Transcription
Hello, it's Geo with you. And today we're talking about the global. About an entire era when the future seemed wonderful, and then everything collapsed in one day. About a crisis that seemed endless, but from which America emerged with the world's strongest economy. A time of contrasts and legends. A time of jazz and unemployment benefits. Rivers of champagne and Prohibition. The era of the Mafia and the FBI. But what was happening in the world behind the scenes of these vivid images? We are all familiar with the names that became symbols of that era – Al Capone, Franklin Roosevelt, The Great Gatsby. I've talked about different people, but it seems I've never tried to talk in detail about the world that surrounded them. How it was similar to the present, and how it differed. The short period of the 20s and 30s is unique in American history. And in history in general. In no previous era has the life of one generation encountered such an incredible number of changes. This applied to literally everything – from technology to social order. The Roaring Twenties were replaced by the Great Depression, which flowed into World War II. How did this happen? Why? I will try to tell about it in such a way as to emphasize the people. There will also be economics of the Great Depression, of course, but just… the very basics. Because hundreds of scientific works have been written about this crisis, and I don't see the point in retelling them. If you want to listen to a detailed lecture on economics, listen to economists. And I want you to feel after my video how different life in the 1920s was from everything that came before. And what it led to. "...and the funeral bell rang in the ears of the victors, even at the moment of their triumph." A new era began a year before the new decade. On November 11, 1918, the explosions subsided in Europe. The Great War ended. It lasted 1563 days, claimed the lives of about ten million soldiers, wounded another twenty million, and consumed over three hundred billion dollars. It destroyed empires and overthrew dynasties in Germany, Austria, and Russia. It created new countries on the map – Hungary, Czechoslovakia, and Ireland. Revolutionaries celebrated victory in the streets of Berlin and Petersburg. A strange silence fell on the fronts. Many thought that the Great War had ended all wars. But in reality, it was only the first act before another bloody slaughter. Peace gained a respite for 20 years. But all the pieces were set on the board. In a German hospital, a weeping priest informed Corporal Hitler that the Kaiser had been overthrown in Berlin and peace had been signed, despite the fact that the German army was still standing on the battlefield. For Hitler, the news became the greatest shame of the century. He buried his head in his pillow on his hospital bed and cried. It was all in vain... the futile deaths of two million Germans. Hitler viewed Germany's capitulation as a conspiracy of Jewish criminals. In the following days, he realized that he wanted to become a politician. On the other side of the planet, economist John Maynard Keynes looked skeptically at the Treaty of Versailles, which essentially brought Germany to its knees and placed all responsibility for the start of the war on it. The former empire was deprived of its colonies, merchant fleet, forbidden to use its own coal and iron ore mines, and also forced to pay 33 billion dollars in reparations. Keynes wrote that this treaty perpetuated wartime economic shocks in peacetime. Revenge of the victors was added to the catastrophe on the battlefields. The Treaty of Versailles sowed the wind that would grow into a new storm in 20 years. Humiliated Germany was as if publicly flogged. And many Germans logically harbored resentment. Behind the scenes of this story was another character – Herbert Hoover. An American engineer, businessman, and budding politician. During the war, he organized food aid for starving Belgians. A great humanist, a man-computer who knew about the state of affairs in almost any area of the economy… in 1928, he would become the most popular US president at the time of his election. He triumphed in almost all states. His term was supposed to be a celebration of technocracy and the American dream. But in just a year, the stock market would crash, hundreds of banks would close across the country, unemployment would rise to a record 25 percent, and Hoover would leave the White House as the most hated man in America. But were his actions really the cause of the Great Depression? Was Hoover himself right when he found the cause of the crisis in World War I and international relations? It is clear that today we are much more familiar with his successor in the White House – Franklin Roosevelt. And Hoover, with his four years of presidency, is a complete nobody. But then everything seemed different. Here is a quote from his speech in 1928, a few months after taking office: "We in America today are closer to the final victory over poverty than ever before in the history of any nation." It sounds, of course, funny. In the context that a couple of years after this speech, the number of poor people in the country will double. But then, most likely, not a single person in the world could predict WHAT would soon engulf America… and with it, the rest of the world. The stock market crash in October '29 was like an earthquake that shook the entire American way of life to its foundations. Like the Revolutionary War and the North-South confrontation. President Hoover hoped for the best. And to develop a program for the country's development, on September 26, '29, he invited the best sociologists to dinner. He wanted to know what ordinary Americans were like. What they lived for and what they hoped for. The stock market crash, which would happen a month later, seemed almost unimaginable. Now everything was great. Almost three decades of continuous economic growth. Seven years of unprecedented prosperity. Everyone was firmly confident in tomorrow. And President Hoover embodied this confidence in every way. He exuded the calm of a successful leader. He came to politics relatively recently. And even then, he could hardly be called a politician in the pure sense. In the sense that before that, he was more of an official – he worked for 7 years as Secretary of Commerce. An important position, but far from the most prominent in the country. And the presidential election was Hoover's first ever in his entire career. For an American politician, this is something practically unimaginable. Such a trick has been accomplished by only a few in history. Trump, for example. But, as a rule, all candidates for president have gone towards this gradually, winning increasingly larger elections. At dinner, Hoover told the scientists that America was living in a New Era. It was hard to argue with that. The list of changes in a generation since the end of the 19th century seemed endless. The Great War, mass immigration, national unrest, the rapid growth of cities and industrial corporations like Ford and General Motors. Automobiles, the mass spread of electricity, radio, and cinema. Prohibition, women's suffrage, the first spread of advertising and consumer credit. The world of the 1920s instantly became much more like ours than like the one that existed just 10 years before. From 1890 to the present, America's population has almost doubled – from 63 to 120 million people. About a third of this increase consisted of immigrants. Six and a half million Italian, Polish, and Hungarian Catholics, half a million Greek Orthodox, two million Jews from the Russian Empire. Millions of Slavs from the Balkans. In 1930, a census was conducted in the USA, which revealed that out of 123 million people, 10 were immigrants. And another 24 million had at least one parent born abroad. This is a lot. Traditional rural America of God-fearing Protestants simply could not help but change. Migrants mainly settled in the North. They were drawn not by land and farms, but by factories and apartment buildings in large cities. These cities became islands of multiculturalism in a rural sea. In the 1920s, almost a third of Chicago's residents were foreigners. New Yorkers spoke thirty-seven different languages. And only one in six there attended a traditional Protestant church. Almost all immigrant communities united into enclaves and sought to preserve their cultural heritage. They were strangers in a foreign land, stuck between the world they left behind… and the world where they were not yet fully at home. This is how all these endless Jewish quarters, Little Italys, Little Polands appeared. They took root and became closed groups in themselves. Immigrants read newspapers and listened to radio broadcasts in their native languages. They shopped in stores, opened accounts, and took out insurance policies with companies that served exclusively their specific ethnic group. They educated their children in parish schools in their neighborhoods and buried the deceased with the help of ethnic funeral homes. They joined national organizations to support old traditions and paid dues to mutual aid societies that helped in difficult times. In short, modern American ethnic neighborhoods like Chinatown appeared precisely then. The times, by the way, were not easy. Migrants did not go to the USA out of good living. But they rarely found decent work in their new homeland. They usually did unskilled labor in factories, plants, and construction sites. They had no time for politics. Many gave up and returned to Europe when there was a chance for recovery after the First World War. Especially many Poles, Slovaks, and Croats returned, who got their own countries after the war. And what reaction does the sharp appearance of so many newcomers cause in society? Xenophobia, of course. It was then that the revived Ku Klux Klan gained new popularity. But now it fought not only against blacks but also against all migrants. And this was simply a national-scale problem. By the early 1920s, the Ku Klux Klan had 5 million members. Its representatives were in local government in several states. And in 1924, the Klan lobbied for the strictest anti-immigrant law, which effectively stopped the flow of new migrants into the country. But the main thing had already happened – America received millions of new residents. And for the first time in history, the number of urban residents exceeded the number of farmers. And in the next 10 years of economic growth, another 6 million Americans would leave the villages. But, of course, all this one-story America did not disappear. What do we imagine when we talk about the Roaring Twenties? Even the word "roaring" immediately brings to mind an image of constant parties, jazz, flashing money… and, of course, there were parties. But what was the background? One of the main creators of the myth of the endless wildness and revelry of the 20s, the author of "The Great Gatsby," F. Scott Fitzgerald, wrote that around these fireworks and money lay "the great unknown beyond the city." Where people still continued to move between birth and death according to the rhythms of the sun. 45 million rural Americans had no plumbing or electricity. They went to the toilet outside or used chamber pots. Food was cooked in stoves heated by wood, and houses were lit by old oil lamps. With the onset of darkness, the world outside the window turned into an ominous mystery. Here, for example, is a description of a simple trip to the toilet in the middle of the night: "I had a terrible choice: either sit in the dark and not know what was crawling on me… or bring a lantern and attract moths, mosquitoes, night hawks, and bats." The mother of the future governor of Arkansas personally made soap from the intestines of a freshly slaughtered pig to wash laundry in the cold river herself. The mother of the future president Lyndon Johnson stooped in her early youth when she carried heavy buckets of water from the well to the kitchen. This, by the way, once again shows how much life could change from parents to children. Parents were buried in the field without sewage and electricity, …and children in expensive jackets would pass laws. In general, I don't find it surprising that farmers wanted to leave such a life and move closer to civilization. But it's not that simple. There were also important economic reasons for the mass migration to cities. By the end of World War I, American farmers were doing quite well – America was stably supplying products to warring Europe. But when peace came, all this food had nowhere to go. Prices within the USA went down. The price of cotton, corn, and wool fell threefold. It seems cool. Everything is finally getting cheaper! But in reality, this is a big problem. Within the country, there was simply nowhere to put farm products. The loans that farmers took out to buy various agricultural machinery became impossible to pay. Families were ruined en masse and lost their land. In fact, that's why migration to cities grew at such a pace. People who lost everything were looking for an opportunity to earn money. Hoover knew about this problem and tried to save the farmers. One of the first laws he passed was the Agricultural Marketing Act. It was intended to create so-called Stabilization Corporations. They, with government money, were supposed to buy surplus products from farmers and store them in special warehouses, which would not supply goods to the market. This was supposed to help stabilize prices at a more or less acceptable level. Perhaps this would have even helped… but the rural crisis merged with the Great Depression, and everything went to hell. As a result, American farmers would become the most affected group of the population. Not only did they not feel the economic boom in the Roaring Twenties, but in the impoverished Thirties, they lost what little they had left. And what about the blacks? How did these unusual world changes affect them? Until '24, not particularly. They were still largely leading a helpless, impoverished life in the South, in the former slave-owning states. But then something changed. I recently said that the federal authorities decided to reduce immigration of foreigners to zero. But huge factories still needed cheap labor. And so, Southern blacks became a complete replacement for Italian, Jewish, and Polish migrants. And then about half a million Mexicans joined them, to whom the immigration restriction law did not apply. This influx led to something truly unimaginable – in 1928, Oscar De Priest became the first black congressman in history. The question is, why didn't this happen earlier? Because in America, about 10% of the population was already black. And all because, despite the migration to the North, 4 out of 5 blacks remained living in the Southern states. Under the pressure of what were called Jim Crow laws. I think everyone has heard of segregation? Well, it started precisely with these laws. They appeared after the Civil War, when all slaves on the territory of the states were granted freedom. But former Southern slave owners still found a way to turn the situation to their advantage – they introduced rules that formally meant black people were not slaves, but in essence, they were little different from them. Separate waiting rooms at train stations, separate churches, separate terribly bad schools, and even separate drinking fountains. And, of course, a mass of restrictions on voting rights. That's why blacks couldn't get any representation in power for so long, not even at the local level. Hoover's sociologists found that the life of black people in the South could be described in one word – hell. They were not formally forbidden to work in factories. They lived on their farms in terrible poverty and isolation. The child mortality rate there was twice as high as among whites. The average life expectancy was 15 years shorter. And all this – I remind you – against the backdrop of the Roaring Twenties. The contrast of the brightly shining night of New York and the impenetrable darkness of the night of Alabama – that's what the 1920s were like in America. And this is a great illustration of the fact that the traditional rural country was coming to an end. It was then that the Democratic Party began to rapidly transform into the modern one. I mean, what stereotype do we have about Democrats and Republicans? Democrats are about migrant rights, progress, social support. And Republicans are conservatives, for the middle class and traditional values. Well, before the 1920s, everything was more or less the opposite. The main voters for the Democrats were the Southern states. Which had not yet fully accepted the abolition of slavery. Farmers and planters. And intellectuals, businessmen, and workers voted for the Republicans. By the way, the first black congressman was also a Republican. Well, since the traditional values of rural America were increasingly lagging behind life, Republicans won elections much more often. By the way, before the famous Franklin Roosevelt, in the entire preceding 20th century, only one Democrat became president – Woodrow Wilson. And then – all Republicans. McKinley, Theodore Roosevelt, Taft, Harding, Coolidge, and, of course, Herbert Hoover. And the Democrat Wilson was able to get into the White House only because the Republicans had a split, and two candidates came to the election at once. And both – former presidents. As a result, this diluted the votes of Republican voters, and Wilson won without problems. This, by the way, is a rather well-known mathematical trick – if two candidates with similar programs come to the election, then with a high degree of probability, a third one will win. Even if he might not be the most popular in the country. In short, the almost constant victories of the Republicans symbolized the decline of rural fundamentalism and the triumphant reign of large cities, which now set new American values themselves. These were also broadcast by the first glossy magazines, which also appeared in the 1920s. For example, Time and The New Yorker. Yes, imagine, it seems like they have always existed, but no – they are a product of that very era. But there was also a problem in this division of city and village. Because if one part of your population is getting richer and developing much faster