Feature Article

JOBS LOST, PAY CUT AS DEPRESSION HIT BOTTOM: 1922

Written By: Michael Dawe
Published By: Red Deer Advocate Centennial Book
Article Used with permission. © Copyright Michael Dawe and the Red Deer Advocate, 2007
2007-01-01

People often think of the Great Depression of the 1930s as the worst economic times ever experienced.

However, at least for Central Alberta, one can argue that times were much worse in the depression that followed the end of the First World War.

The worst year of that depression was 1922.

Ironically, the origins of the economic crisis lay in the fantastic boom years of 1910-1913.

While Red Deer experienced unprecedented growth, there was an accompanying frenzy of real estate speculation. .

People invested heavily in land, with only small down payments being made.

The heavy demand drove prices up to astonishing levels, thereby creating bonanzas of paper profits and fuelling even more speculation.

The great boom began to break in 1913.

The economy slowed somewhat.

However, with the highly leveraged market, the extent of the slowdown was felt far more sharply than would normally be the case.

Nevertheless, many people felt that the setbacks were only temporary and that the good times would soon resume.

The outbreak of the First World War shattered that optimism.

The worst stock market crash on record did not happen in October 1929, but rather in December 1914.

The financial markets dissolved into chaos.

With all the available resources being poured into the war effort, there was no chance of a quick turnaround.

Effects in Red Deer were immediate. The speculative profits evaporated and were replaced with crushing debts.

People soon found themselves either unable or unwilling to pay the property taxes on their near worthless lots.

The city found itself in a critical position.

Tax revenues were plunging, but the high debt payments incurred during the boom years remained.

City council consequently adopted drastic measures.

Several city employees were laid off. The salaries of the remaining staff were cut by as much as 40 per cent.

Still, revenues continue to drop faster than expenditures.

A crisis point was reached in 1916.

Only one-third of the current year’s taxes were collected.

Finally, the city’s bank cut off all further credit and the city defaulted on some of its debentures.

At this point, the provincial government intervened.

The city was given the power to issue treasury bills, secured by the amount of tax arrears.

Unfortunately, this scheme was based on the unsound premise that the money from the sale of treasury bills would be enough to tide the city over until property values returned to the "normal" pre-1913 levels.

Following the end of the First World War in November 1918, a new wave of problems swamped the community.

Inflation soared to the highest levels ever recorded.

Then the agricultural sector collapsed.

Commodity prices plunged, drought conditions cut crop yields and new tariffs imposed by the United States in 1922 cut off key markets for local farmers and businessmen.

New emergency measures were adopted. The property tax rate was raised to 46 and then 65 mills.

Business taxes were hiked to 20 per cent from 12 per cent. Still the amount of taxes collected dropped by one half. .

The economic situation became truly desperate. Unemployment soared to an estimated 25 per cent.

The hospital went bankrupt and had to be taken over by the provincial government.

The local utility company, the Western General, was unable to meet its payroll in October 1922.

With the city’s bankers refusing to advance any more money and with treasury bills no longer selling, the city began bouncing its paycheques as well.

Local alderman and school trustees began going door-to-door to try collecting at least some of the taxes.

When the amount gathered proved insufficient, some school trustees took out bank loans to pay the school teachers.

The depth of the economic distress was illustrated by an incident involving the two local funeral directors.

Due to a communication mix-up, both men showed up at the train station to collect the body of a man who had died at Penhold.

A fierce argument and then a fist fight broke out on the station platform.

The man who lost the job had charges laid against his competitor.

The court convicted the ’successful" mortician and fined him an amount equal to what he got for the funeral.

In 1923, the economy finally began to slowly improve.

The crisis began to ease. However, the effects of the economic collapse were felt for many more years.

Red Deer did not experience another economic boom for almost 25 years.

This article was written by Michael Dawe for the Red Deer Advocate’s Centennial Book. The Heritage Community Foundation would like to thank Michael Dawe and the Red Deer Advocate for permission to reprint these materials online. Please visit the Red Deer Advocate online.The images in the article are part of the collection of the Red Deer Archives. Please visit them online.