Bruce Greenwald and the Depression

Arnold Kling points me to Bruce Greenwald on a diagnosis of the Great Depression:

Since about 1870, productivity growth [in agriculture] had been 4% to 5% and demand growth had been 1% to 2%. Agricultural prices had been up before and during the first World War, and then they were down. But the inexorable trend had been down, with all this growth in productivity and limitations on demand, and sooner or later prices were going to collapse. Approximately 35% of the US population was either in farming or in farm towns or were supporting a farming enterprise, and they were going to be marooned.

My problem here is how do productivity increases create poverty? Small farmers were bought out, to create economies of scale, but the over all sector would have been wealthier. Rationally invested small farmers would get better estate prices for the aggregation of the sector. Many of them would have been re-employed in related agricultural transportation and mechanics. Others should have left the farm with some net cash.

I was in Bakersfield when the migrants were raising their kids. I saw that work picked right up for the migrants in highway and housing construction, transportation, auto servicing, retail, and small manufacturing in the post war period. Other than war, the post Depression period was a period of job growth and opportunity.

The problem in the Great Depression was the mismatch between communication technology and transportation technology. Somewhere between 1927 and 1928, mass market commercial broadcasting begin and the utility of the car as a shopping device skyrocketed, but the roads could not meet the task. Downtowns literally stopped moving when the broadcasters began advertising.