than the other, it cannot help but create tension. Farmers plowed day and night, but as a result, over 30 years, their labor productivity increased by only 50%. No, it sounds cool in theory. But if you compare it with the productivity of factory workers, who produced 4 times more goods in the same period, the difference, I think, will be obvious. And in some industries, the gap was even greater. Ford factories produced a brand new car every 9 seconds from the conveyor belt. Although 10 years before that, it took 14 hours for one car. This means Ford started producing cars 5600 times faster! In 1900, a car was a luxury toy for the rich. Only about four thousand people across the country could afford such a purchase. But by 1929, the situation had changed: ordinary Americans already owned more than twenty-six million cars, one for every five people in the country! In that year alone, they bought almost five million cars… and they cost them significantly less, in percentage terms. The sharp increase in the number of cars is the most striking example of America's economic growth. The automotive industry provided the most jobs. Workers bought everything in bulk. And it seemed they would do it all the time. But even such a fabulously successful strategy had its limits. Mass production made mass consumption necessary. A feature turned into a bug. You cannot produce more and more goods if they are not bought more and more. As Hoover's research showed, the growing prosperity of the 1920s largely went to capital owners. To big businessmen and bankers. And while workers' incomes grew, they did not grow as fast as industrial production. And therefore, sooner or later, this whole setup will go to hell. And the automotive industry, the most advanced and fastest-growing, was the first to feel it. General Motors admitted in '26 that the industry was growing at such a pace that it would soon hit a ceiling. They tried to solve the problem by pushing it somewhere into the future. How? Very simple. Because what do we need? So that cars continue to be bought at a rapid pace. How to achieve this if everyone who wanted to and had money has already bought a car? Make it so that those who don't have money can buy it. This is how consumer loans first appeared. And advertising. In the sense, of course, it existed before, but only in the 1920s did it become what we are used to – bright billboards, slogans, marketing campaigns. General Motors alone spent $20 million a year on advertising. But this indicated not only the development of advertising but also that it was becoming increasingly difficult to sell. Because with its help, corporations wanted to awaken in people the desire to buy something that exceeded their real needs and capabilities. Credit and advertising supported car sales for some time, but without new foreign markets or a significant redistribution of purchasing power in favor of impoverished farmers, the limits of consumer demand were already near. Nevertheless, in the rapidly developing industrial cities, almost all Americans noticeably improved their standard of living. Real wages for workers increased by almost 25 percent. By 1928, the average per capita income was 4 times higher than that of farmers. For urban workers, this prosperity was tangible and real. They had more money than ever before, and they could afford many new goods: not only cars but also canned food, washing machines, refrigerators, synthetic fabrics, telephones, trips to the cinema, and another new wonder of technology – radio receivers. Almost none of this was available in rural areas. In the 1920s, for the first time in history, the number of factory workers in the USA exceeded the number of people employed in agriculture. And strangely enough, their lives became easier and easier. No, compared to modern offices, of course, there was fierce hardship and darkness there, but try to put yourself in the shoes of a guy from the 20s. If you were born on a farm, how did your days go? You worked in the field for 12 hours a day without days off. At first, it was the same in factories, but by '23, factories began to abandon the 12-hour workday. By 1930, most employees worked 48 hours a week. Although the two-day weekends we are used to had not yet become the norm of American life, and paid vacations were only a dream for workers. Pensions, in general, remained an unattainable dream for the average American worker. To have money, you had to work until you died. In this context, it might seem strange that the unemployment rate was still above 10%, even in the most prosperous years in the middle of the 20s. There was a lot of interesting stuff there. Constant changes in life often disrupted family relationships, left no time for social activity or participation in civic life, and even made it difficult to organize trade unions. This unstable, fragmented, and unreliable way of life was a reality for millions of Americans. On the one hand, they sometimes tasted prosperity, and on the other hand, they had very little control over their working conditions and how their lives turned out. Like, work while you can and save up in case of dismissal. Fired – sit on a financial cushion and look for a new job. There were no benefits. Moreover, the Republicans in power actively opposed such benefits. Guess why? Because it's a socialist idea! It contradicts the American ideal, in which a person must achieve everything on their own, without any help. This idea was firmly ingrained in the minds of officials and industrialists and did not change until the beginning of the Great Depression. Workers had unions… but due to the hostile attitude towards them from all sides, the number of members began to decrease. From five million during the war to three and a half million by the time the crisis began. Well, and frankly, the unions themselves were also specific then. As a rule, they were created by skilled workers. For themselves and their interests. They often completely ignored the problems of unskilled colleagues. Not to mention ethnic conflicts. Skilled workers were usually native-born white Americans, and the rest were migrants from the depths of Europe and rural areas of America. And corporations skillfully used this. When the American Federation of Labor decided to go on strike at steel mills, the management pulled a fast one – they sent their agents into the working-class neighborhoods to sow enmity between different ethnic groups. And they announced that since the whites refused to work, they would quickly bring in 30,000 blacks who would gladly take their jobs. And, of course, the strike quickly stopped. After this catastrophic defeat, the steelworkers' union gave up on the rights of unskilled workers and handed them over to themselves. There was another trick with unions. Some corporations tried to sit on two chairs at once – to gain the loyalty of their workers and weaken the influence of trade unions. They created their own trade unions from above. And offered workers bonuses, company shares, insurance policies, payment for some entertainment, and even pensions. Cool… and will there be downsides? Yes – all programs were under the control of corporations, which could cancel them at their discretion. As long as there was money in the country, there were no problems – there was enough for everything. As soon as the crisis hit, then goodbye, proletariat. But there was nowhere to go – there were no strong independent trade unions. And the state was not particularly in a hurry to help either. At least at first. More interesting changes were happening in the sphere of women's labor. In 1929, about ten million women were employed. In a very limited number of professions – teaching, office work, domestic service, and… I don't know how else to say it – sewing. At the beginning of the 20th century, women made up 18 percent of all workers. By 1930, this figure had increased to 22 percent. That is, approximately every fourth woman had paid employment. But there's a nuance. Mostly these were young, unmarried girls under 25. And if a woman got married, she almost always quit her job. Especially if the family had children. Only one in ten mothers worked outside the home, and there were very few older women working outside the family. And this was considered the absolute norm of life. Like, as long as you are young and unmarried, you work somewhere as a secretary in an office, try to charm a higher-up boss, and then get married and stay at home, cook borscht, and raise children. Nevertheless, even in this environment, women were gaining more and more rights. In the 1920s, flappers appeared. Something like modern alt-girls. They behaved in a deliberately independent way from men, listened to jazz, smoked, and drove their own cars. In 1920, the 19th Amendment was adopted in the USA, which guaranteed women the right to vote. Many women – especially urban, white, and affluent ones – began to use new means of contraception. Which, as expected, caused an indignant howl from conservatives, who saw this as a threat to the middle class. Because if white native-born American women stop giving birth, then who will populate America? Migrants and black poor? What a horror! Another important change was the almost complete eradication of child labor. The rapid increase in wages led to the fact that just one breadwinner could support a family. If we look again at the beginning of the 20th century, then every fifth child was forced to work. And 30 years later, less than 5% of children worked across America. I repeat, there were purely economic reasons for this. Humanism had nothing to do with it. Federal authorities tried several times to legally ban child labor, but the Supreme Court overturned these attempts each time. Nevertheless, there were fewer and fewer children in factories. And fewer working children means more children in schools. In the 1920s, for the first time, the majority of American teenagers continued their education in high school, rather than going to twist nuts in factories. The number of schoolchildren increased by a whole 8 times. The achievements were not only impressive but also very costly. States took on almost all expenses, including improving roads for all these new cars. As a result, in the 1920s, state debts increased significantly, and in some cases, they reached the limits set by law or credit markets. Local and state taxes also rose sharply, significantly outpacing the growth of personal income. By 1929, the government at all levels collected twice as much in taxes compared to 1914. Americans began to allocate an increasing portion of their income not only for personal needs but also for public purposes, and this annoyed many. Although by today's standards, taxes in the budget were not that much – only 15% of GDP. Now, for example, this figure is about twice as large. But at that time, it was a lot. And people always react to tax increases in the same way – get off my money! Or at least show me what you're spending it on! Nevertheless, federal authorities were reluctant to take responsibility for a long time. Republicans of that time advocated for minimal state intervention in the personal affairs of citizens. Especially in everything related to money. Like, we ask little of you… but we are not going to help you. President Calvin Coolidge best embodied this policy of non-interference. He was a simple, classic white fundamentalist in everything. In religion, in economics, in social issues, and even in fishing. Like, nothing needs to be changed, nothing needs to be done…. and if it needs to be done, then as our grandfathers did. Coolidge liked to occasionally utter laconic phrases that perfectly reflected his conservative beliefs. For example, he stated: "The main business of Americans… is business." In the original, it sounded even more interesting: "The main business of Americans…. is business." At another time, he said: "The man who builds a factory builds a temple. And the man who works there performs a prayer." These statements by Coolidge well conveyed his commitment to thrift and non-interference, which defined the policy of that time. Few government structures that were supposed to somehow regulate the economy or be responsible for state projects were slowly dying. For example, Coolidge canceled Commerce Secretary Hoover's ambitious projects for river management in the West. For the same reason, he vetoed proposals for aid to farmers and accelerated payments to World War I veterans. He also stubbornly resisted attempts to restructure the debt of World War I allies. Coolidge's logic here was simple: "They borrowed money, didn't they? Let them pay as agreed." In general, Coolidge preferred to do nothing and quite believed that everything was going as it should. Prosperity and grace. I've only given a couple of quotes from this guy here, but if you look at it, he didn't say much. And he even considered it his specialty. On the principle, "if you don't say anything, you won't be asked to repeat." He believed that 9 out of 10 problems disappear on their own if they are simply ignored. Future President Hoover, who was then a minister, was simply angered by the president's complacency. Because the problem with this philosophy was that if the one-tenth problem did catch up with Coolidge, he was completely unprepared for it. A striking example was the growth of market speculation from 1927, which Coolidge simply ignored, despite economists' warnings. But as I said, this was his specialty. He considered everyone who advised him to change something to be bad advisors. Including Hoover. Well, and as it were, from Coolidge's point of view, everything looked okay. Prosperity really continued for a long time and it seemed like it would never end. But in the depths of the economy, alarming changes had already begun to occur. Problems in agriculture had been obvious for a long time. But now other sectors began to feel pain. I've already mentioned cars – growth rates there slowed down back in '25. But predatory construction also stopped. The real estate boom in Florida burst like a soap bubble when a hurricane hit it in September 1926. Non-cash transactions fell from a billion dollars to 143 million. This was an ominous hint of the financial collapse that would soon engulf the entire banking system. Inventories in warehouses began to grow in 1928, and by the summer of 1929, their value had increased almost fourfold. This clearly indicated that people were not ready to buy as much as factories were producing. The most alarming of all this was what Hoover called "an orgy of mad speculation." What did this mean? In theory, bond and stock markets should reflect and even anticipate real economic processes. Like, a company's business is growing? This means its shares are getting more expensive. But by 1928, American stock markets had moved far away from this reality. They seemed to have soared into a fantasy world where the laws of rational economics no longer applied, and stock prices ceased to have any connection with their true value. Business activity across the country was steadily declining. But stocks continued to grow rapidly. The market began to grow not by small steps, but by huge leaps. Especially soaring were the stocks of companies that were commonly associated with progress. Like "Radio Corporation." Their papers could grow by 10-15% per day! Among other things, this indicated that people had money…. they just didn't need industrial goods anymore. Chapter 1. The Jazz Age The 1920s, among other things, went down in history as the Jazz Age. This concept was much broader than just music. "The word 'jazz' originally meant sex, then a dance style, and finally, music. When they talk about jazz, they mean a state of nervous excitement, approximately the same as prevails in large cities as they approach the front line. These are the words of F. Scott Fitzgerald. A writer who illustrated this crazy time with his entire life and work. For people like him. He himself was an avid partygoer. He wrote the most famous book about it – The Great Gatsby. And he ended his life like a rock star. In the sense that he drank himself to death and died at 44. In fact, it was he who came up with this name – the Jazz Age. Fitzgerald described it as a time of instant joy and "feverish hedonism." It felt a "thirst for life here and now." The collapse of the old world order after the war was felt. It was shaped by two key moments – the carnival atmosphere and the impact of World War I on the Lost Generation. Life was changing too fast and seemed too short. Therefore, why think about the future, restrain yourself, and postpone something for later? Because there might be no "later" at all. Got money? Let's party! Fitzgerald was not a proponent of an observer who would simply critically describe the state of the golden youth of big cities. He experienced all this firsthand. One could say that in a sense, he popularized his lifestyle. Jazz in the 1920s was perceived as… well, I don't know… like K-pop, perhaps. Something incredibly fashionable, unlike classical tradition, and defiant. In 1922, the first radio stations with regular broadcasting appeared in America. Thus, modern music became accessible to literally everyone. All the main jazz stars appeared precisely in the 20s. Louis Armstrong shone in the clubs of Chicago and New York. His style took this music to a new level. And one of the most popular bands then was "Red… Hot… Peppers." Without chili. The rebellion of the youth of the 1920s manifested itself in many forms: unusual dandy fashion, women smoking in public… frank conversations about sex. Dances invented by African Americans suddenly became popular among white youth. The old, respectable public was horrified. White teenagers dancing like blacks! What an incredible moral decline! Some Americans from the urban middle class saw jazz as "the devil's music." They believed that the jazz rhythms themselves contributed to debauchery and moral decline. Exactly according to the formula "today he plays jazz, and tomorrow he will sell his homeland." None other than Professor Henry van Dyke of Princeton University wrote that "jazz is not music at all. It is simply an irritation of the auditory nerves and the strings of physical passion." Newspapers also kept up. The New York Times published an article that accused