population growth. Technological changes during this period can be documented for a number of individual industries. In bituminous coal mining, labor productivity rose when mechanical loading devices reduced the labor required from 24 to 50 percent.
The burst of paved road construction in the twenties led to the development of a finishing machine to smooth the surface of cement highways, and this reduced the labor requirement from 40 to 60 percent.
Mechanical pavers that spread centrally mixed materials further increased productivity in road construction. These replaced the roadside dump and wheelbarrow methods of spreading the cement. Jerome reports that the glass in electric light bulbs was made by new machines that cut the number of labor-hours required for their manufacture by nearly half. New machines to produce cigarettes and cigars, for warp-tying in textile production, and for pressing clothes in clothing shops also cut labor-hours.
The Banbury mixer reduced the labor input in the production of automobile tires by half, and output per worker of inner tubes increased about four times with a new production method. John Lorant has documented other technological advances that occurred in American manufacturing during the twenties.
For example, the organic chemical industry developed rapidly due to the introduction of the Weizman fermentation process. As Avi Cohen has shown, the continuing advances in these machines were the result of evolutionary changes to the basic machine. Mechanization in many types of mass-production industries raised the productivity of labor and capital. In the glass industry, automatic feeding and other types of fully automatic production raised the efficiency of the production of glass containers, window glass, and pressed glass.
Though not directly bringing about productivity increases in manufacturing processes, developments in the management of manufacturing firms, particularly the largest ones, also significantly affected their structure and operation. Alfred D. Chandler, Jr. Until the First World War most industrial firms were centralized, single-division firms even when becoming vertically integrated.
When this began to change the management of the large industrial firms had to change accordingly. Because of these changes in the size and structure of the firm during the First World War, E.
The firm found that the centralized, divisional structure that had served it so well was not suited to this strategy, and its poor business performance led its executives to develop between and a decentralized, multidivisional structure that boosted it to the first rank among American industrial firms. General Motors had a somewhat different problem.
By it was already decentralized into separate divisions. In fact, there was so much decentralization that those divisions essentially remained separate companies and there was little coordination between the operating divisions. A financial crisis at the end of ousted W. Durant and brought in the du Ponts and Alfred Sloan. Through their efforts, the first soil conservation districts came into being, and demonstration projects were carried out to show the benefits of practices such as terracing and contouring for a discussion of the activities of the SCS during this period, see Hurt, Many other proactive measures taken after the s drought also reduced rural and urban vulnerability to drought, including new or enlarged reservoirs, improved domestic water systems, changes in farm policies, new insurance and aid programs, and removal of some of the most sensitive agricultural lands from production Riebsame et al.
Problems remained, but these programs and activities would play a fundamental role in reducing the vulnerability of the nation to the forthcoming s drought. Although a larger area was affected during the s drought, the conservation techniques that many farmers implemented in the intervening years helped prevent conditions from reaching the severity of the s drought. Fite, G. Holt, Rinehart and Winston, New York. Hurt, D. Nelson Hall, Chicago.
Link, I. Woofter, Jr. Works Progress Administration, Washington, D. Riebsame, W. Changnon, Jr. Westview Press, Boulder, Colorado. United States House of Representatives. Relief of the drought area. Warrick, R. Ausubel and A. Biswas eds. Climatic Constraints and Human Activities , pp. Pergamon Press, New York. Trainer; E. Baker; and W. White, R. University of Oklahoma Press, Norman. More Contact Info Web Policy. Drought Center creates tool that could help detect emerging impacts by tracking news.
Drought Monitor now searchable by tribal area. The Dust Bowl. Contributing Factors Due to low crop prices and high machinery costs, more submarginal lands were put into production. The Great Depression Several factors including a market crash started a period of economic downturn known as the Great Depression.
Dust Bowl Begins The middle of the nation is in the midst of the first of four major drought episodes that would occur over the course of the next decade. Federal Aid Federal aid to the drought-affected states was first given in , but the first funds marked specifically for drought relief were not released until the fall of Dust Bowl The term "Dust Bowl" was coined when an AP reporter, Robert Geiger, used it to describe the drought-affected south central United States in the aftermath of horrific dust storms.
The Dust Bowl Ends Most areas of the country were returned to receiving near-normal rainfalls. During World War I, the U. In , with the war over and the demand for farm goods decreasing, the U. The farmers, however, continued to produce at near record levels creating surplus commodities that sent prices plummeting. Until then, land prices had been rising rapidly as farmers and non-farmers saw buying farms as a good investment. With the collapse of farm prices, the land bubble burst, often dropping the market value of the land well below what the investor owed on it.
