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. With contributions from people like Kristian,
we can avoid Depression and continue doing more content like this. Be like Kristian and join the TimeGhost Army
on Patreon or timeghost.tv. Subscribe and ring the bell. 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!