jazz of almost all the world's woes. And of the decline of Western civilization, and of the decline in the quality of Italian tenors, and of the increase in heart attacks among classical musicians… and even of the unfavorable trade balance with Hungary. But, of course, the youth didn't care. They fled to jazz clubs and found freedom from social norms there. Freedom in clothing, words, and behavior. The uninhibited nature of jazz encouraged sensual self-expression. Another feature of such parties was that representatives of all strata of society gathered there: from bohemian intellectuals and artists to gangsters and socialites. People wore bright clothes. Women – feathers in their hair and short skirts. Men – straw fedoras and striped jackets. Only one thing united them – an atmosphere of wealth and recklessness. Liters of champagne, despite Prohibition. This feeling of celebration and unrestrained fun was the hallmark of the Jazz Age. And it would only end in '29. When America would be shaken by the stock market crash. And money to fuel the growing stock market flowed from all sides. There was so much of it that it seemed like Wall Street was swallowing all the money in the world. Some of it came directly from the pockets of private investors. But not that much. For the most part, large corporations were engaged in buying stocks. In the 1920s, they made substantial profits. There was no point in spending money on expanding production – the market was already saturated with goods. Therefore, companies began to use profits for stock market speculation. Even more money came from the banking system. This is simply wild absurdity. Although logical. There was almost no inflation in the country. The key rate remained low – only 3/5%. This means it was easy for banks to create new money. This, by the way, is not a figure of speech. In the real economy, it is commercial banks that create new money, not the state printing it in a factory. In general, banks could take loans at very low interest rates and issue them to everyone. And those who wanted to took them and invested them not in buying a new car or washing machine, but in the stock market. Because, remember, what was the profit there! You could take a loan from a bank at 10% per annum, invest it in the same Radio Corporation, and recoup the expenses in a week. And then just sit and count the profit. That is, imagine, people actually took loans to buy stocks with them! And for some time, this strategy even worked. The practice became so popular that brokers during the boom could charge clients huge interest on loans they took to buy stocks. Every day, $200-300 million of new loans appeared in the economy. This policy of cheap money was largely the result of the influence of the Federal Reserve. If anyone doesn't know, this is the American Central Bank. In general, this guy was called Benjamin Strong. And he had rather strange ideas. First, Strong was a fan of the gold standard. Well, nothing surprising here. Tying money to gold was the mainstream of economics then. So, Winston Churchill was appointed Chancellor of the Exchequer in England… and he decided to carry out a reform – to restore the pegging of the British pound to gold, which had been abolished during the war. So to speak, to turn back the clock. It would seem, what does the American Federal Reserve have to do with it? And the point is that Benjamin Strong decided to support Churchill and help him maintain the British economy after such maneuvers. Because the exchange rate of the British pound to gold became much higher than the real one. So people simply preferred to buy gold. It was clearly more profitable than investing in business or buying cars, for example. And it was even more profitable to transport this gold to America and buy stocks there! Well, in such a situation, Strong decided that the US should maintain low interest rates. So that money becomes cheaper and the British…
It would be so profitable to invest gold in the American economy. And it would have truly helped the English economy in some ways. Instead, a stock market speculation boom began in America. Because of this policy, Herbert Hoover would contemptuously call Strong "Europe's appendage." Chapter 2. The Mafia and Prohibition But this is what was happening somewhere in the depths of the economy and in high offices. Ordinary people didn't give a damn about all this. They had their own problems and their own joys. For example... Prohibition! I haven't mentioned this yet, but one cannot talk about that era and forget about the mafia, bootleggers, and speakeasies. In short, Prohibition was one of the most radical reforms in US history. Traditionally, everyone drank there, except for the most rabid religious fundamentalists. Whose voices were becoming louder and louder. Why? Well, because it was difficult to object to arguments like "drunkenness harms health." Everyone had dozens of examples before their eyes of how a drunken neighbor drank away his cow, and now his family had nothing to eat. That is, one cannot say that people en masse truly wanted to give up alcohol. They simply didn't know what to object to the convinced teetotalers. And those who fanatically advocated for their cause, held demonstrations, created communities – like the Woman's Christian Temperance Union and the Anti-Saloon League. Politicians perceived these cries as the will of the people and also began to promote them in their speeches. On the one hand, they thought it would help their popularity... and on the other, they saw in the prohibition of alcohol an easy way to improve the quality of life. To raise moral values and reduce crime. Several states already had their own dry laws even before the federal ban. The decisive step was taken in 1919. Prohibition across the country was introduced not just by a separate decree, but by a simple amendment to the constitution! It prohibited the production, sale, and transportation of alcohol. By the way, the new law said nothing about consumption. Drinking was still legal. The amendment came into force in 1920. But at the same time, we know this period as a party frenzy with cubic meters of champagne and whiskey. How so? Well... what always happens when authorities see a simple way to solve all or most problems. It turns out that in attempts to fix one thing, you break another 10 things you didn't even think about. With the introduction of Prohibition, American society found itself in a new reality where alcohol was banned... but it didn't disappear anywhere. Instead of reducing consumption, the law actually fueled interest in alcohol. The entire country was divided into those who tried to circumvent the ban and those who sought to enforce it. Tens of millions of Americans did not want to give up their habits. And where there is demand, there is supply. Speakeasies – underground bars – began to appear en masse. Sometimes these were hidden rooms in seemingly normal bars... meaning, here in the main hall, people were drinking tea and spring water, but if you went down to the basement, to a room without a sign, you could easily find something stronger. It was also in the 20s that cocktails came into vogue. So that it's unclear from the appearance of the drink what you're drinking – a smoothie or gin with fruit juice. Illegal parties in "speakeasies" became a real social phenomenon. Despite the ban, these establishments were very popular. It is estimated that in New York alone, by the end of the 1920s, there were over 30,000 speakeasies. Nothing could be done about them. The owners simply preferred to pay the police or the mafia for protection. And closing such a number of bars turned out to be impossible. Speakeasies became centers of nightlife, where live music played, jazz ensembles performed, and people enjoyed their freedom. Many speakeasies had complex systems of secret passages and tunnels to escape in case of a police raid. This added intrigue and excitement for visitors. And in a sense, it was a protest against the authorities. Because, in essence, millions of ordinary people regularly violated an amendment to the constitution! And they saw nothing wrong with it. A whole culture of circumventing the law emerged. For example, whiskey could be bought at pharmacies with a prescription. And, of course, a whole bunch of doctors appeared who, for a certain price, could give a patient a non-existent diagnosis and prescribe a glass of cognac before bed. Purely for health. American wine producers suffered the most, but they also found a way out. So-called wine bricks went on sale – dried grape juice concentrate. Which contained detailed instructions on what absolutely must not be done to accidentally make wine. Like, DO NOT put the brick in water. DO NOT leave it for 20 days in a dark, cool place. Otherwise, you will get wine, and that is absolutely forbidden. But, of course, the biggest profits were in smuggling and moonshining. Prohibition led to the mass production of counterfeit alcohol and smuggling. All this illegal business was controlled by criminal organizations, which quickly realized that they could make big money from the ban. The mafia, which previously consisted of, well, naturally, racketeering gangs, turned into large organizations. Before the ban, criminals mainly lived in big cities and engaged in gambling, extortion, and prostitution. There was a lot of money there, but not millions directly. But Prohibition rained down a real dollar shower on the mafia. Entire underground structures appeared that controlled the production, transportation, and sale of alcohol across the country. With huge profits. Well, simply because any prohibited item always costs more than a legal one. The most prominent figure in this process was, of course, Al Capone. I, by the way, had a separate video about him. So, Al Capone's criminal business was truly more like a corporation than banditry. It brought in about 60 million dollars a year. By today's standards, that's almost a billion. He had enough funds without problems to buy anyone – officials, police officers, judges... and if they turned out to be too principled, then the best lawyers. Or, as a last resort, hitmen. Of course, Al Capone was not the only one. Many wanted a piece of such a fat pie. And criminals fight competitors not in courts, but in street shootouts. Chicago, Detroit, and New York were hit by a series of alcohol wars, where gangs fought for control over territories and flows of illegal alcohol. But the mafia grew not only from selling whiskey. Whiskey simply brought them colossal money. Which they began to invest in other types of illegal activities. That is, along with alcohol sales, all other crime also grew. So, the authorities thought that Prohibition would help reduce crime, but in fact, the opposite happened. The mafia became one of the most powerful forces in the country. But Prohibition was not the only reason for the increase in crime in the 20s. Social inequality and technological progress also played a role. Ordinary guys from the lower classes also wanted a beautiful life, expensive suits, and champagne. And the mafia allowed them to get all this. Moreover, if you go to an illegal bar and drink illegal alcohol, you are already breaking the law... so why not break it in some other way? And new technologies like radio and – especially – cars, made crime more mobile and difficult to control. Radio and glossy magazines contributed to the creation of new idols from the criminal world. For example, everyone knew about Al Capone, who he was and what he was doing. His life was followed as if he were a Hollywood star. And as for cars... gangsters gained the ability to move quickly around the city and hide from the police. But what's worse – they quickly crossed state borders after some raid or robbery. Why is this important? Because at that time, all police in the US were state police. Sheriffs of Louisiana hardly cooperated with sheriffs from Texas and could not pursue criminals in someone else's territory. That is, Bonnie and Clyde rob a gas station, flee from pursuit, cross into a neighboring state, and that's it – they're safe. Until they commit some offense there, they can feel safe. Well, almost... it was precisely then that the idea of creating a federal police force began to gain popularity. Before that, states resisted it in every way because they feared losing their independence. But when the old system proved incapable of dealing with modern-day bandits, they had to, so to speak, yield. Thus, the FBI appeared. Which has its own complex history, where PR and delusion were often more than real deeds... but in the end, it coped with its task and quickly either imprisoned or shot all the famous gangsters. And the head of the FBI – J. Edgar Hoover – became a national celebrity. Yes, another Hoover, but he is not related to President Herbert Hoover. Not even distantly. By the way, there's another funny thing connected with the FBI. I didn't mention PR for nothing. What era do we consider the most gangster in US history? I think I won't be mistaken if I say that many of you will immediately think of the 30s. Well, not at all. A huge surge in crime occurred in those very roaring 20s. If we take only the most noticeable crimes like bank robberies, there were significantly more of them than in the 30s. Nevertheless, mass culture somehow did not preserve the names of these earlier bandits. But John Dillinger, Bonnie and Clyde, Baby Face Nelson, and others remain popular figures to this day. How so? Well, again, it wasn't without the head of the FBI, J. Edgar Hoover. Because he was tasked with fighting such criminals. And he really wanted to show that he was doing important work. That his work, as they say, is dangerous and difficult. Hoover gave interviews where he essentially greatly overestimated the significance of the gangsters he was trying to catch. So that society would perceive them as a real problem. That is, he first artificially inflated the problem to global proportions... and then successfully solved it. And people formed an image of FBI agents as some kind of superheroes. True, this strategy had a side effect – the gangsters also became stars. And they had no fewer fans than the feds. In short, Hoover wanted to promote the FBI, but at the same time, he also promoted the gangsters. So much so that they are remembered to this day. And the 1930s are still considered the era of crime's peak. And Al Capone, by the way, was arrested and imprisoned without the FBI's involvement at all. In general, Prohibition lasted until 1933. When the Great Depression was in full swing. It became one of the most controversial experiments in US history. Instead of leading to societal improvement, it created huge opportunities for organized crime and turned police and local authorities into corrupt cesspools. Even after its repeal, its consequences were felt for quite a long time. The mafia, which had strengthened on the wave of endless money from the alcohol trade, became a headache for the authorities for decades to come. So Prohibition became an important lesson for society, showing that bans do not always lead to the expected results. And the consequences can be completely unpredictable. And now let's rise to a higher level again and see how the depression began. Because excessively accessible loans themselves did not cause the financial boom. Just as gasoline doesn't start a fire by itself. For a fire to ignite, you need not only fuel but also oxygen... and a spark. Only, to this day, no one has been able to accurately determine what was the spark that ignited the financial fire that engulfed and consumed the markets in '28 and '29. One thing is clear – the oxygen that fueled the stock exchanges was not only in the complex mechanisms and tricks of traders. The main ingredient was the atmosphere itself... when dreams of easy wealth literally floated in the air. Where, as in the field of fools, you could plant a coin and grow a money tree in a couple of days. But experienced traders understood that it would soon be necessary to dump stocks and fix profits. The only question was when? And the more the markets grew, the more speculators began to think about getting out of the game. And so, in this atmosphere of concern, risk, and uncertainty, the stock market opened on October 24, 1929. It should also be added that the index stopped growing a month before that and gradually decreased. Not very much, but noticeably. Experienced players understood – it's time. Waiting for growth is pointless. It all started with a collapse in buy orders. A record number of shares were sold in one day – almost 13 million. By noon, losses reached about 9 billion dollars. The stock ticker, which counted the rates, could not keep up with events and was delayed by 4 hours. A slight panic gripped the stock exchange. But when the stock ticker counted the last transaction at 7 PM, it turned out that everything was not so bad – the index as a whole even bounced back slightly. But the losses, of course, were still significant – the index lost about 30% of its value. This day went down in history as "Black Thursday." Which was followed by Black Friday, Black Monday, and Black Tuesday. On the last day of the crash, almost 16.5 million shares were sold on the New York Stock Exchange – a record that lasted for thirty-nine years. This "Black Tuesday" cast a shadow of darkness and hopelessness over Wall Street. Traders finally understood that the catastrophe could not be stopped. Everyone who believed that the decline would end soon gave up and also started dumping stocks. For another two weeks after that, prices continued to fall rapidly, as if flying down with the same speed with which they had recently flown up. It seems that only then did some realize that trading with borrowed money works both ways. It allows you to earn quickly and lose everything quickly. Even a slight drop in stock prices meant that brokers recalled stocks taken on credit from people. And they were forced to either deposit more cash or agree to the forced sale of their securities. Millions of such sales simultaneously simply knocked the ground out from under the market. The fall relentlessly continued for three weeks. Many famous people lost money. For example, suddenly, Churchill! At the end of the 1920s, he went to America to sign