Asia, Great Depression in

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All Asian countries were deeply affected by the steep fall of agrarian prices that began in 1930 and reached its lowest point around 1933. There was a slight upward trend in subsequent years, but in general, prices stagnated at a low level until they rose again during World War II. Wheat and cotton, which were widely traded in the world market, led the downward trend, and they were soon followed by other types of produce, such as millets, which were grown only for local consumption. Normally, prices reflect supply and demand; in the Depression years there were no major changes in this respect in Asia, but the prices were halved nevertheless. The contraction of credit was the main cause of this catastrophic decline. It upset forward trading, which otherwise served to stabilize prices. Panic sales spread like wildfire. Rural marketing was disrupted and it took years to overcome this upheaval.

Economic historians have hardly taken note of this Asian crisis of the 1930s. Theoretical assumptions caused this neglect: If a country did not experience industrial unemployment and a balance of payments crisis, it was supposedly not affected by the Depression. Most Asian countries were only marginally industrialized at that time and the balance of payments was settled by an outflow of gold, so on these two counts there was no depression in Asia.

The fate of the Asian peasant has been disregarded, too. If the peasants had only practiced subsistence agriculture, prices would have been irrelevant, but most Asian peasants were forced to market much of their produce because they were indebted and had to pay taxes. Debt service and taxation were not adjusted to their reduced income There was widespread agrarian distress in Asia, but governments faced serious peasant revolts only in a few areas. Long-term political effects that were not immediately evident turned out to be more important than these incidents of violent revolt.


Before World War I the international gold standard had maintained an automatic equilibrium in the world market, due to the powerful position of London, which controlled the flow of gold worldwide. After the war the United States emerged as the arbiter of the flow of gold, but instead of letting it flow, it hoarded it in the interest of internal price stability. In spite of this, there was a concerted effort, led by London, to restore the international gold standard. Great Britain returned to it at the prewar parity in 1925 and had to abandon it again in 1931. Japan returned to it as late as 1930, only to abandon it again in 1932; its currency then experienced a dramatic devaluation.

British India was completely at the mercy of the currency policy made by the secretary of state for India in London. India's silver currency had served its colonial rulers very well, because it absorbed a large amount of the silver that became redundant in Europe when most countries demonetized it and shifted to the gold standard. But the colonial government of India collected taxes in depreciating silver while it had to pay its "home charges" (such as debt service) in gold. When it could not make both ends meet any longer, the Indian mints were closed to the free coinage of silver in 1893. The silver rupee became a token currency that was managed by the secretary of state. In 1927 a currency act was passed that pegged the rupee to the gold standard at a rate above the prewar parity. This feat had been accomplished by a slow and steady deflation. Used silver coins were not replaced by new ones but melted down. The silver was quietly sold abroad by the British. When the Depression hit India, the exchange rate of the overvalued rupee was defended by further deflationary measures. This finally led to an enormous outflow of "distress gold" (mostly gold coins and ornaments) that indebted peasants turned over to the moneylenders. Since the respective colonial governments did not impose gold export embargoes, this gold flowed freely to London and other centers. This export filled the gap caused by the decline of the value of commodity exports and thus cured India's balance of payments problem with a vengeance.

In the meantime, China was shielded against the initial impact of the Depression by its silver currency, because the price of silver fell like that of all other commodities. Whereas some countries that were in full control of their respective currencies resorted to competitive devaluation, China's currency was devalued automatically. Overseas Chinese then converted their savings (in gold) into silver, which they invested in China in a big way. But this spree did not last long. President Roosevelt helped the U. S. silver interests by means of a silver purchasing policy that dramatically increased the price of silver in the world market. The silver that had poured into China around 1930 left it again in 1934, and the Depression hit China in a delayed but very dramatic action.

Other Asian countries that were colonies of different European powers were affected by the peculiarities of the currency policies of their respective masters. France had joined the gold standard only in 1928—and at one-fifth of the prewar parity. It was thus in a more comfortable position than other countries and could stay on the gold standard until 1936. In Indochina, the French maintained a colonial currency, the piastre, which they pegged to the French franc in 1931 in order to protect French investments. This aggravated the impact of the Depression on Indochina. In the Netherlands East Indies (now Indonesia) there was no colonial currency. The Dutch currency circulated in the colony, but here, too, a deflationary policy led to an out-flow of gold that benefited the colonial power.

Most Asian countries suffered from the combined impact of deflationary policies and credit contraction. Both were caused by creditors in the central places of the world market who wanted to prevent the depreciation of Asian currencies so as to protect their investments, but also did not want to provide fresh credit. This depressed prices, and also subverted the old argument that access to colonial raw materials was essential for the European powers, and could only be secured by political control. In a world where raw materials were available at very low prices, colonialism did not pay any longer. Colonial control was required only to keep under control debtors who might cancel their debts. The deflationary policy was an integral part of this control of debtors. Its immediate effect was the sharp decline of prices of agricultural produce.


All Asian crops were affected by the fall in prices in the 1930s, but wheat, rice, and sugar were by far the most important. Wheat was grown and traded globally. Its overproduction in the United States was one of the chief causes of the Depression. For some time the storage of wheat in the United States had helped to keep prices at a comfortable level, but when credit contracted in the United States due to the monetary policy of the Federal Reserve Board, wheat poured out of the storage houses in an avalanche of panic sales. Credit signals then reached India, Australia, and other wheat-producing regions very quickly.