The post-war depression did not start with the Stock Market Crash of For the Midwest, it started in , and farmers and the small towns that depended on the land were hit hard. In the s, only slightly less than half of the U. When farmers were not making money, they could not buy the products that factories were making.
The workers could not buy the factory output either, meaning more lay-offs, and the country fell into a downward spiral. However, not everyone saw the pattern emerging. Many thought that because the stock market had been on a sustained upswing, it was a good place to invest money. When it became obvious that the price of stocks far outpaced their productive capacity, investors lost confidence and began selling before prices dropped further. Panic ensued, and the market dropped sharply.
With factories closing and banks failing, unemployment continued to rise. Without the safety nets of today like Social Security, many families found themselves without income, losing their homes and facing poverty. The situation during the s was bad; it got much worse in the s.
Farm families were often better suited to weather hard times than town residents. Farmers could grow their own food in large gardens and raise livestock to provide meat. Chickens supplied both meat and eggs, while dairy cows produced milk and cream. Wherever they could, families cut down on expenses. A major problem was taxes, which had to be paid in cash. Families that could not pay taxes sometimes lost their homes and farms.
The state and governments slashed costs wherever they could. The federal government began to provide relief to offset the impact of the Depression.
Iowan Henry Wallace, a corn scientist and farm journal editor, was named secretary of agriculture. He saw that low prices were brought about by surplus production. The federal government adopted a policy that would guarantee farmers a higher-than-market price for their crops and livestock if they would reduce their production. The Agricultural Adjustment Act began sending much needed checks to farmers who would sign up for the system, and the money was a great stimulant to the economy.
It saved many a farm from foreclosure. The environment also seemed hostile to the farmers during the s. The winters of and were especially long and cold. The summer of saw one of the worst droughts ever recorded and crops dried up in the fields. Livestock died for lack of food and water. West of Iowa, on the Great Plains, lands that could no longer sustain the grasses that held the soil in place began to lose topsoil to the strong hot winds.
So much dust was picked up that soon great dark clouds, not of rain but of soil particles, began to drift eastward. Iowa was never hit as hard by the Dust Bowl as Kansas and Oklahoma, but the clouds of dust that blocked out the sun and found their way through any cracks in the house around windows or doors left a lasting impression on those who lived through them.
Times were tough through the entire decade of the s. While government programs helped, it was the start of World War II and the renewed demand for manufactured goods and farm products that lifted the United States out of the worst economic period in its history. It was, however, at a heartbreaking cost in American lives.
It was on "Black Tuesday," October 29, , that investors traded around 16 million shares on the NYSE in a single day that resulted in billions of dollars being This is an interview by W. Tarpley, who was a finance officer in the U.
Treasury, of Raymond Tarver. Tarver gives his personal account of the effects of the closing of the bank he worked in during the Great Depression. Interview with George Mehales by R. Through this oral history interview, George shares stories of his life including what happened to him during the stock market crash of October All parts of the nation were faced with the worst economic depression in history in Iowans suffered along with the rest of the nation.
This video from Iowa Public Television explains causes and effects of the stock market crash of During the Great Depression, a series of droughts combined with non-sustainable agricultural practices led to devastating dust storms, famine, diseases and deaths related to breathing dust. This caused the largest migration in American history. Many factors led to the Dust Bowl. An increased demand for wheat during World War I, the development of new mechanized farm machinery along with falling wheat prices in the s, led to millions of acres of native grassland being replaced by heavily disked fields of This young man in overalls is removing drifts of soil from the highways near Guymon, Oklahoma.
These piles of soil blocked roadways throughout the area during the Dust Bowl. This photograph shows a Dust Bowl farmer raising his fence to keep it from being buried under drifting sand in Cimarron County, Oklahoma. This photograph shows a farmer pumping water from a well to his parched fields in Cimarron County, Oklahoma. One possible solution to the dust problem during this time period in America is irrigation.
Packing winds of 60 miles per hour, the loose topsoil was scooped up and mounded into clouds of dust hundreds of feet high. Farmers borrowed money from the banks to be able to survive. Many had to sell their farms with roughly , farmers losing their farms in alone. Many became hobos who wandered around America looking for any type of work. Others tried to survive by using more mechanisation and expanding the acreage they farmed, but this only made the over-production worse.
They refused to set up co-operatives to regulate production levels because they hated government interference.
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