a contract for his new, not yet written book. And there, he succumbed to the general enthusiasm for playing the stock market. He invested the entire advance in stocks. Then he invested more and more. He even managed to invest 26 thousand dollars on Black Thursday because his broker said it was a temporary decline and growth would resume. So Churchill sat through Black Friday, Monday, and Tuesday... hoping that everything would soon improve. And when it became clear that it wouldn't improve, it turned out that he had lost 75 thousand dollars. In today's money, that's over a million. There was also a professor named Irving Fisher. A respected economist from Yale University. A week before the crash, he stated: "Stock prices have reached a level that resembles a permanently high plateau. I believe that in the near future, or perhaps never, the index will not fall by 50-60 points from its current level. I expect the market to grow significantly in the coming months compared to today." This phrase would be remembered for a very long time. Fisher lost both his reputation and most of his money, including his house. He was so struck by his own mistake that he spent the next couple of years studying the crisis and trying to explain what had happened. As a result, in 1933, he published a work titled "Debt Deflation," where he explained point by point what and why had happened. My video is not about economics, so I will not retell this theory... I will only say that in the 1930s, almost no one paid attention to "Debt Deflation." Because, well, what useful thing could an economist who lost money on the stock market like a total loser write? Only decades later was this theory dug up, and it was concluded that Fisher was generally right. Major businessmen also suffered. For example, the founder of General Motors, William Durant. He was one of those millionaires who hoped to profit from the decline and buy stocks for a pittance. Durant spent almost his entire vast fortune buying falling securities on all the blackest days of the week. And, as expected, he was left with nothing and for the next few years had to live on a pension from the company. And then, in a small town in Michigan, he opened a coffee shop with bowling, where he personally worked in the kitchen. In general, the stock market crash was colossal. By mid-November 1929, about 26 billion dollars had simply evaporated. A gigantic sum. But why am I talking about it so calmly? Here's the simple point from which the Great Depression suddenly began for everyone, millions of people were left without money! A horror, right? Well, yes, a horror... but not a horror, horror, horror. It's not that simple. No economic study has been able to show that the 1929 stock market crash was the direct cause of the Great Depression. Yes, the stock market collapsed, but it's impossible to directly link it to a decade-long economic nightmare. Many specialists argue that these are unrelated things. Meaning, that in those circumstances, the depression would have started anyway, with or without the stock market crash. It sounds strange, but American economists held exactly the same opinion immediately after Black Tuesday. Because there were no signs of any depression – neither great nor ordinary. President Hoover stated on October 25 that "The basic business of the country, that is, the production and distribution of goods, is on a solid and prosperous basis." A couple of years later, he would be harshly ridiculed for this, but if you look at the situation through the eyes of a person from 1930, you could say – well, what is he wrong about? A slowdown in business activity was noticeable by mid-summer '29, but there was still little reason to consider it anything more than a normal downturn that happens in the economy every few years. The only thing that stood out was the explosive growth in stock prices by almost half since 1928. So the stock market crash was not a surprise for Hoover. He had long warned that the market was overheated, and now he could confidently say – "Well, I told you so!" Moreover, Hoover saw a positive side to this – that the economy would finally get rid of accumulated toxins. And he was not alone in this thought. Many great minds of that time held similar views. For example,... John Maynard Keynes... yes, the very one whose name would later be associated with the US exiting the Great Depression. So, in 1929, he also said that Black Thursday was a natural and healthy development that would redirect money from speculation to more productive purposes. A respected financial columnist for The New York Times even poetically called the stock market crash "a reaction to an orgy of reckless speculation." The American Economic Association stated in December 1929 that the economy would recover by June of the following year. But this is the opinion of experts. What about ordinary people? After all, they shouldn't be indifferent that their savings have turned to dust? Well... how to put it... in the same New York Times, a poll was conducted – what was the most important news for you in '29? You'll never guess... The most important news of '29, according to Americans... was Admiral Byrd's expedition to the South Pole. Yes, that's what they considered more important than the beginning of the greatest crisis in history. The behavior of financial markets after the Crash only confirmed the optimism of that time. I mean, although stocks fell to the very bottom, by April 1930, they had recovered 20% of their value. And the industrial companies index returned to approximately the same level as at the beginning of 1929. Black Tuesday is far from the first panic sale on Wall Street... but unlike previous crises, it did not lead to the bankruptcy of any major company or bank. Yes, for many individual shareholders, it was a catastrophe, but the real depression had not yet begun. Not yet. Another popular image of Black Tuesday is legions of small shareholders – workers, taxi drivers, office clerks – who lived, intoxicated by the dreams of the crazy decade... and who were now tearing their hair out because they had lost all their money. This picture is retold by everyone. But the funny thing is that it originates from an essay by Fred Allen, which he published in 1931. And who is this Fred Allen? An economist? A sociologist? A journalist? No, he's a damn comedian! Basically, a stand-up comedian, if that word existed then. In reality, nothing like that happened. According to the US Department of the Treasury, in 1929, only 2.5% of the population owned securities. This means that the vast majority of Americans did not notice any crash at all. Unexpected, right? Well, while you're digesting this information, let me tell you a little about Herbert Hoover – the president during whose term the Great Depression began. Let's see what he did to restore the economy... and whether he could do anything at all. Hoover came from a humble religious family. He lost his parents early, so he was raised by his uncle's family. After school, he entered Stanford University. Now it's one of the most prestigious universities in the world, but then it had just appeared. In 1895, Hoover received a degree in geology and... went to a regular job. For the first two years, he dug the earth alongside other laborers... until two years later, an English mining concern invited him to work. No longer as a worker with a pickaxe, but as a promising geological engineer. His first task was to go to Australia and find gold. And you know what? He found it. Not just found it, but also helped develop new technologies to make extraction more efficient. And he continued in the same vein. After another successful expedition to China, the company's executives made him a partner. For the next fourteen years, Hoover traveled the world, developing and managing mining projects in Australia, Asia, Africa, and Latin America. In 1909, he published the book "Principles of Mining," which became a textbook for engineers and managers. There, he advocated for collective bargaining between workers and company management, for an eight-hour workday, and for safety in mines. The book became a standard in mining schools and strengthened Hoover's reputation as a progressive and educated businessman. By 1914, at the age of forty, he had accumulated a fortune of 4 million dollars and decided to retire from active business. When the Great War began, Hoover voluntarily offered to organize international efforts to provide aid to Belgium, which was suffering from German occupation. His success in "feeding the starving Belgians," so to speak, brought him worldwide fame as a great humanitarian. In 1917, Hoover returned to the United States to take on the role of Food Administrator in Woodrow Wilson's wartime government. The Democratic president, I remind you. Hoover himself had not been involved in politics before, nor had he supported Democrats or Republicans. After the war, he accompanied Wilson to Paris as a personal advisor, as director of the Supreme Economic Council, and head of several other associations and departments. Hoover is credited with reorganizing the war-torn European economy: mines were reopened, rivers were cleaned, bridges and roads were restored, food and medicine were delivered. By the time the Treaty of Versailles was signed, Hoover had already become a celebrity, an object of admiration and respect. He was called "the most important figure the war brought into Washington's life." Or this: "Hoover's high public spirit, his intellect, knowledge, compassion, and rare understanding of what is truly important for the country, combined with his organizational skills and dedication, could make him an excellent president." And a young assistant secretary of the Navy, Franklin Roosevelt, said of Hoover that this man "is an absolute miracle." And that he "wished Hoover would become President of the United States. Because there can be no better candidate." I remind you, this was all in 1918. Ten years later, Hoover would indeed become president. And four years later, he would lose the election to Roosevelt. Be that as it may, in the early 1920s, Hoover decided to go into politics. All parties wanted to recruit such a popular figure into their ranks. But in the end, he declared himself a Republican and it was in this capacity that he took the position of Secretary of Commerce. He entered the White House with an incredible rating. And of course, Hoover was a Republican. An individualist and businessman at heart. But he believed that American individualism was not selfish or self-centered. On the contrary, it included respect for others and commitment to society. For Hoover, the word that reflected the essence of American individualism was "service." Exactly the same word is used by some Protestant churches. Which is logical, as Hoover himself was also a devout Protestant. In his book, he wrote: "The ideal of service is a great spiritual force poured out by our people as never before in the history of the world." This was a unique American ideal, which, according to Hoover, made the growth of state power, which other countries suffered from, unnecessary in America. Meaning, that Americans are cool, smart people, and they will somehow be able to build a life without the state constantly looking after them and trying to help. In 1928, Hoover gained the power of president, and he was determined to use it to the fullest. He was pleased when he passed the Agricultural Marketing Act through Congress. This was an impressive confirmation of his campaign promise that "the government should be a constructive force." I remind you that with this law, Hoover wanted to support farm product prices and save farmers from ruin. Hoover wanted to revive the spirit of reform of the progressive era, which had been forgotten first due to the war... and then due to Presidents Harding and Coolidge, who, instead of reforms, preferred not to rock the boat and not to break what they thought was not broken. But Hoover believed that reforms were already 14 years overdue. And he hoped to be able to implement them. He also clearly outlined his goals: "We want to see a country of homeowners and farmers. We want their savings to be protected. We want them to have stable jobs. We want more and more people to be insured against death, accidents, unemployment, and old age. We want everyone to be safe." Hoover was supposed to be the ideal president for a steadily developing country. But in the end, the country fell into the greatest crisis. And it turned out that Hoover's policies were not very suitable for the crisis. What do I mean? Well, if the Great Depression didn't start with the stock market crash, then it must have started with something? So... in the second year of his presidency, Hoover passed one law... which many economists say that if it wasn't the cause of the Great Depression itself, then at least it certainly didn't help improve the situation. We are talking about the so-called "Hawley-Smoot Tariff." Opponents of the law called it "protectionism at its methodological peak." The meaning was simple as three cents – business activity is declining in America, people are buying less and less. Farmers are dying altogether. It is necessary to ensure that even in such conditions, the profits of American companies do not fall. But how? Elementary – reduce sales of imported goods. Support domestic producers. The Hawley-Smoot Tariff Act provided for the introduction of huge duties on over 900 goods from abroad! Smarter economists understood that this was the end. That it would lead to the exact opposite results. Over a hundred scientists signed a collective letter asking Hoover to veto the law. Hoover's economic advisor, Thomas Lamont, almost on his knees begged the president to stop this insane reform. But Hoover lacked the political will. Although, wait... what's the problem here, actually? Because at first glance, it all sounds logical. If foreign goods become more expensive, then citizens will buy cheaper domestic ones. Local companies will start earning more, and the economy will go up again. But it's not that simple. Even then, the world was a single global trade network. Goods from different countries were sold all over the planet. And if suddenly all countries are deprived of such a large sales market as the USA, it breaks the whole system. Naturally, European countries did not sit idly by and, in response, introduced their own giant tariffs on American goods. Well, that's it, world trade essentially stopped. Everyone became poorer. Even those very American companies that the law was supposed to support. Exactly because they sold their products not only in the USA. And if at home they might have indeed earned more profit... then in other countries, on the contrary, they lost almost everything. Why did Hoover – such a supposedly savvy businessman and millionaire – not accept the arguments of adequate economists? Well, because he adhered to traditional, old-fashioned views on the economy. No, Hoover wanted to carry out reforms... but not in the economy. In his opinion, non-intervention and freedom should prevail there. Because whatever factor appears there, the market will definitely solve it. Hoover, like many others, believed that a decline in business activity is an inevitable part of the cycle. Like a human illness. You can catch a cold at any moment. But a cold always passes. And there's no need to interfere with the natural process. Hoover was not even the most prominent representative of this idea. He could perhaps have been persuaded. But his Secretary of the Treasury, no. This guy's name was Andrew Mellon. And it seems he seriously considered it his merit that he was forcing the government not to interfere in the development of the crisis. Mellon had one simple formula: "Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate. It will cleanse the system of rot." Meaning not literally to kill people and destroy houses, but figuratively. If during a crisis some companies and people are ruined, then it's good – it means they were inefficient. Mellon said that having lost easy money, people will start working harder and lead more moral lives. This, of course, is a complete frenzy. Like, they didn't live richly, and there was nothing to start with. In general, in Hoover's cabinet, this Mellon was the most prominent representative of a strict non-intervention policy. For this, he was nicknamed "the lazy fairy" in the newspapers. Who, instead of doing her job, simply says, "you just have to wait, and everything will sort itself out." A very interesting opinion, of course. As if the minister invented a foolproof excuse for himself to sit idly by. Hoover, however, was not like that. He wanted to act. In general, he understood that the crisis would pass more gently if people were helped. He understood that banking panic should not be allowed, that impoverished farmers should be helped, and a possible mass wave of layoffs in factories should be stopped. The thoughts are generally correct. Simply because of his outdated beliefs, Hoover could not act effectively. After the stock market crash, he began inviting heads of banks, railways, steel producers, and even utility companies to the White House. For almost two weeks, these people emerged from daily meetings with the president and made ritualistic statements that the economy remained strong and the future looked optimistic. What happened at these meetings between Hoover and big business? Hoover asked industrialists not to cut wages. This was a significant achievement – because in all previous crises, employers first solved their problems at the expense of workers' wages. But Hoover convinced them that "the first blow should fall on profits, not on wages." Maintaining wage levels, in his opinion, not only protected the dignity and well-being of workers but also preserved purchasing power in the economy. Meaning, if workers have money, they can spend it and thus support sales. This was a very good idea. Which would later become the basis of Keynesian economic theory. But even in the 1920s, it was already understood by many economists. Including Hoover. The Federal Reserve System further lowered interest rates to saturate the economy with money... The Federal Farm Board tried to support product prices... in short, everyone tried to work to