Thomas Chadbourne - Great Depression

Great Depression

Chadbourne represented some of the largest firms in the world in a period of globalization during the 1920s during which multi-national corporations began to be established in significant numbers. Following the 1929 crash, he summed up his own responsibility thus: “The capitalistic system is on trial. If we think the people who are running the industries of this world can by reason of greed bring about such a depression as this and not take steps to mend it, no matter what sacrifice may be to individuals, we are mistaken. We can’t get away with it.”

Representing a consortium of sugar producers in an attempt to stabilize world sugar prices during the Great Depression, the Chadbourne Committee, meeting in Brussels under the leadership of Thomas Chadbourne, secured an agreement between several nations to reduce production and establish export quotas. (Yale ) Signatories included Cuba, Java, Hungary, Poland, Czechoslovakia and an initially reluctant Germany. Production was to be curtailed by 15% and held at that level over a five-year period. Chadbourne planned additional negotiations with countries that consumed but produced little to no sugar, in an attempt to stop them from entering the market. These included Great Britain, France, Yugoslavia, Argentina, and Japan. By the time this agreement was reached, in May 1931, the worldwide sugar surplus had reached an estimated 3.5 million tons (ibid.) and prices had fallen from a pre-Depression level of 7 cents per pound to just one and one half cents per pound. Low prices of commodities, including sugar, depressed wages within the US, and perpetuated crises in Caribbean single-commodity producing nations. The situation is cited as a key factor inciting the revolution in Cuba that would ultimately result in the ouster of the Machado regime. To alleviate misgivings from impoverished consumers in his native United States, Chadbourne stressed that the maneuver would serve to restore prices paid by refineries to sugar producers, but would not affect retail prices. Some contemporaries took exception at this claim. Among these, some observers recognized a need to restore prices even at the expense of consumers, while others condemned the practice as protecting domestic business profits while exacerbating public hardship. Concerns were expressed that farm yields were failing to cover production costs, and farm foreclosures were pervasive during this period. Yet despite successfully limiting production among signatories, Chadbourne was unable to effect a return to pre-Depression prices because US producers increased cultivation and continued to flood the market. At the same time, India doubled its sugar exports from some 3,000,000 tons in 1930 to 6,000,000 tons in 1935. Neither the United States nor the United Kingdom participated in the Chadbourne Committee discussions. Citing inadequate means to compel other farmers to adhere to quotas, US producers had already refused to accept production caps proposed by Chadbourne. Congress and the Roosevelt administration would respond to the ongoing crisis by adopting such compulsory measures, along with subsidies for farmers leaving land uncultivated, under the Agricultural Adjustment Act of 1933 and Jones-Costigan Amendment of 1934.

Chadbourne argued for the creation of a “silver reserve system” wherein all countries would agree to hold a reserve stock (a bullion) of silver, and to produce coinage using a consistent portion of silver. The plan was conceived in response to silver devaluation, which Chadbourne attributed to countries “dumping” large amounts of silver on the world market, by reducing the amount of silver they used in coins. Chadbourne estimated that half the world’s population held its wealth in silver. Those individuals saw their wealth steadily eroded with the growing worldwide silver surplus. The proposed system would work much in the same way as the Federal Reserve uses monetary policy. To stem inflation, Chadbourne asserted, nations could release stock of silver into the market from their reserves. The concept differs from Federal Reserve tools primarily in that a “bullion” is a stock measured in volume, rather than monetary value. Chadbourne hoped to change the trend whereby silver had become a commodity rather than a store of value.