Through
the “Roaring Twenties”, the urban and industrial US economy had a crazy bull
run. Europe was ravaged by the First World War (1914-19). As the Great War was
coming to a close, a spate of revolutions marked the end of the 19th century bourgeois liberalism. But unscathed by these troubles, the USA
continued its dizzying rise to the summit of the industrialized world. This was
best epitomized by the emergence of New York as the world business capital,
where stock prices on Wall Street rallied more than four times between 1921 and
1929.
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| Flapper - the new woman in short (knee-length) skirt and bobbed hair defined a new modernity |
People
started buying cars and installing radios and telephones at home. This decade
saw the first colour movie as well as the first ‘talkie’ (Jazz Singer 1927). Both commercial aviation and commercial sports
(in newly built stadiums) took off. Fashionable young women, wearing short
(knee-length) skirt, bobbed hair and smoking in public defined a new modernity.
Rise of Jazz music, described as the classical music of the USA, culturally
marked the decade. The Great Gatsby
of F Scott Fitzgerald, who also coined the term ‘the Jazz Age’, best captured
the spirit of the “Roaring Twenties”.
Stock
prices crashed for the first time on the Black Thursday (24th
October, 1929). But at that moment, it
was difficult to imagine that this sounded the death knell of capitalism
itself. As the crisis spread from the financial market to the real economy,
demand collapsed completely, triggering a melt-down in the US housing market.
In two years, industrial production fell by a third and automobile production
halved. As plants closed down and small businesses followed suit, millions lost
their jobs.
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| As stocks continued to collapse through late October, crowd gathered everyday on Wall Street |
As
all the major currencies were tied to the gold standard, the US price deflation
spread through it fast. The USA was also the largest exporter and second
largest importer in the world and the leading global lender. Between 1929 and
1932, as both the US import and export fell by 70%, global commodity prices
slumped. Cotton farmers were ruined in Gujarat as prices crashed to less than
half in Bombay, cocoa prices fell by as much as 90% in Ghana, forcing the
growers to stop import of basic food items like rice. And in Brazil, fearing a
complete price collapse, coffee growers forced the railways to buy coffee
beans. And in 1932, people looked, rather smelt, in astonishment as steam
engines ran on coffee instead of coal!
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| Another bank run! |
This
was a truly unprecedented scenario but the policymakers tried to stick to their
traditional solutions. Even as national economies collapsed around them and world
trade fell by 60%, governments instead of spending more, actually tried to
balance their budgets by cutting costs (came to be known as penny pinching).
The US Federal Reserve did nothing to address the liquidity shortage, leading
to multiple waves of bank failures. Soon the dominant images in urban US were long
queues in front of soup kitchens, shuttered factories and shanty towns
(derisively named Hooverville, after President Hoover, who failed miserably to
address the situation).
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| Great Depression directly led to the rise of Hitler and Mussolini |
Meanwhile
in Europe, the issues related to the German reparation payment, hyper-inflation
and mass unemployment further precipitated the breakdown of the 19th
century laissez faire capitalism. Savings were wiped out and unemployment skyrocketed everywhere. Such dire economic situation paved the way for the rise
of Hitler and Mussolini in Germany and Italy. By 1935 or so, Nazi Germany could
create enough jobs and re-ignite the economic engine. And on the left, the
Soviet Union powered ahead with planned economic development. It led a
generation of politicians/students to believe in state-led industrialization as
an alternative.
President
Hoover in the US and the Labour governments in Britain and Australia sank
without a trace. Army Generals threw out the incumbents in many Latin American
countries. In the colonial world, this crash in commodity prices either fuelled
another round of anti-colonial struggle (like India) or led to the emergence of
it. As situation deteriorated everywhere, policymakers were not only forced to
innovate but even had to give up their fundamental beliefs. In 1931, in a
moment of great symbolic importance, Great Britain gave up free trade and gold
standard.
In
1933, Franklin D Roosevelt became the 32nd President of the United
States and initiated his famous “New Deal’. He launched massive public works
programmes to provide employment. Securities and Exchange Commission was set up
(1933) to regulate stock markets and the Glass-Steagall Act was passed (1934)
to regulate the banks after one fifth of them failed in just two years. New
Deal envisioned Welfare Capitalism –
the land of unbridled capitalism, passed the Social Securities Act (1935) and
hiked tax on riches (New Deal and the Second World War took the top marginal
tax rate from 24% to 84%).
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| One of the most famous photographs of the Great Depression - Migrant Mother - destitute pea-picker Florence Owens Thompson, age 32, mother of 7 children at Nipomo, California March 1936 |
Even as the economy was slowly coming back on track, the
worst drought in modern times struck the Great Plains in 1934. This vast flat
region around Oklahoma turned into a ‘Dust Bowl” and more than 2.5 million people
were forced to flee. Most of them went to California in search of a better life
but the reality turned out to be quite different. John Steinbeck’s classic
novel, The Grapes of Wrath presents
perhaps the most vivid picture of this tragedy.
At times it seemed that the American society was on the verge
of a total breakdown – children grew up quickly, teens drifted away, people
postponed marriages and babies, families just fell apart even without formal
divorce (it had a very different impact on American women but it would require
another post). The most popular tune of the time was “Brother, Can You Spare a
Dime?”
Jobless
Americans turned to radio (first radio soap operas and comic shows took off in
the 30s) and then to television (Roosevelt, who used to do a popular half an
hour fireside chat in radio, became the first head of state to be live telecast
in 1935), inexpensive board games (Monopoly
was invented in 1935) and above all to Hollywood. As a famous historian noted -
giant movie theatres rose like dream palaces in the grey cities of mass
unemployment. These movies, made by Metro-Goldwyn-Mayer or Twentieth
Century-Fox, including the iconic ones like Frankenstein,
It Happened One Night, Gone with the Wind transported the
viewers to a dreamland and hardly ever portrayed the grim reality outside.
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| Vivian Leigh and Rhett Butler in Gone With the Wind - movies transported jobless Americans to a dreamland and hardly ever showed the grim reality outside |
