Economic Survival: Businesses, Farmers, and a Changed Land

1. Economic Survival: Businesses, Farmers, and a Changed Land Jean Walker Director, West Texas Center for Economic Education Dr. Anne Macy Gene Edwards Professor of Finance Dr. Duane Rosa Professor of Economics The Dirty Thirties Social Studies Conference August 11, 2012

2. The Texas Panhandle - Timeline • Battle of Adobe Walls – June 27, 1874 • Quanah Parker and the Commanches were defeated • Battle of Palo Duro Canyon – September 28, 1874 • Colonel Ranald S. MacKenzie led his 4th Cavalry troop to victory over the southern Plains tribes, marking the turning point of the Red River War. • First three permanent settlements: • Old Mobeetie – 1875 • Old Tascosa – 1876 • Clarendon – 1878 • 1876 - Colonel Charles Goodnight moves a herd onto the JA Ranch • 1887 Act – settlers could buy 160-640 acres of farm land or 4 sections of grazing land for $2/acre payable in 40 years at 5%.

3. The Railroads Brought the Settlers • Fort Worth and Denver City RR: • Quanah – 1887 • Childress – Feb.,1887 • Clarendon – July, 1887 • Washburn – August 1887 • Tascosa – Dec., 1887 • Channing • Texline – Dec., 1887 • Atchison, Topeka and Santa Fe RR: • Higgins - 1887 • Canadian • Miami • Panhandle City - 1888 • Pecos Valley & Northeastern Texas Railway (the “Pea Vine”) 1898: • Amarillo • Canyon City • Umbarger • Dawn • Hereford • Frio • Bovina • Farewell • Texico

4. Railroads in the Texas Panhandle: • Rock Island Line: • 1901-02 – through Sherman County • Rock Island’s Choctaw, Oklahoma & Texas: • Shamrock - 1908 • McLean • Alanreed • Groom • Conway • Vega • Wildorado - 1908 • Adrian • Glenrio • Tucumcari – 1908 • Santa Fe Lines: • Canyon to Plainview – 1907 • Plainview to Slaton - 1910 1892-1897: Amarillo was the largest rural shipping point for cattle in the nation.

5. Growth of the Texas Panhandle • Population of Texas Panhandle • 1890 - 9,452 • 1900 - 21,284 • 1910 - 90,000 • 1920 - 115,000 • 1930 - 240,000 • 1887 – Amarillo founded • 1887 – Amarillo National Bank founded • 1889 – First National Bank of Amarillo founded • 1887 - Goodnight plants 100 acres of wheat • By 1912, the Santa Fe shipped 2.8 million bushels of wheat from the Panhandle • 1903-1917 – major land rush to the Texas Panhandle

6. After World War I • 1918 - After World War I, farmers continued to produce a surplus of wheat and cotton to “feed and cloth the world.” • By 1919, farmers had sown 7 times more land in wheat than in the previous decade. • Between 1912-19, cattle prices more than doubled. • 1918 – Amarillo Oil Company found gas on the Masterson Ranch north of Amarillo. • For several years thereafter, wildcatters found abundant gas and some oil. • By 1922, pipelines supplied gas for heating and cooking to cities of the region. • 1923 - American Smelting and Refining Company located a zinc refinery north of Amarillo using the natural gas to run the zinc smelter. • Smelting, refining, shipping wheat and cattle all depended on the railroads. 1917-1933 Prohibition was the law leading to speakeasies, bootlegging, and a rise in organized crime.

7. The Borger Oil Boom • January 11, 1926 - The Dixon Creek Oil Company hit a gusher in Hutchison County, kicking off an oil boom. • Panhandle oil fields produced: • 1925 – 1 million barrels of oil • 1926 – 26 million barrels of oil • 1926 – within 90 days, the Borger area grew by 35,000 people

8. Consequences of the Oil Boom • Law and order were almost non-existent in Borger • In 1927 and again in 1929, Gov. Moody sent the Texas Rangers to “clean up” Borger. • The town of Panhandle was the nearest rail head, and before a spur line was build to Borger in late 1926, Panhandle shipped more freight that any town on the Santa Fe except Chicago. • Other oil towns—Pampa, Lefors, McLean, White Deer, Canadian, Miami—grew. • The railroads grew—by 1930, 10% of Amarillo depended on the Santa Fe railroad for their livelihood. • 1929-30—the Santa Fe building which stands today was built.

9. A Growing Panhandle Economy Because of the Oil Boom • Related industries grew: • Carbon black (extracted from natural gas) • Used in tires and rubber products • On the eve of the Great Depression, 12 Panhandle plants produced 60% of carbon black in the USA • Helium • Contained in the natural gas of the Texas Panhandle • Bureau of Mines constructed a plant west of Amarillo-1929 • Refineries • 1927--Phillips Petroleum erected the largest oil refinery in the world near Borger • 1928—Texas Company (Texaco) bought and expanded a refinery opened a decade earlier east of Amarillo • Pipelines, pump stations, compressor plants, gas processing plants were built – the Panhandle was booming!