Rice was not immediately affected by these events. Wheat could not be easily substituted for Rice: This was not just a matter of taste, but also of the skills and implements required for preparing the respective foods. Thus the rice price remained high everywhere in Asia in the summer of 1930. Moreover, rice was only marginally traded in the world market. It was almost exclusively an Asian crop, produced and consumed locally. Japan was a crucial exception, and it played a decisive role in triggering the global fall of the rice price. After World War I, Japan was a rice-deficit country. Rice riots had shaken the government and arrangements were made for a timely import of rice. In Japan rice is harvested at the end of summer, whereas in monsoon Asia (South and Southeast Asia) the main harvest reaches the market in January. Rice from Burma (now Myanmar) and, to a lesser extent, from Thailand and Indochina, would reach Japan in March when it was needed most. But by 1928 Japan had achieved self-sufficiency and imposed an import embargo on rice. In 1930 Japan had a very plentiful rice harvest. At that time the Japanese government was pursuing a deflationary policy in order to support the yen, which had just been pegged to the gold standard. The double impact of deflation and the rich harvest caused the rice price to fall by about one-third in October 1930. This should have been a purely domestic concern since Japan did not export or import rice, but grain traders all over the world interpreted this as a signal that the rice price would now share the fate of the wheat price. In November 1930 the rice price in Liverpool was reduced by half, and Calcutta followed the Liverpool precedent in January 1931. At that point, the rice price experienced a free fall, and by 1933 rice was cheaper than wheat in India. Actually, the production, consumption, and export volume of rice did not decline very much in this period—only the price remained low, and so did the income of the producers.

In 1930 in lower Burma, the world's major rice export region at that time, the peasants rose in a violent revolt led by the charismatic Saya San. Burmese peasants had to pay both poll tax and land revenue. The poll tax was collected before the winter harvest, forcing the peasants to market their rice. Moneylenders and grain dealers usually eagerly provided credit for the tax payment against the coming harvest, but in late 1930 they knew that the price of rice would fall in January and thus they did not provide any credit when the tax collector pounced on the peasants. In response, Saya San, who had earlier petitioned the government on behalf of the peasants, led the peasants in a violent rebellion that took the British two years to suppress. Other rice-growing provinces of British India remained quiet during the period because peasants did not have to pay poll tax or even land revenue, but only rent to landlords. A peasant could get away with paying no rent for some time, but then the landlord could sue him and he would forfeit his occupancy right. This produced an atmosphere of smoldering discontent but no immediate revolt. Unrest was more pronounced in India's wheat-growing region, where peasants were in more direct contact with the revenue authorities. The National Congress, an Indian political party, had sponsored agrarian campaigns in this region in 1930, and this contributed to the subsequent emergence of the Congress as a peasant party.

Sugarcane was a major cash crop in several Asian countries, particularly in India, the Netherlands East Indies, and the Philippines. Before the Depression, the Netherlands East Indies was the major exporter of refined white sugar. Much of this white sugar was exported to India, where sugarcane was mostly converted into brown sugar for rural consumption, and imported refined sugar was in demand in urban areas. In 1931 the British Indian government imposed a prohibitive tariff on sugar, thus greatly encouraging Indian sugar production. By 1937 India was ready to export sugar, but the International Sugar Agreement of that year classified India as a sugar importing country, so India was denied an export quota. The protective tariff of 1931 did not affect British imperial interests. But if India had been permitted to export sugar in 1937, the (British) Caribbean sugar planters would have faced Indian competition. Thus the year 1937 marked a setback for India. On the other hand, sugar production expanded in the Philippines because of its free access to the U. S. market.


Some scholars of Asian history have tried to prove that the Depression was a boon in disguise for Asian countries because they benefited from import substitution (the replacement of imported industrial products such as cotton textiles by indigenous production). Actually, the scope of import substitution was severely limited by the reduced buying power of the rural masses. The textile industry was the only major industry in Asia in the early twentieth century. Japan did make a major advance in the Depression years by buying cheap Indian cotton and using the cheap labor of Japanese peasant girls to produce textiles. The devaluation of the Japanese yen by about 60 percent in 1932 gave Japanese products an enormous competitive advantage. The British in India responded to this by instituting protective tariffs and securing preferential access to the Indian market for their own products. Under these arrangements the Indian textile industry progressed somewhat in the 1930s, but the main beneficiaries were the handloom weavers who got cheap food and cheap cotton and competed with the mills, which could not cut their costs easily. Actually, the Depression remains the only period in which the real wages of labor increased in India. China experienced similar developments. The investment spree of the early 1930s encouraged industrial growth. Even the Japanese invested in Chinese mills. But all this was soon engulfed by the delayed impact of the Depression, and then by the ravages of war after the Japanese invasion of China. Other Asian countries had hardly any industry that could have profited from import substitution.



Albert, Bill, and Adrian Graves, eds. The World Sugar Industry in War and Depression. 1988.

Boomgaard, Peter, and Ian Brown, eds. Weathering the Storm: The Economies of Southeast Asia in the 1930s Depression. 2000.

Brown, Ian, ed. The Economies of Asia and Africa in the Inter-War Depression. 1989.

Feuerwerker, Albert. The Chinese Economy, 1912–1949. 1968.

Rothermund, Dietmar. India in the Great Depression, 1929–1931. 1992.

Rothermund, Dietmar. The Global Impact of the Great Depression, 1929–1939. 1996.

Rothermund, Dietmar. "Currencies, Taxes and Credit: Asian Peasants in the Great Depression, "1930–1939." In The Interwar Depression in an International Context, edited by Harold James. 2001.

Dietmar Rothermund

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