Transcript Slide 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
1
The Texas Panhandle - Timeline

Battle of Adobe Walls – June 27, 1874
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Battle of Palo Duro Canyon – September 28, 1874
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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:
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Quanah Parker and the Commanches were defeated
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%.
2
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
3
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.
4
Growth of the Texas Panhandle
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Population of Texas Panhandle
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1887 – Amarillo founded
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1887 – Amarillo National Bank founded
1889 – First National Bank of Amarillo founded
1887 - Goodnight plants 100 acres of wheat
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1890 - 9,452
1900 - 21,284
1910 - 90,000
1920 - 115,000
1930 - 240,000
By 1912, the Santa Fe shipped 2.8 million bushels of wheat from
the Panhandle
1903-1917 – major land rush to the Texas Panhandle
5
After World War I
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1918 - After World War I, farmers
continued to produce a surplus of wheat
and cotton to “feed and cloth the world.”
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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.
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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.
6
The Borger Oil Boom

January 11, 1926 - The Dixon Creek Oil Company hit a gusher
in Hutchison County, kicking off an oil boom.
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Panhandle oil fields produced:
 1925 – 1 million barrels of oil
 1926 – 26 million barrels of oil
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1926 – within 90 days, the Borger area grew by 35,000 people
7
Consequences of the Oil Boom

Law and order were almost non-existent in Borger
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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.
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1929-30—the Santa Fe building which stands today was built.
8

A Growing Panhandle Economy
Because of the Oil Boom
Related industries grew:
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Carbon black (extracted from natural gas)
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Helium
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Contained in the natural gas of the Texas Panhandle
Bureau of Mines constructed a plant west of Amarillo-1929
Refineries
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Used in tires and rubber products
On the eve of the Great Depression, 12 Panhandle plants
produced 60% of carbon black in the USA
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!
9
The Roaring 1920s
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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.
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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.)
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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:
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Oliver-Eakle (Barfield) Building – 1927
Amarillo Hotel – 1927
Herring Hotel - 1928
10
The Great Depression begins…
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Oct. 24, 1929 - the stock
market crashed after a
market boom that started
in 1922.
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Dow Jones
Industrial
Average
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?
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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.
11
1929-1933: So What Happened?
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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.
12
Money in Circulation
Money in Circulation*
Year
1929
$26.2
1930
$25.1
1931
$23.5
1932
$20.2
1933
$19.2
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.
13
Money Creation
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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
14
Bank Holiday

Texas Governor Miriam A. Ferguson closed the
banks on March 2, 1933.
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Businesses had no way to deal with customer
accounts:
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FDR declared a 4-day bank holiday on March 5, 1933.
Could not make deposits
Could not protect income
Used credit and checks
Established a money changing facility
15
Bank Holiday
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Four Amarillo banks remained closed for
two weeks-
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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
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People deposited $1,435,000
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Number of U.S. Banks Closing Temporarily or
Permanently, 1920-1933
Year
Number of Bank Closings
1920
168
1921
505
1922
367
1923
646
1924
775
1925
618
1926
976
1927
669
1928
499
1929
659
1930
1352
1931
2294
1932
1456
1933
4004
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.
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Loss of Confidence
Year
Stocks
T-Bills
T-Bonds
$100 in
Stocks
$100 in
T-Bills
$100 in
T-Bonds
1928
43.81%
3.08%
0.84%
$143.81
$103.08
$100.84
1929
-8.30%
3.16%
4.20%
$131.88
$106.34
$105.07
1930
-25.12%
4.55%
4.54%
$98.75
$111.18
$109.85
1931
-43.84%
2.31%
-2.56%
$55.46
$113.74
$107.03
1932
-8.64%
1.07%
8.79%
$50.66
$114.96
$116.44
1933
49.98%
0.96%
1.86%
$75.99
$116.06
$118.60
1934
-1.19%
0.32%
7.96%
$75.09
$116.44
$128.05
1935
46.74%
0.18%
4.47%
$110.18
$116.64
$133.78
1936
31.94%
0.17%
5.02%
$145.38
$116.84
$140.49
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Wealth Loss
Year
Stocks
T-Bills
T-Bonds
$100 in
Stocks
$100 in
T-Bills
$100 in
T-Bonds
1937
-35.34%
0.30%
1.38%
$94.00
$117.19
$142.43
1938
29.28%
0.08%
4.21%
$121.53
$117.29
$148.43
1939
-1.10%
0.04%
4.41%
$120.20
$117.33
$154.98
1940
-10.67%
0.03%
5.40%
$107.37
$117.36
$163.35
1941
-12.77%
0.08%
-2.02%
$93.66
$117.46
$160.04
1942
19.17%
0.34%
2.29%
$111.61
$117.85
$163.72
1943
25.06%
0.38%
2.49%
$139.59
$118.30
$167.79
1944
19.03%
0.38%
2.58%
$166.15
$118.75
$172.12
1945
35.82%
0.38%
3.80%
$225.67
$119.20
$178.67
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Amarillo Bank & Trust
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Next to advertisement for autos
Entitled “Men and Credit”
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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.
20
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.
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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
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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
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Dust storms are hard on retailers.
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Merchants swept and shoveled buckets of dirt from
the display windows.
Clothing
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Furniture
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Continuous brushing to rid the clothes of dust induced a
shop-worn appearance
Even if able to just wipe the dust, the finish was still
scratched
Perishables
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Unless covered or in packaging, the food was ruined
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Dust in the Home
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Continuous cleaning
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Clean the outside first
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Porch, sidewalk, or street?
Non-wealth increasing work
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What is clean enough?
Waste of valuable time
Opportunity cost for housewives
25
Inventory
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Do you buy new or wait?
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Affects demand at retailers
Homes and businesses carry less inventory
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Tax Revenues
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Depression causes tax revenues to fall
Decreases the size of city government
Stops or reduces public projects
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Repair and pave roads
Amarillo Board of City Development appropriation
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1929-30: $100,000
1930-31: $75,000
1932-33: Mayor requested decrease to $25,000. The
board shut down instead.
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Surviving the 1930’s

