Animators of the 1930’s seemed especially fond of creating little microcosms wherein the inhabitants were made of the same material as their land, and even their architecture. This took many forms—cake, candy, and, in this case, balloons. Imagine, if you will, a world in which we lived on land made of flesh and used implements which were also made of human parts. Not a very pleasant picture, is it? And, yet, that’s basically what’s going on here. In balloon land, everything is made out of balloons—the “people,” the buildings, the vegetation—everything. For some reason, this was meant to be amusing. Perhaps I’ve over-thought it.
However, I see that I’m not the only person to feel similarly disturbed by this concept. To quote Tom Servo from Mystery Science Theater 3000, upon seeing Balloon Land for the first time, “Okay, now we’re in Hell. It finally happened.”
Here’s the 1935 animated short with music by Carl Stalling. And, as a counterpoint, here’s Episode 1003 of Mystery Science Theater 3000, "Merlin's Shop of Mystical Wonders," in which Mike and the ‘Bots are faced with a snippet of the cartoon—about 7 minutes in.