The Great Depression Begins in the 1920s

Some history books mark the start of the Depression as October 29, 1929. However, for the Midwest, hard times had started about ten years earlier. During World War I, the government guaranteed farmers high prices for their crops and livestock.

Farmers put more acres in cultivation and increased the size of their herds. They borrowed money from local banks to buy more land and machinery. As the demand for land increased, so did its price, and sales of farmland rose sharply.

In 1920, however, the government ended its guarantees. Farm prices were allowed to drop back to natural prices—determined by supply and demand. In this case, there were big supplies. Farmers continued to produce at high levels and soon surpluses appeared. As a result, prices for crops and for land fell.

Those who had borrowed money could not pay off their loans. Even if they sold their farms, the money they received sometimes was less than what they owed. When banks could not collect the money they borrowed, they could not repay the people who had deposited money in their bank accounts. For several more years the number of bank failures remained high.

Low crop prices hurt farmers, but there were other factors at work. Farm families had to pay high prices for farm machinery through the 1920s. And rates to haul grain were much higher than they had been before the war.

Many rural areas had built new schools and put gravel on country roads when times were good. Because they were still paying for those improvements, taxes were high. Many local school boards asked teachers to accept less pay for their work. Sometimes teachers resigned rather than accepting lower wages.

What made many Midwesterners angry was that the eastern cities seemed to be doing well. Before the collapse in 1929, wages for city workers were rising, and businesses were doing well. Most farm families still did not have electricity in their homes, and rural schools were clearly falling behind the educational instruction that town schools could offer.

Things became worse in the 1930s, but for many farm families the 1920s were a time of serious economic challenges, too.

by Tom Morain in Iowa Pathways from Iowa Public Television

2012-05-23 12:55:03 RBaxter

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