The Big Picture Of The Great Depression


Far from being an innovation, the AAA was actually typical—one of many programs put into effect in countries all over the world in the depths of the Depression to deal with the desperate plight of farmers. The year 1933 saw the triumph nearly everywhere of a simple supplyand-demand kind of thinking that the French called “economic Malthusianism,” the belief that the only way to raise prices was to bring output down to the level of current consumption. In February 1933, Indian, Ceylonese, and East Indian tea growers agreed to limit exports and prohibit new plantings for five years. A central committee of planters assigned and administered quotas limiting the exportation of tea. Dutch, British, French, and Siamese rubber growers adopted similar regulations for their product. In April 1933 representatives of nearly all the countries of Europe met in London with representatives of the major wheatexporting nations, of which the United States, of course, was one of the largest. The gathering produced an International Wheat Agreement designed to cut production in hopes of causing the price of wheat to rise to a point where it would be profitable for farmers, yet still “reasonable” for consumers.

The best that those in charge of the ship of state could manage to do was ride out the hurricane without foundering.

In addition to these international agreements, dozens of countries acted unilaterally in 1933 with the same goals in mind. Argentina adopted exchange controls, put a cap on imports, and regulated domestic production of wheat and cattle. The government purchased most of the 1933 wheat crop at a fixed price, then dumped the wheat abroad for whatever it could get. A Danish law of 1933 provided for government purchase and destruction of large numbers of low-quality cattle, the cost to be recovered through a slaughterhouse tax on all cattle butchered in Denmark. Declining demand caused by British restrictions on importation of Danish bacon led the Danish government to issue a specified number of “pig cards” to producers. Pigs sent to market with such cards brought one price, those without cards a lower one. The Dutch enacted similar restrictions on production of pork, beef, and dairy products.

Switzerland reduced milk production and limited the importation of feed grains in 1933, and Great Britain set up marketing boards that guaranteed dairymen a minimum price for milk. Sweden subsidized homegrown wheat and rye, and paid a bounty to exporters of butter. In 1933 France strengthened the regulations protecting growers of grapes and established a minimum price for domestic wheat. After Hitler came to power, the production, distribution, and sale of all foodstuffs was regulated. Every link from farmer to consumer was controlled.

Looking at the situation more broadly, the growers of staple crops for export were trying to push up prices by reducing supplies, ignoring the fact that higher prices were likely to reduce demand still further. At the same time, the agricultural policies of the European industrial nations were making a bad situation worse. By reducing imports (and in some cases increasing domestic output) they were injuring the major food-producing countries and simultaneously adding to the costs of their own consumers.

It was, the British historian Sidney Pollard has written, “a world of rising tariffs, international commodity schemes, bilateral trade agreements and managed currencies.” The United States was as much a part of Pollard’s world as any other country.

One further example of the need to see American Depression policies in their world context is revealing. It involves the recession of 1937-38 and President Roosevelt’s supposed responsibility for it. In early 1937 the American economy seemed finally to be emerging from the Depression. Unemployment remained high, but most economic indicators were improving. Industrial production had exceeded 1929 levels. A group of New Dealers who met at the home of the Federal Reserve Board chairman Marriner Eccles in October 1936 were so confident that the Depression was ending that their talk turned to how to avoid future Depressions. The general public was equally optimistic. “When Americans speak of the depression,” the French novelist Jules Romains wrote after a visit to this country at that time, “they always use the past tense.”

At this point Roosevelt, egged on by his conservative secretary of the treasury, Henry Morgenthau, warned the public in a radio speech that “the dangers of 1929 are again becoming possible.” He ordered a steep cut in public works expenditures, and instructed the members of his cabinet to trim a total of $300 million from their departmental budgets. The President promised to balance the federal budget, and in fact brought the 1937 deficit down to a mere $358 million, as compared with a deficit of $3.6 billion in 1936. This reduction in federal spending, combined with the Federal Reserve’s decision to push up interest rates and the coincidental reduction of consumer spending occasioned by the first collection of Social Security payroll taxes, brought the economic recovery to a halt and plunged the nation into a steep.recession. The leading historian of the subject, K. D. Roose, called the recession a downturn “without parallel in American economic history.”