Arkansas: The state that went bust in the Depression

Historians in the News

AS the states dream up budget plans for a new year, some find themselves staring at deficits in the billions of dollars, vanishing federal stimulus funds, mounting health care costs, their own struggling cities and a canyon of underfunded pension liabilities ahead....

As it happens, the most recent such collapse occurred during the Great Depression, when Arkansas found itself, in the words of one state historian, “plain, flat broke.” There are familiar threads then and now, not least of all the overlay of a national financial slump.

But in many ways, the situation in Arkansas was a unique set of decisions and woes, piled one on top of the next, and a case study, some contend, in why this will not happen to states today. As that thinking goes, times now for states are undeniably grim, but not as grim as they once were in Arkansas. But should a state find itself near default, there is also a lesson in Arkansas, where the fallout lingered for decades.

In the 1920s, Arkansas made a push to build roads for the nation’s fast-expanding automobile industry, hoping to pull the state into the modern age. Local road districts took on the task, borrowing money and building what they could, but the result was more a financially troubled mishmash than a statewide network, so the state eventually stepped in, said Ben Johnson, a history professor at Southern Arkansas University in Magnolia....

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