stop the monster that was already visible on the horizon. And its name was deflation. Oh yes, I haven't mentioned this at all yet... but the main problem that the economy faced during the Great Depression was, suddenly... a decrease in prices! According to the most ordinary law of supply and demand. There are more and more goods, demand for them is lower... accordingly, prices are decreasing. Companies' profits are falling... they invest less in business development, lay off workers... there is even less money in the economy. And so on in a circle. That is, on the one hand, it sounds cool – you go to "Pyaterochka," and everything costs half as much. But on the other hand, it doesn't matter to you how much something costs if you have zero in your pocket. In general, Hoover tried to prevent such a development. On December 5, he announced measures to revive the economy by stimulating construction work. At Hoover's request, the heads of railways and utility companies agreed to expand their programs. He also sent letters to the governors of each state and the mayors of major cities with a proposal to accelerate the construction of roads, streets, public buildings, and other infrastructure projects to provide jobs. Within a few months, Hoover added federal government resources to these efforts, requesting an additional 140 million dollars from Congress. This means... Hoover did exactly the same thing that Roosevelt would do a few years later. Only Roosevelt is remembered as a hero in this story, while Hoover is remembered as an anti-hero. Why? Because he didn't just do that. But even here, despite the correct vector, his strength was insufficient. Meaning, 140 million for construction support is not billions that Roosevelt would later allocate. Why didn't Hoover go the same way in this case? Well, because federal power in America was not particularly strong then. Hoover depended not only on big business but also on state authorities. In 1929, federal spending was about 3% of GDP. For comparison, now it's over 20%. Local government spending was much higher then. This means that essentially Hoover had nowhere to spend billions to help the economy. He could only ask for it. And don't forget that the situation still didn't seem so critical. No one, including Hoover, who was more anxious than most, suspected that the country was on the edge of an abyss from which it would take more than ten years to get out. And even Roosevelt, who would come in as if everything was ready and with a carte blanche for any actions, would still not be able to act as effectively as is commonly said. Politicians could not only not imagine all the complexities of the next decade, but they also almost did not realize what was happening around them at the end of 1929... and throughout most of 1930. They didn't even have normal unemployment statistics. Yes, imagine, experts and congressmen, when estimating the number of unemployed, did it literally by eye. Although with each month, more and more people were losing their jobs. It's like an iceberg, most of which is hidden underwater. If you only look at the tip, it seems that optimistic forecasts can be made. On May 1, 1930, Hoover stated at a speech to the Chamber of Commerce: "I am convinced that the worst is behind us, and with persistent efforts, we will recover quickly." And a month later, he said that the crisis, in his opinion, was over. Again, of course, an opportunity to laugh at the idiot... but considering the information and scale available then, Hoover's statements did not seem so outrageously idiotic. By April 1930, the stock market had begun to rise noticeably again. Banks generally held firm. Only some rural banks suffered, but even they did not go bankrupt or close. Looking at the overall figures, by the fall of '30, the amount of deposits had even increased. That is, citizens brought money to the cashiers again. Unemployment reports, although alarming, still did not cause panic. Major employers seemed to be keeping their promises to maintain wages at the previous level, and private industry, along with local authorities, agreed to Hoover's request to accelerate construction projects. But the reality, which could not be seen through the poor statistical data, was this: the economy, for some reason, continued its mysterious decline. By the end of 1930, the number of bankruptcies reached a record 26 thousand! GDP fell by 12.5% compared to the previous year. Industries producing durable goods were particularly hard hit: production at some steel mills decreased by 38 percent. The decline in the automotive industry was approximately the same... and I remind you that it provided the most jobs in the country. Despite public promises, private business did not increase, but actually reduced construction spending. Because the demand for new houses decreased. The exact number of layoffs remained unknown – only later studies showed that in 1930 alone, 4 million people lost their jobs. Nevertheless, most Americans in 1930 did not see the full picture. They assessed the situation through the prism of their recent experience and past crises. The last such was in '21. Then GDP fell by almost 24%. Which is twice as much as in '30. Unemployment was even higher. So in 1930, Americans could rightly consider that this was not a crisis at all, but just a pale imitation of the '21 crisis. And if we survived that, then we will survive this one too. Not only ordinary citizens believed this, but also most politicians. From all parties. Hoover believed that he was doing enough for the economy to recover on its own. Just as it always had. This belief kept him from more aggressive anti-crisis actions. And society did not demand it from him. In mid-1930, Hoover still remained the leader in the fight against the depression, and it seemed that he was winning – or at least not losing. The powerful financier Bernard Baruch confidently predicted in May '30 that Hoover's presidency would survive the depression, and he would emerge from it as a great leader. Baruch, by the way, was a friend of the Democratic Party, so it cannot be said that he was simply flattering his boss. But in the fall of '30, something happened, and it finally became clear to everyone – the Titanic had gone to the bottom. If the stock market crash affected only a small percentage of the population, then by the end of '30, something happened that affected everyone. An unprecedented banking panic began. Later, Hoover also admitted the problem. He wrote that "Our banking system was the weakest link in the entire economy. The element that first succumbed to fear... It was the most difficult part of the dark tragedy I had to face." American banks were fragile even in good times. In the 1920s, they closed at a rate of over five hundred per year. In 1929, 659 banks ceased operations – a completely normal figure for that decade. In 1930, by October, the numbers remained approximately the same. But then, in the last two months, as many banks closed as in the entire previous year. At the root of this weakness lay a complex and convoluted structure. It was a legacy of the long struggle of the American government against a central bank. Dating back to the mid-19th century. The US financial system was similar.
to chaos. And it developed approximately the same way – without any control and almost without rules. By 1929, there were about twenty-five thousand banks in the country. And 52 different regulatory regimes. Many of the banks simply didn't have enough money. Carter Glass, the father of the Federal Reserve System, called them "nothing more than 'pawnshops,' often run by 'small shopkeepers who called themselves bankers – and all they knew was how to handle cash." Well, technically, that's how it was. No simple, strict banking license was required. Opening a bank was as easy as a tire shop in a garage. There was another quirk – virtually all banks in the US were small. Because populist politicians opposed banking networks that wanted to open branches in different cities. They saw it as a threat that bankers would seize power and establish rule. Therefore, in 1930, only 750 American banks had branches. Out of 26 thousand! Such a policy practically deprived banks of their footing. They didn't have enough resources and strength to stay afloat in case of a panic. Technically, in such conditions, banks could have been supported by the Fed… as it does now, for example. But then, only 30% of banks had an agreement with the Fed. Although, when the shit hit the fan, it didn't help them at all. By the end of 1930, fear swept through the fragile financial system like fire through dry leaves. What exactly sparked it is still unclear, but the Louisville National Bank in Kentucky was the first to collapse. Here, it must be said, what a bank panic is and why banks burst because of it. It is both a purely psychological and a mathematical phenomenon. At some point, a rumor spreads that a certain bank is on the verge of bankruptcy and money needs to be withdrawn from it urgently. It's possible that the bank is perfectly fine. But a queue is already forming there, demanding the return of deposits. It must be understood that if all depositors rush with the same requests simultaneously, then no bank in the world can fulfill their demands. A bank's accounts never have as much money as is formally deposited. This is because a bank not only stores deposits but also conducts its commercial activities – issuing loans, investing in stocks, and so on. Therefore, if a kilometer-long queue forms at a branch, it has nothing left to do but go bankrupt. Especially when it comes to some small bank around the corner, without branches and deposit insurance. And in America in the 1930s, almost all of them were like that. Well, that's it, it started. Due to the run of depositors, one bank collapsed. Others saw this and decided to withdraw their money from another bank just in case. It also collapsed. People rushed to a third… and such an avalanche started that nothing could stop it. The wave of panic quickly spread to Indiana, Illinois, Missouri, and further to Iowa, Arkansas, and North Carolina. Crowds of frightened depositors lined up to withdraw their savings. Banks, in turn, tried to maintain liquidity. In the sense that no one wanted to close down intentionally – everyone wanted to survive the run if possible and maintain trust in their brand. And how to do that? Try to get money back into the vault – recall loans, sell assets on the stock exchange. But this only worsened the situation. Because stocks were already worth little. And when frightened bankers rushed to the stock market and started selling everything they could in a hurry – stocks plummeted again. And they dragged down the value of assets of even reliable banks. The wave of urgent loan recalls led to a wave of bankruptcies and withdrawal of money from the economy. This vicious cycle is called a liquidity crisis. It began to turn into a real financial tornado that threatened to destroy the entire banking system of the country. And when the solid "Bank of the United States" in New York collapsed, it was the end, panic gripped all of America. This closure became the largest commercial bank bankruptcy in American history at that time. About four hundred thousand people lost their savings totaling almost 286 million dollars. But the real losses were much more serious than dry figures. The bank's closure became a symbol of how strongly psychological factors can influence trust in the banking system. The very name of the bank confused many people both in the country and abroad. Well, like – Bank of the United States! How solid! It created the impression that the bank had some official connection to the state. And since it collapsed, it means everything will collapse soon. In reality, of course, it had no connection to the state. Except for the name. This bank served mainly Jewish immigrants in New York, and that's all. This is just one point. The second, more complex one, is that the Fed could have saved this bank in principle. But it couldn't. One banker put it this way: "this event shook confidence in the Federal Reserve System more than any other in recent years." When this confidence collapsed, banks began to desperately defend themselves, caring little about the health of the entire system. But, as it soon turned out, the financial bottom that everyone feared so much was not yet the end. Because then they knocked from below. The bank panic of the late 1930s merely opened a hatch into an abyss leading to an even greater depression. At that critical moment, banks desperately lacked cash to meet customer demands. The irony is that banks' attempts to maintain liquidity only worsened the situation: there was less and less money in the system, loans became stricter… and this gradually led to a complete collapse. By selling securities and loans to other banks, mafias, and collectors to pay depositors, they only lowered prices, making it harder for debtors to repay. Strict lending measures during rapid deflation only tightened the noose around the neck of an already suffocating economy. Almost no one found inventive solutions to stop the panic. I encountered only one unusual case. In Utah, a small bank owner managed to survive the darkest days with a very simple and elegant solution – he ordered his cashiers… to work slower! To issue deposits in small bills and count them for a long time. By the beginning of 1931, it seemed that the Great Depression was a problem born exclusively in the United States. Problems in agriculture, falling sales of cars and housing, rampant speculation on Wall Street, and the sudden disappearance of assets after the stock market crash, plus a weak banking system – this was more than enough. But Herbert Hoover believed that Europe bore a significant share of the responsibility for the Great Depression. In the spring of 1931, Hoover began to claim that the main causes of the disasters came from abroad. It became increasingly clear that this depression was not just another economic downturn, but something much larger, a historical turning point. And such an unprecedented event must have special causes. Hoover found them in what he considered the most significant event of the century – World War I. Let's try to leave America for a couple of minutes and assess whether Hoover was right or not. History indeed confirms this view. The war created conditions for future catastrophe. Including due to the huge reparations imposed on Germany. Because they weakened not only Germany but the entire European economy. And, as a consequence, opened the way for Hitler to power. In September 1930, the Nazi party used dissatisfaction with reparations and achieved significant success in the elections. This marked the beginning of a chain reaction that eventually reached even the United States. Hoover later noted that Americans had to learn about the economic interdependence of nations through bitter experience when this disaster knocked on every door. Hitler actively gained political points by criticizing Germany's weak economy. To deprive him of this trump card, Chancellor Brüning proposed creating a customs union with Austria in March 1931. But then France intervened – it decided that this was the first stage of Austria's annexation by Germany, which was strictly forbidden by the Treaty of Versailles. France could start pressuring Austrian banks to disrupt the creation of the customs union… and this caused panic in Vienna. In May, depositors attacked the largest Austrian bank, which – surprise, surprise – was forced to close. Then the panic spread to Germany, and then to neighboring countries. At the center of this chain of events was the complex problem of international debts and reparations left over from World War I. American private banks actively lent to Germany in the 1920s. Germany relied on these loans to pay reparations to Britain and France, which, in turn, used this money to repay their debts to the US. One possible way to reduce the pressure on Germany and Austria would have been to waive these debts… or at least suspend payments. The United States could have set an example. In the sense that Germany owed nothing to America. Americans waived German reparations. But the allies – England and France – owed them. About 10 billion dollars. If America had forgiven these debts, and the French and British had forgiven Germany's reparations, then all of history could have gone differently. It would have only made the economies of all countries easier. But the administrations of Republican presidents in the 1920s refused to acknowledge the connection between German reparations and the allies' obligations to the US. Any attempts to reduce these debts were perceived in America as an attempt to shift war expenses from Europeans to Americans. After the war, disappointment in the policy of Democrat and Catholic Woodrow Wilson grew, and Americans did not want to take on additional expenses. This opinion was reinforced by the position of Wall Street. In the sense that brokers and financiers also advocated for the write-off of European debts. But populist politicians saw in this a desire of the fucking rich to protect their private investments at the expense of American taxpayers. Therefore, the demand for full repayment of war debts became not just a financial issue, but a political one. It reflected animosity towards Europe, regret about involvement in the war, and America's determination not to be influenced by international financiers. Principles turned out to be more important than rationality. This mood permeated almost all strata of society – thrifty, isolationist, anti-European, anti-Wall Street… To understand how serious everything was, one must appreciate the political courage it took for Hoover to propose a one-year moratorium on all intergovernmental payments, reparations, and debts to all countries in 1931. Although Congress eventually approved this proposal, Hoover faced harsh criticism. One Republican congressman called him an "Eastern lord, drunk with power… an agent of Germany." Another senator began calling him an "Englishman in the White House." Oh, wow! And these were quotes from Republicans. That is, people from Hoover's own party. Imagine what the Democrats were saying then? The Majority Leader stated: "I cannot help but