On March 4, 1933, at the height of the Great
Depression, a new President of the United
States of America takes the oath of office.
President Franklin Delano Roosevelt has promised,
"a new deal for the American people" to take
them out of their economic nose dive before
the American economy crashes completely and
is literally bankrupt.
There's only one thing - no one, including
the President, really has a plan for how to
do that.
Welcome to Between-2-Wars a chronological
summary of the interwar years, covering all
facets of life, the uncertainty, hedonism,
and euphoria, and ultimately humanity's descent
into the darkness of the Second World War.
I'm Indy Neidell.
In our 1929 episode on the Wall Street Crash,
we saw how it rocked not only the American
economy but also the American dream of opportunity
for prosperity for all.
The psychological effect had been immediate.
Although the plummet in the value of the stock
market only directly affected a minority of
Americans, its symbol as an indicator of economic
progress panicked the majority.
Economic activity immediately slowed as Americans
reigned in spending.
Now in 1933, the United States is caught in
the throes of the worst financial crisis that
it has ever experienced- it is the Great Depression.
But the Crash alone did not cause the Depression;
instead, subsequent crises created a domino
effect tumbling the US into a dramatic economic
downturn.
Even in 2019, historians still debate which
of these events is the event.
There are some definite measurable effects
that we can conclude contributed in some way,
how much is a matter for interpretation of
course.
The first measurable effect is the Stock Market
collapse itself, which beyond the psychological
impact also eliminates staggering amounts
of investment capital, impacting actual operations
and production.
Then the Smoot-Hawley Tariff Act in June 1930
creates some of the most radical protectionist
trade policies in the history of the US.
Raised tariffs on imported goods launch instant
retaliation from America's trading partners
with their own protectionist policies, which
in turn further exacerbates already ailing
foreign trade.
A bigger shock in monetary terms is the series
of bank collapses that follow the crash in
waves.
Some of these are tightly linked to the international
debt system, creating complex dependencies
between US banks and the also suffering global
economy.
Could it have been avoided?
Well, that is a contentious issue that we
will never be able to conclude finally.
Some economists say that intervention in the
banking system and more involvement of the
Federal Reserve to prop up the banks could
have thwarted the crisis.
Others claim the opposite; that it was too
much intervention by the Fed that tipped the
balance.
Followers of John Maynard Keynes idea that
an economy in shock is incapable of self-recovery,
so stimulus through public spending and tax
cuts is your way out of the crisis say that
that started too late.
Opponents of the Keynesian theory say it shouldn't
have started at all, and a lack of public
finance austerity aggravated the crisis.
And so on... in essence it's complicated,
but I'm sure that quite a few of you have
your own opinions to share and we’ll see
them in the comments.
Whatever and whoever caused it, and whether
or not it could have been stopped, there is
no debate about what actually happens.
The banking system slides ever deeper into
crisis.
In 1931 alone nearly 3,000 banks, holding
close to $1.7 billion in deposits, collapse.
Many Americans will never see their savings
again.
By 1932, 11.5 million Americans, around one-quarter
of the workforce, are unemployed.
The unemployment rate for African-Americans
is at least 2 and in places 3 times above
the national average.
For those lucky enough to still be working,
underemployment is a fact of life.
Pay and hours are slashed so that by the summer
of 1932, more than half of working Americans
are only employed part-time.
Whole families lose their sources of income,
are unable to make mortgage payments or pay
rent, and lose their homes.
Tumbling commodity prices, already a problem
for farmers in the "roaring twenties" continue
to plummet.
In 1929, cotton farmers received around 16
cents per pound, which drops to only 5 in
the early years of the 1930s.
And already before droughts hit, hundreds
of thousands of farming families become migratory
farm workers, taking work wherever they can
find it.
As incomes disappear, purchasing power drops,
sending prices tumbling, which in turn eliminates
purchasing power from the sellers and wholesalers,
who have to drop prices further to move their
product.
A vicious circle that just pulls the economy
further and further into a tailspin.
By 1933, industrial production will have fallen
by 37%, prices by 33%, and real GNP by 30%.
The economic hardship has a massive affect
on social relations.
No longer is there any clear separation between
destitute layabouts and well-to-do working
Americans.
And many middle-class Americans, who now find
themselves unemployed, struggle to accept
the harsh reality that they too need public
assistance.
A doctor working at a free clinic at the time
will recall in his later life:
"people of that status would find it very
difficult to accept charity.
[...] Every day [...] someone would faint
on a streetcar.
They'd bring him in, and they wouldn't ask
any questions [...] they knew what it was.
Hunger.
When he regained consciousness, they'd give
him something to eat."
It is no wonder that the bitterness and impoverishment
of the era get reflected in one of the bestselling
records of the time.