10. The Roaring 1920s • Presidents: 1920 – Harding; 1924 – Coolidge; 1928 – Hoover • Prosperity of the 1920s was based largely on purchases of homes and cars which could now be bought in installments. • 60% of American households had cars. Between 1920 and 1929 homeownership nationally doubled. Most homes had electric lights and flush toilets. • 1920 – Women got the right to vote (19th Amendment). • 1926 – Construction began on the 2,344 mile Route 66 running from Chicago to Los Angeles connecting the “main streets of America.” (In 1926 only 800 miles was paved, but in the Panhandle, the only pavement was from Washburn, east of Amarillo, to what is now Soncy Road.) • Radio became a household staple. (NBC started in 1926 and CBS in 1928) • Movies became popular; “talking” movies introduced in 1927. • 1927 - Charles Lindbergh made his trans-Atlantic flight. • Building Amarillo: • Oliver-Eakle (Barfield) Building – 1927 • Amarillo Hotel – 1927 • Herring Hotel - 1928

11. The Great Depression begins… • Oct. 24, 1929 - the stock market crashed after a market boom that started in 1922. • The crash caused a “crisis of confidence” for the economy. • Panic selling came from speculators who had bought stock on margin. • In hindsight, what should we also have seen? • A decline in construction began in 1925, increasing in 1928. • The agricultural sector was a drag on the economy with dropping prices and indebtedness for land. Dow Jones Industrial Average

12. 1929-1933: So What Happened? Politicians kept promising that “prosperity was just around the corner.” Business activity continued to decline and unemployment, which was 4.2% in 1928 was 23.6% by 1932. The economy was in a downward spiral. The Fed did not intervene in the way they would have today.

13. Money in Circulation The FED raised interest rates, contracting the money supply. With less money circulating, fewer goods and services were bought and more people became unemployed. When interest rates increased, the bonds held by the banks lost value, creating problems for the banks. *Currency plus bank deposits, in billions of dollars.

14. Money Creation Crop failures and depression Declining land values Hard to service mortgages Decreased deposits in local bank Banks decrease loans because deposits are down and because loan repayment is slow Can lead to cash crunch Money creation in reverse

15. Bank Holiday • Texas Governor Miriam A. Ferguson closed the banks on March 2, 1933. • FDR declared a 4-day bank holiday on March 5, 1933. • Businesses had no way to deal with customer accounts: • Could not make deposits • Could not protect income • Used credit and checks • Established a money changing facility

16. Bank Holiday • Four Amarillo banks remained closed for two weeks-- • Amarillo National Bank, First National Bank, American State Bank, and Amarillo Bank and Trust • Federal examiners declared the banks financially sound and solvent. • March 15, 1933 -- all 4 reopened • People deposited $1,435,000

17. Number of U.S. Banks Closing Temporarily or Permanently, 1920-1933 A rise in bank failures led to a significant reduction in the amount of money available to buy goods and services. The Federal Reserve, founded in 1913, hesitated to loan to banks considered “unsound.” They allowed them to fail. Remember that pre-FDIC, when a bank failed, depositors lost funds. The Federal Deposit Insurance Corporation was created and accounts became insured on January 1, 1934. Current perspective: 140 banks failed in 2009 and 157 banks in 2010.

18. Loss of Confidence

19. Wealth Loss

20. Amarillo Bank & Trust • Next to advertisement for autos • Entitled “Men and Credit” • Sound and successful banks must requires (sic) definite standards of those to whom it sells credit. Loans at this bank are not made as favors to anyone, but on the basis of safety and profit, both to bank and borrower.

21. The Dust Bowl Dalhart reported black dusters in 1934. March 3, 1935, was the first black duster in Amarillo. April 14, 1935, was the “granddaddy of them all.” Poor agricultural practices and years of sustained drought caused the Dust Bowl, which lasted about a decade.

22. The Dust Bowl The birds were the first sign. The wind had picked up from the north…riding the wind were hundreds, and then thousands, of birds headed south as if it were fall, not spring. On the horizon to the northeast, a thick strip of darkness appeared as if a storm were approaching. But there were no flashes of lightning or thunder. Silently, the darkness loomed higher and closer. Great, billowing clouds of dirt suddenly bore down on the city. Soon, the city was plunged into darkness as the dust storm swept through at more than 50 miles an hour. . . . Historic Amarillo by Mike Cox

23. Dust and Depression Hard to separate the Dust Bowl from the Depression Dust Bowl occurs within the Depression We know that it ended, but when you are in a drought or in a depression, you do not know when it will end-- --affects how you approach decision-making