suspect that this moratorium is a harbinger of the fact that we will not get back the remaining debts." That is, Hoover's essentially correct and rational action met with stupid resistance from literally all sides. The moratorium on intergovernmental debt payments was supposed to give German banks the necessary breathing room. Hoover also agreed to a "freeze," where private banks promised not to demand repayment of German debts. These steps were aimed at calming the financial chaos in Germany and protecting the American financial system from its consequences. These measures were strong and decisive, but, as Hoover himself later noted, they only provided a temporary pause, because more powerful forces of the crisis began to tear apart the financial stability of another country like wolves – this time Britain. Despite Hoover's efforts, fears began to spread around the world like mercury, seeping into the financial system. The holy faith in the omnipotence of the gold standard did not help matters. The gold standard, which united the world economy, theoretically guaranteed that economic fluctuations in one country would be transmitted to others. It was assumed that this transmission should mitigate crises and keep the world system in balance. In good economic weather, it was believed that the gold standard worked as a kind of soft pump, keeping prices and interest rates stable or changing them within narrow limits throughout the global trading system. Well, meaning economies could grow and fall, but the cost of money would be stable and more or less the same. However, in the bad economic weather of 1931, huge surges originating from national economic crises in Austria and Germany threatened to flood other countries, and the international plumbing system broke. Gold began to move back and forth uncontrollably. Hoover compared these panic movements of gold to a loose cannon on the deck of a ship in a stormy sea. In the sense that it's unclear when it will fire and who it will hit. And what happened in England? Well, they ignored Churchill's attempts to return to the gold standard and finally abandoned it. Not without reason. In general, the essence of a living economy is that there should be money in it. And when your money is tied to gold, it starts to be regulated not by economic reasons. In the sense that your entire economy can be ruined if it is deprived of its gold reserves. Even if everything else worked normally. Approximately the same thing happened with England in 1931. As soon as its own crisis began, European bankers began to withdraw their capital. Then France joined in. To put pressure on London and force it to oppose the customs union between Germany and Austria. Tons of gold began to flow out of England. As a result, its economy suffered, and to somehow save it, the government decided to abandon the gold standard and introduce a floating exchange rate. A good decision. But then most observers, including Hoover, considered Britain's abandonment of the gold standard a complete disaster. Hoover compared the British situation to that of a bankrupt bank facing depositor demands but unable to convert its assets into cash and forced to close its doors. In the sense that he truly considered money not backed by gold to be useless, worthless pieces of paper. The debt freeze and Britain's abandonment of gold led to the freezing of a huge volume of global financial assets. Everything that depended on Austrian, German, or British banks disappeared. The United States itself worsened the situation when it introduced high tariff barriers and restricted capital outflow after the Wall Street crash. The global financial system froze, and the international economy slowed to an arctic silence. Germany soon announced a policy of national self-sufficiency, and Britain isolated its empire from the rest of the world. As a result, the volume of world trade decreased from $36 billion in 1929 to approximately $12 billion by 1932. This is to understand that the Great Depression is not just about the US. Meanwhile, the US was already experiencing a series of bank failures that shook the country in the final weeks of the 1930s. Then American banks lost another billion and a half dollars they held in German and Austrian bonds… which had practically become worthless. But even worse was that fear quickly spread beyond Europe and reached the US. Foreign depositors began to massively withdraw gold and capital from the American banking system. This, by the way, is another quirk. On the one hand, Hoover and his advisors fiercely criticized England for abandoning the gold standard… but when they found themselves in the same situation, the gold standard in the US also went to hell. True, Roosevelt eventually abolished it, not Hoover, but there's literally a couple of years difference. In short, after the bank panic of the 1930s, there was a bank panic in 1931. Depositors, already affected once, rushed to withdraw money again with doubled force. This crisis overshadowed the panic of late 1930 and paved the way for the full-scale catastrophe that erupted in 1931. Within one month of Britain's abandonment of the gold standard, 522 American banks went bankrupt. By the end of the year, 2,300 banks had suspended operations – an absolute record for the US. American banks were now bleeding profusely from two wounds: one inflicted by domestic customer runs, and the other by foreign capital withdrawal. Unfortunately for the Americans, the rules of the gold standard game, as Hoover understood them, stated that the problem of gold outflow from the country was paramount. Gold was flowing out. There was less and less money in the economy, and it became more expensive. And along with this, prices continued to fall. How did they try to stop this? From the perspective of gold standard theory, it was correct… but from a practical standpoint, it was perverse. The Fed raised the rate! And this at a time when the banking system was dying from a lack of money. But the Federal Reserve acted firmly – it was necessary to stop the outflow of gold at all costs. And then think about other problems. The result was sad. This was the last nail in the coffin of the American banking system. By 1931, John Maynard Keynes had been trying for almost a decade to develop a theory of national and international monetary management that would not depend on gold. But his ideas were not yet fully formed at this stage – his major work "The General Theory of Employment, Interest and Money" only appeared in '36. At that time, his views interested few economists or statesmen. And all mainstream economists proceeded from one rule – MORE GOLD IS NEEDED! After Britain's departure from the gold standard and the resumption of bank runs in the second half of '31, Hoover changed his views and decided to push for tax increases. He presented the so-called Revenue Act to Congress. This decision was driven by the threat of a huge budget deficit that exceeded all known precedents. The federal budget for 1932 was in deficit by almost 3 billion dollars – the largest peacetime deficit in US history at that time. And this was also another consequence of the gold standard policy – that under no circumstances should a budget deficit be allowed. So Hoover also got it for this. Ironically, Roosevelt pedaled this topic in his election campaign! Like, oh, what a scoundrel Hoover is, he allowed an unprecedented thing – federal authorities spending more than they earn! What's ironic about that? That Roosevelt himself, when he became president, would begin to increase the budget deficit on a cosmic scale. And deliberately. Again, the problem could have been solved not by raising taxes, but by injecting money into the economy, but the Fed had more important things to do. So it turned out as it turned out. It didn't solve the problem anyway. The third winter of the Great Depression was underway. Humiliation and desolation reigned in rural areas. Harvests rotted in the fields, and livestock died of exhaustion. One might ask, where is that famous Hoover Farm Board, which was supposed to support farmers? It's gone. It wasn't designed for such a massive crisis, so there wasn't enough money. Let me try to convey the general atmosphere. In cities and small towns across the country, gaunt people in tattered coats, with collars turned up against the cold wind, stuffed newspapers into holes in their shoes… and gloomily lined up for meager handouts at soup kitchens for the homeless. Tens of thousands of laid-off workers left their homes and set off, thumbing rides in hopes of catching a lift. They huddled in freight cars as they headed south, north, or east – wherever the highways and railways led, in search of any work. Those who stayed put tried to survive with relatives, borrowed food from corner stores, mended old coats and shirts, darned socks, clinging to the remnants of hope amidst the ruins of their dreams. Hoover claimed no one was starving, but in New York, school officials reported twenty thousand undernourished children in 1932, while in the orchards of Oregon, apples fell to the ground without buyers. The picture is strange – poverty and hunger amidst wealth. It caused surprise and anger. Huge mountains of unsold wheat lay dead in the fields, while in Seattle, Chicago, New York, and other cities, men and women made their way through damp alleys at night, searching for scraps of food in garbage cans. There was no widespread starvation, but there were indeed many who were underfed. How did this happen? It was all due to the same low food prices. Due to the lack of money in the economy, they were so low that it made no sense for farmers to harvest and sell their crops. They would never have recouped their own expenses in their lives. By early 1932, more than ten million people were unemployed – almost 20 percent of the entire American workforce. And in large industrial cities like Chicago and Detroit, unemployment reached 50 percent. It's not surprising that in such conditions, these became the centers of new criminal groups. General Motors laid off 100,000 workers – 70% of all its employees. They wandered aimlessly through the streets of the automotive capital, not knowing what to do. Black workers, who were traditionally hired last and fired first, were particularly hard hit. In Chicago, blacks constituted 4 percent of the population, but among the unemployed, they were 16 percent. In Pittsburgh, the situation was even worse – out of 8 percent of the population, almost half were unemployed. It would seem what should happen in such conditions? Well… I'm not hinting at anything… but if you look at most European countries at that time, it was almost like this – a revolution would quickly erupt. But in America, there was no such sentiment even remotely. Those who witnessed the Great Depression firsthand were perplexed by the passivity of the American people. Their submissiveness to fate when they fell into the grinder of crisis. There was no life-giving breath of popular enthusiasm or popular outrage. Here is a quote from American historian Johnson, who himself lived through the Great Depression: "In the mind of the average American, 1931 was the year of the Great Depression because it was in the last 12 months that it truly affected us, ordinary people. Not international bankers, not financiers of any kind, not big executives, and not outcasts who are chronically on the verge of unemployment in all years." Johnson admitted that Americans had only just begun to be afraid. But this fear was combined with the feeling that it wouldn't last long. That no one believed for a moment that hard times would last for another six years. 1931 was difficult, but there were no bayonets, no gunfire on the streets, no signs of the dissolution of the Senate… Revolutionaries did not gain followers in this country worthy of mention. No, of course, there were those who wanted a revolution. The FBI, in general, gained more popularity out of fear of the Reds than from fighting bank robbers. But there was no real threat of riots and rebellions. And meanwhile, while Hoover was losing his last popularity in attempts to cope with the crisis, a new star was rising on the political arena – the governor of New York, Franklin Roosevelt. A Democrat and a proponent of more active state involvement in citizens' lives. As early as '30, when the crisis was just gaining momentum, Roosevelt advocated for state unemployment insurance and pensions. funding of $20 million. The name itself and the short duration reflected the fears that persisted in American culture. That the crisis would not last long. And that aid should be provided temporarily, so as not to create a class of professional unemployed who would deliberately sit on benefits. The main difference of this committee was in its positioning. Roosevelt did not present it as charity. He did not perceive the distribution of benefits as alms. On the contrary, in his opinion, it was the fulfillment of a civic duty. In his speeches, he emphasized that the state undertakes this task with joy, because it believes that it will help restore close ties with the people, which are necessary to preserve the democratic form of government. It sounds grand, but behind these words lay a real change in the relationship between the state and citizens. And the old view, exemplified by Hoover's popularity, was fading into the past. No matter how he tried to deal with the Great Depression, nothing worked. His last efforts brought him neither political salvation nor glory. Cartoonists increasingly depicted him as a gloomy and heartless jerk who, due to his adherence to outdated ideas, condemned people to unemployment and hunger. Through the efforts of the Democrats, Hoover began to be considered almost the main culprit of the crisis. The Great Depression was not yet called great by anyone, but it was called the "Hoover Depression." The people added their own curses: shantytowns built from roofing felt and cardboard began to be called "Hoovervilles," and turned-out empty trouser pockets – "Hoover flags." Hoover became increasingly isolated, both politically and personally. The Depression changed Hoover – physically and psychologically. He ceased to be the confident and neat man he had been before, his appearance and mood worsened, and his usual calm demeanor was replaced by bitterness and irritation. He did not resemble the Hoover everyone knew. His hair was disheveled, he was almost hunched over his desk… cursing politicians and foreign governments… using words that he probably learned in his youth as a miner. One of the most destructive political steps for Hoover was the expulsion of the so-called "Bonus Army" from Washington in July '32. Thousands of unemployed World War I veterans had gathered in the capital since spring. They demanded early cash payment for their military service, which they were promised to receive in '45. When the Senate refused to pass the bonus bill, many veterans went home, but a few thousand remained. On July 28, when the District of Columbia police tried to evict them from city buildings – a riot broke out, resulting in two veterans being shot. The district authorities appealed to Hoover for help, and he summoned federal troops. Towards evening, cavalry with drawn sabers, accompanied by tanks and infantry, finally dispersed the veterans. This should have been the end of it… but the general commanding the operation decided to see it through. According to the original plan, he was supposed to simply drive the striking veterans back to their tent camp. But he didn't stop there, he gassed the camp with tear gas, and then burned all the tents and huts there. But whether with this episode or without it, Hoover would hardly have been re-elected. By the time visitors to the White House saw the president, he appeared prematurely aged. His day began at six in the morning and ended almost at midnight, without a break. His clothes were disheveled, his hair was tousled, his eyes were bloodshot, and his face had taken on an ashen hue. Hoover became increasingly irritable and delicate. Hoover, shy by nature and prone to self-defense, was never suited for the political arena, where criticism and insults were commonplace. As early as 1919, he admitted that he lacked the mental disposition or manners of a politician… and, above all, he was too sensitive to political mud. By the fall of 1932, he had lost all interest in campaigning. He only started his campaign in October, and it seemed he was doing it more for form's sake than for the voters. Just four years ago, he had achieved one of the most convincing victories in presidential election history, and now he suffered a complete defeat. True, he was unlikely to be upset. The great engineer, once the most respected American, became the most hated and despised figure in the country. All eyes and hopes were now turned to his successor – Franklin Delano Roosevelt. Well, now it's time to look at the man whose name is associated with the way out of the Great Depression. The only president to win elections 4 times. Herbert Hoover brought precision and business acumen to the White House. Roosevelt, on the other hand, was a natural politician. Hoover impressed guests with his deep understanding and knowledge of American business. His secretary recalled: "He had a mathematical mind. Let bank employees enter his office, and he would easily count the number of banks in the country, describe their assets and liabilities, talk about financial trends, and delve into the liquidity of each institution, all from memory." And Roosevelt amazed guests with something else. He could ask someone to draw a line on a map of the US… and then tell anecdotes about each state the line passed through. While Hoover remained reserved and did not try to use presidential privileges, Roosevelt, on the contrary, savored every detail of them. Hoover took his first elected office directly in the White House. Roosevelt, on the other hand, had been a professional politician all his life. He had prepared his path to the White House for years – through the New York legislature and the position of Assistant Secretary of the Navy to the governorship in Albany. In 1920, he was already a candidate for vice president when the Democratic Party suffered a crushing defeat. The following year, he was vacationing at his