The Economic Crisis of 1929

Spanish Flu & Covid-19


When the economic crisis broke out in 1929, nobody knew when it would end. We don’t know how and when the present crisis will end. We should perhaps think the unthinkable


By Sada Reddi

In our last article on the Spanish influenza epidemic of 1919 (MT 20 March 20), we underlined the fact that the calamity occurred at a time when the colony had the financial resources accruing from high sugar prices to face the challenge. There was no economic crisis during or in the aftermath of the epidemic. It was quite different in several other countries where the influenza epidemic led to the 1921-22 economic recession. However, on 24th October 1929 the American stock market crashed, and in one single day 12,894,650 shares changed hands. A few historians have tried to find a causal link between the epidemic and the 1929 Great Depression but they could conclude that it could only have been a contributory factor. Here, a decade after the epidemic, Mauritius faced a grave economic crisis resulting from the Great Depression, which affected the economy and society at all levels.

Crisis after the Great Depression

After the sugar boom of the 1920s, the prices of sugar began to fall drastically and had a deflationary impact on the economy. The average price of sugar fell by 20% annually between 1924 and 1929 and by 27% in 1930. The island’s revenue declined from about Rs 40 million in 1920-1921 to about Rs 14 million in 1929-1930. All governments of the time made an already bad situation worse by pursuing a policy of retrenchment.

All European economies faced similar problems because they implemented orthodox fiscal policies advocating that expenses should not exceed income. According to Keynes, fiscal policy during a depression calls for government expenditure to exceed tax revenue with a view to boosting aggregate demand. He criticized the British government for its orthodox policies. Unfortunately that same policy was adopted in Mauritius.

Response

In response to the crisis, the colonial government cut its budget allocations, closed schools and laid off many government employees. Private companies cut costs by reducing their labour force. Unemployment was on the rise. The sugar estates resorted to the same policy of cutting wages, dismissing workers and employing more women and children at lower wages. In 1927, the daily wage of a male labourer was Rs 1.25; in 1929 it dropped to Rs 1.00, and in 1930 to 50-75 cents. A woman labourer obtained 30-45 cents daily and a boy received 25-30 cents. (Anjalay of Belle Vue Harel was paid 25 cts a day for carrying manure in the 1940s.)

There were several reductions in wages such that the daily wage of a male labourer dropped to 45 cents in 1932, and did not improve until 1935/36. The monthly wage of an estate labourer amounted to Rs 10.50; with food allowance it came to Rs 25. In the 1930s, the wages remained around Rs 10 mostly for that period, but with a fall in the prices of food, wages and food came down to Rs 17. These are official figures but, in reality, labourers’ actual earnings were much less.

Between 1935-1936, four sugar factories closed down; in towns, lack of money for construction and reduction in maintenance work affected both the agricultural and industrial classes. This is reflected in government statistics. Between 1921-1931, agricultural labour declined by 3000 while the industrial class declined by 10,000. Employers recruited more women as agricultural workers. The number of women agricultural labourers increased from 9678 in 1921 to 15,105 in 1931.

Impact on labourers

As conditions worsened, labourers resorted to protests. In 1934 and 1935, workers marched to Parc à Boulets clamouring for jobs. In 1935 the Spinning and Weaving mill dismissed workers who thereafter assembled at Government House to stage a protest. In July, 100 men were dismissed from the Public Works Department and they assembled at the Company Garden to protest. On the 7th June 1935, 200 unemployed Indians marched about 30 miles from the south of the island to see the Governor in the capital. One paper reported that these peaceful marches were becoming frequent and could turn into a catastrophe.

Unemployment and underemployment were on the increase. The colonial government opened an Unemployment Bureau but all it achieved was a census of the unemployed and it was closed soon after. Malnutrition was rampant and productivity was low. There was reduction in the consumption of rice which suggests that workers were underfeeding themselves. Dr Millien calculated that the population registered a deficit in carbohydrate by 18%, protein by 35% and fat by 59%.

Deterioration in health of population

The health of the population deteriorated and there was an increase in hookworm and malaria. In 1930, whooping cough swept over the island for 3 months causing a large number of deaths among children. In 1932, 30,000 patients were treated for hookworm. In 1931 and 1932, there was an increase in death rate and low birth rate. Though the reasons ‘were obscure but it is believed to have been due to depressed economic conditions aggravated by a severe cyclone in 1931’. The total deaths from malaria increased from 2310 in 1929 to 3984 in 1931. In 1937, the Mauritian intellectual non-workers, artisans and members of the general population lamented ’the terrible miseries from which we have been enduring for the last decade, which situation is daily worsening without any serious attempt made by the responsible authorities to alleviate the hardship, poverty and destitution’.

Financial support to sugar sector

Although in those days, there was no stimulus package per se, on numerous occasions the colonial government provided financial support to the sugar industry to weather the storm. The financial measures were many: repayments of several loans were remitted in full. There was a reduction in export duties, a grant-in-aid from the Mauritius Improvement and Development Fund to the extent of one pound per ton of sugar produced, to be repaid over a period of 30 years. Customs export duties were reduced. The Watts commission found that Mauritius was incurring losses when sugar was below per Rs 8.98 cwt F.O.B, and recommended a higher price for Mauritian sugar, which was considered over- generous by Malcolm de Chazal who denounced several flaws in the report of the commission of inquiry. In fact the recommended price was not based on any real examination of the figures in Mauritius. Francis Watt, who was a sugar estate owner in the West Indies, had written to the West Indian Commission and recommended the same figure for Mauritius.

Financial support to the industry was extended to all the sugar estates whether they were making a profit or loss. Later the Hooper Commission of Inquiry found that of the 31-35 factories which filled a survey questionnaire, except for 1931 and 1934 when 23-28 factories reported a loss, 29 mills out of 34 reported a profit for the remaining years. All the financial assistance went to the sugar estates; neither the workers nor the small planters benefited from that assistance extended by the British government.

Protest marches by labourers

The extremely difficult conditions in which the labourers lived explains why in 1937 when the economic situation improved, the labourers and small planters and other staff of the industry felt that they deserved an increase in their wages for the sacrifices they had endured. When these were refused by a few estates, and even worse when a few sugar mills cut the prices of the uba canes, the small planters organized a protest march to Port-Louis to present their grievances to the Protector of Immigrants. The labourers in turn made a similar demand for an increase in their wages but the employers refused to give them their due. They organized a march on Union sugar factory which resulted in the shooting of labourers. One month of labour unrest engulfed the whole island in 1937.

Present crisis – prepare for long haul too

After 1937 the workers had thought that their situation would improve but that was not to happen. The difficult years of the Great Depression were followed by the outbreak of the Second World War in 1939 and lasted up to 1945. The war plunged the country in a serious food crisis that debilitated the labouring classes for another 7 years. From 1925 when sugar prices started to fall to the end of the war, the labouring classes had suffered for two decades. When the economic crisis broke out in 1929, nobody knew when it would end. We don’t know how and when the present crisis will end. We should perhaps think the unthinkable and brace for the short-term but also for the long haul.


* Published in print edition on 30 March 2020

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