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The Great Depression: Economies
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[One] unusual aspect of the Great Depression was deflation. Prices fell 25%, 30%, 30%, and 40% in the UK, Germany, the US, and France respectively from 1929 to 1933. These were the four largest economies in the world at that time.
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The "liquidationist" monetary-overninvestment view of business cycles collapsed in the Great Depression. It had provided a framework for economists to analyze the busts of the nineteenth and early twentieth century,but its interpretation of the Great Depression was absurd. Periods of high unemployment lasted not for months or years but for decades. They lasted too long to be dismissed as frictions that resulted as the market reallocated productive resources away from what were now seen as low value goods.
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According to the WPA, three-fifths of all first-time rural relief cases in the Great Plains area were directly related to drought, with a disproportionate amount of cases being farmers (68%) and especially tenant farmers (70% of the 68%). However, it is not known how many of the remaining cases (32%) were indirectly affected by drought. The WPA report ... noted that 21% of all rural families in the Great Plains area were receiving federal emergency relief by 1936 (Link et al., 1937); the number was as high as 90% in hard-hit counties (Warrick, 1980). Thus, even though the exact economic losses are not known for this time period, they were substantial enough to cause widespread economic disruption that affected the entire nation.
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East Texas—the land between the Sabine and Trinity rivers—is Southern in character, with pine-covered hills, cypress swamps, and remnants of the great cotton plantations founded before the Civil War. Cotton farming has been supplemented by diversified agriculture, including rice cultivation; almost all of the state's huge rice crop comes from East Texas, and even the industrial cities of Beaumont and Port Arthur are surrounded by rice fields. The inland pines still supply a lumbering industry; Huntsville , Lufkin , and Nacogdoches are important lumber towns. The real wealth of East Texas... comes from its immense, rich oil fields. Longview is an oil center, and Tyler is the headquarters of the East Texas Oil Field. Oil is also the economic linchpin of Beaumont and Port Arthur and the basis for much of the heavy industry that crowds the Gulf Coast.
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The ultimate cause of the Great Depression is still the subject of debate by economists. Although the collapse of the New York Stock Exchange determined its timing there were several factors involved:
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The stock market crash of 1929 greatly added to economic uncertainty: no one at the time knew what its consequences were going to be. The natural thing to do when something that you do not understand has happened is to pause and wait until the situation becomes clearer. Thus firms cut back their own plans for further purchase of producer durable goods. Consumers cut back purchases of consumer durables. The increase in uncertainty caused by the stock market crash amplified the magnitude of the initial recession.
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