family's summer estate in Canada when he suddenly fell ill with polio. He was only thirty-nine years old. He would never be able to stand again without heavy steel braces on his legs. Through incredible effort and willpower, he learned to "walk" a few steps a day. But for the most part, he remained in a wheelchair. Although his disability was not a secret, he never spoke about it specifically and did not allow himself to be photographed in a wheelchair. Roosevelt's prolonged struggle with illness changed him both physically and spiritually. In his youth, he was athletic and slender, but due to forced immobility, his upper body became more… how to put it… massive. He developed a powerful torso and strong, muscular arms like a wrestler. He often proudly told guests that his biceps were bigger than those of the famous boxer Jack Dempsey. Like many disabled people, he developed a talent for denial of illness – a kind of ostentatious optimism that helped him not to dwell on life's difficulties. This talent sometimes led to duplicity. In other situations, it gave Roosevelt an aura of irrepressibility and confidence. And it turned banal phrases like "all we have to fear is fear itself" into inspiring calls. Roosevelt's acquaintances generally believed that it was precisely his illness and disability that made him a true politician. Only then did a superficial and arrogant guy turn into a purposeful leader. And, strangely enough, the illness opened up career prospects for him. While he was ill and not involved in politics, he remained the only Democrat with a strong reputation that was not overshadowed by disagreements and endless election defeats in the 1920s. Roosevelt managed to turn forced inaction into an asset. Working in a small office in New York, he spent his time writing endless letters. And his public representative became his wife – Eleanor. For her, too, her husband's illness was a turning point. Her life had already been full of suffering. At the age of eight, she lost her mother, and two years later, her younger brother and father died. Her surviving brother was a chronic alcoholic, as were several other relatives. To protect herself from their drunken nightly intrusions, Eleanor locked her bedroom door with three locks. Marriage to Roosevelt seemed to be the thing that would pull her out of this mire. But a few years later, she learned that her husband was cheating on her with her own secretary. When Franklin fell ill with polio, her suffering intensified even more. But, despite all this, her life had so far differed little from that of the privileged social women among whom she grew up. I mean, she was… well… a bit dim and frivolous. During her honeymoon in Europe in 1905, she couldn't answer a simple question about the structure of the American government. She showed no interest in debates about women's suffrage. Eleanor led a measured life surrounded by large houses, luxurious entertainment, and travel. Her views were ordinary, and her correspondence was filled with examples of what her biographer called "frivolous arrogance and blatant racism." But after Franklin's illness, Eleanor transformed from an ordinary socialite into an independent woman and public figure. She began working as a teacher in a school in New York, gave speeches, wrote articles for magazines, defended women's rights, and spoke out against racial segregation in the South. In 1924, she headed the women's committee at the Democratic National Convention. At the same time, she tirelessly supported Roosevelt's political career. The Democratic Party in the 1920s remained deeply divided. On the one hand, it had an urban, Northeastern wing, with Catholics and opponents of Prohibition. On the other hand, a rural, Southern, and Western wing, with Protestants and supporters of Prohibition. Neither of these factions could gather a majority of votes in elections, but each had enough influence to prevent the other from winning. They kept getting in each other's way from time to time, while the Republicans calmly rested on their laurels. Election disasters in 1920, '24, and '28 clearly showed the weaknesses of the Democrats and the need to somehow unite the two wings if they wanted to win the presidential election. Roosevelt proved to be a master at this. As Governor of New York, he managed to unite the working class and immigrants… and combine them into a single force with conservative, anti-urban farmers from upstate. And he won. Roosevelt understood that even if the Democratic Party united, it would be difficult to win the presidential election as long as the Republicans remained strong. He told his fellow Democrats that their party's true success was possible only if the Republicans led the country into a serious economic crisis and mass unemployment. Roosevelt sat and waited for his hour. For most of the 1920s, he didn't think such an opportunity would arise soon. His plan was simple: restore his health, then run for Governor of New York in 1932, and perhaps for president in '36. But he was asked to compete for the governorship four years earlier. Roosevelt won a convincing victory… at the same time his party suffered another crushing defeat in the presidential election. In essence, the Democratic Party had nothing to boast about in '28 except for this single victory by Roosevelt. And it automatically turned him into one of the main candidates for the upcoming '32 election. Well, and when the Great Depression began, it became clear that Roosevelt's entry into the White House was practically guaranteed. How can one not recall the joke from Game of Thrones that chaos is a ladder. Roosevelt had a fundamentally different view of the Great Depression. He believed that global problems were caused by the fear of change on the one hand and the desire for revolution on the other. He believed that idleness and apathy in government, science, industry, and art were the main enemies of progress. An uncompromising commitment to the state and a keen receptiveness to change best characterized the personality of the new president. But they also served as accusations that Roosevelt had more personality than character. More charm than substance. Journalist Walter Lippmann, after numerous conversations with Roosevelt, concluded that he was just a pleasant person, without a deep understanding of state affairs and firm convictions. In his column in January 1932, Lippmann wrote that Roosevelt was a man who sought to please, but without serious qualifications for the presidency. He was not a crusader, a tribune of the people, or an enemy of vested privileges. Roosevelt was just a man who, without any particular good qualities, desperately wanted to become president. Others noted that Roosevelt's thinking "was neither precise nor orderly." Once, his advisor and speechwriter was amazed when Roosevelt asked him to weave together two bills with completely opposite meanings. Former President Hoover observed that Roosevelt was as changeable as a chameleon. And he became the master of the White House during a very difficult period. In March 1933, the American banking system completely collapsed. The world economy plunged even deeper into the abyss of the Depression. The world was becoming increasingly dangerous. Adolf Hitler became Chancellor of Germany amidst mass unemployment that drove millions of German citizens to despair. Japan, seeking expansion, cast aside all diplomatic constraints and officially announced its intention to withdraw from the League of Nations. The acute problem of World War I debts, temporarily eased by Hoover's moratorium, again caused concern. These growing threats of political violence, war, and global economic instability foreshadowed a grim future for the rest of the decade… and possibly beyond. Almost immediately after his victory, Roosevelt discovered an almost unusual letter among his… 10 pages of handwritten text from his defeated opponent, the incumbent president, Hoover. In itself, this was something incredible. Hoover invited his colleague to dinner to discuss important state issues that he would have to resolve in his position. In particular, Hoover insisted that Roosevelt would have to promote the project of debt write-offs for European countries. It looks like a wise move by a person who knows how to lose with dignity. But for Roosevelt, there was a trap here with far-reaching political consequences. The issue of debts was a real problem of American politics. Any touch to it meant you were attaching yourself to an intractable problem that had caused difficulties and ruined careers for decades. Most economists and the financial community of Wall Street, as well as practically all Europeans, advocated for the complete cancellation of war debts. However, Congress and most Americans continued to consider the loans as inviolable financial and moral obligations of Europe to the US. They served as a reminder that Europeans could not count on financing another war at America's expense. Secretary of State Stimson noted in his diary: "Every congressman is outraged in the newspapers against any concession related to debts." Again, the irony is that it was largely this stubbornness that led Europe to a new war. Hoover did not propose that Roosevelt directly write off all loans, but urged, let's say, to be flexible. So that the issue of debts could be used as a tool of pressure. In addition, Hoover tried to convince his successor that the causes of the Great Depression should be sought abroad. That political slogans are political slogans. Like, well yes, you criticized me to gain points. But reality won't change from that. You're not seriously going to abandon the Gold Standard and save the US economy separately from the rest of the world, right? Well… Roosevelt had his own plans for this. More precisely, at the time of his election, there was no clear plan yet, but when it appeared, it would confirm all of Hoover's worst fears. Nevertheless, in '32, Roosevelt still came to dinner. He listened carefully to Hoover, nodded politely… but Hoover got the impression that he hadn't understood anything from his speeches. Roosevelt was generally known for his reluctance to argue. He avoided direct conflicts. This led to strange administrative habits. For example, he rarely fired anyone. He often assigned one project to people with different views. None of them knew what the others were doing. One of his assistants recalled with irritation that during conversations, Roosevelt would always say "Okay, okay, okay" to all proposals. But when another assistant came to him the next day with directly opposite proposals, he would also say "Okay, okay, okay" to him. It felt like Roosevelt said "okay" to everyone. Nevertheless, he found himself in a unique situation that allowed for the most massive reforms in America's history. What would be called the "New Deal." It would change the landscape of American politics forever. Chapter 3. The New Deal The Depression devastated the nation. When Roosevelt took the oath of office on March 4, 1933, the first thing he did was declare a bank holiday. In other words, he closed all banks indefinitely to calm depositors. I don't know how much they calmed down when they lost access to their money… but essentially, the measure was correct. I'll talk more about it a little later. Farmers continued to go bankrupt. Their incomes had fallen by 50% since '29. Although even then they were earning pennies. In the last three years, banks had foreclosed on almost 850,000 mortgages. This means that almost 850,000 people lost their homes. Politicians and businessmen feared revolution and anarchy. Millionaire Joseph Kennedy Sr. wrote that he was then ready to part with half his fortune to keep the other half safe. Thus began the New Deal. This name was coined by Roosevelt's advisor, who used it in a newspaper a few days before the president's speech, when he was trying to
To explain the essence of his economic views. The speechwriter latched onto this title and added it to the president's speech at the last minute. "Across the nation, men and women forgotten by the government are turning to us for leadership and a more equitable distribution of national wealth. I pledge a new deal for the American people. This is more than a political campaign. It is a call to arms." Roosevelt took office with enormous political capital. Americans of all persuasions demanded immediate action. Roosevelt responded with a series of new programs in the first hundred days of his presidency. During this period, he met with Congress almost every day, and they passed almost all his proposals, including the creation of the Federal Deposit Insurance Corporation. Since then, the tradition of evaluating a president's success or failure after their first hundred days has begun. Roosevelt's team invited journalist Lorena Hickok to give her an unusual assignment. Instead of numbers and statistics, she was to gather the emotions of real people. "I want you to travel across the country and see what's happening. I don't need your reports like a social worker, and I don't need dry statistics. I want your honest reaction, like an ordinary person. Talk to preachers, teachers, businessmen, workers, farmers. Talk to the unemployed, to those receiving aid, and to those who are not. And remember that any one of us could end up in their place. Tell me what you see and hear. Everything, without filters." The Depression was already in its fourth year. Millions of people across the country were drowning in despair and looking to Washington with timid hope. They were still trying to understand the nature of the disaster that had befallen them. Streams of data flowed onto the desk at the Federal Emergency Relief Administration, showing numbers... but more was needed – to feel the human side of the catastrophe. To understand what fear and hunger felt like. Lorena Hickok, who turned forty in 1933, had also gone through a difficult childhood on the harsh northern plains and became "almost the best reporter in the country." She called herself that. Colleagues described her as a large, loud, and disrespectful woman who yielded to men in nothing – not in smoking, not in playing poker, and not in writing articles. Her career began in Milwaukee at a rather mediocre newspaper, and then led her to New York, where in 1928 she joined the Associated Press. And she didn't just join; she was entrusted with covering major national news – a rarity for a female journalist at that time. In 1932, she wrote about the Lindbergh baby kidnapping – the most sensational true-crime story of that period... and later she received an assignment that changed her life: to cover Eleanor Roosevelt's activities during the presidential campaign. Hickok did not limit herself to the role of a journalist. She became close to Eleanor and broke journalistic objectivity rules – she began to coordinate her texts with Eleanor herself before publication. By the end of the campaign, Hickok was no longer just a reporter but had become Eleanor's press agent and close friend. In June 1933, Hickok left the Associated Press and spent a month on a road trip through New England and eastern Canada... in the company of the president's wife. Then she began her new assignment: interviewing ordinary people, housewives, workers, farmers, and relief administrators. At night, she typed her impressions on a portable machine in hotel rooms. Her reports began to arrive at the office in Washington from the coal regions of Pennsylvania and West Virginia. Then from the villages of New England, from the wheat fields of North Dakota. They continued to arrive for almost two more years – from Georgia, the Carolinas, Alabama, and Texas. From the ranches, mines, orchards, and cities of the Far West. Hickok looked at the world through the eyes of an experienced reporter, writing in a grounded, unsentimental style that combined cold realism with warm compassion. In December 1933, an enthusiastic Eleanor wrote to her: "Your reports will be the best story of the Depression for future generations." Unemployment and wage cuts became the most obvious and painful consequences of the Depression. According to government data, in 1933, 25 percent of the working-age population was unemployed – about thirteen million people, including almost four hundred thousand women. Most of them were heads of households, the sole breadwinners. However, despite widespread poverty, its burden was not evenly distributed. Differences in gender, age, race, profession, and region could affect how the Depression impacted individuals. In short, every unhappy family was unhappy in its own way. Different people suffered differently and coped with difficulties differently. For many Americans, the Great Depression brought only slightly harder times than usual. In the sense that many lived so miserably and poorly that they somehow didn't particularly notice the crisis. Historian James Patterson called this "old poverty," which existed in America long before the Depression began. According to his estimates, even at the height of prosperity in the 1920s, about forty million Americans... including almost all non-whites, most elderly people, and a significant portion of the rural population,... lived an unbearably difficult life that almost no one knew about. This poverty was barely noticeable and practically unimaginable to their more affluent compatriots. Who hung out in Manhattan and sipped cocktails in endless speakeasies. Thus, the Depression was not just a temporary crisis. It became an episode that revealed deeply rooted structural inequality in American society. Further west, in the region where Texas and Oklahoma meet, nature and man in the 1930s gave rise to an ecological disaster known as the Dust Bowl. The pioneers who dared to start farming there faced unforeseen consequences. They worked the land with tractors, in an attempt to plant more and more cotton and wheat. But the land there was not particularly suitable for this and quickly deteriorated. As early as the 1920s, serious soil erosion was detected there. And when a drought suddenly occurred in 1930, the land cracked, dry grass crunched underfoot. By '34, in some areas, the soil was deprived of water to a depth of one meter. The wind lifted dust into the sky, creating giant waves up to two kilometers high. They were called "black