Most people agree that if World War I never occurred, the Great Depression would not occur. ...
This starts with two unsupportable premises. I've not run across anyone with much knowledge of early 20th Century economics who saw that large a connection between the two. The after effects of the Great War aggravated the Depression, but there were other ongoing economic trends that made a period of deep economic change, or high volatility, inevitable in those decades.
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The Canadian Prairies, American Great Plains and the Ukraine all suffered a series of droughts during the 1930s. Famine soon followed.
The problem started during the 1860s when railroads and gov’ts encouraged immigrants to settle and plow the prairies. High grain prices also encouraged farmers to plow more land during WW1.
Since the 1870s and 1920s were unusually wet periods “rain followed the plow.” They plowed vast averages of marginal dry grasslands.
When droughts arrived during the 1930s, some farmers starved while others migrated to California.
This came just when the agricultural sectors of nations like Germany, the US, & several other key players changed from the dominant sector to subordinate in factors like labor use. In both the US and Germany the transfer of agricultural labor to urban industrial labor hit the tipping point where the latter absorbed the majority of the labor. Two problems occurred with this in the 1920s. 1. The effects of these droughts pushed the transfer along faster. 2. Skilled agricultural workers could not adapt thru skills fast enough and were stuck in the low wage unskilled tier. The "Okies" Farmers migrating from the plains to live in poverty in California are the poster child for this trend. It was occurring globally. Thus instead of absorbing surplus labor in the US as thru 1910 or 1920 the agricultural sector was now creating surplus labor & at a high rate.
Several factors converged to produce a “perfect storm” to create the American Great Depression.
- The economy since the Civil War was driven by the expansion of railroads and steel. By the late twenties, the U.S. was saturated with railroads and that growth turned to stasis. Timber bridges were already being converted to steel bridges. The new automobile industry and skyscrapers would not yet pick up the slack. It was a market driven downturn that was inevitable. This factor often gets neglected. [It follows the Kondratieff Long Wave economic theory: a downturn driven by the unexpected stoppage of growth in a critical economic sector.]
- Actions of the Fed, bad investment practices that led to the 1929 crash and cash flow (debts, loans) following WW1 always get the blame, but they were not the only factors.
- Once the turndown began, the Smoot-Hawley tariff act only made it worse.
- Then, in the peak of the downturn, the dust bowl hit at a worse possible time.
- For centuries, the American frontier had been the “relief point” in hard times for people seeking a new start, either from Europe or eastern US (or Canada). With the elimination of the frontier, the stresses mounted. California resisted movement of settlers from the dust bowl states.
Bottom Line: No WW1 or a different outcome would have impacted the Depression, but would not have prevented it.
#1. here is critical to understanding the global economy of the first half of the 20th Century.
Whenever a new technology replaces a older tech there is a displacement in labor. Skilled labor, including management, in the mature industries incur a significant income loss as the the surplus shifts to the new sector/s. If you look at the number of technology changes 1910-1940 its larger than usual. In the US railroads, coal, agriculture, horse breeding (for industrial use as well as agriculture), steam power, & others were mature industries. those were not growing or absorbing labor their previous rates. This displacement of labor has a profound economic effect as the skilled labor in one sector is displaced and becomes unskilled labor while reeducation occurs. The means a drop in wages and related economic activity. When wages declined & labor fled the rural towns in the 1920s-50s it mean a huge loss of capitol as businesses in the rural population were unable to recoup long therm investment. Ditto for small towns that lost the revenue stream, unable to pay for past investment in infrastructure. This has a knock on effect back into the industrial sector as purchasing by labor in the mature or dealing sectors labor declines. ie: Sears saw its mail order division grow at a slower rate & decline in net revenue as the rural market shrank. The new generation of urban customers preferred brick and mortar venues & Sears made a expensive expansion investment in that direction.
#3 was repeated globally as proponents of market restrictions increased and free market policies declined. The Great War aggravated this, but there had always been a tension between the two & there was a trend towards restriction & government intervention before 1914 as the European empires consolidated their positions. This touches back on mature industries, which tend to try to protect their cash flow via artificial controls on the markets. It also is reflected in the rise of socialist doctrines which tend towards intervention in the markets to protect labor.
The comment below is illustrative of the ongoing tension between free and 'controlled' markets.
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Tariffs: Now this is where a German victory becomes interesting. As early as the September program, the Germans are contemplating an economic union of some sort. This would include the minor, neutral states of Europe as well. In prewar Europe, tariffs and trade barriers were a significant burden on the Continent. The extreme case was Russia where the cost of tariffs exceeded military spending. If Germany does impose an economic union of sorts, growth will be far more rapid in the postwar era in those states included.
When you examine the global economy from 1914 or 1900 it looks like a perfect storm of deep changes in the worlds economy. This peaked out some time between 1920 & perhaps 1940. Economic change is never cheap & the multiple trends of deep change reaching their high or low point after 1920 were costly across the world. Efforts to restore things 'back to the good old days' through antiquated or fadish economic policy, warfare, and denial made this worse.