Agriculture Crisis as a Cause of the Great Depression

2022-01-18 17:21:06
6 pages
1500 words
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University of Richmond
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Introduction

Amongst the economic downtown that the world has experienced, the great depression is remembered as one of the worst. The downtown lasted from 1929 to 1939. It all began after the stock market first crashed in the year 1929. The crash managed to send Wall Street into an extreme panic that ended up with millions of investors pulling out (Infobase Learning 2018). By 1933, America was in a deep economic crisis with over 15 million Americans being unemployed and a majority of the financial institutions including banks had failed. Herbert Hoover was the president of the US at the time and he kept an optimistic tone trying to encourage the masses that everything would be resolved but at the end of 1931, the country was barely surviving (Infobase Learning 2018).

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In the 1930s, the physical state of America left much to be desired. This is especially true for the rural American environment. The Great Depression came as much as an agricultural crisis just as it was a financial one (Federico 2005). The economic hardships were compounded by soil erosion, numerous floods, and droughts. There was a catastrophic flood that left many people still recovering that occurred in Mississippi in 1927 due to river banks bursting. The damage rolled over to the period in which the Great Depression started. In 1936 and 1937, further devastating floods occurred in New England on both the Mississippi River and Ohio (Madsen 2001). Although the environmental hazards were a key indicator of just how much the US could be capricious, it came at a time when the country could not afford any more losses in economic value (Infobase Learning 2018). The natural calamities worsened things for the agricultural sector limiting the farmers of the United States from supplying a steady flow of produce to the country. This led to very limited food in the market hence ending up with the prices getting inflated drastically. The state of the soil too was not in good condition. A cataclysmic dust bowl also occurred during the Great Depression period. This led to the loss of acres of fertile soil in wind erosion (Federico 2005). The dust bowl was so severe that it sparked one of the greatest internal migrations witnessed in America’s history as the farmers fled the site and settled in urban areas. The migration did nothing to help as it only increased the population in urban areas that were barely sustaining themselves financially. The dust bowl also saw to it that millions of crops were destroyed created a deeper financial crisis for both the farmers and the State (Madsen 2001).

There have been arguments that the Great Depression was aggravated by the need for other parts of the world to pursue deflationary policies and adhere to the gold standard in order to control the downtown. However, the figures that were arrived at, 2 percent increase in currency circulation and 1.9 percent currency plus deposits decrease, show that the monetary policies were insufficient and could not account for the contraction in nominal income that affected the whole world by over 25 percent (Federico 2005). This only leaves the world to find other answers to what led to the spread of the macroeconomic effects of the downtown. The agricultural price decline accounts contributed to the Great Depression. The agricultural decline that affected the US in a major way eventually had a spillover effect on the other sectors of the economy (Madsen 2001). This led to its spread to other countries. In the 1930s, in countries that were developed such as the US, Japan, and Europe, over 30 percent of workers sustained themselves through the agricultural sector compared to the manufacturing industry. This suggests that the countries largely depended on the agricultural sector and any disruption of personal income would eventually catch up on the whole country. There is a lot of evidence that proves that the periods of 1928 (just before the Great Depression occurred) and 1932 saw a lot of decline in agricultural prices and this played a vital role in the depressing effects of real income and aggregated prices (Federico 2005).

The declining real prices in the sector were brought about by the country redistributing large amounts of income to other sectors when the agricultural sector was being crippled by its financial trouble. The redistribution had major significant changes when it came to investments and consumption (Federico 2005). There were several problems that were being experienced for example the marginal inclination of spending money on the people who had lost income was exceedingly higher than those who were gaining income. The redistribution of income also led to the decrease of prices for farms thus resulting in spiking up the cost of borrowing for the farmers. The farmers also became incapable of honoring their debts in form of loans that they took from the bank and this also led to the financial institutions experiencing a lot of problems as well. All these created a ripple effect that touched on most parts of the economy. The bankruptcy of farmers led to the fall of banks and the decline in prices of land led to the drop in real estate value (Madsen 2001).

The price declines in the agricultural sector also created a ripple effect that diffused worldwide or internationally (Federico 2005). Just like any other sector, the prices of agriculture were determined by the produce in terms of exchange rates, tariffs, and currency. Only the countries that chose to abandon the gold standard very early were the ones who could manage to get themselves out of the great depression just as fast. This is mainly because by abandoning it, the countries were able to recover the agricultural sector much faster.

At the time, even the people had started to notice the importance of agriculture in the economy. A movement was started that was labeled back-to-the-land. This was a way in which the majority of the Americans acknowledged the severity of their situation and the need for security in the future (Federico 2005). Before that, the country had witnessed a huge percentage of people migrating from the rural areas to the urban ones in search of other tools of trade. The stock market was overhyped to the extent that even the lowest income earners were investing in it. The entire country was embracing a more industrialized economy because it offered a means of fast money compared to the agricultural sector. However, during and after the depression, there was a mantra was formed that gained popularity that encouraged people towards the idea that the safest place to live was the farm. The new mantra revolved around the fact that even at one worst, there would be a roof for his or her family and food to feed them as well. The same could not be said for the industrialized world that was fully dependent on whether or not the country was in a good financial state. In the early 1930s, there was a drastic drop of 4 million rural to urban migration (Madsen 2001). The rural area also witnessed an increase of a third in its population. The praise was carried on even by the people who chose not to go back to the rural farms. Some of the people could not go back simply because there was nothing to go back to especially those who had been victims of the floods and the huge dust bowl that was responsible for erosion that destroyed many farms. The environmental problems also started being addressed. Most people started interpreting the economic situation and hazardous environmental occurrences such as floods as a result of poor agricultural practices in the last few years. A movement was started in a bid to rehabilitate the lands and find out better as well as productive farming techniques. Franklin D. Roosevelt even mentioned when he gave his inauguration speech encouraging people to divert back to better practices (Infobase Learning 2018). The rehabilitation of the agricultural sector played a major role in the world recovering from the Great Depression.

Conclusion

There are many researchers who stand against the idea that the agricultural sector was part of the reason for the Great Depression. In their arguments, they state that even if the sector played a role, it is so negligible that it cannot account for anything. However, after analyzing all the occurrences that led up to the start of the downtown, it is clear that the agricultural sector was a major influence in both starting and as well as aggravating the situation. If the agricultural sector had been saved a few years early and the great depression would not have occurred or been that severe. Agriculture plays a very vital role in maintaining the economy both in the past and in the present. It is one of the few sectors that can be fallback plans of countries when there is an economic crisis.

Bibliography

Federico, Giovanni. 2005. "Not Guilty? Agriculture In The 1920S And The Great Depression". The Journal Of Economic History 61 (4): 949-976.

Infobase Learning. 2018. Great Depression Environmental Effects.

Madsen, Jacob B. 2001. "Agricultural Crises And The International Transmission Of The Great Depression". The Journal Of Economic History, 61 (2): 1-40.

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