World War I, “The war to end all wars” brought many nations to the brink of bankruptcy. As Winton wrote, “Stock markets across the world were shuttered when war broke out. When trading resumed on the New York Stock Exchange in January 1915, the Dow Jones Industrial Average was trading at 60% of its January 1913 level… Between 1913 and 1920, the UK government debt grew 10 times, and US government debt by 8 times.” The supply of basic commodities was also disrupted, especially in those areas that suffered the wreck of the battlefields, apart from workers who left and joined the war. The commodity prices soared to the sky and beyond. While other countries suffered, this offered an island nation in the Caribbean an opportunity to be a major player in the commodities market, they had something sweet the world wanted desperately after WWI, Cuba had Sugar, lots of it.
The Sweet Sweet Country O’ Mine
Even today, more than 100 years after WWI, sugar is still Cuba’s main agricultural product. The Cuban economy heavily relied on sugar exports, although production has declined since 1991 after the breakup of the Soviet Union which was their major importer. The sugar trail could be traced back to 1523, when Spain began growing sugarcane in the country as part of their colony. The Haitian Revolution in 1791 resulted in Cuba replacing Haiti as the primary sugar producer in the Caribbean. In 1805, their annual sugar production grew from 14,000 tons in 1790 to more than 34,000 tons. Another factor in the growth of their sugar economy was when the price of coffee plummeted due to overproduction in South America and Europe investors, landowners, and farmers would focus on sugar production instead. In the 1960s, Cuba still remained the largest sugar producer in the world, exporting 90% of its crop. Although it’s quite different today, Cuba is no longer the top exporter. Last year, Reuters reported that Cuba’s output had averaged around 1.4 million metric tons of raw sugar over the last five years, compared with an industry high of 8 million tons in 1989.
Beginning of The Golden Days
In the years prior to the war, Cuba experienced six years of unprecedented prosperity. A month before the outbreak of war in Europe in 1914, the sugar price was at 1.93 cents per pound only. A month after, it rose to 3.66 cents per pound— the demand for Cuban sugar increased because the sugar beets of Europe were now battlefields and their farmers soldiers fighting on the front. The Cuban sugar industry took center stage. In just a year, they were able to produce over a whopping 2.6 million tons of raw sugar, which was a 15.4% share of the world production, compared to their contribution of only 2.7% a year in 1900. The United States and England became two of their major customers, with England buying 2.5 million tons of sugar from them. The Allied Powers were alarmed by the skyrocketing price of sugar. So, they created Sugar Equalization Board that “bought and distributed the 1918-19 crop of Cuban sugar, and stimulated US sugar production by equalizing prices of domestic and imported crops.” They fixed the sugar price at 4.6 cents per pound.
Dance of The Millions
Cuba’s economic future was looking sweet and bright. Capitalists from America would fly to Cuba to buy lands of cane fields. As a result, 25 modern mills were built. Among the many Cubans who expanded their land properties were 50,000 “colonos.” They were also able to pay off their debts and live lavish and luxurious lives. Good times and golden days. As Cuban Studies Institute wrote:
The construction industry was also thriving, with elegant homes being built in the Vedado and Miramar fashionable suburbs in Havana. Wealthy Cubans recreated Gothic, Italian Renaissance and French classical architectural styles. The Country Club suburb had beautiful mansions.
Moreover, historian Hugh Thomas said, “The rest of 1920 was passed, day by day, in a dream-like atmosphere, more reminiscent of a film comedy than real life.”
That was because when the controlled price for sugar ended on December 31, 1919, its price soared to the ridiculously high price of 22.5 cents per pound.
The Death of Banks
In connection, banks loosely lent money to investors and ignored the usual strict bank procedures. When the price unexpectedly plummeted to 3 cents per pound in December 1920, the mill owners, “Colonos,” and investors that borrowed from banks in anticipation of a high sale on their next harvest went into default. So many farmers were going bust all at once that banks became insolvent. Add the panic of the people who withdrew their savings in fear that their banks would close, and you had a major shortage of currency in circulation. The financial catastrophe began. By 1921, 20 banks in Cuba had already collapsed. Investors shed their holdings for pennies on the dollar and hoped the next steamer back to their respective countries. After the sweet came the bitter to Cuban and its sugar fields.
Europe’s beet sugar fields started turning green again, and the factories started running. The sugar price in Cuba stabilized at 3.75 cents per pound, marking the final dance of the millions.