How did government programs to combat the
Great Depression affect the Texas Panhandle?
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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
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28
Surviving the 1930’s
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(cont.) New Deal Programs
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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

29
Surviving the 1930’s

(cont.) New Deal Programs
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CWA – Civil Works Administration
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Young men worked for 30 to 50 cents an hour
building and paving Route 66.
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CWA opened a beef cannery.
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CWA sponsored special night classes for adults at
Amarillo High School.
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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).
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Other parks: Ellwood, Glenwood (East
Park), Sanborn, Thompson (North Park),
San Jacinto, Bivins, and Oliver-Eakle
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Ag or Oil?
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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
32
Agriculture and the Great Depression
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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.
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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.
33
Agriculture and the Great Depression

Farmers with fixed indebtedness were hit hard, and
by 1932, 52% of all farm debts were in default.
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Before the 1930s, most programs to raise farm prices had
aimed at price parity or “fair exchange” values.

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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.
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.
34
Potter County
1930
1935
1940
Number of
farms
322
396
302
Acreage of crop
failures
912 (1929)
30,910 (1934)
9,157 (1939)
Total farm value
$10,461,170
$7,146,738
$6,026,569
35
Agriculture and the Great Depression
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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.
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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.
36
The Panhandle Connection to
1930s Farm Legislation

J.C. Paul came to Panhandle City in 1888 to establish a bank.
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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.

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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.
37
“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
38
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
39
number of farms in the Panhandle declined by nearly 25%.
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.
40
Route 66: “The Mother Road”
“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.
In his 1939 novel,
The Grapes of
Wrath, and the
movie made in
1940, John
Steinbeck
immortalized
Route 66.
John Steinbeck, The Grapes of Wrath
41
Route 66: “The Mother Road”

Economic consequences of Route 66:

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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.
42
What Caused the Dust Bowl
1.
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
43
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.
44
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
45
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
46
Palmer Drought Index – July 1934
47
Palmer Drought Index – June 2012
48
January-December 1934 Statewide
Temperature Ranks
49
January-June 2012 Statewide
Temperature Ranks
50
http://www.ncdc.noaa.gov/temp-and-precip/drought/historicalpalmers.php?index=pdsi&month%5B%5D=1&beg_year=1910&end_year=1930&submitted
=Submit
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Dr. Duane Rosa
[email protected]
806-651-2520
Dr. Anne Macy
[email protected]
806-651-2523
Jean Walker
[email protected]
806-651-2515
College of Business
West Texas A&M &University
Canyon, Texas
52