blizzards." These dust clouds reached eastern cities and plunged them into dusty darkness. Newspapers compared it to the last day of Pompeii. Living in such conditions became impossible. Thousands of people left their homes, free of any loan debts. Three hundred thousand people left Oklahoma. They became victims of their own farming methods and harsh natural conditions. Most of them went to California and inadvertently became symbols of the destruction and apathy of an entire decade. The evil twin brother of the American dream. These people were refugees in their own country. Why did this particular image go viral the most? Because among them, for a time, worked the writer John Steinbeck. Who in '38 published the most famous novel about the hardships of the Great Depression – "The Grapes of Wrath." The economy hit rock bottom in March 1933. This coincided with the beginning of Roosevelt's presidency. Then a slow and steady growth began. But how much credit did the New Deal deserve for this? By '37, the economy had surpassed all indicators of the late roaring twenties. Except for unemployment. It was still high. This would only change with the start of World War II, when military orders would again require millions of hands. The New Deal policy is usually associated with economist John Keynes, but the fact is that New Deal proponents did not accept his main argument. Well, the one that talks about the need to increase government spending to pump money into the economy. So, in reality, the New Deal didn't have any single magic recipe. They tried to find a separate solution for all problems. For example, banks. Roosevelt closed them all in one fell swoop. Not in the sense of dissolving or banning them, but simply putting them into a state of eternal weekend. The bank as if exists... but doesn't work. And they remained in this state until a new law was passed. On March 9, 1933, Roosevelt submitted the Emergency Banking Act to Congress... it was passed and signed the same day. Powerful. But even here there was a catch. Because almost this entire law was drafted by Herbert Hoover's advisors. It provided for a system of reopening so-called "sound banks" under the supervision of the Treasury... but with a guarantee of federal credit if people started rushing to withdraw their money again. While the new rules were still in draft form, Roosevelt sent inspectors to all bank branches to analyze their operations. Within three days of the law being signed, three-quarters of the Federal Reserve System banks reopened. There was no new panic. On the contrary, within a month, billions of dollars in currency and gold returned there. The banking system finally calmed down. By the end of '33, the government closed 4,000 local banks and forcibly merged them with larger ones. Initially, their wealth was equal to three and a half billion dollars. But from this money, depositors were able to recover 85%. Which is not so bad. In addition, the new law introduced control over the activities of commercial banks. Now they were not allowed to cooperate with securities firms. To prevent another uncontrolled surge in stock market speculation. It also created the Federal Deposit Insurance Corporation – now all deposits up to two and a half thousand dollars were protected by law. This put an end to bank runs. Now ordinary people could not fear that if their bank collapsed, they would lose their money. This reform provided unprecedented stability. If in the prosperous 20s, 500 banks failed every year, then after '33, this number decreased by 50 times! To ten banks a year. Then it was time to think about the Gold Standard. Briefly, let me remind you that under it, the United States maintained the exchange of paper dollars for gold. Anyone could come with green papers to the bank and get coins strictly at a certain rate. In theory, this sounds good, but when the amount of money in the economy decreases, it's bad. I've already said that to get out of this vicious cycle, you need to inject money into the economy. But in that case, gold will start flowing out of the country. Therefore, countries that sought to maintain the gold standard were forced to allow their economies to shrink. As long as the Federal Reserve protected America's gold reserves, it could not intervene to prevent the collapse of the banking system. Roosevelt took a radical step here too. First, he abolished the Gold Standard, which shocked millions of people... and second, so that they wouldn't try to export precious metal from the country against this backdrop, he banned gold exports. Checkmate. But that's not all. Then Roosevelt ordered all gold coins held by people to be exchanged for paper dollars at the old fixed rate. Gold ceased to be legal tender throughout the states. With such harsh measures, the treasury obtained several thousand tons of gold. All this wealth was solemnly transported to the newly built Fort Knox. And the dollar was allowed to float freely. With the adoption of another Gold Reserve Act in 1934, the nominal price of gold was changed from twenty and a half to thirty-five dollars per ounce. These measures finally allowed the Fed to increase the money supply in the economy to a normal level. Factories started working again. In the next two years, production increased by 25%. After banks, it was the stock market's turn. Before the Wall Street crash of 1929, securities were not particularly regulated at all. Buy whatever you want and however you want, but at your own risk. Companies that listed their shares on the stock exchange didn't even have to publish any reports about their operations. Therefore, trading was purely a lottery. To prevent a repeat of the crash, the Securities Act was passed. It required the disclosure of company balance sheets, profit and loss statements, and all information about management. And all reports had to be audited by independent experts. In 1934, the U.S. Securities and Exchange Commission was created to regulate the stock market. And this commission is still active today. All these endless laws and measures met with various reactions. Closing banks? - Ugh, a nightmare! Deposit insurance? - Well, it sounds cool. Abolishing the gold standard? - Damn, this damn cripple has gone completely deaf! Protecting the stock market from speculation? Well, that's a normal guy. On such swings, people no longer understood what emotions to feel – rejoice or be indignant. But there was one decision that was unequivocally supported by almost everyone, from black residents of Alabama to elite millionaire clubs. And that, of course, was the repeal of Prohibition. States and cities received new tax revenues. The mafia lost its main source of super-profits. And voters forgave Roosevelt all unpopular measures at once. And only now did they get around to what is most often credited with restoring the US from the Great Depression – the creation of the Public Works Administration. Which began to finance mega-projects. The construction of airports, hospitals, schools, roads, and bridges. All at the state's expense. And not just out of the goodness of their hearts, but to reduce unemployment, give workers money so they could start buying and pull the economy out of the crisis. From 1933 to '35, the Administration spent over three billion dollars. Thirty-four and a half thousand facilities were built across the country. For example, the famous Golden Gate Bridge in San Francisco was built under this program. But money was not only spent on new construction but also on repairing old ones. Hundreds of thousands of people found work and restored millions of hectares of land affected by erosion and devastation. As one expert noted, Roosevelt's New Deal changed the American landscape. Literally. But the biggest problems were, of course, in agriculture. It was simply a madhouse. Farmers even in the prosperous 1920s earned pennies. With the onset of the crisis, everything only got worse. Inadequately low prices forced them to produce even more... which, in turn, continued to lower prices. And this was against the backdrop of the country being in a so-called deflationary spiral. When it became clear that no amount of production could pay for itself, farmers simply gave up. They didn't harvest... they killed livestock because it was more expensive to keep them than to sell them. Roosevelt and his administration were convinced that the recovery of agriculture was the key to the country's full economic recovery. Therefore, they devised the most new laws to support farmers. One of the first significant programs was the Agricultural Adjustment Administration. Its goal was to raise prices for agricultural products through artificial scarcity. In other words, for prices to rise, you just need to grow less. Farmers were paid subsidies for leaving part of their land unused. It sounds, frankly, illogical at first glance. How is it possible that you are poor... because you produce too much food? This is madness! Well, you know... no one wants to work at a loss. Farmers are not philanthropists who should provide food for cities at their own expense. Therefore, such a stupid situation arose. That on the one hand, the harvest rotted in the fields... and on the other, the unemployed in large cities were almost starving. So it's not surprising that ordinary voters somewhere in Chicago, to put it mildly, didn't understand why they had little food when there was actually plenty of it? And why raise the price of, say, corn, if in that case they couldn't afford to buy it? Therefore, as early as '36, the U.S. Supreme Court declared such a farmer support program unconstitutional. But the government found a way out here too – instead of paying subsidies for fallow land, they started paying farmers to plant something useless that no one needed anyway. Like alfalfa. In short, in a way, Roosevelt's reforms worked... Farmers' incomes began to recover from 1933. Along with the incomes of the rest of the population. But agriculture still remained a problem. Far from all farmers were able to receive bonuses from state support. Especially black farmers and those who worked on rented plots. Against the backdrop of other successes, this was a failure. Roosevelt was much more successful with labor rights. First, he abolished the type of contracts that were contemptuously called "yellow-dog contracts." This is when, upon hiring, a person was asked to sign a paper stating that they pledged not to join a union. And if they joined, then goodbye. The police and courts did not respond to any complaints from workers. You knew what you were signing, right? What claims then? So now the government recognized such claims as justified. The following year, the authorities went even further and extended the minimum wage decree. When Roosevelt was criticized for this and asked what philosophy lay behind it, he angrily replied – "Philosophy? What philosophy? I am a Christian and a Democrat – that is my philosophy." The reforms were so radical and there were so many of them that many began to lose patience and trust. Yes, his leadership was energetic, but more and more people considered it ineffective. This was especially true for conservatives. On the one hand, Republicans – like Herbert Hoover. And on the other hand, his own party colleagues. For example, former presidential candidate Al Smith. These guys grumbled that Roosevelt was supposedly destroying American ideals and depriving people of freedom. Some of them united in the American Liberty League, while others focused on making the Republican Party a lifeline from Roosevelt's "madness." They all expected that Roosevelt's decisions would soon lead to disaster, and then they could step onto the stage and loudly say, "We warned you!" But the disaster never came. And the economy, though slowly, was crawling out of the rut. When Roosevelt presented a new unemployment benefits bill in 1935, he already knew how to respond to criticism. That he clearly distinguishes between simple aid and work-related aid. In his annual message to Congress on January 4, 1935, he stated directly that the federal government should stop giving out aid just like that. Because such forms of support lead – quote – "to spiritual and moral decay and destroy society." Roosevelt even compared unemployment benefits to a drug that one can get addicted to. On the other hand, there is nothing wrong with giving people work for a decent wage. Because it strengthens self-esteem, self-confidence, courage, and determination. Therefore, he proposed that the federal government, possessing sufficient power and resources, should provide work for about three and a half million unemployed. This means Roosevelt was going with the mainstream and didn't say anything that could brand him a socialist. But there's a nuance. He also added that besides the able-bodied people, there are one and a half million sick, elderly, and disabled people in the country. They cannot work due to natural factors. And for them, benefits should be left, and there is nothing wrong with that. Because these people will definitely not get hooked on free money. Because they wouldn't be able to work under any circumstances. In general, Roosevelt was convinced that giving out benefits is a path to degradation, and work is a path to the revival of the nation... nevertheless, it was he who introduced mandatory financial assistance for those who can no longer work. And few in Congress argued with this. Clever. Back in the 1930s, several important laws were passed aimed at protecting consumer rights. In '35, the Holding Company Act appeared. It was intended to protect the rights of ordinary people from large corporations that controlled gas and electricity companies. In the same year, the Federal Power Act was passed, aimed at making utility prices affordable for all segments of society. Then, in 1938, the Natural Gas Act was introduced, which protected consumers from exploitation by gas companies. In the same year, the Food, Drug, and Cosmetic Act was passed. This law gave the government the authority to test and license drugs, as well as check the safety of cosmetics. The Department of Agriculture was given the authority to set food quality standards. Also in 1938, the Wheeler-Lea Act was passed, which expanded the powers of the Federal Trade Commission... which could now restrict free trade. To cancel fraudulent deals in advance. All these laws were aimed at making the market more transparent and fair... but, of course, for the then proponent of a free market, this seemed like the collapse of all American ideals. Something became too much control. Of course, products became better, banks more reliable, companies more protected... but at what cost? At the cost of our and your freedom! But as subsequent elections showed, voters appreciated this course and re-elected Roosevelt for a second term. In 1935, Roosevelt proposed a new tax program, known as the "Wealth Tax Act." It was aimed at redistributing wealth. The bill provided for an income tax of up to 79%! But only for those who earn more than 5 million dollars a year. In those times, such a sum was astronomical, and in fact, this tax affected only one person in the entire country – Rockefeller. So, what was the point of introducing it? Will the budget burst without this old man's money? Well, not at all. Here we are dealing with a classic self-promotion. Let me remind you that Roosevelt was still a professional politician. And he, besides the economy, had to think about his own rating. Especially before new elections. In a private conversation, Roosevelt admitted that the real goal of this law was – quote – "to steal the glory from Huey Long." There was such a popular guy who actively advocated for a progressive tax rate. So Roosevelt wanted not so much to get new money into the treasury as to win Long's voters. The bill caused sharp dissatisfaction among the wealthy segments of society. Many of them began to call Roosevelt a "traitor to his class," and the law itself was christened a "tax" for pumping money out of the rich. But then many realized that it didn't directly concern them and calmed down... and Roosevelt calmly won the election. But it's sad to talk about that now. So, what do we have as a result? Under Roosevelt, spending to support the poor in America doubled. But everything in life has to be paid for, and the US paid for it with an increase in the budget deficit and a 40% drop in the dollar. Already during his second term, in '37, Roosevelt decided to cut social spending... but this led to a new wave of crisis. Not as large-scale, but still. The number of unemployed and homeless increased again. Therefore, the president reversed everything. By 1939, ten years after the start of the Great Depression, the situation in the country was still difficult. Many researchers believe that the final salvation of the American economy was made possible by World War II. Military orders filled the reviving American factories. Millions of young Americans went to serve in the army, which relieved them of the need to look for work and provided for them at the state's expense. As a result, the imbalance between productivity, production, wages, and consumption that struck America in 1929 was finally eliminated. And here, of course, Roosevelt's merit is small. But under the guise of it, he carried out many important reforms. America emerged from the crisis with a new social security system, with a Securities Commission, and with the Agricultural Credit Act. Farm debts were reduced or even written off. New loans were issued on favorable terms. A new tax system was introduced in the country, which redistributed funds in favor of the poor, and social spending significantly increased. The concept of a guaranteed minimum standard of living became an integral part of American life. Before the Great Depression, America lived in faith in the invincibility of its prosperity. In the correctness of its ideals and its special place in the world. This faith was destroyed. But from the crisis, a new country emerged – tempered and taught resilience in the face of adversity. The country that survived this storm became stronger and wiser. For example, that society as a whole will be happier if it helps those in need, rather than leaving them to fate. America turned its wounds into lessons for future generations. All the best.