24. Dust storms are hard on retailers. • Merchants swept and shoveled buckets of dirt from the display windows. • Clothing • Continuous brushing to rid the clothes of dust induced a shop-worn appearance • Furniture • Even if able to just wipe the dust, the finish was still scratched • Perishables • Unless covered or in packaging, the food was ruined

25. Dust in the Home • Continuous cleaning • What is clean enough? • Clean the outside first • Porch, sidewalk, or street? • Non-wealth increasing work • Waste of valuable time • Opportunity cost for housewives

26. Inventory • Do you buy new or wait? • Affects demand at retailers • Homes and businesses carry less inventory

27. Tax Revenues • Depression causes tax revenues to fall • Decreases the size of city government • Stops or reduces public projects • Repair and pave roads • Amarillo Board of City Development appropriation • 1929-30: $100,000 • 1930-31: $75,000 • 1932-33: Mayor requested decrease to $25,000. The board shut down instead.

28. Surviving the 1930’s • How did government programs to combat the Great Depression affect the Texas Panhandle? • CCC – Civilian Conservation Corp • Developed road access to Palo Duro Canyon, the visitor center, cabins, shelters, water crossings, and headquarters. • Palo Duro Canyon State Park - opened on July 4, 1934. • Built Buffalo Lake Wildlife Refuge

29. Surviving the 1930’s • (cont.) New Deal Programs • WPA – Works Progress Administration • Borger - the WPA paved streets and replaced boom shacks with permanent buildings • Amarillo – provided curbs and gutters in the San Jacinto and Country Club section, improved Northwest Texas Hospital, and built post office and federal building in downtown Amarillo. • Preserved historical and archeological past, retrieving artifacts now displayed in Panhandle Plains Historical Museum

30. Surviving the 1930’s • (cont.) New Deal Programs • CWA – Civil Works Administration • Young men worked for 30 to 50 cents an hour building and paving Route 66. • CWA opened a beef cannery. • CWA sponsored special night classes for adults at Amarillo High School.

31. Emergency Relief and Construction Act (1932) • Thompson Park (called Municipal Park) • Had been a city dump • Workers dug the lake • Dug holes for trees ($0.10 per hole) -- over 10,000 holes dug. Children planted trees (metal disc at base). • Other parks: Ellwood, Glenwood (East Park), Sanborn, Thompson (North Park), San Jacinto, Bivins, and Oliver-Eakle

32. Ag or Oil? Historian David Nail proposes that Amarillo focused on oil & gas and not agriculture The Dust Bowl brought agriculture to Amarillo Forced hard times on Amarillo Forced investors to recognize caring for land instead of speculating on land

33. Agriculture and the Great Depression • Since World War I had provided world-wide markets for wheat and high wheat prices, farmers had broken out more and more grazing land for wheat. Gasoline tractors had helped this. • However, by the fall of 1930, prices of farm and ranch products dropped alarmingly. • In 3 years, wheat prices fell from $1.08 to $ .33 per bushel. • Rains were still good and bumper harvests through 1931 produced a glut of wheat, but prices continued to fall, declining 56% from 1929 to 1932. • Then in the summer of 1931, the rains stopped. • There were no wheat crops in 1932, 1933, 1934.

34. Agriculture and the Great Depression • Farmers with fixed indebtedness were hit hard, and by 1932, 52% of all farm debts were in default. • Most farm mortgages at the time were “balloon” mortgages where the whole principal was due about every 5 years. • If prices were stable, banks would “roll over” the loan, but would foreclose if the borrower were behind. • Before the 1930s, most programs to raise farm prices had aimed at price parity or “fair exchange” values. • The Agricultural Marketing Act of 1929 committed the govt. to a policy of farm price stabilization and established the Federal Farm Board to encourage cooperative marketing associations. • Politicians often used high tariffs, such as the Smoot-Hawley Act of 1930.

35. Potter County

36. Agriculture and the Great Depression • By 1932, it was apparent that production controls were needed. • The Agricultural Adjustment Act, passed in 1933, gave the Agricultural Adjustment Administration (AAA) the responsibility of raising farm prices by restricting supply. • Acreage allotments with “adjustment payments” came into being, injecting government control into agriculture in a way not seen before. • In 1936, the Supreme Court ruled the Agricultural Adjustment Act unconstitutional because it attempted to regulate agricultural production, a power reserved to the states. • The Dust Bowl focused attention on the need for soil conservation, so the Soil Conservation and Domestic Allotment Act of 1937 was passed to accomplish the same thing.

