Deflation’s Consequences: Winners, Losers, and a Brief New Normalcy

Macleod, David I.

doi:10.1007/978-3-031-55393-6_16

David I. Macleod²

2 Accesses

Abstract

The immediate effect of deflation in the US has been variously described as a brief depression or severe recession. The gross domestic product (GDP) per capita in constant (1996) dollars shrank slightly from $5556 in 1919 to $5401 in 1920 and more markedly to $5168 in 1921. During 1922, however, it recovered to $5401 again and then rose sharply to $6016 in 1923. The pain was distributed unevenly, as farm commodity prices plunged and estimated unemployment among the civilian labor force soared from 5.2 percent in 1920 to 11.3 percent in 1921. It shrank modestly to 8.6 percent in 1922 and stabilized around 4.3 percent in 1923.

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Notes

1.
HSCam, Ca2ll, Ba475.
2.
Jamie Martin, “The U.S. Wants to Tackle Inflation: Here’s Why That Should Worry the Rest of the World,” NYT, April 28, 2022, https://www.nytimes.com/2022/04/28/opinion/fed-inflation-interest-rates-third-world-debt.html, accessed April 28, 2022.
3.
James H. Shideler, Farm Crisis, 1919–1923 (Berkeley: University of California Press, 1957), 282; HSCam, Ae84, Da1295; Samuel H. Williamson, “Seven Ways to Compute the Relative Value of a U.S. Dollar Amount, 1790 to Present,” at http://www.measuringworth.com/uscompare/, accessed April 29, 2022.
4.
Shideler, Farm Crisis, 69–75, 156–57, 181–83.
5.
CR, April 12, 1921, 170.
6.
American Column and Lumber Co. et al. v. U.S., 257 US 377 (1921), 412 (quotation), 416, 418; Robert K. Murray, The Harding Era: Warren G. Harding and His Administration (Minneapolis: University of Minnesota Press, 1969), 378–380.
7.
NICB, The Cost of Living in the United States, 1914–1926 (New York: NICB, 1926), 34, 59, 164–67.
8.
Meltzer, 1: 112–13, 127, 132; Board of Governors of the Federal Reserve System, Banking and Monetary Statistics (Washington: The Board, 1943), 440, 463.
9.
James Grant, The Forgotten Depression (New York: Simon & Schuster, 2014), 159 (quotation), 161.
10.
George Soule, Prosperity Decade: From War to Depression, 1917–1929 (New York: Rinehart, 1947), 200–204; Archibald M. McIsaac, The Order of Railroad Telegraphers: A Study in Trade Unionism and Collective Bargaining (Princeton: Princeton University Press, 1933), 54–57.
11.
Elma B. Carr, The Use of Cost-of-Living Figures in Wage Adjustments, BLS Bulletin 369 (GPO, 1925), 401.
12.
Paul H. Douglas, Real Wages in the United States, 1890–1926 (1930; New York: Augustus Kelley, 1966), 182, 187, 239–240.
13.
Ibid., 463–64.
14.
Ibid.; Louis Johnston and Samuel H. Williamson, “What Was the U.S. GDP Then?” MeasuringWorth 2019, at http://measuringworth.org/usgdp/, accessed Sept. 23, 2019.
15.
Paul F. Brissenden, Earnings of Factory Workers, 1899 to 1927, Census Monograph 10 (GPO, 1929), 122, 129; Florence Kelley, “Wage-Earning Women and the Reaction,” Woman Citizen 5 (April 23, 1921): 1194–95.
16.
Kate Huntley, Financial Trends in Organized Social Work in New York City (New York: Columbia University Press, 1935), 70, 73; Price V. Fishback and Shawn Everett Kantor, “The Political Economy of Workers’ Compensation Benefit Levels, 1910–1930,” Explorations in Economic History 35 (1998): 118–19.
17.
Thomas Piketty and Emmanuel Saez, “Income Inequality in the United States, 1913–1998,” QJE 118 (Feb. 2003): 8; Simon S. Kuznets, Cyclical Fluctuations: Retail and Wholesale Trade, United States, 1919–1925 (New York: Adelphi, 1926), 144–45.
18.
HSBC, 1004; Kenneth A. Snowden, “Historical Returns and Security Market Development, 1872–1925,” Explorations in Economic History 27 (1990): 413–18; Emmanuel Saez and Gabriel Zucman, “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data,” QJE 131 (May 2016): 553, plus online appendix, table B1.
19.
Douglas, Real Wages, 361, 364.
20.
Ibid., 375–78.
21.
HSCB, 156–57.
22.
Douglas, Real Wages, 386.
23.
NICB, Cost of Government in the United States (New York: NICB, 1926), 34; Douglas, Real Wages, 382.
24.
John Corbin, The Return of the Middle Class (New York: Scribner’s, 1922), 106–8; Claudia Goldin and Lawrence F. Katz, “Decreasing (and Then Increasing) Inequality in America: A Tale of Two Half-Centuries,” in The Causes and Consequences of Increasing Inequality, ed. Finis Welch (Chicago: University of Chicago Press, 2001), 53; Viva Boothe, Salaries and the Cost of Living in Twenty-Seven State Universities and Colleges, 1913–1932 (Columbus: Ohio State University Press, 1932), 12. Percentiles in Thomas Piketty and Emmanuel Saez, “Inequality in the United States, 1913–1998,” NBER Working Paper 8467, Table A7, deflated using their CPI Index, Table B1.
25.
David P. Barrows, “What Are the Prospects of the University Professor?” University of California Chronicle 24 (April 1922): 198–203; Dorothy Hart Bruce et al., “What Are the Prospects of the University Professor’s Wife?” ibid. 24 (Oct. 1922): 508–531.
26.
Daniel Horowitz, The Morality of Spending: Attitudes toward the Consumer Society in America, 1875–1940 (Baltimore: Johns Hopkins University Press, 1985), 141 (first quotation); Jessica B. Peixotto, Getting and Spending at the Professional Standard of Living: A Study of the Costs of Living an Academic Life (New York: Macmillan, 1927), 3–4, 46, 80–105, 182–83 (first quotation), 196, 242 (2nd quotation), 277.
27.
Goldin and Katz, “Decreasing (and Then Increasing) Inequality,” 50–63.
28.
Ibid., 53–54.
29.
It secured a second printing in 1923.
30.
In the Library of Congress’s Chronicling America, an online collection of newspapers, a search found 15,894 pages that mentioned “high cost of living” in 1920, but just 1600 in 1922. https://chroniclingamerica.loc.gov, accessed December 7, 2019.
31.
HathiTrust digitizes printed sources held by major scholarly libraries. A keyword search finds sources that use the keyword somewhere—unlike Chronicling America, which indexes individual pages—and thus does not indicate frequency of usage within sources. Duplicate listings are common, but these should leave trends unaffected. An August 29, 2021 search for “inflation” found 4573 US sources published in 1919; 5548 for 1920; 5911 for 1921; 6101 for 1922; 3110 for 1923; and 3586 for 1924.

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History, Central Michigan University, Mt. Pleasant, MI, USA
David I. Macleod

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Macleod, D.I. (2024). Deflation’s Consequences: Winners, Losers, and a Brief New Normalcy. In: Inflation Decade, 1910—1920. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-55393-6_16

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DOI: https://doi.org/10.1007/978-3-031-55393-6_16
Published: 30 April 2024
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-031-55392-9
Online ISBN: 978-3-031-55393-6
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