Most famously recorded by Bing Crosby in 1932,
"Brother, Can You Spare a Dime?" and instantly
an anthem of the time.
[Indy picks up a guitar and Sings]
"They used to tell me I was building a dream
And so I followed the mob
When there was earth to plow or guns to bear
I was always there right on the job
They used to tell me I was building a dream
With peace and glory ahead
Why should I be standing in line
Just waiting for bread?
Once I built a railroad, I made it run
Made it race against time
Once I built a railroad, now it's done
Brother, can you spare a dime?"
If that isn't enough to showcase the pessimism
of the time, then just look at how birth rates
fall from close to three children per woman
in 1928 to 2.1 in 1936... people simply can't
afford to have children.
Regardless if it's his fault or not it reflects
poorly on incumbent President Hoover during
the 1932 Presidential Election campaign.
He had become an American icon during the
Great War when he was at the head of the Allied
effort to feed the starving Belgian population.
He had promised a glorious future for America
on the campaign trail and won by a landslide
in 1928.
But a sizable portion of the electorate now
sees his handling of the crisis as inadequate.
Hoover believed that active government policy
was needed to ward off recession and in 1930
works to increase federal and state spending,
but the Depression only deepens.
When his first measures have little effect,
Hoover tries again at the end of 1931 to save
the economy and his Presidency.
With the creation of the Reconstruction Finance
Corporation (RFC), he aims to lend public
funds on a massive scale to banks and other
financial institutions.
His program is historic.
Never before in peacetime has a federal government
intervened so directly in the economy, but
again it fails to thwart the recession.
The fact that the RFC provides financial assistance
to banks but not ordinary Americans is used
by the Democrats to accuse Hoover of being
too cozy with east-coast elites.
And then a public relations disaster hits
Hoover at what Ironically is at the core of
his reputation, the legacy of his WWI achievements.
In 1924, Congress had passed the World War
Adjusted Compensation Act, or Bonus Act, which
provided for a retirement payment to veterans.
Immediate payments were limited and small,
but most veterans received what was called
an "Adjusted Service Certificate," a specified
bonus they were owed and could redeem after
their birthday in the year 1945.
When hard-times and unemployment befall them,
many veterans now hope that they can somehow
receive this payment earlier.
After all, if the government can literally
pay billions to the banks, then surely they
can provide financial assistance to war heroes?
It grows into a movement and hundreds of thousands
of what is quickly dubbed the 'Bonus Army'
flock to Washington in the spring and summer
of 1932 to lobby for a new Bonus Bill which
would release their payments earlier.
They set up in one of the many makeshift shantytowns
popularly dubbed 'Hoovervilles' that have
sprung up across the United States from rampant
homelessness.
At first, the government tolerates the presence
of the Bonus Army.
But even when their proposed bill is defeated
in mid-June, many still remain in the encampments.
Tensions begin to mount.
In late-July, Hoover orders the Army Chief
of Staff, General Douglas MacArthur, to clear
out the main Bonus Army camp along the Anacostia
River.
But MacArthur goes above and beyond his duty.
He orders his soldiers to destroy the camp
and drive the veterans out of Washington altogether.
They fire tear gas, advance with bayonets,
and burn the encampments.
Most veterans flee, but some stay to fight,
hurling bricks or tin cans back at the marching
soldiers.
They're not a real match for a fully equipped
army though.
A certain Major by the name George S. Patton
is in charge of around 600 men in the operation
and recalls:
"Bricks flew, sabers rose and fell with a
comforting smack, and the mob ran.
We moved on after them, occasionally meeting
serious resistance.
Once six men in a truck threw a regular barrage
of bricks, and several men and horses were
hit.
Two of us charged at a gallop, and had some
nice work at close range with the occupants
of the truck, most of whom could not sit down
for some days."
Many veterans had brought their families and
entire life possessions with them, and now
the soldiers burn down what is essentially
their homes, with no regard for the fact that
they are full of everything these families
own.
Images of it all are picked up by the media,
with newspapers across the country covering
the events, and the plight of the Bonus Army
now elicits mass sympathy amongst the public.
Although it is MacArthur who is mostly responsible
for the overreach, the buck stops with the
Commander in Chief who instantly faces an
even more significant loss in reputation.
When Franklin D. Roosevelt, the Democratic
presidential nominee reads about the events
in the New York Times, he expresses sympathy
for the veterans, but also some satisfaction,
reportedly telling an aide that they no longer
need to take Hoover seriously as an opponent
after such an unmitigated disaster.
His prediction is correct.
In November 1932, Roosevelt wins the Election
in a landslide, carrying 42 out of the 48
states for the Electoral College, and 57.4%
of the popular vote against Hoover's 39.7%.
But by the time FDR is inaugurated in March
1933, things have only gotten worse.
