The Crisis in Primary Products
ONE of the most important factors deepening the depression in 1930–1 was the collapse of raw-material prices [Condliffe, 1932; Timoshenko]. Between 1929 and 1933, the world price of foodstuffs fell by 55 per cent and of raw materials by 60 per cent — a much sharper fall than in manufacturing prices. In addition, capital imports evaporated, and the worsening terms of trade led to restrictions in the import of manufactured goods. Why was the fall in primary products so steep? We can begin to answer this question by making a few general observations, since the price falls varied considerably between commodities, indicating that there is no monocausal explanation. It can be argued that capital imports and commodity-control schemes kept prices artificially high during the late 1920s, so that, when international borrowing was no longer possible, surpluses were dumped on international markets in a panic and rapid price falls ensued. In addition, although farm income declined substantially during the depression, output was maintained.
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