When reading Grapes of Wrath by John Steinbeck, one is painted a picture of corporate abuses over helpless people who are finally saved after years of struggle by the government. Steinbeck blames banks and the invention of the tractor and other machinery for displacing thousands of “Okies” who were no longer needed to attend to the crops. He also describes a scene where the California farmers destroyed their oranges and other goods in front of the starving people because no one had the money to buy the products. I will do my best to address these points and explore the reality of the economy during the Great Depression.
Contrary to popular belief, the problem in the eyes of government and corporations was not high prices, it was low prices. Corporations blamed low prices on evils such as “unfair competition” and claimed their “profits weren’t protected.” In response to these complaints, Franklin Roosevelt started the first of many “New Deal” government interventions by creating the National Recovery Administration (NRA) in 1933. The first administrator of the agency, Hugh Johnson, called it “the greatest social advance since the days of Jesus Christ.”
The NRA essentially centralized businesses and industries into regulatory cartels. Large businesses suddenly had the power of law to declare “codes of fair competition” and eliminate “destructive competition.” This led to the formulation of price floors and minimum wage laws, meaning that if a business offered a lower wage to employees or lower price to consumers than the industry’s standards they would be fined and/or imprisoned. A famous example is that of Jacob Maged, a New Jersey tailor who charged 35 cents for pressing a suit, 5 cents below the 40 cent minimum established by the NRA. Only when he agreed to follow the NRA standards did he avoid a $100 fine and a 30 day jail sentence.
Such a law diminishes creativity in start-up businesses, provides a de facto monopoly to the larger players in an industry, and establishes what large businesses consider “fair competition”: no competition. Without free competition and fluctuation of prices and wages, the individual people are inevitably the ones who are most impacted in a negative way. Mandatory higher wages destroy jobs for lower-skilled workers, and mandatory higher prices obviously prevent people from buying goods they especially need during a depression. In other words, the NRA was preventing the market from readjusting its labor and goods to the productive areas of the economy in the name of “fair competition” and other terms created by businessmen looking to use government to protect their profits.
The NRA was just the beginning of the attack on low prices. Many farm goods such as wheat and cotton were experiencing large drops in prices as the recession and depression worsened. Government believed the problem was overproduction, which they then believed led to prices that were too low, putting a strain on businesses. It is worth noting that the economists who actually predicted the Great Depression strongly recommended against the policies pushed through by the Roosevelt Administration.
In an attempt to “stabilize” farms and food prices, the Agriculture Adjustment Act was passed in 1933. The basic goal of the newly formed Agriculture Adjustment Administration (AAA) was to pay farmers to reduce their crop area and output. This, the AAA and Roosevelt Administration believed, would bring stability to the economy by raising prices to their so-called appropriate level. Oklahoma is the initial setting of the Joad family in Grapes of Wrath, so we’ll stick with Oklahoma figures for now.
In Oklahoma in 1933, 87,794 cotton farmers plowed under acres of their already-growing fields for a total payment of $15,792,287 from the federal government.
In 1934, Oklahoma pig farmers received more than $4 million to slaughter a portion of their sows and younger pigs.
In 1934 and 1935 wheat farmers were paid nearly $14 million to reduce their acreage. What’s ironic is just years earlier in 1917, under the watch of Herbert Hoover at the Food Administration, the government paid farmers an artificially high $2-per-bushel of wheat to expand the production of wheat for the efforts of World War 1. First government subsidized the unnatural growth of wheat (causing a major wheat bubble and artificial reallocation of farmers’ resources in the Midwest), and less than 20 years later government was paying farmers to stay away from wheat and do absolutely no farming on their land.
In the entire U.S., production of other products like milk and butter decreased approximately 30% thanks to the new federal subsidies.
It was this process that played the single greatest role in landowners getting rid of their tenants in Oklahoma, not some far off mysterious bankers as Steinbeck portrays in Grapes of Wrath. Another major factor was that the federal subsidies did not reach the smaller family farms in Oklahoma, which provided a double-whammy to the small farms with the artificially higher prices that came with the food destruction. Basically, large farms were paid to do nothing and even destroy their crops, which increased prices and diminished competition artificially, which in turn led to the eventual decline of small farms (who were often bought by the larger subsidized farms) as well as the removal of many tenants of the larger farms.
These fatally flawed policies monopolized large farms and forced many farmers to leave the state, most choosing to go to California and the Southwest. Steinbeck places the majority of the blame on corporations, but he failed to see that the corporations would have been powerless without the force of government. Both the NRA and AAA were ruled unconstitutional by the Supreme Court in 1936, but many similar policies have remained in place up to the present day.
Basic economic common sense tells us that you cannot create wealth by destroying wealth. If this were the case you’d have Apple destroying most of its iPods, Chipotle would demolish its burritos, and more businessmen would probably be following this practice. However, it is plain common sense that assures and convinces us that you cannot expand your wealth by voluntarily destroying your goods. This is what Steinbeck blames California farmers for doing, but there is no historical evidence that suggests farmers sprayed kerosene on their oranges and dumped their potatoes in the rivers. The only examples of farmers destroying their crops are those who were paid to do so by the federal government.
A question is worth asking: if, as Steinbeck wrote, farmers did destroy their oranges and potatoes because no one could afford to purchase them, why not sell them for even 1/2 cent a piece? The loss would be far less than actually paying people to harvest the goods, only then to proceed to physically destroy them all. Such a bogus event would not benefit the farmer, the workers, or the consumers. The farmers would be better off not growing those crops at all or simply giving them away, rather than expending even more resources on hiring guards and people to destroy the food.
John Steinbeck is a fantastic writer but, as with many writers, he has a flawed or incomplete view of the real economic world. People are not helpless peons when given the ability to make their own choices, start their own businesses, and live their lives as they see best. The attempt at a planned economy during the Great Depression did not reduce unemployment or diminish the impacts of the economic correction as expected or hoped. It is a prime example and vital reminder of the destruction that is bound to occur when a select few are empowered to control, manipulate, and implant their vision of a perfect society on the rest of the people.
Originally written for DavidKretzmann.com.Published in