Bank failures have surged, and state governors
across the country have declared mandatory
bank holidays.
In a desperate attempt to maintain prices,
farmers are now burning their crops.
Ominously, and only weeks before he takes
office, Roosevelt survives an assassination
attempt in Miami.
But despite the pessimism gripping the country,
Roosevelt exudes optimism and confidence in
his inaugural address.
He challenges the millions of Americans who
are listening on their radios; to struggle
with him to save America, famously declaring
"that the only thing we have to fear is...fear
itself."
And he wastes no time before making changes.
However, it’s not really a unified program,
it's consistent improvisation and reaction.
Nevertheless, he and his circle of advisors
–dubbed the 'Brain Trust' – now develop
a set of policies that together will famously
become "The First New Deal."
His first priority is fixing the banking system.
He declares a mandatory bank holiday and then
pushes the Emergency Bank Act into legislation.
The act gives the government the power to
close banks in danger of failing and reopening
those that will be stable.
The Fed is empowered to pump more currency
into banks.
These immediate measures do much to re-foster
public trust in the banking system so that
depositors quickly stop hoarding their cash
and place it back into savings.
The regular operation of banks begins again,
and the stock markets react positively.
Although it's difficult to discern any single
economic theory behind his policy, Roosevelt
is certainly convinced that it is essential
to 'reflate' the economy, meaning that the
severely depressed prices have to rise.
For that, cash needs to move more freely though,
and with this in mind, he prohibits the private
hoarding of gold currency and bullion, the
export of gold, and takes government control
over domestic gold production already in early
April 1933.
Two weeks later, on the 20th, he unlinks the
dollar from the gold standard to let it be
traded at free market valuation.
The dollar plunges by 11.5% against the European
currencies still held to the gold standard.
This gives hope for increased exports, and
the stock market rises, enabling the acquisition
of much-needed capital for the ailing industry.
Social programs designed to stimulate the
economy are also introduced.
The most famous is the Civilian Conservation
Corps (CCC).
If they were single, healthy, unemployed,
and a member of a family on relief, young
men could sign up to the Corps and go to help
preserve and repair America's agricultural
economy.
Most of their wages will go to the man's family
as he works to build bridges, prevent floods,
save crops from grasshoppers, and other such
tasks.
Huge stimulus packages are introduced.
The Public Works Administration (PWA) is set
up and empowered with $3.3 billion, which
is around 5.9% of the nations entire economy,
to fund large-scale public works such as dams,
bridges, and schools.
Other agencies are formed such as the Civil
Works Administration, a jobs creation program
which by the end of the year 1933 has already
provided 4 million Americans with work.
All of this is supported by a Presidential
public communications program, the first of
its kind, with biweekly press conferences
where FDR continues to exude confidence.
He frequently broadcasts his "fireside chats"
on the radio where he casually relays his
policy to
the public.
But to turn around this huge drifting ship
that is the United States of America, and
have her sailing at full speed again is no
small task, and it meets its challenges.
Some of the programs that the FDR White House
introduces are seen as government overreach,
one of them- the National Industrial Recovery
Act- is even found unconstitutional by the
Supreme Court and overturned.
At any rate, this unprecedented federal involvement
in the economy changes US politics forever.
Also, In parallel to the economic downturn,
massive droughts strike the midwest in three
waves to create the infamous and iconic Dust
Bowl.
This part natural, part manmade disaster creates
terrible hardship across rural America.
Nonetheless, the economy grows by over 10%
most years for the rest of the 1930s, though
in 1937/38 it briefly slips back into recession
as FDR's administration ends many of the New
Deal programs.
Taxes are raised so that the top tax bracket
is at 79% by 1936, raising accusations of
damaging the free market economy through wealth
redistribution.
Public debt soars from $23 billion in 1933
to $40 billion by 1939, leaving future administrations
to deal with some of the effects.
When the last drought ends, and the dust settles
in 1939, unemployment has sunk to 17%, but
that's far from full employment and GDP is
still not back to the 1929 level.
The Great Depression, though, keeps the US
mostly involved with itself instead of taking
an active part in the dramatic events of the
world in the 1930s.
The crisis sends repercussions across the
globe, contributing to the destabilization
of the world economy during the entire decade.
In an ironic twist of history, it is the ensuing
global conflagration that which will finally
bring America back from the precipice of bankruptcy
once and for all.
If you'd like to see how the crisis begins,
then watch our video on the Wall Street Crash
which you can click on right here... any moment
now…
Our TimeGhost Army member of the week is Kristian
Petrov.
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we can avoid Depression and continue doing
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And remember the wise words of Pythagoras:
“Concern should drive us into action, not
into a depression.
No man is free who cannot control himself.”
Cheers!
