VIII. LAGGARDS: AGRICULTURE

Manufacturing was clearly the star industry of the 1920s. Its output doubled between 1921 and 1929, and it accounted for about 30 percent of all payrolls. Annual labor and capital productivity grew two to three times faster than ever before. Cars and electrically powered consumer and investment durables, especially communications-oriented products, changed the rhythms of daily living.

Some industries, however, did not keep pace. Agriculture had enjoyed halcyon years during the war, but struggled mightily with overproduction once the farm sectors in the warring countries came back on line. The 1920s marked the point when agriculture ceased to be the most important American industry. Muncie’s factories were depopulating family farms, mechanization was forcing consolidation of smaller farms, and the farm labor force was steadily shrinking. So farmers as a group had a lot to be unhappy about, but the traditional meme that a rural collapse was a major cause of the Depression in America is an overstatement.

Giovanni Federico, an Italian historian of world agriculture, has reexamined the American data and taken issue with the standard story. Much of the rural perception of disaster, Federico suggests, was only by comparison with the golden years of the war. A longer view gives a different impression. In the 1900s, the American farmer’s terms of trade (the ratio of farm prices to manufacturing prices) mostly languished in the 80s. It jumped to 100 in 1910, then took off in 1915, soaring to about 125 in 1917—the consequence of the “Western settlement” nations (United States, Canada, Australia, and New Zealand) enjoying a virtual monopoly on the international agricultural trade during the war years. The first blow was that the war ended, catching farmers with outsized debt incurred to expand their planting. The second was that European agriculture recovered faster than expected. And the third was the nasty 1920–1921 recession. Wholesale farm prices suffered a real drop of about 18 percent even as planned production declined. Deflation magnified the burden of farm mortgages, and many farmers defaulted.⁴⁷

But Federico’s data suggest that farmers coped. Based on a model that relates population growth and improving diets to food demand, he finds that American farm production had adjusted to demand by the end of the 1920–1921 downturn, and stayed that way for the rest of the decade. There was probably modest overproduction in 1928 and 1929, but not on a scale sufficient to cause a crisis. The 1929 Survey of Current Business shows that the index of farm labor output had increased by just over 14 percent over the 1923–1925 average. Farm prices had stayed flat, consistent with the slightly negative inflation for the entire economy. Nor did farm equipment manufacturers have a bad decade. The biggest of them, International Harvester, had gross profits of $11.4 million in 1922 and more than $59 million in both 1928 and 1929. That is far from GM territory, but it suggests a healthy, modernizing industry. Ford also continued to enjoy healthy sales of its tractors and trucks.

Figure 2.5 lends considerable support to Federico’s thesis. Prices for meat animals and farm crops jumped enormously during the war, undoubtedly encouraging farmers’ ambitions—although the real farmer price gains were no more than 10–30 percent depending on their product mix. The end of the war was brutal for all farmers, but by 1925, crop farmers had fully caught up: the combination of price increases and improved worker output put them ahead of the 80 percent postwar inflation in the overall economy, while meat farmers took until about 1928 to reach that blessed state. While that was no more than holding their own, it is a less dire picture than painted by farm advocates.

Having said that, however, a real collapse was just around the corner. The 1930s combination of deflation, bumper crops, and heavy debt loads prostrated farm belts throughout the world and was one of several major forces creating the Great Depression. Because of the diversity of the United States’ economy, the debacle in global agriculture was less consequential in America than in most other countries with large agrarian sectors. In 1935, the Federal government effectively socialized the biggest cash crops—a bailout not unlike the one provided to the banking sector in 2007–2008.

Economics aside, the cultural loss from the disappearance of traditional agriculture was unsettling. The self-sufficient family farm, and its concomitant Jeffersonian vision of a nation of rural small producers was dying, the victim of the same mass production forces that had radically changed the manufacturing sector. Machinery was gradually replacing labor, and smaller farmers could not withstand the mechanized corporate competition. Family farmers were defaulting on their mortgages and losing their land, and with it, their sense of place and long-term security. For most, factory work in big, heartless cities was the only alternative, and it was a scary one, as documented in the Muncie interviews. In 1900, some 40 percent of the labor force worked in agriculture; by 1930 it was down to 22 percent, on its way to the almost invisible 2 percent that prevails today.