37. The Panhandle Connection to 1930s Farm Legislation • J.C. Paul came to Panhandle City in 1888 to establish a bank. • He was also secretary-treasurer of the Southern Kansas Railway Co. of Texas (a branch of the Santa Fe Railway) which was extending its line to Panhandle City. (The bank fixtures in the museum in Canyon were from that bank; they were custom-made in 1908 by a Tennessee firm.) • Paul helped form Amarillo National Bank in 1893 and Amarillo Bank & Trust Co. in 1906. • He was an organizer/first president of the Panhandle Bankers Association. • Frank Paul, his son, came back to banking after World War I. • In 1936, Paul went to Washington D.C. with Marvin Jones, the 13th District Congressman who was chairman of the House Ag Committee, to testify before Congress. Grover Hill (connected to Amarillo National Bank) and John E. Hill went also. • Because they had been dealing with farm failures for several years, the group knew how to set up the agricultural credit system using feed, seed, and loans through the Federal Land Banks to forestall foreclosure.

38. “Roosevelt’s more ambitious and extensive approach concentrated, instead, on raising commodity prices, encouraging conservation, providing credit, reducing tenancy, and improving the quality of rural life. New Deal emphasis on a planned economy, however, ran contrary to the deeply ingrained belief of Panhandle farmers in the free market system. However, conditions quickly became so intolerable that most farmers were force to accept federal regulation in order to survive.” “Area cattlemen, however, balked at governmental intervention into their affairs. Exhibiting an independent streak that had always marked their character, ranchers refused to take part in AAA livestock purchase programs until 1934, when the harsh realities of overstocked and drought-stricken ranges and cheap prices forced most to give in. Between the summer of 1934 and January 1935 the government bought and destroyed thousands of starving and diseased cattle from beleaguered stockmen at the price of four to twenty dollars per head.” . . . . . . . . p. 97-98 of The Golden Spread by B. Byron Price and Frederick W. Rathjen

39. Route 66: “The Mother Road” These iconic pictures reflect the struggles of the families who left the Dust Bowl behind, heading west to find new hope in California. Between 1935 and 1940, the number of farms in the Panhandle declined by nearly 25%.

40. Route 66 The Jericho Gap, an 18 mile stretch of Route 66 between Groom and Alanreed, was one of the most treacherous stretches of Route 66, and was the last to be paved. It was notorious for bogging cars down in the mud after rainstorms. Local farmers and ranchers made supplemental income by pulling stranded motorists out of the mud for a fee. The mud from the rich black soil was a gooey mud the locals called “black gumbo.” The Dustbowl and the Great Depression slowed the paving, but in 1938, the Jericho Gap, the last stretch of unpaved Route 66, was finally paved.

41. Route 66: “The Mother Road” In his 1939 novel, The Grapes of Wrath, and the movie made in 1940, John Steinbeck immortalized Route 66. “And then the dispossessed were drawn west . . . car-loads, caravans, homeless and hungry; twenty thousand and fifty thousand and a hundred thousand and two hundred thousand. . . .The kids are hungry. We got no place to live. Like ants scurrying for work, for food, and most of all for land. John Steinbeck, The Grapes of Wrath

42. Route 66: “The Mother Road” • Economic consequences of Route 66: • The trucking industry began to rival the railroad for preeminence in the American shipping industry. • Route 66 symbolized the “road to opportunity” for those leaving the Dust Bowl for California. • The all-weather capability of the road on the eve of WWII became significant to the greatest wartime manpower mobilization in the history of the nation. • A new tourism industry arose along the road, including filling stations, restaurants, and a new creation, the “motor hotel” or motel.

43. What Caused the Dust Bowl Ocean temperatures in the 1930’s were unstable. Cooler than normal tropical Pacific Ocean temperatures and warmer than normal tropical Atlantic ocean temperatures created ideal drought conditions due to the unstable sea surface temperatures. Result was dry air and high temperatures in the Midwest from 1931 to 1939

44. What Caused the Dust Bowl? 2. The normal supply of moist air from the Gulf of Mexico was reduced. In the 1930’s, the jet stream was weakened and changed course causing the normally moisture rich air from the Gulf of Mexico to become drier. Low level winds further reduced the normal supply of moisture and reduced rainfall throughout the Midwest.

45. Environmental Conditions Leading Up to Dust Bowl The 1910’s – 1920’s were years of extraordinary and consistent rainfall The land, already weakened by livestock overgrazing, was converted to the production of wheat as prices reached record levels Farmers were encouraged to try dry farming in 1920’s and grow wheat on a huge scale

46. Environmental Conditions Leading Up to Dust Bowl The soil became loose and friable (crumbly texture) with the wheat stubble disked under it and had nothing to hold it Farming technology was changing dramatically during 1920’s from horse driven plows to tractors- farmers could plant, plow and harvest more acres. Farmers knew wet years wouldn’t last, but they were making money

47. Palmer Drought Index – July 1934

48. Palmer Drought Index – June 2012

49. January-December 1934 Statewide Temperature Ranks

50. January-June 2012 Statewide Temperature Ranks